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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): November 13, 1997
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
TEXAS 1-9016 75-6335572
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
</TABLE>
6210 N. BELTLINE ROAD, SUITE 170, IRVING, TEXAS 75063
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 756-6000
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
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The undersigned Registrant hereby amends its Current Report on Form 8-K
dated November 13, 1997, which was filed with the Securities and Exchange
Commission on November 26, 1997, 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 of the Properties Acquired Pursuant to Rule 3-14
of Regulation S-X. The financial statements required by this Item 7(a) are
included herein on pages F-1 to F-4.
(b) Pro Forma Financial Information. The pro forma financial information
required by this Item 7(b) is included herein on pages F-5 to F-11.
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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
Dated: January 12, 1998
2
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INDEX
<TABLE>
<CAPTION>
PAGES
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<S> <C>
Financial Statements of the Properties Acquired Pursuant to
Rule 3-14 of Regulation S-X............................... F-1 to F-4
Pro Forma Financial Information............................. F-5 to F-11
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INDEPENDENT AUDITORS REPORT
Board of Trust Managers
American Industrial Properties REIT
We have audited the accompanying Historical Summary of Gross Income and
Direct Operating Expenses of the Commerce Center, which is an industrial
property (the "Property"), as described in Note 1 for the year ended May 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.
In 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 dated November 13,
1997 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
Commerce Center, as described in Note 1, for the year ended May 31, 1997, in
conformity with generally accepted accounting principles.
Easley, Endres, Parkhill &
Brackendorff, P.C.
Houston, Texas
August 5, 1997
F-1
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COMMERCE CENTER
HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
AUGUST 31, MAY 31,
1997 1997
------------ ----------
(UNAUDITED)
<S> <C> <C>
Gross Income
Rental.................................................... $299,026 $1,063,894
Reimbursements............................................ 69,702 250,032
Other..................................................... 1,968 24,180
-------- ----------
Total gross income................................ 370,696 1,338,106
Direct Operating Expenses
Property management and administration.................... 34,331 107,779
Utilities................................................. 15,407 41,359
Real estate taxes......................................... 43,131 173,761
Repairs and maintenance................................... 32,058 107,914
-------- ----------
Total direct operating expenses................... 124,927 430,813
-------- ----------
Excess of gross income over direct operating expenses....... $245,769 $ 907,293
======== ==========
</TABLE>
See accompanying notes.
F-2
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COMMERCE CENTER
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
YEAR ENDED MAY 31, 1997 AND
THREE MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying Historical Summary of Gross Income and Direct Operating
Expenses include the accounts of Commerce Center (the "Property"), an office
park located in Houston, Texas, which includes nine buildings containing 286,167
square feet of available lease space. The Property is owned by Midway/ Commerce
Center Limited Partnership (the "Partnership").
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 dated November 13,
1997 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 May 31, 1997, and the three months ended August 31, 1997, 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.
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
May 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 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 reports and maintenance are expensed as incurred; major
replacements and betterments are capitalized.
3. TRANSACTIONS WITH AFFILIATES
Management Fees
An affiliate of the Partnership receives a management fee equal to four
percent of the Property's operating revenue, not including reimbursed expenses
from tenants. Management fees of $52,626 and $15,086 were incurred during the
year ended May 31, 1997 and the three months ended August 31, 1997,
respectively,
F-3
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COMMERCE CENTER
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES -- (CONTINUED)
and are included in property management and administrative expense in the
accompanying Historical Summary.
4. OPERATING LEASES
The Property has operating leases with terms ranging from one to five
years. The minimum future rentals under operating leases for years ending May 31
are as follows:
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<S> <C>
1998........................................................ $1,181,488
1999........................................................ 1,027,293
2000........................................................ 794,034
2001........................................................ 581,770
2002........................................................ 243,527
Thereafter.................................................. 6,001
----------
$3,834,113
==========
</TABLE>
5. SUBSEQUENT EVENT
On November 13, 1997, the Partnership sold the Property for $10.7 million
to American Industrial Properties REIT.
F-4
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Condensed Consolidated Balance Sheet of the Trust
as of September 30, 1997 has been prepared as if each of the following
transactions had occurred as of September 30, 1997: the acquisition (i) through
a partnership in which the Trust has a 98.0% controlling ownership interest, of
Merit Texas Properties Portfolio consisting of eight properties consisting of 20
light industrial and warehouse/ distribution buildings in the Dallas, Texas
area; and (ii) of Commerce Center, an office park consisting of nine buildings
in Houston, Texas (collectively, the "Acquisitions"). The following Pro Forma
Condensed Consolidated Statements of Operations of the Trust for the year ended
December 31, 1996 and the nine months ended September 30, 1997 have been
prepared as if each of the following transactions had occurred as of January 1,
1996: (i) the issuance of 2,657,973 Shares of the Trust at $12.25 per share in
July 1997 (the "Private Placement"); and (ii) the Acquisitions.
The Pro Forma Financial Information is presented for informational 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
management, all material adjustments necessary to reflect the effect of these
transactions have been made. The Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1997 is not necessarily
indicative of the results of operations to be expected for the year ending
December 31, 1997.
F-5
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ASSETS
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<CAPTION>
TRUST PRO FORMA
HISTORICAL ACQUISITIONS TOTAL
---------- ------------ ---------
(A)
<S> <C> <C> <C>
Real estate, net............................................ $ 73,757 $ 37,318(B)
10,755(C) $121,830
Cash -- unrestricted........................................ 25,780 (13,448)(B)
(3,980)(C) 8,352
Cash -- restricted.......................................... 1,401 -- 1,401
Other assets, net........................................... 4,151 297(B)
64(C) 4,512
-------- -------- --------
$105,089 $ 31,006 $136,095
======== ======== ========
LIABILITIES AND SHAREHOLDERS' AND PARTNERS' EQUITY
Mortgage notes payable...................................... $ 41,380 $ 20,675(B)
6,600(C) $ 68,655
Notes payable to affiliates................................. 5,450 -- 5,450
Accrued interest payable.................................... 1,078 -- 1,078
Accounts payable, accrued expenses and other................ 2,641 752(B)
239(C) 3,632
-------- -------- --------
50,549 28,266 78,815
-------- -------- --------
Minority interest in consolidated subsidiary................ -- 2,740(B) 2,740
Shareholders' and partners' equity:
Shares of beneficial interest ($0.10 par value)........... 466 -- 466
Additional paid-in capital................................ 158,906 -- 158,906
Accumulated distributions................................. (58,456) -- (58,456)
Accumulated loss from operations and extraordinary gains
(losses)............................................... (47,836) -- (47,836)
Accumulated net realized gain on sales of real estate..... 1,460 -- 1,460
-------- -------- --------
Partners' equity.......................................... 54,540 -- 54,540
-------- -------- --------
$105,089 $ 31,006 $136,095
======== ======== ========
</TABLE>
F-6
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT SHARE AND UNIT DATA)
(UNAUDITED)
(A) Represents adjustments for the Acquisitions, including the Merit Texas
Properties Portfolio and Commerce Center.
(B) Represents adjustments for the acquisition of the Merit Texas Properties
Portfolio, through a partnership in which the Trust has a 98.0% controlling
partnership interest for which the Trust made an investment, including
closing and transaction costs, of $34,578, comprised of cash of $13,448,
mortgage debt of $20,675, deferred loan costs of $297, and $752 of assumed
liabilities. The limited partner of such partnership made an investment of
$2,740. The mortgage debt bears interest at LIBOR plus 2% with a maturity
of one year.
(C) Represents adjustments for Commerce Center, which was purchased for $10,755,
including closing and transaction costs, comprised of cash of $3,980,
mortgage debt of $6,600, deferred loan costs of $64, and $239 of assumed
liabilities. The mortgage debt bears interest at LIBOR plus 2% with a
maturity of one year.
F-7
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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<CAPTION>
TRUST PRO FORMA
HISTORICAL ACQUISITIONS TOTAL
---------- ------------ ---------
(A) (B)
<S> <C> <C> <C>
INCOME
Rents and tenant reimbursements............................ $11,320 $5,175 $16,495
Interest income............................................ 158 49 207
------- ------ -------
11,478 5,224 16,702
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EXPENSES
Property operating expenses................................ 4,022 1,785 5,807
Depreciation and amortization.............................. 2,909 961(C) 3,870
Interest on mortgage notes payable......................... 5,901 2,401(D) 8,302
General and administrative................................. 3,378 -- 3,378
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16,210 5,147 21,357
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Income (loss) from operations.............................. $(4,732) $ 77 $(4,655)
======= ====== =======
Income (loss) from operations per share(a)................. $ (2.60) $ (1.04)
======= =======
Weighted average number of Shares outstanding(a)........... 1,822 4,480
======= =======
</TABLE>
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(a) The Share amounts and number of Shares outstanding have been restated to
reflect the impact of the one for five reverse Share split, which was
approved by the Trust's shareholders and became effective on October 15,
1997.
F-8
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) 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 $177 and
extraordinary gain on extinguishment of debt of $5,810.
(B) Represents adjustments for the Acquisitions, based on historical operating
results. Depreciation is based on the allocation of the purchase price and
a 40 year life. Interest expense is based on the borrowings incurred for
the Acquisitions at the related interest rate. The Trust is allocated all
net income under the terms of the partnership agreement until it receives a
cumulative preferred return of 20%, as defined in the partnership
agreement.
(C) Represents depreciation of the Acquisitions. Buildings are depreciated using
the straight-line method over a 40 year period.
(D) Represents interest expense related to borrowings of $27,275 for the
Acquisitions, based on an interest rate of LIBOR plus 2% (7.48% for 1996).
Also includes amortization of deferred loan costs incurred related to the
borrowings of $361.
F-9
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
TRUST PRO FORMA
HISTORICAL ACQUISITIONS TOTAL
---------- ------------ ---------
(A) (B)
<S> <C> <C> <C>
INCOME
Rents and tenant reimbursements............................ $ 7,787 $4,264 $12,051
Interest income............................................ 436 16 452
------- ------ -------
8,223 4,280 12,503
------- ------ -------
EXPENSES
Property operating expenses................................ 2,758 1,288 4,046
Depreciation and amortization.............................. 2,105 721(C) 2,826
Interest on mortgage notes payable......................... 4,015 1,555(D) 5,570
General and administrative................................. 1,759 -- 1,759
------- ------ -------
10,637 3,564 14,201
------- ------ -------
Income (loss) from operations.............................. $(2,414) $ 716 $(1,698)
======= ====== =======
Income (loss) from operations per share(a)................. $ (0.86) $ (0.36)
======= =======
Weighted average number of Shares outstanding(a)........... 2,793 4,658
======= =======
</TABLE>
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(a) The Share amounts and number of Shares outstanding have been restated to
reflect the impact of the one for five reverse Share split, which was
approved by the Trust's shareholders and became effective on October 15,
1997.
F-10
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
(A) 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 $312 and
extraordinary gain on extinguishment of debt of $2,643.
(B) Represents adjustments for the Acquisitions, based on historical operating
results. Depreciation is based on the allocation of the purchase price and
a 40-year life. Interest expense is based on the borrowings incurred for
the Acquisitions at the related interest rate. The Trust is allocated all
net income under the terms of the partnership agreement until it receives a
cumulative preferred return of 20%, as defined in the partnership
agreement.
(C) Represents depreciation of the Acquisitions. Buildings are depreciated using
the straight-line method over a 40 year period.
(D) Represents interest expense related to borrowings at $27,275 for the
Acquisitions, based on an interest rate of LIBOR plus 2% (7.60% for 1997).
F-11
