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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 15, 1997
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BURNHAM PACIFIC PROPERTIES, INC.
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(Exact name of Registrant as specified in its Charter)
Maryland
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(State or other jurisdiction of incorporation)
1-9524 33-0204162
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(Commission File Number) (IRS Employer Identification No.)
610 West Ash Street, San Diego, California 92101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 652-4700
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(former name of former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
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A. Gateway Retail Center Acquisition
On August 15, 1997, the Company purchased Gateway Retail Center in Marin
County, California, a 186,473 square foot market/drug retail center.
The Company's acquisition cost was approximately $22,340,000, and was
funded from borrowings under the Company's Credit Facility. The Center
is the fourth acquisition of the six properties brought to the Company
in October 1995, as a part of the transaction that named David Martin as
President and CEO of Burnham Pacific. Development of the Center was
completed during 1997, and therefore the Center does not have an income
statement which reflects a full year of operations.
B. Mountaingate Plaza Acquisition
On October 15, 1997, the Company purchased Mountaingate Plaza in Simi
Valley, Ventura County, California, a 282,162 square foot
entertainment/promotional center from an unrelated Seller. The
Company's acquisition cost was approximately $27,500,000. The
acquisition was financed by the assumption of a $23,592,000 mortgage
loan from a bank, bearing interest at 8.05%, due in March 2006, with the
remainder financed with borrowings under the Company's Credit Facility.
The acquisition of Mountaingate Plaza does not constitute the
acquisition of a property which is significant within the contemplation
of Item 2 under Form 8-K or Rule 3-14 of Regulation S-X; i.e., an asset
whose acquisition cost is in excess of 10% of the gross Company value of
the Company's assets of December 31, 1996. However, the purchase price
of Mountaingate Plaza does represent more than 5% of such value of the
Company's assets at December 31, 1996, and the Company therefore
anticipates filing audited income statements of the operations of
Mountaingate in conformance with Regulations S-X, Rule 3-14 within 75
days from its purchase date.
C. Powell Portfolio Acquisition
On October 29, 1997, the Company purchased five retail shopping centers
(the "Powell Portfolio") from an unrelated seller for a purchase price
of approximately $23,500,000. The portfolio purchased consists of the
following five centers:
Company Owned Total
Center Name Location Square Footage Square Footage
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Chambers Creek
Shopping Center Tacoma, Washington 58,179 58,179
Design Market Bellevue, Washington 88,587 88,587
Fairwood Square
Shopping Center Renton, Washington 33,040 76,040
Puget Park
Shopping Center Everett, Washington 40,932 81,932
Silver Plaza
Shopping Center Silver City, New Mexico 8,921 52,921
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The acquisition of the above portfolio was financed by the assumption of
a $1,623,358 mortgage loan from an insurance company, bearing interest
at 8.75%, due in February, 2017, secured by the Chambers Creek Shopping
Center; a $2,578,447 mortgage loan from an insurance company bearing
interest 8.38%, due in July, 2007, secured by the Puget Park Shopping
Center; with the remainder financed with borrowings under the Company's
Credit Facility.
The Powell Portfolio was acquired pursuant to an agreement to acquire a
total of ten existing retail centers, with the ability to purchase three
additional centers, at a future date, two of which are under
development. The acquisition of the eight additional centers (the
"Additional Powell Assets"), which in total include approximately
321,000 square feet of space in Washington, Oregon and New Mexico, is
subject to the completion of due diligence and the completion and
leasing of those centers currently under construction, and thus no
assurance can be given that such acquisition(s) will be made.
The Company anticipates filing a further 8-K reporting the acquisition
of any Additional Powell Assets, at such time as the aggregate of the
Powell Portfolio and Additional Powell Assets would become
"significant" within the contemplation of Item 2 under Form 8-K or Rule
3-14 of Regulation S-X, i.e. assets whose acquisitions cost is in excess
of 10% of the gross carrying value of the Company's assets at December
31, 1996. However, the purchase price of the Powell Portfolio does
represent more then 5% of such value of the Company's assets at December
31, 1996, and the Company anticipates filing audited income statements
of the operations of the Powell Portfolio in conformance with
Regulations S-X, Rule 3-14 with 75 days from its purchase date.
D. Golden State Portfolio Acquisition
On November 5, 1997, the Company issued a press release announcing the
signing of letters of intent relating to a proposed acquisition of a 2.7
million square foot California retail portfolio, and simultaneous
investments by two capital groups of $120,000,000. A copy of the press
release making such announcement is attached as Exhibit I hereto. The
closing of the transactions are subject to a number of conditions
including due diligence and definitive documents. There can be no
assurance that the transactions will be completed.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
a) None.
b) The following Exhibit accompanies this report - November 5, 1997 Press
Release.
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.
BURNHAM PACIFIC PROPERTIES, INC.
Date: 11-14-97 By: /s/ DANIEL B. PLATT
Daniel B. Platt, Chief Financial Officer
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EXHIBIT I
PRESS RELEASE
CONTACT:
Daniel B. Platt, Chief Financial Officer
Tel: 619-652-4700
Fax: 619-652-4711
[email protected]
BURNHAM PACIFIC ANNOUNCES MERGER PROPOSAL AND EQUITY FINANCING WITH NEW
STRATEGIC INVESTORS
SAN DIEGO, November 05, 1997 -- Burnham Pacific Properties, Inc. (NYSE:BPP)
announced today the signing of letters of intent with Golden State
Properties relating to a proposed merger of the 2.7 million square-foot
California retail portfolio of Golden State into Burnham Pacific.
Simultaneously, Blackacre Capital Group, LP and Westbrook Partners, L.L.C.
would invest $120 million in newly issued convertible preferred securities of
Burnham Pacific. It is anticipated that the transactions will close by year
end subject to a number of conditions including due diligence and definitive
documents.
The Parties
West Coast-based Burnham Pacific is a publicly traded real estate
investment trust listed on the New York Stock Exchange under the symbol
"BPP." Burnham currently owns 37 retail properties and four office/industrial
properties totaling over 5.7 million square feet, all located on the West
Coast.
Golden State is a private investment partnership between Los
Angeles-based Highridge Partners (Gene Rosenfeld and John Long) and private
real estate investment fund Blackacre Capital Group L.P. of New York. Golden
State currently owns 20 retail properties totaling approximately 2.7 million
square feet, all of which are grocery anchored centers in California.
Westbrook Partners is a private New York based investment fund manager
with over $2.5 billion in real estate assets under management.
The combined entity would own 61 properties totaling some 8.5 million
square feet having a book value exceeding $1 billion, which would make it the
largest publicly traded West Coast retail REIT.
The Strategy
Both companies recognized the opportunity to acquire anchored West Coast
retail properties at prices below replacement cost, at rents below current
market, and in mature locations with established demand and barriers to entry.
Both companies began executing the same strategy in 1996, continuing until
today. With a total West Coast retail property market size of over 900 million
square feet and no one owner controlling more than a 1% market share,
considerable opportunity exists for growth through consolidation.
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BPP Announces Merger Proposal with Golden State Properties - Page two
Both companies further recognize the efficiencies and synergies gained by
operating as a single entity executing this shared vision. A significant
element of this vision will be to employ an aggressive acquisition program of
single assets, portfolios and operating companies.
David Martin, President of Burnham Pacific, commented, "The transaction
would accomplish several important things for us; first it provides short-term
and long-term accretion for our shareholders; secondly, it would make us the
largest player in our market and provides many operating efficiencies and
market opportunities as a result; and lastly, it would bring to the company two
successful and highly sophisticated real estate operating company investors
that not only provide a significant endorsement of our strategy, but supplement
our existing team."
John Long, Managing Partner of Highridge, added, "We believe we are still
in the early innings of the California recovery and the retail property
rebound, and we believe that the best way for us to take advantage of this
opportunity is to merge our portfolio with Burnham Pacific."
Ron Kravit, Managing Director of Blackacre, agreed, "We were offered
several competitive cash offers, however, we believe that significant upside
remains in our assets and in the combined entity. Of all the West Coast retail
entities, we believe Burnham Pacific is the best positioned to be the major
consolidator on the West Coast. We further believe in the merits of the
company's strategy and its potential earnings growth and multiple expansion,
and therefore we are very pleased to be a major shareholder and look forward to
significant increase in shareholder value."
Paul D. Kazilionis, Managing Principal of Westbrook Partners added, "Part
of our company's strategy is to back those real estate companies which we
believe are emerging as the leading player in each of their respective
sectors. We believe that this merger clearly positions Burnham Pacific as the
leader in West Coast retail, given the Company's strong assets and markets,
experienced management team and growth strategy."
The Golden State Properties
The Golden State portfolio consists of 20 grocery-anchored retail centers,
all located in California. Of the total income, 54% comes from grocery stores,
of which the largest is Ralph's at 8.3%, Rally's at 7.4% and Lucky's at 3.8%.
The total portfolio is currently 93% occupied.
The Structure
The Golden State portfolio is being valued at an initial price of up to
$314 million and a total price of up to $344 million. The partners of Golden
State are reinvesting equity in Burnham Pacific in the form of $50 million of
convertible preferred securities priced at a conversion premium of 7% over the
negotiated
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BPP Announces Merger Proposal with Golden State Properties - Page three
merger price of $14 3/8 per share, equaling $15 3/8 per share. The convertible
preferred securities will carry a dividend yield of 8%.
In addition, Westbrook Partners will also acquire $70 million of
convertible preferred stock in Burnham Pacific under similar terms and
conditions as the Partners of Golden State. The Westbrook funding will occur
at the closing of the transaction.
The company's total equity base would increase some 35% with the addition
of the $120 million in convertible preferred securities.
Nomura Real Estate Finance has committed to fund $150 million in first
mortgage debt collaterialized by the Golden State assets at a fixed rate of 85
basis points over treasuries. The rate will be locked prior to closing.
The balance of the initial closing, some $55 million before costs, will be
funded from Burnham Pacific's line of credit which is also provided by Nomura.
Burnham Pacific expects this transaction to be accretive to its funds from
operations per share on a primary and fully diluted basis assuming a consistent
leverage ratio prior to and after the transaction.
Donaldson, Lufkin & Jenrette Securities Corporation is acting as Financial
Advisor in connection with the transactions.
Burnham Pacific Properties is a fully integrated real estate operating
company which acquires, rehabilitates, develops and manages retail properties
on the West Coast. Headquartered in San Diego, Burnham Pacific has regional
offices in Los Angeles, San Francisco and Portland, Oregon. More information
on Burnham Pacific Properties may be found on the company's website at
www.burnhampacific.com, or by calling 800-462-5181.
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