SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 11, 1997
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VALUE PROPERTY TRUST
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(Exact name of registrant as specified in its charter)
Maryland 1-6613 23-1862664
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
120 Albany Street, 8th Floor
New Brunswick, New Jersey 08901-2163
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 296-3080
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VALUE PROPERTY TRUST AND SUBSIDIARIES
INDEX
Page No.
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Item 2. Acquisition or Disposition of Assets.................... 2
Item 7. Financial Statements and Exhibits ...................... 3
Signatures ........................................ 4
Appendix A ............................................. F-1 - F-8
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VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 11, 1997 and July 15, 1997, Value Property Trust (the
"Trust") received net cash proceeds of $6.3 million and provided mortgage
financing in the amount of $6.2 million from the sale of two real estate
properties to unaffiliated third parties. The carrying value of these two real
estate properties was approximately $7.4 million. The properties were located in
California and were divested based on a number of factors including the price
offered, the Trust's evaluation of the property's potential for future
appreciation and the current return to the Trust. The Trust continues to operate
21 properties in eight states.
One of the properties sold was encumbered under the terms of the
indenture relating to the Floating Rate Notes (the "New Indenture"). On August
1, 1997, the Trust will use $2.6 million of the net proceeds from the sale of
the encumbered property to prepay a portion of the Floating Rate Notes, as
required under the terms of the New Indenture.
During the third quarter of fiscal 1997, as previously reported on
Form 8-K filed with the Securities and Exchange Commission on July 9, 1997, the
Trust received net cash proceeds of $40.1 million from the sale of three real
estate properties to an unaffiliated third party. The carrying value of these
real estate properties was approximately $28.6 million. The properties were
located in California and were divested based on a number of factors including
the price offered, the Trust's evaluation of the property's potential for future
appreciation and the then current return to the Trust.
Two of the properties sold during the third quarter were encumbered
under the terms of the New Indenture. On July 1, 1997, the Trust used $22.1
million of the net proceeds from the sale of the encumbered properties to prepay
a portion of the Floating Rate Notes, as required under the terms of the New
Indenture.
During the second quarter of fiscal 1997, as previously reported on
Form 8-K filed with the Securities and Exchange Commission on April 1, 1997, the
Trust received net cash proceeds of $28.2 million from the sale of four real
estate properties to unaffiliated third parties. These sales occurred between
February 21, 1997 and March 17, 1997. The carrying value of these real estate
properties was approximately $22.4 million. Three of the properties, located in
Maine, Oregon and Washington, were outside of the geographic regions in which
the Trust is focusing its operating activities. The fourth property, located in
Pennsylvania, was divested based on a number of factors including the price
offered, the Trust's evaluation of the property's potential for future
appreciation and the then current return to the Trust.
Two of the properties sold during the second quarter of fiscal 1997
were encumbered under the terms of the New Indenture. The Trust used $11.1
million of the net proceeds from the sale of the encumbered properties to prepay
a portion of the Floating Rate Notes on March 3, 1997 and April 1, 1997, as
required under the terms of the New Indenture.
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<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
The Pro Forma Balance Sheet as of March 31, 1997, the Pro Forma
Statement of Operations for the Six Months Ended March 31, 1997 and for the Year
Ended September 30, 1996, which are attached as Appendix A, hereto, have been
prepared to reflect the sale of nine real estate properties and the repayment of
related debt. The pro-forma financial information is based on and should be read
in conjunction with the historical financial statements and the notes thereto
filed as part of the Trust's quarterly report on Form 10-Q for the quarter ended
March 31, 1997 and the Trust's annual report on Form 10-K for the fiscal year
ended September 30, 1996. The Pro Forma Balance Sheet as of March 31, 1997 was
prepared as if the third and fourth quarter property sales, the mortgage
financing and the related loan repayments had occurred on March 31, 1997. In
addition, the Pro Forma Balance Sheet as of March 31, 1997 reflects the loan
repayment from an encumbered second quarter property sale which was required on
April 1, 1997 under the terms of the New Indenture. The Pro Forma Statement of
Operations for the six months ended March 31, 1997 and for the year ended
September 30, 1996 were prepared as if the property sales which occurred during
the second, third and fourth quarters of fiscal 1997 and the related loan
repayments had occurred on October 1, 1995. In addition, the Pro Forma Statement
of Operations for the year ended September 30, 1996 was prepared as if the
mortgage financing had occurred on October 1, 1995 and matured on September 30,
1996. The pro forma financial information is unaudited and not necessarily
indicative of the results that would have actually occurred had the nine
property sales and related loan repayments been consummated on October 1, 1995
nor does it purport to represent the financial position and results of
operations for future periods.
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<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
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 thereunto duly authorized.
Value Property Trust
/s/Robert T. English
--------------------
Robert T. English
Secretary, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
DATE: July 28, 1997
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<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
APPENDIX A TO
CURRENT REPORT ON FORM 8-K
ITEMS 2 AND 7
Pro Forma Unaudited Financial Statements as of March 31, 1997 and audited
and Pro Forma unaudited Financial Statements as of September 30, 1996.
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<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
FORM 8-K -- Item 2 and 7 (b)
INDEX OF PRO FORMA FINANCIAL STATEMENTS
Page No.
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Pro Forma Balance Sheet as of March 31, 1997......................... F-2
Pro Forma Statement of Operations for the Six
Months Ended March 31, 1997 ................................... F-4
Pro Forma Statement of Operations for the Year
Ended September 30, 1996 ...................................... F-5
Notes and Management's Assumptions to the Unaudited
Pro Forma Financial Statements................................. F-6
F-1
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VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)
- ------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
-------------------------------
Historical Third Fourth Pro Forma
March 31, Quarter Quarter Amount
1997 Sales Sales (As Adjusted)
--------- --------- --------- ---------
ASSETS
<S> <C> <C> <C> <C>
Assets Held for Sale:
Investment in partnerships ............. $ 15,906 $ (4,590) A $ (5,535) B $ 5,781
Real estate owned ...................... 47,076 (23,811) A (1,898) B 21,367
--------- --------- --------- ---------
Total Assets Held for Sale ....... 62,982 (28,401) (7,433) 27,148
--------- --------- --------- ---------
Assets Held for Investment:
Mortgage loans ......................... 605 6,257 B 6,862
Real estate owned ...................... 37,801 37,801
--------- --------- --------- ---------
Total Assets Held for Investment . 38,406 6,257 44,663
--------- --------- --------- ---------
Total Invested Assets ............ 101,388 (28,401) (7,433) 71,811
Cash and cash equivalents ................. 53,526 18,040 A 3,688 B 75,254
Restricted cash ........................... 11,943 (6,847) A 5,096
Interest receivable and other assets ...... 3,908 3,908
--------- --------- --------- ---------
Total Assets ..................... $ 170,765 $ (17,208) $ 2,512 $ 156,069
========= ========= ========= =========
LIABILITIES
Senior secured notes (due 1999) ........... $ 49,729 $ (28,936) A (2,570) B $ 18,223
Accounts payable and accrued expenses ..... 1,540 1,540
Interest payable .......................... 252 252
--------- --------- --------- ---------
Total Liabilities ................ 51,521 (28,936) (2,570) 20,015
--------- ---------- --------- ---------
</TABLE>
F-2
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VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED BALANCE SHEETS (Unaudited)(continued)
(In Thousands)
- ------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
Historical Third Fourth Pro Forma
March 31, Quarter Quarter Amount
1997 Sales Sales (As Adjusted)
--------- --------- --------- ---------
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Preferred shares, $1 par value:
3,500,000 shares authorized, none issued -- -- -- --
Common shares, $1 par value:
20,000,000 shares authorized,
11,226,310 shares
issued and outstanding ............... 11,226 11,226
Additional paid-in capital ................ 88,848 88,848
Accumulated earnings ...................... 19,170 11,728 A 5,082 B 35,980
--------- --------- --------- ---------
Total Shareholders' Equity ....... 119,244 11,728 5,082 136,054
--------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity ........... $ 170,765 $ (17,208) $ 2,512 $ 156,069
========= ========= ========= =========
See accompanying notes to the consolidated financial statements.
</TABLE>
F-3
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VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
Six Months -------------------------------------------------
Ended Second Third Fourth Pro Forma
March 31, Quarter Quarter Quarter Amount
1997 Sales Sales Sales (As Adjusted)
----------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental properties:
Rental income........................... $ 11,649 $ (1,918) C $ (2,026) F (642) H $ 7,063
Operating expense reimbursements........ 1,675 (41) C (627) F (197) H 810
Interest and fee income on mortgage loans... 42 42
Interest on short-term investments.......... 1,114 1,114
Other....................................... 8 8
----------- ----------- ----------- ---------- -------------
Total Revenue........................... 14,488 (1,959) (2,653) (839) 9,037
----------- ----------- ----------- ---------- -------------
Expenses:
Interest.................................... 2,773 (692) D (903) G (105) I 1,073
Rental properties:
Operating............................... 4,931 (658) C (786) F (333) H 3,154
Depreciation and amortization........... 944 (4) C (253) F (63) H 624
Other operating expenses.................... 1,515 1,515
----------- ----------- ----------- ---------- -------------
Total Expenses.......................... 10,163 (1,354) (1,942) (501) 6,366
----------- ----------- ----------- ----------- -------------
Income before gain on sale of real estate...... 4,325 (605) (711) (338) 2,671
Gain on sale of real estate.................... 7,872 (6,077) E 1,795
----------- ----------- ----------- ---------- -------------
Net income..................................... $ 12,197 $ (6,685) $ (711) (338) $ 4,466
=========== =========== =========== ========== =============
Per share:
Income before gain on sale of real estate...... $ .39 $ .24
Gain on sale of real estate.................... .70 .16
----------- -------------
Net income .................................... $ 1.09 $ .40
=========== =============
Weighted average number of common
shares outstanding.......................... 11,226 11,226
=========== =============
See accompanying notes to the consolidated financial statements.
</TABLE>
F-4
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VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Data)
- ------------------------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
Year -----------------------------------------------
Ended Second Third Fourth Pro Forma
September 30, Quarter Quarter Quarter Amount
1996 Sales Sales Sales (As Adjusted)
-------- --------- ----------- ---------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Rental properties:
Rental income................................. $ 26,925 $ (4,312) J $ (3,908) M (1,447) P $ 17,258
Operating expense reimbursements.............. 3,557 (140) J (1,113) M (454) P 1,850
Interest and fee income on mortgage loans 2,853 558 Q 3,411
Interest on short-term investments................ 1,713 1,713
Other............................................. 18 18
-------- --------- ----------- ---------- ---------
Total Revenue................................. 35,066 (4,452) (5,021) (1,343) 24,250
-------- --------- ----------- ---------- ---------
Expenses:
Interest.......................................... 10,489 (386) K (765) N (89) R 9,249
Rental properties:
Operating..................................... 12,084 (1,525) J (1,633) M (743) P 8,183
Depreciation and amortization................. 2,347 (67) J (763) M (183) P 1,334
Other operating expenses.......................... 3,173 3,173
-------- --------- ----------- ---------- ---------
Total Expenses................................ 28,093 (1,978) (3,161) (1,015) 21,939
-------- --------- ----------- ---------- ---------
Net income........................................... $ 6,973 $ (2,474) L $ (1,860) O (328) S $ 2,311
======== ========= =========== ========== =========
Net income per share................................. $ .62 $ .21
======== =========
Weighted average number of common
shares outstanding................................ 11,226 11,226
======== =========
See accompanying notes to the consolidated financial statements.
</TABLE>
F-5
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
MARCH 31, 1997 AND SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying Pro Forma Balance Sheet as of March 31, 1997 is
presented as if the real estate property sales which occurred during the third
and fourth quarters of fiscal 1997, the mortgage financing and the related loan
repayments had occurred on March 31, 1997.
The accompanying Pro Forma Statement of Operations for the six months
ended March 31, 1997 and the year ended September 30, 1996 are presented as if
the real estate property sales which occurred during the second, third and
fourth quarters of fiscal 1997 and the related loan repayments had occurred on
October 1, 1995. In addition, the Pro Forma Statement of Operations for the year
ended September 30, 1996 was prepared as if the mortgage financing had occurred
on October 1, 1995 and matured on September 30, 1996. The Pro Forma Statements
of Operations do not assume an increase in investment income for the periods
presented.
These pro forma financial statements should be read in conjunction with
the historical financial statements and notes hereto as of March 31, 1997 and
September 30, 1996 filed as part of the Trust's quarterly report on Form 10-Q
for the quarter ended March 31, 1997 and the Trust's annual report on Form 10-K
for the fiscal year ended September 30, 1996, respectively. In management's
opinion, all adjustments necessary to reflect the effects of these real estate
property sales by the Trust have been made.
The unaudited pro forma financial statements are not necessarily
indicative of the actual financial position as of March 31, 1997 or what the
actual results of operations would have been assuming the real estate property
sales had been consummated on October 1, 1995, nor do they represent the
financial position and results of operations for future periods.
NOTE 2 - ADJUSTMENTS TO THE PRO FORMA FINANCIAL STATEMENTS
A) Reflects the net cash proceeds of $40.1 million received from the sale of
three real estate properties with a carrying value of approximately $28.4
million as of March 31, 1997. Reflects the use of $22.1 million of the net cash
proceeds from the sale of two encumbered properties during the third quarter of
fiscal 1997 to prepay a portion of the Floating Rate Notes, as required under
the terms of the New Indenture. Reflects the use of $6.8 million of the net
proceeds from the sale of an encumbered property in the second quarter to prepay
a portion of the Floating Rate Notes, which was required on April 1, 1997 under
the terms of the New Indenture.
B) Reflects the net cash proceeds received of $6.3 million and the mortgage
financing of $6.2 million from the sale of two real estate properties with a
carrying value of approximately $7.4 million as of March 31, 1997. The real
estate transaction involving the mortgage financing is considered a sale under
the requirements of Statement of Financial Accounting Standards Number 66
F-6
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
"Accounting for Sales of Real Estate." The Trust provided a nine percent per
annum, one year balloon mortgage with a 20 year term. Reflects the use of $2.6
million of the net cash proceeds from the sale of an encumbered property during
the fourth quarter of fiscal 1997 to prepay a portion of the Floating Rate
Notes, as required under the terms of the New Indenture.
C) Reflects the reversal of revenue and expense associated with the operations
of the four properties sold during the second quarter of fiscal 1997.
D) Reflects the reduction in interest expense related to the two encumbered
properties sold during the second quarter of fiscal 1997.
E) Reflects the reversal of the gain on sale of real estate assuming the four
property sales were consummated on October 1, 1995. In conjunction with the
adoption of Fresh Start Reporting on September 30, 1995, all gains and losses
for a period of one year after such adoption are applied against the carrying
value of long lived assets held for investment. Therefore, as a result of the
adoption of Fresh Start Reporting, the pro forma statement of operations does
not report the gain on sale of $6.1 million in net income from the four real
estate sales during the second quarter of fiscal 1997, but rather applies the
$6.1 million as a reduction of the carrying value of the remaining assets held
for investment.
F) Reflects the reversal of revenue and expense associated with the operations
of the three properties sold during the third quarter of fiscal 1997.
G) Reflects the reduction in interest expense related to the two encumbered
properties sold during the third quarter of fiscal 1997.
H) Reflects the reversal of revenue and expense associated with the operations
of the two properties sold during the fourth quarter of fiscal 1997.
I) Reflects the reduction in interest expense related to an encumbered property
sold during the fourth quarter of fiscal 1997.
J) Reflects the reversal of revenue and expense associated with the operations
of the four sold properties during the second quarter of fiscal 1997.
K) Reflects the reduction in interest expense related to the two encumbered
properties sold during the second quarter of fiscal 1997.
L) Does not reflect the gain on sale of real estate assuming the property sales
were consummated on October 1, 1995. In conjunction with the adoption of Fresh
Start Reporting on September 30, 1995, all gains and losses for a period of one
year after such adoption are applied against the carrying value of long lived
assets held for investment. Therefore, as a result of the adoption of Fresh
Start Reporting, the pro forma statement of operations does not report the gain
on sale of $5.9 million in net income from the four real estate sales during the
second quarter of fiscal 1997, but rather applies the $5.9 million as a
reduction of the carrying value of the remaining assets held for investment.
M) Reflects the reversal of revenue and expense associated with the operations
of the three sold properties during the third quarter of fiscal 1997.
F-7
<PAGE>
VALUE PROPERTY TRUST AND SUBSIDIARIES FORM 8-K
N) Reflects the reduction in interest expense related to the two sold encumbered
properties during the third quarter of fiscal 1997.
O) Does not reflect the gain on sale of real estate assuming the property sales
were consummated on October 1, 1995. In conjunction with the adoption of Fresh
Start Reporting on September 30, 1995, all gains and losses for a period of one
year after such adoption are applied against the carrying value of long lived
assets held for investment. Therefore, as a result of the adoption of Fresh
Start Reporting, the pro forma statement of operations does not report the gain
on sale of $11.7 million in net income from the three real estate sales during
the third quarter of fiscal 1997, but rather applies the $11.7 million as a
reduction of the carrying value of the remaining assets held for investment.
P) Reflects the reversal of revenue and expense associated with the operations
of the two sold properties during the fourth quarter of fiscal 1997.
Q) Reflects the increase in interest income associated with the mortgage
financing from the sale of a property during the fourth quarter of fiscal 1997.
R) Reflects the reduction in interest expense related to an encumbered property
sold during the fourth quarter of fiscal 1997.
S) Does not reflect the gain on sale of real estate assuming the property sales
were consummated on October 1, 1995. In conjunction with the adoption of Fresh
Start Reporting on September 30, 1995, all gains and losses for a period of one
year after such adoption are applied against the carrying value of long lived
assets held for investment. Therefore, as a result of the adoption of Fresh
Start Reporting, the pro forma statement of operations does not report the gain
on sale of $5.1 million in net income, from the two real estate sales during the
fourth quarter of fiscal 1997, but rather applies the $5.1 million as a
reduction of the carrying value of the remaining assets held for investment.
F-8
