SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM____TO ___
COMMISSION FILE NUMBER: 1-7003
PROPERTY CAPITAL TRUST
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2452367
- ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
177 MILK STREET, BOSTON, MASSACHUSETTS 02109
--------------------------------------------
(Address of principal executive offices)
(zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(617) 482-4081
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes [X] No [ ].
NUMBER OF SHARES OF COMMON SHARES OUTSTANDING AS OF NOVEMBER 7, 1998: 9,584,220
---------
<PAGE>
PROPERTY CAPITAL TRUST
INDEX
Page
PART I. FINANCIAL INFORMATION Number
- ------------------------------ ------
ITEM 1. FINANCIAL INFORMATION
Consolidated Balance Sheets - September 30, 1998 (unaudited)
and December 31, 1997 2
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1998 and 1997
(unaudited) 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Shareholders' Equity -
Nine Months Ended September 30, 1998 and 1997 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7-9
PART II. OTHER INFORMATION
- --------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10-11
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
PROPERTY CAPITAL TRUST
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Real Estate Investments
Assets Held for Sale directly by the Trust $ - $ 15,077,000
Cash and cash equivalents 3,085,000 3,160,000
Interest and rents receivable - 280,000
Other assets 8,000 2,666,000
------------- -------------
$ 3,093,000 $ 21,183,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 523,000 $ 5,983,000
Accrued interest - 41,000
Mortgage notes payable - 8,345,000
------------- -------------
523,000 14,369,000
------------- -------------
Shareholders' Equity
Common Shares (without par value, unlimited shares authorized, 9,584,220
issued, and 9,584,220 and 9,397,369 outstanding,
respectively) 108,568,000 108,568,000
Accumulated deficit (105,998,000) (100,438,000)
------------- -------------
2,570,000 8,130,000
Less cost of Treasury Shares - (1,316,000)
------------- -------------
Total Shareholders' Equity 2,570,000 6,814,000
------------- -------------
$ 3,093,000 $ 21,183,000
============= =============
</TABLE>
See accompanying notes
2
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -----------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rents from Owned Properties held directly by the Trust $ 48,000 $ 2,678,000 $ 469,000 $ 8,742,000
Structured Transactions held directly by the Trust
Base income - 583,000 1,853,000 1,817,000
Overage income - 322,000 107,000 995,000
Income from unconsolidated Investment Partnerships - 45,000 - 135,000
----------- ----------- ----------- -----------
48,000 3,628,000 2,429,000 11,689,000
Interest income 51,000 108,000 167,000 304,000
Other income - 2,000 7,000 18,000
----------- ----------- ----------- -----------
99,000 3,738,000 2,603,000 12,011,000
----------- ----------- ----------- -----------
EXPENSES
General and administrative expenses 162,000 642,000 909,000 1,691,000
Expenses on Owned Properties held directly by the Trust - 1,126,000 210,000 3,931,000
Trustees' fees and expenses 30,000 24,000 90,000 71,000
Interest - 723,000 10,000 2,180,000
Professional fees 6,000 36,000 6,000 146,000
Depreciation - 125,000 - 1,180,000
----------- ----------- ----------- -----------
198,000 2,676,000 1,225,000 9,199,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL
ESTATE INVESTMENTS (99,000) 1,062,000 1,378,000 2,812,000
GAIN ON SALE OF REAL ESTATE INVESTMENTS - 4,750,000 4,083,000 26,128,000
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (99,000) $ 5,812,000 $ 5,461,000 $28,940,000
=========== =========== =========== ===========
NET (LOSS) INCOME PER SHARE
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL
ESTATE INVESTMENTS $ (0.01) $ 0.11 $ 0.14 $ 0.30
GAIN ON SALE OF REAL ESTATE INVESTMENTS - 0.50 0.43 2.73
----------- ----------- ----------- -----------
BASIC AND DILUTED NET (LOSS) INCOME PER SHARE $ (0.01) $ 0.61 $ 0.57 $ 3.03
=========== =========== =========== ===========
AVERAGE SHARES 9,584,220 9,584,220 9,584,220 9,561,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes
3
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 5,461,000 $28,940,000
Adjustments to Net Income
Gain on sale of real estate investments (4,083,000) (26,128,000)
Depreciation and amortization - 1,320,000
Income from unconsolidated Investment Partnerships - (135,000)
Distributions of income from Investment Partnerships - 24,000
Changes in assets and liabilities
Decrease in interest and rents receivable 280,000 755,000
Decrease (increase) in other assets, net 2,658,000 (799,000)
(Decrease) increase in accounts payable and accrued
expenses and accrued interest (4,185,000) 841,000
----------- -----------
Net Cash Provided by Operating Activities 131,000 4,818,000
----------- -----------
INVESTING ACTIVITIES
Owned Properties held directly by the Trust
Dispositions 4,564,000 8,865,000
Additions (65,000) (3,116,000)
Structured Transactions held directly by the Trust
Dispositions/repayments 6,316,000 46,750,000
Investment Partnerships
Distributions in excess of income - 1,515,000
----------- -----------
Net Cash Provided by Investing Activities 10,815,000 54,014,000
----------- -----------
FINANCING ACTIVITIES
Cash dividends paid (11,021,000) (34,086,000)
Scheduled amortization of mortgage notes payable - (230,000)
Proceeds from exercise of stock options - 515,000
----------- -----------
Net Cash Used in Financing Activities (11,021,000) (33,801,000)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (75,000) 25,031,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,160,000 1,648,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,085,000 $26,679,000
=========== ===========
</TABLE>
See accompanying notes
4
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON SHARES
Balance at beginning of period $108,568,000 $108,053,000
Stock options exercised - 515,000
------------ ------------
Balance at end of period 108,568,000 108,568,000
------------ ------------
ACCUMULATED DEFICIT
Balance at beginning of period (100,438,000) (45,319,000)
Net income 5,461,000 28,940,000
Cash dividends paid (11,021,000) (34,086,000)
------------ ------------
Balance at end of period (105,998,000) (50,465,000)
------------ ------------
TREASURY SHARES
Balance at beginning of period (1,316,000) (1,362,000)
Distribution to Trustees of Treasury Shares included in Rabbi
Trust for the benefit of Trustees (186,851 and 3,851
Treasury Shares, respectively) 1,316,000 26,000
------------ ------------
Balance at end of period - (1,336,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 2,570,000 $ 56,767,000
============ ============
NUMBER OF COMMON SHARES
Common Shares issued at beginning of period 9,584,220 9,400,860
Stock options exercised - 183,360
------------ ------------
Common Shares Issued at End of Period 9,584,220 9,584,220
============ ============
</TABLE>
See accompanying notes
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management of Property Capital Trust (the "Trust"), the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of normal and recurring adjustments, necessary to
present fairly the Trust's financial position as of September 30, 1998 and the
results of its operations and its cash flows for the periods ended September 30,
1998 and 1997.
Operating results for the nine months ended September 30, 1998 are not
indicative of the results that may be expected for the remainder of calendar
1998. The information contained in these financial statements should be read in
conjunction with the Trust's 1997 Annual Report on Form 10-K filed with the SEC
on March 31, 1998, as amended by the Trust's Amendment No. 1 on Form 10-K/A
filed with the SEC on April 30, 1998.
2. REAL ESTATE INVESTMENTS
ASSETS HELD FOR SALE DIRECTLY BY THE TRUST
At September 30, 1998, there were no Assets Held for Sale directly by the Trust.
On June 17, 1998, the Trust's Cincinnati Marriott Inn $2,000,000 land investment
was purchased by the Trust's lessee for $2,000,000 and the Trust's related
leasehold mortgages were prepaid at their face amount of $4,316,000. In August
1996, the Trust had allocated $1,016,000 of its former allowance for possible
investment losses to these mortgages. As a consequence, the repayment resulted
in a gain to the Trust of $1,016,000. In addition, the Trust received $1,600,000
of land rent and mortgage interest, earned in 1991 through 1994, which had
previously been written off.
In January 1998, the Trust sold Park Place to an unrelated party for
$14,145,000, resulting in a gain to the Trust of $3,067,000. Previously, in
August 1996, the Trust had allocated $1,239,000 of its former allowance for
possible investment losses to this investment. The property's $8,345,000 first
mortgage was assumed by the buyer.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS PLAN
Since 1995, the Trust has operated under a business plan (the "Business Plan")
which provided for the orderly disposition of all of the Trust's investments on
a property-by-property basis. As of September 30, 1998, the Trust had disposed
of all of its real estate investments and had approximately $3,000,000 in cash
which it intends to utilize to satisfy all of its remaining obligations and then
to distribute the remainder to its shareholders.
In the summer of 1997, management of the Trust and the Trustees began to
consider possible alternatives for terminating the Trust once its assets had
been sold. In June 1998, after discussions with several groups, the Trust
announced that it had entered into an agreement to merge with and into Maryland
Property Capital Trust, Inc. (the "Corporation"). Simultaneously with the
execution of the merger agreement, the Corporation entered into a series of
related agreements (the "Related Transactions") with affiliates of the Beal
Companies, LLP, a Boston based real estate development and investment company.
Due to recent market conditions, however, the parties renegotiated the terms of
the proposed merger and the Related Transactions in October 1998. As a result of
a restructuring of the merged entity's capitalization, the interests of Property
Capital Trust's shareholders will be junior to certain interests of affiliates
of the Beal Companies, LLP in the merged entity. Therefore, at the time of the
merger, while the Trust's shareholders will receive all of the Trust's remaining
net worth (which is currently estimated to be $0.23 per share after giving
affect to expected operating expenses through the date of merger and accrued
expenses) prior to the consummation of the merger, the interests of the Trust's
shareholders in the surviving entity will be without value.
The merger is subject to the approval of the Trust's shareholders and, if
approved, would eliminate the need to establish a liquidating trust to hold
reserves to meet contingent liabilities of the Trust and the expenses related
thereto (which expenses, net of interest income, were estimated to be $0.03 per
share). The Trust expects to circulate a proxy statement to shareholders, in
anticipation of a shareholder vote on the proposed merger in January 1999. If
approved by shareholders, the merger should close in late January or February
1999. Details of the merger and its consequences will be set forth in the proxy
statement. No assurances can be given that the merger will be consummated.
To date, the Trust has distributed $13.65 per share from the proceeds of sales
of its assets. If the merger is consummated, the distributions will total
approximately $13.88 per share. In addition, the existing shareholders will be
entitled to receive the net proceeds from litigation to determine the full
compensation due for certain land that was condemned at Loehmann's Fashion
Island prior to its sale (which amount is not expected to exceed $0.10 per share
and could be zero).
In July 1998, the American Stock Exchange (the "ASE") halted trading the Trust's
Common Shares because the Trust had completed the disposition of its real estate
in accordance with its Business Plan, and as a result, had fallen below the
ASE's guidelines for continued listing. Since the Trust did not have sufficient
tangible assets to satisfy the ASE guidelines, and would not satisfy such
requirements after the merger, the ASE delisted the Trust on October 29, 1998.
The Trust's shares are now traded on the over-the-counter Bulletin Board (symbol
"PCTG").
As a consequence of the implementation of the Business Plan, the disposition of
all of its investments and the payment of special dividends from the proceeds of
sales of the Trust's investments, certain operating results which have
historically been utilized to judge the Trust's financial performance (such as
Funds from Operations and Net Income) have decreased and it is not anticipated
that the Trust will generate any net income in the future.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Trust had no debt at September 30, 1998 as compared to $8,345,000 at
December 31, 1997, which was comprised solely of a mortgage loan on Park Place.
Park Place was sold in January 1998 subject to its mortgage loan. The Trust has
reviewed its liquidity needs in view of its Business Plan. The Trust's principal
liquidity needs are to fund normal operating expenses and the minimum dividend
distributions (if any) required
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
to maintain the Trust's REIT status under the Internal Revenue Code. The Trust
expects to fund these liquidity needs from interest income and cash on hand.
At September 30, 1998, the Trust's entire portfolio of real estate investments
had been disposed of and its principal asset was $3,085,000 in cash.
On June 17, 1998, the Trust's Cincinnati Marriott Inn $2,000,000 land investment
was purchased by the Trust's lessee for $2,000,000 and the Trust's related
leasehold mortgages were prepaid at their face amount of $4,316,000. In August
1996, the Trust allocated $1,016,000 of its former allowance for possible
investment losses to these mortgages. As a consequence, the repayment resulted
in a gain to the Trust of $1,016,000. In addition, the Trust received $1,600,000
of land rent and mortgage interest, earned between 1991 and 1994, which had
previously been written off.
On January 29, 1998, the Trust sold the Park Place office building in Clayton,
Missouri, for $14,145,000. The Trust realized a gain of $3,067,000 on the sale
of this investment.
During the first quarter of 1998, the Trust terminated the Amended and Restated
Deferred Stock Plan for Non-Employee Trustees. All of the assets of such plan,
which were held in a Rabbi Trust, were distributed to the Trustees. Previously,
in the Trust's financial statements, Common Shares held by the Rabbi Trust were
reflected as "treasury stock," the remaining assets were reflected in "other
assets" and the fund balance was reflected in "accounts payable and accrued
expenses."
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
VERSUS THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursements) decreased 98% and 95%, respectively, for the three and nine
months ended September 30, 1998, as compared to the same periods in the prior
year, due to the sale, in January 1998, of the Park Place office building, the
Trust's last Owned Property held directly by the Trust, and from the adjustment
at June 30, 1998 of approximately $200,000 of previously recorded revenues from
Loehmann's Fashion Island, which had been sold in December 1997. During the
three months ended September 30, 1998, the Trust received $48,000 from the new
owners of Loehmann's Fashion Island related to the time of the Trust's
ownership. This amount had not previously been accrued.
Base income from Structured Transactions held directly by the Trust increased 2%
for the nine months ended September 30, 1998, as compared to the same period in
the prior year, due to the receipt, in June 1998, of $1,600,000 of land rent and
mortgage interest (earned between 1991 and 1994 but previously written off) from
the Cincinnati Marriott Inn. The receipt and recognition of this income occurred
in conjunction with the disposition of the Trust's investments in the Cincinnati
Marriott Inn.
Overage income from Structured Transactions held directly by the Trust decreased
89% for the nine months ended September 30, 1998, as compared to the same period
in the prior year, due to the sale of all but one of the Trust's remaining
Structured Transactions held directly by the Trust prior to calendar 1998 and
the disposition of the Cincinnati Marriott Inn investments in June 1998.
Interest income decreased 53% and 45%, respectively, for the three and nine
months ended September 30, 1998, as compared to the same periods in the prior
year. Interest income is earned on net proceeds received by the Trust from the
sale of its investments, which proceeds are invested until they are distributed
to shareholders in the form of special dividends.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
EXPENSES
Total expenses decreased 93% and 87%, respectively, for the three and nine
months ended September 30, 1998, as compared to the same periods in the prior
year, due to the sale of all but one of the Trust's remaining real estate
investments in the first quarter of 1998 and the disposition of the last real
estate investment in June 1998. Included in total expense decreases were
decreases in professional fees of 83% and 96%, respectively, for the three and
nine months ended September 30, 1998, as compared to the same periods in the
prior year, due to the downward revision at June 30, 1998 of approximately
$140,000 accrued for estimated liabilities for legal and similar fees payable
that were, in fact, not incurred. General and administrative expenses also
decreased by 75% and 46%, respectively, for the three and nine months ended
September 30, 1998, as compared to the same periods in the prior year, primarily
due to the reduction of the Trust's management and support staff.
GAIN ON SALE OF REAL ESTATE INVESTMENTS
Net income for the nine months ended September 30, 1998 included a gain on sale
of real estate investments of $4,083,000, comprised of $1,016,000 from the
prepayment of Cincinnati Marriott Inn's leasehold mortgages at their face amount
in June 1998 and $3,067,000 from the sale of the Park Place office building in
January 1998. For the nine months ended September 30, 1997, net income included
a gain on sale of real estate investments of $26,128,000, comprised of
$4,750,000 from the sale of Elm Creek and Sandpiper Cove apartment investments
in September 1997, $1,944,000 from the sale of the Lakeside Center investment in
June 1997, $857,000 from the sale of the Telegraph Hill apartments in June 1997
and $18,577,000 from the sale of the City Centre Holiday Inn investment in
January 1997.
DIVIDENDS
During the nine months ended September 30, 1998, the Trust declared and paid
dividends of $1.15 per share.
On June 16, 1998, the Trustees declared a special dividend of $0.80 per share,
payable July 10, 1998 to shareholders of record on July 1, 1998. Due to the
magnitude of the dividend declared in relation to the Trust's stock price at
that time, and the halting of trading after July 10, 1998, the Trust's shares
did not trade ex-dividend on the ASE.
On February 3, 1998, the Trustees declared a special dividend of $0.35 per
share, payable February 27, 1998 to shareholders of record on February 13, 1998.
Due to the magnitude of the dividend declared in relation to the Trust's stock
price at that time, the ASE determined that the Trust's shares would trade
ex-dividend on March 2, 1998.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the prospects for
the Trust to be materially different from any prospects expressed or implied by
such forward-looking statements. Such risks, uncertainties and other factors
include, among others, management's estimates of future dividends, the
likelihood and timing of the merger and its assessment from time to time as to
the appropriate amount to set aside as reserves to meet both anticipated and
unanticipated liabilities.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The information provided in Item 2 of Part I of this report is incorporated
herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 2 Second Amendment to Agreement and Plan of Merger, dated
October 16, 1998, by and between Property Capital Trust
and Maryland Property Capital Trust, Inc.
Exhibit 27.1 Financial Data Schedule
Exhibit 99.1 Press Release, dated October 26, 1998, of Property
Capital Trust, announcing the results of the third
financial quarter, renegotiation of the merger announced
on June 18, 1998 and the delisting of the Trust's shares
from the American Stock Exchange.
(b) Report on Form 8-K:
Current Report dated June 29, 1998, attaching the Trust's press release
dated June 17, 1998 and June 18, 1998.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PROPERTY CAPITAL TRUST
----------------------
Registrant
/s/ Robert M. Melzer
--------------------
Robert M. Melzer
President, Chief Executive Officer and
Chief Financial Officer
Date: November 16, 1998
11
EXHIBIT 2
EXECUTION COPY
SECOND AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER dated as of October
16, 1998 (hereinafter referred to as this "Agreement") is made and entered into
by and between Property Capital Trust, a Massachusetts business trust (the
"Trust"), and Maryland Property Capital Trust, Inc., a Maryland corporation (the
"Corporation").
RECITALS
A. The parties hereto entered into an Agreement and Plan of Merger on June
18, 1998 (the "Original Agreement").
B. The Original Agreement was amended by the parties hereto on August 7,
1998 (the "First Amendment").
C. The parties hereto desire to amend the Original Agreement and the First
Amendment as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Trust and the Corporation hereby agree as
follows:
1. The parties acknowledge that the Investment Agreement (the "Investment
Agreement"), dated as of June 18, 1998 and amended August 7, 1998, by and among
Framingham York Associates Limited Partnership, a Massachusetts limited
partnership ("FYA"), the Trust and the Company is being amended by the parties
thereto on the date hereof. All references to the Investment Agreement contained
in the Original Agreement, the First Amendment or this Agreement shall be deemed
to include the amendment to the Investment Agreement executed on the date hereof
as well as any subsequent amendment to such agreement. The reference in
paragraph I of the recitals in the Original Agreement to "331,672 shares of
common stock of the Corporation" is hereby changed to "319,489 shares of common
stock of the Corporation" and the reference to "Additional Shares" in said
paragraph I is hereby deleted.
2. Section 4.1(a) is hereby amended to read in its entirety as follows:
"(a) At the Effective Time, each share of beneficial interest, no par value
per share, of the Trust (the "Shares") outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the Trust, the Corporation or the holders of any of the securities
of either entity, be converted into the right to receive:
(i) a cash payment equal to the quotient obtained by dividing the algebraic
sum of:
(w) all cash and cash equivalents held by the Trust on the
Effective Date, including rent and interest received in respect of
the land underlying the Cincinnati Marriott and the subordinate
leasehold mortgages thereon (the "Cincinnati Property"), PLUS
(x) the proceeds from the sale of the Cincinnati Property, if such
property is sold by the Effective Date but the proceeds of such
sale have not been distributed, net of all expenses reasonably
related thereto except overhead and similar expenses, MINUS
<PAGE>
(y) the aggregate amount that the Trust is obligated to repay to
The Beal Companies Inc. pursuant to Section 1.2(b)(iii) of the
Investment Agreement; MINUS
(z) the aggregate amount payable pursuant to the Rights Agreement
dated September 28, 1990 between the Trust and State Street Bank
and Trust Company (the "Rights Agreement") upon termination
thereof, including amounts due in connection with the redemption
of all outstanding preemptive or similar rights to subscribe for
shares of capital stock of the Trust or any successor of the
Trust, including the Company,
by the number of shares of the Trust outstanding on the Effective Date
(together, the "Cash Consideration");
(ii) one-sixtieth of a share of the common stock, par value $.01 per share,
of the Corporation (the "Corporation Common Stock"); and
(iii) one Contingent Payment Right (as defined below) (the Cash
Consideration, the Corporation Common Stock and the Contingent
Payment Right are collectively referred to as the "Merger
Consideration").
3. Section 4.2(e) of the Original Agreement is hereby deleted and replaced
with the following:
"No fractional shares of Corporation Common Stock shall be issued pursuant
hereto. Each holder who would receive a fractional share of Corporation Common
Stock less than 0.5 of a share of Corporation Common Stock shall receive no
Corporation Common Stock in respect of such fraction and each holder who would
receive a fractional share of Corporation Common Stock equal or greater to 0.5
shall receive one (1) share of Corporation Common Stock in respect of such
fraction."
4. The parties agree that no cash shall be paid in lieu of fractional
shares of Corporation Common Stock and any references contained in the Agreement
to such cash shall hereby have no further force or effect. References in
Sections 4.1(c), 4.2(a), 4.2(b) and 4.2(d) of the Original Agreement to "cash in
lieu of fractional shares" is hereby deleted. The reference in Section 4.1(c) to
Section 4.2(e) is hereby deleted
5. Section 5.3 of the Original Agreement is hereby deleted and replaced
with the following:
"Section 5.3 Merger Agreement. The Contribution and Merger Agreement by and
between Property Capital Trust Limited Partnership, a Massachusetts limited
partnership ("PCT LP"), and FYA pursuant to which PCT LP shall merge into
FYA shall have been executed."
6. Section 6.1 of the Original Agreement is hereby deleted and replaced
with the following:
"Section 6.1 No Modification. The Surviving Corporation's Charter, the
Surviving Corporation's By-laws and the operating partnership agreement
(the "Partnership Agreement") of FYA to be in effect immediately after the
merger of PCT LP into FYA pursuant to Article 2 of the Contribution and
Merger Agreement by and between PCT LP and FYA shall each contain
provisions with respect to indemnification incorporating the terms and
conditions set forth in Section 6.2 hereof, which provisions shall not be
amended, repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at or before the Effective Time were
trustees, officers, employees, shareholders or agents of the Trust, unless
such modification is required by law."
7. Section 6.2 of the Original Agreement is hereby amended to (i) replace
all references to "PCT LP" with references to "FYA as the surviving partnership
after the merger of PCT LP into FYA" and (ii) add to all references to "the
Surviving Corporation" a reference to "and/or FYA, as applicable."
8. The parties hereby ratify and confirm that they continue to be bound by
the terms and provisions of the Original Agreement and the First Amendment
which, except as expressly modified hereby, shall continue in full force and
effect.
2
<PAGE>
9. This Agreement may be executed in counterparts, each of which shall be
deemed an original of all which, when taken together, shall be deemed one and
the same instrument.
10. Any terms used herein and not defined shall have the meanings ascribed
to such terms in the Original Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PROPERTY CAPITAL TRUST
By:______________________________
Robert M. Melzer, President and Chief
Executive Officer
MARYLAND PROPERTY CAPITAL TRUST,
INC.
By:______________________________
Robert L. Beal,
Secretary
3
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,085,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,093,000
<CURRENT-LIABILITIES> 523,000
<BONDS> 0
0
0
<COMMON> 108,568,000
<OTHER-SE> (105,998,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,093,000
<SALES> 6,512,000
<TOTAL-REVENUES> 6,686,000
<CGS> 210,000
<TOTAL-COSTS> 1,125,000
<OTHER-EXPENSES> 90,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> 5,461,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,461,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 5,461,000
<EPS-PRIMARY> .57
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EXHIBIT 99.1
NEWS RELEASE
PROPERTY CAPITAL TRUST
Contact:
Robert M. Melzer, President
and Chief Executive Officer
617/482-4081
PROPERTY CAPITAL TRUST ANNOUNCES THIRD QUARTER RESULTS AND REPORTS ON STATUS OF
MERGER AND AMERICAN STOCK EXCHANGE LISTING
BOSTON, OCTOBER 26, 1998--Property Capital Trust today reported a net loss of
$99,000 ($.01 per share) for the quarter ended September 30, 1998. This loss was
anticipated as the Trust, having disposed of all of its real estate investments,
no longer has sufficient revenues to meet its expenses.
The Trust announced in June 1998 that it intended to merge, subject to
Shareholder approval, with an affiliate of the Beal Companies, LLP. The merger
was approved by the Trustees in order to enable the Trust to distribute its
remaining assets to its Shareholders without having to set aside reserves for
two or three years to meet expenses and contingent liabilities. However, the
recent decline in the stock market, and in REIT prices in particular, caused
representatives of the Beal Companies, LLP to reassess their decision to merge.
We are pleased to report that their conclusion is to proceed with the merger,
although on a modified basis (see below).
As a result of the time spent in the reassessment and a renegotiation of certain
terms of the merger agreement, it is now anticipated that the merger will not be
consummated until January or February 1999. Nonetheless, management still
anticipates that the distribution to Shareholders to be declared immediately
prior to the consummation of the merger will be $.23 per share. The
restructuring of the merged entity's capitalization, however, will result in the
interests of Property Capital Trust's Shareholders being junior to certain
interest of affiliates of the Beal Companies, LLP. Therefore, at the time of the
merger, the interests of the Trust's Shareholders in the merged entity will be
without value. Please note that no assurances can be given that the merger will
actually occur or that the interests of Property Capital Trust's Shareholders in
the merged entity will have any value in the future.
Since the Trust does not have sufficient tangible assets to satisfy American
Stock Exchange guidelines, and will not satisfy such requirements after the
merger, the American Stock Exchange, with the Trust's concurrence, has concluded
that the Trust should be delisted. We expect that this will occur on October 29.
Management is currently attempting to find a market maker for the Trust's shares
in the over-the-counter market. You should contact your broker on or after
October 29 if you wish to buy or sell shares of the Trust.
With regard to the condemnation award for a portion of the Trust's former
investment, Loehmann's Fashion Island, the trial has now been rescheduled for
January 1999 and the award, if any, will probably not be paid out to
Shareholders before June 1999. The Trust continues to believe that the award
will not be more than $.10 per share and might, in fact, be nothing. Pursuant to
the terms of the merger, any such award paid after the merger is consummated
will be distributed to the Trust's Shareholders as of the date of the merger.
Finally, please note that in order to reduce expenses the Trust has relocated
its offices to the address noted below.
Management's estimates of future dividends and the likelihood and timing of the
merger constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to all of the
qualifications to Management's prior estimates which are set forth in the
Trust's Form 10-K for the fiscal year ended December 31, 1997. Given the many
uncertainties involved in predicting future results, these estimates should in
no sense be considered a guaranty that they will prove to be accurate.
