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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No.--Not Applicable)
American Industrial Properties REIT
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(Name of Issuer)
Common Shares of Beneficial Interest, $.01 par value per share
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(Title of Class of Securities)
026791 20 2
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(CUSIP Number)
Scott A. Wolstein, President and Chief Executive Officer
Developers Diversified Realty Corporation
34555 Chagrin Boulevard
Moreland Hills, Ohio 44022
(440) 247-4700
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 30, 1998
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box / /.
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CUSIP NO. 026791 20 2 13D PAGE 3 OF 14 PAGES
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Scott A. Wolstein
2 CHECK APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO (exchange of shares in a merger)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(a) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
6*
NUMBER OF 8 SHARED VOTING POWER
SHARES -0-*
BENEFICIALLY 9 SOLE DISPOSITIVE POWER
OWNED BY 6*
EACH 10 SHARED DISPOSITIVE POWER
REPORTING -0-*
PERSON WITH
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
-0-*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Less than one percent (1%)*
14 TYPE OF REPORTING PERSON
IN
* See Item 5(a) for a discussion of Mr. Wolstein's status with, and the
fact that he may be deemed to beneficially own all shares held by,
Developers Diversified Realty Corporation.
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ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the common shares of beneficial interest,
$.01 par value per share ("Common Shares"), issued by American Industrial
Properties REIT, a Texas real estate investment trust ("AIP"), to Developers
Diversified Realty Corporation, an Ohio corporation ("DDRC") and Scott A.
Wolstein, the Chairman of the Board, President and Chief Executive Officer of
DDRC, pursuant to the Agreements (as defined herein).
The principal executive offices of AIP are located at 6210 North
Beltline Road, Suite 170, Irving, Texas 75063-2656.
ITEM 2. IDENTITY AND BACKGROUND
This schedule is filed jointly by: (i) DDRC by virtue of its direct
ownership of 2,207,618 Common Shares, and (ii) Scott A. Wolstein by virtue of
his direct ownership of 6 Common Shares and his status as the Chairman of the
Board, President and Chief Executive Officer of DDRC (DDRC and Mr. Wolstein
collectively, the "Reporting Parties").
The business address of each of the Reporting Persons is 34555 Chagrin
Boulevard, Moreland Hills, Ohio 44022.
Mr. Wolstein's principal occupation is serving as the Chairman of the
Board, President and Chief Executive Officer of DDRC. Under the Purchase
Agreement, Mr. Wolstein has been appointed Chairman of the Board of AIP. Mr.
Wolstein is a citizen of the United States.
Set forth in Appendix A hereto are the name, business address, present
principal occupation or employment, and the name, principal business and address
of any corporation or other organization in which such employment is conducted,
of each director and executive officer of DDRC. Each such person is a citizen of
the United States.
During the last five years, none of DDRC, Mr. Wolstein or any of the
persons named in Appendix A: (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws, or finding any
violations with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Under the Share Purchase Agreement (the "Purchase Agreement") dated as
of July 30, 1998 between AIP and DDRC, DDRC
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received 949,147 Common Shares in exchange for $14,711,778.50. DDRC borrowed
this amount under its existing credit facility with The First Chicago National
Bank, as administrative agent, and certain other banks (the "Credit Facility").
Under the Merger Agreement (the "Merger Agreement" and, together with
the Purchase Agreement, the "Agreements") dated as of July 30, 1998 among AIP,
DDRC and DDR Office Flex Corporation, a Delaware corporation ("Merger Sub"),
DDRC received 1,258,471 Common Shares and Mr. Wolstein received 6 Common Shares
in exchange for their respective interests in Merger Sub. Merger Sub owned five
light industrial or office properties and was merged into AIP, with AIP as the
survivor of the merger. The closing of the purchase of 949,147 Common Shares and
1,258,477 Common Shares under the Purchase Agreement and the Merger Agreement,
respectively, are collectively referred to herein as the "Initial Closing," and
the date of the Initial Closing is referred to as the "Initial Closing Date."
DDRC anticipates funding the additional purchases of Common Shares and
Preferred Shares (as defined herein) described in Item 4(a) through a
combination of all or some of the following: working capital, borrowings under
the Credit Facility, and the issuance of medium-term notes or equity securities
under its shelf registration statement.
ITEM 4. PURPOSE OF TRANSACTION
Except as described below, neither of the Reporting Persons has any
current plans or proposals which relate to or would result in any of the events
described in Items (a) through (j) of Item 4 of Schedule 13D:
(a) Under the rules of the New York Stock Exchange (the "NYSE"), a
majority the holders of the Common Shares (the "Shareholders") present at a
meeting of the Shareholders at which a quorum is present must approve each of
the Purchase Agreement, the Merger Agreement and the transactions contemplated
under each of the Agreements (collectively, the "Transactions"). Following
Shareholder approval, under the Purchase Agreement DDRC is obligated to purchase
an additional 5,226,583 Common Shares in exchange for $81,012,036.50 (the
"Second Purchase").
From time to time during the period commencing on the date of the
closing of the Second Purchase (the "Second Closing Date") and ending on the
second anniversary of the Second Closing Date, AIP has the option to sell to
DDRC the additional shares described in the first sentence of the following
paragraph (the "Additional Purchased Shares") for an aggregate purchase price
that may not exceed $200,000,000 (the "Additional Purchase Option") solely for
the purpose of funding property acquisitions approved by a majority of the Trust
Managers of AIP (the "Managers") that are not affiliates of the seller of the
property
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or of the assignor that assigned its right to acquire such property to AIP. The
Additional Purchase Option may only be exercised by action of a majority of the
Managers, excluding the Managers appointed by DDRC.
The Additional Purchased Shares may consist of any combination of the
following, as AIP elects: (i) Common Shares, at a price of $15.50 per share, or
(ii) Series A Convertible Preferred Shares, $.01 par value per share (the
"Preferred Shares"), that are convertible into Common Shares after the
expiration of the Standstill Period (as defined herein), at a price of $14.00
per share, but if DDRC would own, as a result of any such sale and purchase, in
excess of 49.9% of the outstanding Common Shares, then AIP may sell only
Preferred Shares to DDRC. The price per share of the Additional Purchased Shares
is subject to adjustment if the ten trading day average price per Common Share
on the NYSE falls below $12.12 per share and in the event of any share split,
subdivision, combination, merger, reclassification or share dividend.
Effective as of the Initial Closing Date, Mr. Wolstein was awarded
options to purchase 100,000 Common Shares at a purchase price per Common Share
equal to the closing price on the NYSE of one Common Share on the Initial
Closing Date. Mr. Wolstein's compensation package, including the number of
shares subject to options, is subject to revision by the Board of Trust Managers
of AIP (the "Board"), excluding the Managers appointed by DDRC, after
consultation with an independent compensation consultant. All of Mr. Wolstein's
options vest on the Second Closing Date and terminate in the event the Purchase
Agreement is terminated prior to the Second Closing.
If the Purchase Agreement is terminated prior to the Second Closing
Date, depending on the circumstances of such termination: AIP must repurchase
the Common Shares held by DDRC and, at the option of DDRC, return the properties
acquired under the Merger Agreement; or AIP may, at its option, return the
properties acquired by it under the Merger Agreement to DDRC, each as described
more fully in Item 6(a)(vii) and Item 6(a)(viii).
(b) Under the Merger Agreement, Merger Sub was merged with and into
AIP, with AIP as the survivor of such merger.
(c) To the best of the Reporting Persons' knowledge, no such
transaction is contemplated.
(d) Under the Purchase Agreement, the Board was expanded to 11 members.
DDRC has the right to nominate four Managers, including the Chairman of the
Board. At the Initial Closing, DDRC nominated Mr. Wolstein, James A. Schoff,
Albert T. Adams and Robert H. Gidel for election as Managers. The Board elected
each of Messrs. Wolstein, Schoff, Adams and Gidel to the
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Board, with Mr. Wolstein serving as its Chairman. DDRC may continue to nominate
three Managers (of a Board that will comprise 10 Managers commencing in May
1999) for so long as it retains its Common Share holdings, with reductions in
the number of nominees on a graded scale to zero when it holds less than 25% of
the shares acquired under the Agreements. DDRC's nominees must resign if the
Purchase Agreement is terminated prior to the Second Closing. One Manager (not
nominated by DDRC) has indicated that he will retire at AIP's next annual
meeting of shareholders.
(e) Except as described herein, the Reporting Persons are not aware of
any changes to AIP's present capitalization or dividend policy.
(f) Except as described herein, the Reporting Persons are not aware of
any material changes in AIP's business or corporate structure resulting from
this transaction.
(g) If the Purchase Agreement is terminated by AIP, other than a
termination resulting from a material breach by DDRC, AIP: is obligated to pay a
$3.5 million break-up fee to DDRC; is obligated to repurchase the Common Shares
held by DDRC, as described in Item 6(a)(vii); and may be obligated to return the
properties acquired under the Merger Agreement, as described in Item 6(a)(viii).
In addition, DDRC may make a demand for any amounts owed pursuant to the funding
option described in Item 6(a)(iv). DDRC and the Significant Shareholders (as
defined herein) are parties to voting agreements described in Item 6(b). Under
the Purchase Agreement and those voting agreements, AIP and the Significant
Shareholders may not seek transactions that compete with the Transactions,
subject to certain exceptions. The obligations and agreements described in this
paragraph may impede a change of control of AIP.
(h) The Reporting Persons are not aware of any such plan or proposal.
(i) The Reporting Persons are not aware of any such plan or proposal.
(j) The Reporting Persons are not aware of any such actions other than
those described herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) DDRC beneficially owns 2,207,618 Common Shares, representing
approximately 17.9% of the outstanding Common Shares. Mr. Wolstein, as an
individual, beneficially owns six Common Shares, representing less than 1% of
the outstanding Common Shares. As the Chairman of the Board, President and Chief
Executive Officer of DDRC, Mr. Wolstein may be deemed to beneficially own
2,207,624 Common Shares, consisting of all of
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the Common Shares owned by DDRC and Mr. Wolstein, representing approximately
17.9% of the outstanding Common Shares.
The Common Shares and Preferred Shares, as applicable, to be acquired
by DDRC in the Second Purchase and under the Additional Purchase Option have not
been included in determining the beneficial ownership of DDRC or Mr. Wolstein.
The options granted to Mr. Wolstein also have not been included in determining
his beneficial ownership. DDRC and Mr. Wolstein believe that it will be in
excess of 60 days before such Common Shares, Preferred Shares, or options are
received or exercisable, as applicable, because AIP must convene a special
meeting of the Shareholders, prepare a proxy statement for that special meeting,
file that proxy statement with the Securities and Exchange Commission (the
"Commission"), solicit proxies for that meeting in accordance with the rules of
the Commission and the NYSE, and obtain a favorable vote at that meeting, before
those shares or options may be received or exercised, as applicable.
(b) DDRC has the sole power to vote and dispose of the 2,207,618 Common
Shares listed as owned by it in Item 5(a). Mr. Wolstein has the sole power to
vote and dispose of the six Common Shares listed as owned by him in Item 5(a).
As the Chairman of the Board, President and Chief Executive Officer of DDRC, Mr.
Wolstein may be deemed to have the power to vote and dispose of the 2,207,624
Common Shares described in Item 5(a).
(c) Except as described herein, none of the Reporting Persons or any of
the persons identified in Appendix A has effected any transaction in the Common
Shares in the past 60 days.
(d) No other person is known to have the right to receive, or the power
to direct the receipt of dividends from, or the proceeds from the sale of, the
Common Shares described in Item 5(a).
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENT, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
(a) Purchase Agreement.
(i) Standstill Provisions. From the Initial Closing Date until the
third anniversary of the Second Closing Date (the "Standstill Period"), DDRC is
subject to a standstill provision that limits DDRC's ability to: acquire Common
Shares, other than under the Purchase Agreement; act with others as a "group,"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended; solicit proxies or submit shareholder proposals in opposition to a
majority of the Board; assist or encourage others in purchasing in excess of
five
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percent of the Common Shares; and seek to control the management or policies of
AIP.
(ii) Anti-Dilution. If DDRC's beneficial ownership of Common Shares
falls below forty percent (40%) of the outstanding Common Shares on a fully
diluted basis (the "Forty Percent Threshold"), DDRC has the right to purchase,
at a price of $15.50 per Common Share, a number of Common Shares such that,
immediately after such purchase and giving effect thereto, DDRC's beneficial
ownership of Common Shares will be less than or equal to the Forty Percent
Threshold. The purchase price of all Common Shares issued pursuant to this
option will reduce the Additional Purchase Option on a dollar for dollar basis.
If DDRC's beneficial ownership of Common Shares falls below the Forty
Percent Threshold after the Additional Purchase Option has been exhausted or
otherwise terminated, then, notwithstanding the standstill provisions described
in Item 6(a)(i), DDRC has the right (to the extent permitted by law) to
purchase, in the open market or in one or more privately negotiated
transactions, a number of Common Shares such that, immediately after such
purchase and giving effect thereto, DDRC's beneficial ownership of Common Shares
will be less than or equal to the Forty Percent Threshold.
(iv) Funding Prior to the Second Closing Date. From the Initial
Closing Date until the earlier of (x) the Second Closing Date, (y) 180 days
after the Initial Closing Date, or (z) the date the Purchase Agreement is
terminated, DDRC is obligated to lend to AIP, at AIP's request, amounts that
cannot in the aggregate exceed $81,012,036.50 (the amount of the purchase price
of the Second Purchase), solely for the purpose of funding certain property
acquisitions. All such loans will be made pursuant to a promissory note that
bears interest at 10.25% annually, with interest payable quarterly, and with
principal and interest payable within 30 days after a demand by DDRC. Each
property acquisition must be approved by a majority of the Managers that are not
affiliates of the seller of the property or of the assignor of the right to
purchase the property at any time between the Initial Closing Date and the
exercise of the option. This option may only be exercised by action of a
majority of the Managers, excluding the Managers appointed by DDRC.
(v) Additional Purchase Option. The Additional Purchase Option is
described in Item 4(a).
(vi) Right to Nominate Managers. DDRC's right to nominate Managers
is described in Item 4(d).
(vii) Repurchase Obligation. On any termination of the Purchase
Agreement prior to the Second Closing Date, AIP
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must repurchase all Common Shares issued to DDRC within 30 days after such
termination.
(viii) Return of Properties. On any termination by DDRC of the
Purchase Agreement, other than a termination resulting from a material breach by
AIP, prior to the Second Closing Date, AIP may assign the properties acquired
under the Merger Agreement to DDRC in lieu of a portion of the funds required to
be paid under the repurchase obligation described in Item 6(a)(vi). On any
termination by AIP of the Purchase Agreement, other than a termination resulting
from a material breach by DDRC, prior to the Second Closing Date, DDRC has the
option to require AIP to return those properties to DDRC in lieu of a portion of
the funds required to be paid under the repurchase obligation described in Item
6(a)(vi).
(b) Voting Agreements. DDRC is a party to separate voting agreements
with each of the following shareholders of AIP (the "Significant Shareholders"):
(i) LaSalle Advisors Limited Partnership and ABKB/LaSalle Securities Limited
Partnership (the "LaSalle Entities"); (ii) Praedium II Industrial Associates LLC
("Praedium"); (iii) Morgan Stanley Asset Management Inc., on behalf of certain
of its clients with respect to shares of AIP over which it exercises investment
discretion, and MS Real Estate Special Situations, Inc. (the "Morgan Entities");
and (iv) USAA Real Estate Company ("USAA"). The voting agreements provide that
each Significant Shareholder will (i) either vote the Common Shares that it
beneficially owns, or recommend that such shares, vote, as applicable, in favor
of the transactions contemplated by the Purchase Agreement and the Merger
Agreement, and (ii) not solicit competing transactions involving AIP. The voting
agreement with the LaSalle Entities is subject to the LaSalle Entities' ability
to vote or recommend otherwise for fiduciary duty reasons. The voting agreements
provide that each Significant Shareholder, except for Praedium, agrees to either
vote the Common Shares that it beneficially owns or recommend that such shares
vote, as applicable, in favor of the Managers nominated by DDRC for so long as
DDRC's rights to nominate Managers continues under the Purchase Agreement. In
the Purchase Agreement, DDRC has agreed to vote its Common Shares in favor of
the nominees of each Significant Shareholder for so long such Significant
Shareholder has a right to nominate a Manager.
(c) Registration Rights Agreement. AIP and DDRC are parties to a
registration rights agreement (the "Registration Rights Agreement") relating to
the Common Shares. The Registration Rights Agreement provides that DDRC may make
up to three demands to have Common Shares registered pursuant to the Securities
Act of 1933, as amended (the "Securities Act"). These demand registration rights
are subject to certain limitations on other stockholders exercising their demand
rights.
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DDRC has the right to require that AIP file and have declared effective
a shelf registration statement to remain effective for three years from the date
such registration statement is declared effective. DDRC also has certain
"piggy-back" registration rights. DDRC must be notified prior to the filing of
any registration statement under the Securities Act by AIP. DDRC may include
Common Shares in any such registration statement. AIP must use its best efforts
to include any such Common Shares in that registration statement.
DDRC's rights under the Registration Rights Agreement rank pari passu
with those of the Significant Shareholders under similar agreements with AIP.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
A. Agreement among the Reporting Persons to file a joint
statement on Schedule 13D
B. Purchase Agreement(1)
C. Merger Agreement(1)
D. Voting Agreement between DDRC and the LaSalle
Entities(1)
E. Voting Agreement between DDRC and Praedium(1)
F. Voting Agreement between DDRC and the Morgan
Entities(1)
G. Voting Agreement between DDRC and USAA(1)
H. Registration Rights Agreement(1)
I. Credit Facility(2)
(1) Incorporated by reference herein from AIP's Current Report on Form 8-K
filed with the Commission on August 5, 1998, Commission file number
1-9016.
(2) Incorporated by reference herein from DDRC's Annual Report on Form 10-K
filed with the Commission on March 31, 1998, Commission file number
1-11690.
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
each of the undersigned hereby certifies that the information set forth in this
statement is true, complete and correct.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio
corporation
By: /s/ Scott A. Wolstein
--------------------------
Name: Scott A. Wolstein
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Title: Chief Executive Officer
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/s/ Scott A. Wolstein
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Scott A. Wolstein
Dated as of August 7, 1998
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DIRECTORS AND EXECUTIVE OFFICERS
OF DEVELOPERS DIVERSIFIED REALTY CORPORATION
The following table sets forth the name, business address,
present principal occupation or employment, the name, principal business and
address of the principal office of any corporation or other organization in
which such employment is conducted of each director and executive officer of
Developers Diversified Realty Corporation, an Ohio corporation ("DDRC").
Principal Occupation or
Employment and Name, Principal
Business and Address of
Organization in which
Name and Business Address Employment Conducted(1)
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A. Directors of DDRC
Scott A. Wolstein(2) Chairman of the Board,
President and Chief Executive
Officer of DDRC (real estate
investment trust); Chairman of the
Board of American Industrial
Properties REIT (real estate
investment trust)
James A. Schoff(2) Vice Chairman of the Board and Chief
Investment Officer of DDRC (real estate
investment trust)
William N. Hulett III Director of DDRC (real estate investment
6127 Chagrin River Road trust)
Bentleyville, OH 44022
Ethan Penner President of Nomura Asset Capital
101 California Street Corporation (real estate financing)
Suite 4225
San Francisco, CA 94111
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(1) The business address of the organization in which each person's
employment is conducted is the same as such person's business address.
(2) The business address of each such person is 34555 Chagrin Boulevard,
Moreland Hills, Ohio 44022.
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Principal Occupation or
Employment and Name, Principal
Business and Address of
Organization in which
Name and Business Address Employment Conducted(1)
- ------------------------- -----------------------
Albert T. Adams Partner, Baker & Hostetler LLP (law firm)
3200 National City Center
1900 East 9th Street
Cleveland, OH 44114-3485
Dean S. Adler Principal, Lubert-Adler Partners, L.P.
Belgravia, 8th Floor (real estate investments)
1811 Chesnut Street
Philadelphia, PA 19103
Barry A. Sholem Co-Chairman, Donaldson, Lufkin & Jenrett,
2121 Avenue of the Stars Inc. Real Estate Capital Partners (real
Los Angeles, CA 90667 estate investments)
B. Executive Officers of DDRC
Scott A. Wolstein(2) See A. above
James A. Schoff(2) See A. above
John R. McGill(2) Vice President and Director of Development
Joan U. Allgood(2) Vice President and General Counsel
Loren F. Henry(2) Vice President and Director of Management
William H. Schafer(2) Vice President and Chief Financial Officer
Alan Bobman(2) Regional Vice President of Leasing
Steven M. Dorsky(2) Regional Vice President of Leasing
Robin R. Walker(2) Regional Vice President of Leasing
- ----------------
(1) The business address of the organization in which each person's
employment is conducted is the same as such person's business address.
(2) The business address of each such person is 34555 Chagrin Boulevard,
Moreland Hills, Ohio 44022.
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EXHIBIT A
This Exhibit A to Schedule 13D is filed pursuant to the requirements of
Rule 13d(1)(f)(1)(iii). The undersigned, Developers Diversified Realty
Corporation and Scott A. Wolstein, hereby agree that the Schedule 13D to which
this Exhibit A is attached is filed on behalf of each of the undersigned.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION, an Ohio
corporation
By: /s/ Scott A. Wolstein
--------------------------
Name: Scott A. Wolstein
--------------------------
Title: Chief Executive Officer
-----------------------
/s/ Scott A. Wolstein
------------------------------
Scott A. Wolstein
Dated as of August 7, 1998
