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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
December 18, 1996
----------------------------------------------------------------------
Date of Report (Date of Earliest Event Reported)
AMERICAN REALTY TRUST, INC.
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Georgia 1-9948 54-0697989
- --------------------------------------------------------------------------------
(State of Incorporation) (Commission (IRS Employer
File No.) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, TX 75231
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 692-4700
-----------------
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
1
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 17, 1996, American Realty Trust, Inc. (the "Company") purchased the
Best Western Oceanside in Virginia Beach, Virginia for $6.8 million (4.2% of
the Company's assets at December 31, 1995). The seller of the property was
Atlantic Resort Associates, L.P. ("ARALP"), a Virginia partnership.. The
property was constructed in 1983 and consists of 110 rooms.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December
31, 1995 and the nine months ended September 30, 1996. A pro forma balance
sheet as of September 30, 1996 is also presented.
A summary of the pro forma transaction follows:
On December 17, 1996, the Company purchased the Best Western Oceanside in
Virginia Beach, Virginia for $6.8 million exclusive of commissions and closing
costs. The Company acquired the property through Ocean Beach Partners, L.P.
("OCPLP"), a newly formed partnership of which ART Oceanview Corporation, a
wholly-owned subsidiary of the Company is the 1% general partner and the
Company is the 99% Class B limited partner. In conjunction with the
acquisition, OCPLP issued 1,813,660 Class A limited partner units in OCPLP
having an agreed value of $1.00 per partnership unit to the former limited
partners of ARALP. The Class A limited partner units are entitled to a $.095
per unit preferred annual return. The Class A limited partners do not
otherwise participate in the income, loss or cash flow of the property. The
Class A limited partner units may be exchanged for Series D Cumulative
Preferred Stock in the Company at a rate of 20 units per share of preferred
stock. No more than one-third of the Class A limited partner units held
may be exchanged between January 1, 1997 and May 31, 2001. Between June 1,
2001 and May 31, 2006 all unexchanged Class A units are exchangeable. The
Company obtained new mortgage financing for the remaining $5.0 million of the
purchase price. The mortgage bears interest at 9.94% per annum, requires
monthly payments of principal and interest of $48,685 and matures January 1,
2017.
The pro forma statements of operations present the Company's operations as if
the transaction described above had occurred at the beginning of each of the
periods presented.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
2
<PAGE> 3
AMERICAN REALTY TRUST, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Best Western
Actual Oceanside Pro forma
---------- ------------ ---------
(dollars in thousands)
<S> <C> <C> <C>
Assets
Notes and interest receivable
Performing............................................... $ 51,392 $ - $ 51,392
Nonperforming, nonaccruing............................... 1,827 - 1,827
--------- ------------ ---------
53,219 - 53,219
Less - allowance for estimated losses......................... (3,926) - (3,926)
--------- ------------ ---------
49,293 - 49,293
Real estate held for sale, net of accumulated depreciation.... 60,403 - 60,403
Less - allowance for estimated losses......................... (3,328) - (3,328)
--------- ------------ ---------
57,075 - 57,075
Real estate held for investment, net of accumulated
depreciation............................................. 31,924 6,879 38,803
Investments in marketable equity securities, at market........ 1,947 - 1,947
Investments in equity investees............................... 54,335 - 54,335
Cash and cash equivalents..................................... 1,097 - 1,097
Other assets.................................................. 9,454 - 9,454
--------- ------------ ---------
$ 205,125 $ 6,879 $ 212,004
========= ============ =========
</TABLE>
3
<PAGE> 4
AMERICAN REALTY TRUST, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Best Western
Actual Oceanside Pro forma
---------- ------------ ---------
(dollars in thousands)
<S> <C> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities
Notes and interest payable.................................... $ 107,613 $ 5,066 $ 112,679
Margin borrowings............................................. 36,843 - 36,843
Other liabilities............................................. 7,640 - 7,640
--------- ------------ ---------
152,096 5,066 157,162
Minority interest............................................. 1,097 1,813 2,910
Commitments and contingencies
Shareholders' equity
Preferred Stock, authorized 20,000,000 shares, issued and
outstanding
4,000 shares Series B, 10% cumulative, $2.00 par value... 8 - 8
15,489 shares Series C, 10% cumulative, $2.00 par value.. 31 - 31
Common Stock, $.01 par value; authorized 16,667,000 shares,
6,739,540 shares in 1996 and 5,858,328 in 1995 issued.... 68 - 68
Paid-in capital............................................... 68,623 - 68,623
Accumulated distributions in excess of accumulated
earnings................................................. (16,795) - (16,795)
Treasury stock at cost, 282,352............................... (3) - (3)
--------- ------------ ---------
51,932 - 51,932
--------- ------------ ---------
$ 205,125 $ 6,879 $ 212,004
========= ============ =========
</TABLE>
4
<PAGE> 5
AMERICAN REALTY TRUST, INC.
PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Best Western
Actual Oceanside(1) Proforma
------------ ----------- ----------
(dollars in thousands, except per share)
<S> <C> <C> <C>
Income
Rents...................... $ 14,733 $ 1,735 $ 16,468
Interest................... 3,416 - 3,416
Other...................... 1,293 - 1,293
--------- -------- ---------
19,442 1,735 21,177
Expenses
Property operations........ 11,166 1,263 12,429
Equity in losses of
investees............... 3,122 - 3,122
Interest................... 10,656 316 10,972
Depreciation and
amortization............ 1,319 - 1,319
Advisory fee to affiliate.. 1,093 - 1,093
General and administrative 1,855 - 1,855
Minority interest.......... - 57 57
--------- -------- ---------
29,211 1,636 30,847
--------- -------- ---------
Income (loss) before gain on
sale of real estate and
extraordinary gain......... (9,769) 99 (9,670)
Gain on sale of real estate... 7,799 - 7,799
--------- -------- ---------
Income (loss) before extra-
ordinary gain.............. (1,970) 99 (1,871)
Extraordinary gain............ 381 - 381
--------- -------- ---------
Net income (loss)............. (1,589) $ 99 (1,490)
========
Preferred dividend
requirement................ (65) (65)
--------- ---------
Net income (loss) applicable
to Common shares........... $ (1,654) $ (1,555)
========= =========
Earnings per share
Income before
extraordinary gain...... $ (.32) (.30)
Extraordinary gain......... .06 .06
--------- ---------
Net (loss)................. $ (.26) (.24)
========= =========
Weighted average shares of
Common Stock used in
computing earnings per
share...................... 6,357,447 6,357,447
========= =========
</TABLE>
- ---------------------
(1) Assumes acquisition by the Company on January 1, 1996.
5
<PAGE> 6
AMERICAN REALTY TRUST, INC.
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Best Western
Actual Oceanside(1) Proforma
---------- ------------- -----------
(dollars in thousands, except per share)
<S> <C> <C> <C>
Income
Rents..................... $ 17,869 $ 2,357 $ 20,226
Interest.................. 4,929 - 4,929
Other..................... 154 - 154
---------- ------------- -----------
22,952 2,357 25,309
Expenses
Property operations....... 13,260 883 14,143
Equity in losses of
investees.............. 5,123 - 5,123
Interest.................. 8,941 503 9,444
Depreciation and
amortization........... 1,691 - 1,691
Advisory fee to affiliate. 1,195 - 1,195
General and administrative 2,554 - 2,554
Minority interest......... 671 172 843
---------- ------------- -----------
33,435 1,558 34,993
---------- ------------- -----------
Income (loss) from operations (10,483) 799 (9,684)
Income tax expense........... 2 - 2
---------- ------------- -----------
Income (loss) before gain on
sale of real estate and
extraordinary gain........ (10,485) 799 (9,686)
Gain on sale of real estate.. 6,866 - 6,866
---------- ------------- -----------
Income (loss) before extra-
ordinary gain............. (3,619) 799 (2,820)
Extraordinary gain........... 783 - 783
---------- ------------- -----------
Net (loss)................... $ (2,836) $ 799 $ (2,037)
========== ============= ===========
Earnings per share
Income (loss) before
extraordinary gain..... $ (.62) $ (.48)
Extraordinary gain........ .14 .14
---------- -----------
Net (loss)................ $ (.48) $ (.34)
========== ===========
Weighted average shares of
Common Stock used in
computing earnings per
share..................... 5,858,328 5,858,328
========= ===========
</TABLE>
- ---------------------
(1) Assumes acquisition by the Company on January 1, 1995.
6
<PAGE> 7
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
(b) Financial statements of properties acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -------------------------------------------------------------
<S> <C>
99.0 The Best Western Oceanside Audited Statement of Revenues and Direct
Operating Expenses for the year ended December 31, 1995.
</TABLE>
________________________________
SIGNATURE
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 hereto duly authorized.
AMERICAN REALTY TRUST, INC.
Date: January 15, 1996 By: /s/ Thomas A. Holland
-------------------------- ---------------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
7
<PAGE> 8
AMERICAN REALTY TRUST, INC.
EXHIBIT TO ITS
CURRENT REPORT ON FORM 8-K
Dated December 18, 1996
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- -------------------------------------------- ------
<S> <C> <C>
99.0 Best Western Oceanside Audited Statement of 9
Revenues and Direct Operating Expenses for
the year ended December 31, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 99.0
THE BEST WESTERN OCEANSIDE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
American Realty Trust
We have audited the accompanying statement of revenues and direct operating
expenses of The Best Western Oceanside for the year ended December 31, 1995.
This statement of revenues and direct operating expenses is the responsibility
of the Property's management. Our responsibility is to express an opinion on
this statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenues and direct
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and direct operating expenses. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of revenues and
direct operating expenses presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement is prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K of American Realty Trust) and, as described in Note 1, is
not intended to be a complete presentation of the results of operations.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues and
direct operating expenses of The Best Western Oceanside for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
December 11, 1996
10
<PAGE> 3
THE BEST WESTERN OCEANSIDE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES
Room revenues $ 2,225,209
Telephone revenues 43,677
Parking revenues 39,493
Rental revenues 29,061
Other revenues 19,778
-----------
Total revenues 2,357,218
OPERATING EXPENSES
Salaries and benefits 418,704
Utilities 169,948
Repairs and maintenance 108,956
Lease expense 87,738
Property taxes 67,821
Insurance and licenses 29,785
-----------
Total direct operating expenses 882,952
-----------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 1,474,266
===========
</TABLE>
The accompanying notes are an integral part of this statement.
11
<PAGE> 4
THE BEST WESTERN OCEANSIDE
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Best Western Oceanside is a 110 room hotel located in Virginia
Beach, Virginia. During 1995, the property was owned by Atlantic
Resort Associates, LLP.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
Furniture sales $ 12,010
Snack machines 5,109
Miscellaneous 2,659
--------
Total $ 19,778
--------
NOTE 4: SUBSEQUENT EVENT
The property was sold to American Realty Trust, a Georgia trust, on
December 17, 1996.
12
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