<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 30, 1998
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
TEXAS 1-9016 75-6335572
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
6210 NORTH BELTLINE ROAD, SUITE 170, IRVING, TEXAS 75063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's telephone number, including area code: (972) 756-6000
<PAGE> 2
The undersigned Registrant hereby amends its Current Report on Form 8-K
dated April 30, 1998, which was filed with the Securities and Exchange
Commission on May 14, 1998, to include the financial statements required by Item
7(a) and the pro forma financial information required by Item 7(b).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements: See Index to Financial Statements and Pro
Forma Financial Information appearing on page F-1 of this Form 8-K/A.
(b) Pro Forma Financial Information: See Index to Financial Statements
and Pro Forma Financial Information appearing on page F-1 of this Form 8-K/A.
(c) Exhibits
The following exhibit is filed with this report:
Exhibit
Number Description
23.1 Consent of Ernst & Young LLP
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ CHARLES W. WOLCOTT
------------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
July 7, 1998
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<S> <C>
FINANCIAL STATEMENTS
SPIEKER PROPERTIES PORTFOLIO
Report of Independent Auditors F-2
Combined Historical Summary of Gross Income and Direct Operating Expenses F-3
Notes to Combined Historical Summary of Gross Income and Direct
Operating Expenses F-4
NORTH AUSTIN OFFICE BUILDING
Report of Independent Auditors F-7
Historical Summary of Gross Income and Direct Operating Expenses F-8
Notes to Historical Summary of Gross Income and Direct Operating Expenses F-9
PRO FORMA FINANCIAL INFORMATION F-12
Pro forma condensed consolidated balance sheet as of December 31, 1997 F-14
Pro forma condensed consolidated statements of operations for the year
ended December 31, 1997 F-16
Pro forma condensed consolidated statements of operations for the three
months ended March 31, 1998 F-19
</TABLE>
F-1
<PAGE> 5
Report of Independent Auditors
Board of Trust Managers
American Industrial Properties REIT
We have audited the accompanying Combined Historical Summary of Gross Income and
Direct Operating Expenses (the "Combined Historical Summary") of the Spieker
Properties Portfolio, which is comprised of six industrial properties (the
"Properties"), as described in Note 1 for the year ended December 31, 1997. This
Combined Historical Summary is the responsibility of the Properties' management.
Our responsibility is to express an opinion on this Combined Historical Summary
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Combined Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Combined Historical Summary. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Combined
Historical Summary. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the Combined Historical Summary has been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Current Report on Form 8-K of American
Industrial Properties REIT, as described in Note 1, and is not intended to be a
complete presentation of the income and expenses of the Properties.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the combined gross income and direct operating
expenses of the Spieker Properties Portfolio, as described in Note 1, for the
year ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Dallas, Texas
April 7, 1998, except for Note 5 as to
which the date is May 6, 1998
F-2
<PAGE> 6
Spieker Properties Portfolio
Combined Historical Summary of Gross Income and Direct Operating Expenses
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
1998 1997
--------------- ------------
(Unaudited)
<S> <C> <C>
GROSS INCOME
Rental $1,263,799 $4,773,233
Reimbursements 195,537 752,696
Other 19,317 47,682
---------- ----------
Total gross income 1,478,653 5,573,611
DIRECT OPERATING EXPENSES
Repairs and maintenance 122,699 510,437
Utilities and other property operating 85,382 438,159
General and administrative 16,228 139,462
Real estate taxes 131,203 487,293
Management fees 33,613 144,856
---------- ----------
Total direct operating expenses 389,125 1,720,207
---------- ----------
Excess of gross income over direct operating expenses $1,089,528 $3,853,404
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 7
Spieker Properties Portfolio
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses
Year Ended December 31, 1997 and
Three Months Ended March 31, 1998 (Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Spieker Properties Portfolio is not a legal entity but rather a combination of
affiliated properties that have common ownership. The accompanying Combined
Historical Summary of Gross Income and Direct Operating Expenses (the "Combined
Historical Summary") include the accounts of six industrial properties located
in the southwestern United States (the "Properties"). The Properties are owned
by Spieker Properties, a publicly traded real estate investment trust. The
Properties are as follows:
<TABLE>
<CAPTION>
Total
Property Square Feet
- -----------------------------------------------------------------------------
<S> <C>
Arizona
Black Canyon Tech Center (Phoenix) 100,000
Tucson Tech Center (Tucson) 115,030
Colorado Springs, Colorado
Academy Pointe Atrium II 90,766
Aerotech 75,892
New Mexico
Broadbent (Albuquerque) 59,296
Texas
Summit Center (Austin) 96,950
-------
Portfolio total 537,934
=======
</TABLE>
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of American
Industrial Properties REIT. The Combined Historical Summary is not intended to
be a complete presentation of income and expenses of the Properties for the year
ended December 31, 1997, and the three months ended March 31, 1998, as certain
costs such as depreciation, amortization, interest, and other debt service costs
have been excluded. These costs are not considered to be direct operating
expenses.
F-4
<PAGE> 8
Spieker Properties Portfolio
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses (continued)
1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited Combined Historical Summary has been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and was prepared on the same basis as the Combined Historical Summary for the
year ended December 31, 1997. In the opinion of management of the Properties,
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the information for this interim period have been made.
The excess of combined gross income over direct operating expenses for such
interim period is not necessarily indicative of the excess of gross income over
direct operating expenses for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Properties' Combined Historical Summary in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts included in the
Combined Historical Summary and accompanying notes thereto. Actual results could
differ from those estimates.
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis; as such, the rental
revenues for leases which contain rent abatements and contractual increases are
recognized on a straight-line basis over the initial term of the related lease.
Property operating cost recoveries from tenants of common area maintenance, real
estate taxes and other recoverable costs, are recognized in the period when the
recoveries are earned.
CAPITALIZATION POLICY
Ordinary repairs and maintenance are expensed as incurred; major replacements
and improvements are capitalized.
F-5
<PAGE> 9
Spieker Properties Portfolio
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses (continued)
3. OPERATING LEASES
The Properties have operating leases representing potential future receipts with
terms ranging from one to seven years. The minimum future rentals under
operating leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 4,672,383
1999 3,816,215
2000 3,389,968
2001 2,750,847
2002 1,846,384
Thereafter 513,626
-----------
$16,989,423
===========
</TABLE>
4. SUBSEQUENT EVENT
On May 6, 1998, the Properties were sold for a combined purchase price of $43.5
million to American Industrial Properties REIT.
F-6
<PAGE> 10
Report of Independent Auditors
Board of Trust Managers
American Industrial Properties REIT
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (the "Historical Summary") of North Austin Office Building
(the "Property"), as described in Note 1 for the year ended December 31, 1997.
This Historical Summary is the responsibility of the Property's management. Our
responsibility is to express an opinion on this Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The Historical Summary has been prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission for inclusion in
the Current Report on Form 8-K of American Industrial Properties REIT, as
described in Note 1 and is not intended to be a complete presentation of the
income and expenses of the Property.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses of North
Austin Office Building, as described in Note 1, for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Dallas, Texas
May 15, 1998
F-7
<PAGE> 11
North Austin Office Building
Historical Summary of
Gross Income and Direct Operating Expenses
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
GROSS INCOME
Rental $ 697,606 $2,528,018
Reimbursements 261,918 1,109,935
Other -- 45,296
---------- ----------
Total gross income 959,524 3,683,249
DIRECT OPERATING EXPENSES
Repairs and maintenance 28,272 64,292
Utilities and other property operating 264,734 1,160,047
Real estate taxes 60,969 233,520
Management fees 29,393 109,630
---------- ----------
Total direct operating expenses 383,368 1,567,489
---------- ----------
Excess of gross income over direct operating expenses $ 576,156 $2,115,760
========== ==========
</TABLE>
See accompanying notes.
F-8
<PAGE> 12
North Austin Office Building
Notes to Historical Summary of Gross Income
and Direct Operating Expenses
Year Ended December 31, 1997 and
Three Months Ended March 31, 1998 (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
North Austin Office Building (the "Property") is a commercial office building
containing approximately 260,000 square feet located in Austin, Texas. The
building was 98% occupied by five tenants, with one tenant occupying 44% of the
net rentable square feet at March 31, 1998. Under the terms of its lease, the
tenant is required to pay base rent of $92,805 per month until May 2007.
The accompanying Historical Summary has been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K of American
Industrial Properties REIT. The Historical Summary is not intended to be a
complete presentation of income and expenses of the Property for the year ended
December 31, 1997, and the three months ended March 31, 1998, as certain costs
such as depreciation, amortization, interest, and other debt service costs have
been excluded. These costs are not considered to be direct operating expenses.
Additionally, income from the buy-out of a tenant's lease has been excluded, as
this income is not comparable to the future operations of the property.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying interim unaudited Historical Summary has been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission and was
prepared on the same basis as the Historical Summary for the year ended December
31, 1997. In the opinion of management of the Property, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for this interim period have been made. The
excess of gross income over direct operating expenses for such interim period is
not necessarily indicative of the excess of gross income over direct operating
expenses for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Historical Summary in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect
F-9
<PAGE> 13
North Austin Office Building
Notes to Historical Summary of Gross Income
and Direct Operating Expenses (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the reported amounts included in the Historical Summary and accompanying notes
thereto. Actual results could differ from those estimates.
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis; as such, the rental
revenues for leases which contain rent abatements and contractual increases are
recognized on a straight-line basis over the initial term of the related lease.
Property operating cost recoveries from tenants of common area maintenance, real
estate taxes and other recoverable costs are recognized in the period when the
recoveries are earned.
CAPITALIZATION POLICY
Ordinary repairs and maintenance are expensed as incurred; major replacements
and improvements are capitalized.
3. MANAGEMENT FEES
The Property is managed by a third party. The management fee is 3.0% of gross
revenue collected.
4. OPERATING LEASES
The Property's minimum future rentals under operating leases as of December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998 $ 2,742,231
1999 2,667,952
2000 2,350,908
2001 2,352,803
2002 2,352,803
Thereafter 10,418,473
-----------
$22,885,170
===========
</TABLE>
F-10
<PAGE> 14
North Austin Office Building
Notes to Historical Summary of Gross Income
and Direct Operating Expenses (continued)
5. SUBSEQUENT EVENT
On April 30, 1998, the Property was sold for approximately $22.2 million to
American Industrial Properties REIT.
F-11
<PAGE> 15
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS)
The following Pro Forma Condensed Consolidated Balance Sheet of
American Industrial Properties REIT (the "Trust") as of March 31, 1998 has been
prepared as if each of the following transactions had occurred as of March 31,
1998: (i) the acquisition of the Spieker Properties Portfolio (as defined in the
Historical Summary included elsewhere herein), a group of six industrial
properties (the "Spieker Portfolio"); and (ii) the acquisition of North Austin
Office Building ("North Austin").
The following Pro Forma Condensed Consolidated Statement of Operations
of the Trust for the year ended December 31, 1997 has been prepared as if each
of the following transactions had occurred as of January 1, 1997: (i) the
acquisition of 15 industrial real estate properties (the "1997 Acquisitions");
(ii) the sale of 2 industrial real estate properties (the "1997 Dispositions");
(iii) the merger (the "Merger") with four publicly traded real estate limited
partnerships (the "RELPs"); (iv) the acquisition of the Spieker Portfolio; (v)
the acquisition of North Austin; and (vi) the acquisition, through AIP
Operating, L.P., a limited partnership in which the Trust has a 99% controlling
ownership interest, of Spring Valley #6 on February 11, 1998 (together with
North Austin, the "1998 Acquisitions").
The following Pro Forma Condensed Consolidated Statement of Operations
of the Trust for the three months ended March 31, 1998 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
acquisition of the Spieker Portfolio; and (ii) the 1998 Acquisitions.
The Pro Forma Financial Information of the Trust has been prepared
using the purchase method of accounting for the Merger and the property
acquisitions, whereby the assets and liabilities of the RELPs and the properties
were adjusted to estimated fair market value, based upon preliminary estimates,
which are subject to change as additional information is obtained. The
allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following Pro Forma Financial Information may differ from the
amounts ultimately determined.
Such Pro Forma Financial Information is based in part upon (i) the
Consolidated Financial Statements of the Trust for the year ended December 31,
1997 included in the Trust's Annual Report on Form 10-K for the year ended
December 31, 1997; (ii) the Consolidated Financial Statements of the Trust for
the three months ended March 31, 1998 included in the Trust's Quarterly Report
on Form 10-Q/A for the quarter ended March 31, 1998; (iii) the Financial
Statements of USAA Real Estate Income Investments I Limited Partnership for the
year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current
Report on Form 8-K, dated January 20, 1998; (iv) the Financial Statements of
USAA Real Estate Income Investments II Limited Partnership for the year ended
June 30, 1997 and the six months ended December 31, 1997 filed with Amendment
No. 1 to the Trust's Current Report on Form 8-K, dated January 20, 1998; (v) the
Financial Statements of USAA Income Properties III Limited
F-12
<PAGE> 16
Partnership for the year ended December 31, 1997 filed with Amendment No. 1 to
the Trust's Current Report on Form 8-K, dated January 20, 1998; (vi) the
Financial Statements of USAA Income Properties IV Limited Partnership for the
year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current
Report on Form 8-K, dated January 20, 1998; (vii) the Combined Historical
Summary of Merit Texas Properties Portfolio for the nine months ended September
30, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K,
dated October 17, 1997; (viii) the Historical Summary of Commerce Center for the
year ended May 31, 1997 and the three months ended August 31, 1997 filed with
Amendment No. 1 to the Trust's Current Report on Form 8-K, dated November 25,
1997; (ix) the Historical Summary of Spring Valley #6 Industrial Property for
the year ended December 31, 1997 filed with Amendment No. 1 to the Trust's
Current Report on Form 8-K, dated February 11, 1998; (x) the Combined Historical
Summary of Skyway and Central Park Industrial Properties for the six months
ended June 30, 1997 filed with the Trust's Current Report on Form 8-K, dated
March 23, 1998; (xi) the Historical Summary of Inverness Industrial Property for
the nine months ended September 30, 1997 filed with the Trust's Current Report
on Form 8-K, dated March 23, 1998; (xii) the Combined Statement of Revenues and
Certain Expenses of Corporex Plaza and Presidential Plaza for the nine months
ended September 30, 1997 filed with the Trust's Current Report on Form 8-K,
dated March 23, 1998; (xiii) the Historical Summary of Avion Industrial Property
for the nine months ended September 30, 1997 filed with the Trust's Current
Report on Form 8-K, dated March 23, 1998; (xiv) the Combined Historical Summary
of Spieker Properties Portfolio for year ended December 31, 1997 and the three
months ended March 31, 1998 filed with Amendment No. 1 to the Trust's Current
Report on Form 8-K, dated April 30, 1998; and (xv) the Historical Summary North
Austin Office Building for year ended December 31, 1997 and the three months
ended March 31, 1998 filed with Amendment No. 1 to the Trust's Current Report on
Form 8-K, dated April 30, 1998.
The Pro Forma Financial Information is presented for information
purposes only and is not necessarily indicative of the financial position or
results of operations of the Trust that would have occurred if such transactions
had been completed on the dates indicated, nor does it purport to be indicative
of future financial position or results of operations. In the opinion of the
Trust's management, all material adjustments necessary to reflect the effect of
these transactions have been made.
F-13
<PAGE> 17
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Trust Recent Spieker Pro
Historical (A) Transactions (B) Portfolio (C) Forma
---------- ------------ --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Real estate, net $ 255,093 $ 22,276 $ 43,507 $ 320,876
Cash - unrestricted 18,844 (6,404) (11,328) 1,112
Cash - restricted 1,401 -- -- 1,401
Other assets, net 6,807 199 387 7,393
--------- --------- --------- ---------
$ 282,145 $ 16,071 $ 32,566 $ 330,782
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 121,845 $ 15,498 $ 32,154 $ 169,497
Notes payable to affiliates 7,200 -- -- 7,200
Accrued interest payable 268 -- -- 268
Accounts payable, accrued
expenses and other 6,123 573 301 6,997
Tenant security deposits 1,294 -- 111 1,405
--------- --------- --------- ---------
136,730 16,071 32,566 185,367
Minority interests 7,294 -- -- 7,294
Shareholders' equity:
Shares of beneficial interest
($0.10 par value) 1,120 -- -- 1,120
Additional paid-in capital 242,497 -- -- 242,497
Less Shares in treasury, at cost (1,019) -- -- (1,019)
Accumulated distributions (60,457) -- -- (60,457)
Accumulated loss from operations
and extraordinary gains (losses) (47,331) -- -- (47,331)
Accumulated net realized gain
on sales of real estate 3,311 -- -- 3,311
--------- --------- --------- ---------
138,121 -- -- 138,121
--------- --------- --------- ---------
$ 282,145 $ 16,071 $ 32,566 $ 330,782
========= ========= ========= =========
</TABLE>
F-14
<PAGE> 18
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(In thousands)
(Unaudited)
(A) Represents the historical financial position of the Trust as of March 31,
1998.
(B) Represents adjustments for the acquisition of North Austin. The acquisition
was financed with cash of $6,404 and borrowings on the Trust's acquisition
line of credit (the "Credit Facility") of $15,498. The Credit Facility
bears interest at the 30-day LIBOR rate plus 1.75%, with a maturity of one
year.
(C) Represents adjustments for the acquisition of the Spieker Portfolio. The
acquisition was financed with cash of $11,328 and borrowings on the Credit
Facility of $32,154. The Credit Facility bears interest at the 30-day LIBOR
rate plus 1.75%, with a maturity of one year.
F-15
<PAGE> 19
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Trust Recent RELPS RELPS
Historical (A) Transactions (B) Historical (C) Adjustments (D) Adjustments (E)
---------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME
Rents and tenant reimbursements $ 12,201 $ 12,212 (G) $ 11,888 $ 2,036 (I) $ --
(730)(H) (1,894)(J)
Equity in earnings of joint venture -- -- (108) 264 (I) --
(156)(K)
Interest and other income 546 70 (G) 527 (527)(L) --
(164)(H)
-------- -------- -------- ------- --------
12,747 11,388 12,307 (277) --
-------- -------- -------- ------- --------
EXPENSES
Property operating expenses 4,315 4,216 (G) 5,560 43 (I) --
(201)(H) (391)(J)
Depreciation and amortization 3,157 1,760 (G) 4,003 1,014 (I) (2,790)(M)
(87)(H) (309)(J)
Interest expense 5,778 4,630 (G) 3,089 1,388 (I) (1,022)(N)
(256)(H) (907)(J)
General and administrative 2,504 -- 1,518 63 (I) --
(121)(J)
-------- -------- -------- ------- --------
Total expenses 15,754 10,062 14,170 780 (3,812)
-------- -------- -------- ------- --------
Gain (loss) from operations before
minority interest (3,007) 1,326 (1,863) (1,057) 3,812
Minority interest -- -- -- 208 (I) --
-------- -------- -------- ------- --------
Income (loss) from operations $ (3,007) $ 1,326 $ (1,863) $ (849) $ 3,812
======== ======== ======== ======= ========
Income (loss) from operations
per share:
Basic and diluted $ (0.91)
========
Weighted average number of
Common Shares outstanding 3,317
========
<CAPTION>
Spieker Pro Forma
Portfolio (F) Total
--------- --------
<S> <C> <C>
INCOME
Rents and tenant reimbursements $ 5,526 $ 41,239
Equity in earnings of joint venture -- --
Interest and other income 48 500
------- --------
5,574 41,739
------- --------
EXPENSES
Property operating expenses 1,720 15,262
Depreciation and amortization 857 7,605
Interest expense 2,762 15,462
General and administrative -- 3,964
------- --------
Total expenses 5,339 42,293
------- --------
Gain (loss) from operations before
minority interest 235 (554)
Minority interest -- 208
------- --------
Income (loss) from operations $ 235 $ (346)
======= ========
Income (loss) from operations
per share:
Basic and diluted $ (0.03)
========
Weighted average number of
Common Shares outstanding 11,193 (O)
========
</TABLE>
F-16
<PAGE> 20
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(In thousands, except per share data)
(Unaudited)
(A) Represents the historical results of operations of the Trust for the year
ended December 31, 1997. Certain reclassifications have been made to the
historical statements of operations of the Trust to conform to the pro
forma financial information presentation. In addition, excludes gain on
sale of real estate of $2,163 and extraordinary gain on extinguishment of
debt of $2,643.
(B) Represents adjustments for the 1997 Acquisitions, the 1997 Dispositions,
and the 1998 Acquisitions.
(C) Represents the combined historical results of operations of the RELPs
acquired in connection with the Merger.
(D) Represents adjustments (i) to eliminate the historical results of
operations of a real estate property which, in conjunction with the Merger,
was sold by the RELP to an affiliate, and (ii) to consolidate one real
estate partnership that had been accounted by the RELP on the equity
method.
(E) Represents adjustments (i) resulting from the Merger, including adjustments
to depreciation for the Trust's new basis and incremental general and
administrative costs estimated to be incurred by the Trust as a result of
the recent growth, and (ii) the elimination of non-recurring interest
recorded by the Trust.
(F) Represents adjustments for the acquisition of the Spieker Portfolio, based
on historical operating results. Depreciation is based on the allocation of
the purchase price, with buildings depreciated using the straight-line
method over a 40 year period. Interest expense is based on the borrowings
incurred at the related interest of 7.45% (the average 30-day LIBOR rate
plus 1.75% during the year ended December 31, 1997).
(G) Represents adjustments for the 1997 Acquisitions and the 1998 Acquisitions,
based on historical operating results. Depreciation is based on the
allocation of the purchase price, with buildings depreciated using the
straight-line method over a 40 year period. Interest expense is based on
the borrowings incurred at the related interest rates, which range from
7.25% (fixed rate under mortgage notes payable) to 7.45% (the average
30-day LIBOR rate plus 1.75% during the year ended December 31, 1997).
(H) Represents adjustments to remove the historical results of operations of
the 1997 Dispositions.
F-17
<PAGE> 21
(I) Represents adjustments, based on historical operating results, for the
investment in USAA Chelmsford Associates Joint Venture (the "Joint
Venture"), accounted by the RELP on the equity method, which is
consolidated by the Trust due to an amendment to the joint venture
agreement subsequent to the Merger providing the Trust with control over
the major decisions of the Joint Venture.
(J) Represents adjustments to eliminate the historical results of operations of
a real estate property which, in conjunction with the Merger, was sold by
the RELP to an affiliate.
(K) Represents adjustment to eliminate the equity in earnings of a joint
venture. In connection with the Merger, the interest in the joint venture
was sold by the RELP to an affiliate.
(L) Represents adjustments to eliminate interest income as a result of cash
distributions to the RELP limited partners prior to the Merger.
(M) Represents adjustment to reduce the depreciation of real estate acquired in
the Merger. This adjustment represents increased depreciation resulting
from the allocation of purchase price, reduced by the use of a 40 year
period by the Trust, rather than a 30 year period, as had been the practice
by the RELPs.
(N) Represents adjustment to eliminate interest expense accrued by the Trust
related to the notes payable convertible into Common Shares of Beneficial
Interest of the Trust (the "Common Shares"). The amount of non-recurring
interest expense represents the difference between the market trading price
of $11.88 per Common Share on February 26, 1997, the date of issuance of
the modified notes, which contained the convertibility option, and the
$10.00 conversion price.
(O) The pro forma weighted average shares outstanding includes 9,817 Common
Shares outstanding at December 31, 1997 and 1,376 Common Shares issued in
February 1998. Diluted earnings per share are the same as basic earnings
per share as the Trust has a loss from operations.
F-18
<PAGE> 22
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Trust Recent Spieker Pro Forma
Historical (A) Transactions (B) Portfolio (C) Total
---------- ------------ --------- ---------
<S> <C> <C> <C> <C>
INCOME
Rents and tenant reimbursements $ 8,499 $ 1,137 $ 1,460 $ 11,096
Interest and other income 227 -- 19 246
-------- -------- -------- --------
8,726 1,137 1,479 11,342
-------- -------- -------- --------
EXPENSES
Property operating expenses 2,498 405 389 3,292
Depreciation and amortization 1,616 118 214 1,948
Interest expense 2,663 342 598 3,603
General and administrative 794 -- -- 794
-------- -------- -------- --------
Total expenses 7,571 865 1,201 9,637
-------- -------- -------- --------
Gain (loss) from operations before
minority interest 1,155 272 278 1,705
Minority interest (57) -- -- (57)
-------- -------- -------- --------
Income (loss) from operations $ 1,098 $ 272 $ 278 $ 1,648
======== ======== ======== ========
Income (loss) from operations per share:
Basic and diluted $ 0.10 $ 0.15
======== ========
Weighted average number of
Common Shares outstanding 10,618 11,193 (D)
======== ========
</TABLE>
F-19
<PAGE> 23
AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998
(In thousands, except per share data)
(Unaudited)
(A) Represents the historical results of operations of the Trust for the three
months ended March 31, 1998. Certain reclassifications have been made to
the historical statements of operations of the Trust to conform to the pro
forma financial information presentation.
(B) Represents adjustments for the 1998 Acquisitions, based on historical
operating results. Depreciation is based on the allocation of the purchase
price, with buildings depreciated using the straight-line method over a 40
year period. Interest expense is based on the borrowings incurred at the
related interest rates, which range from 7.28% (fixed rate under mortgage
notes payable) to 7.44% (the average 30-day LIBOR rate plus 1.75% during
the three months ended March 31, 1998).
(C) Represents adjustments for the acquisition of the Spieker Portfolio, based
on historical operating results. Depreciation is based on the allocation of
the purchase price, with buildings depreciated using the straight-line
method over a 40 year period. Interest expense is based on the borrowings
incurred at the related interest rate of 7.44% (the average 30-day LIBOR
rate plus 1.75% during the three months ended March 31, 1998).
(D) The pro forma weighted average shares outstanding represents 11,193 Common
Shares outstanding at March 31, 1998. Diluted earnings per share are the
same as basic earnings per share as the outstanding options to acquire
Common Shares have an exercise price greater than the average market price
per Common Share during the period and, therefore, the effect would be
anitdilutive.
F-20
<PAGE> 24
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
23.1 Consent of Ernst & Young LLP
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Current Report on Form 8-K, dated April 30,
1998, filed with the Securities and Exchange Commission by American Industrial
Properties REIT ("AIP") of our reports (i) dated April 7, 1998, except for Note
5 as to which the date is May 6, 1998, with respect to the audit of the
Combined Historical Summary of Gross Income and Direct Operating Expenses of
the Spieker Properties Portfolio for the year ended December 31, 1997; and (ii)
dated May 15, 1998 with respect to the audit of the Historical Summary of Gross
Income and Direct Operating Expenses of North Austin Office Building for the
year ended December 31, 1997. We further consent to the incorporation by
reference of such reports in AIP's Registration Statement on Form S-3 (No.
333-46699), AIP's Registration Statement on Form S-3 (No. 333-48555), and AIP's
Registration Statement on Form S-3 (No. 333-52879), all filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Dallas, Texas
July 7, 1998
