SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: MARCH 18, 1998
STARWOOD FINANCIAL TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-10150 95-6881527
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1114 Avenue of the Americas, 27th floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Copy to: James B. Carlson
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Registrant's telephone number, including area code: (212) 930-9400
Angeles Participating Mortgage Trust
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
In response to comments received from the Securities and Exchange
Commission, the Trust hereby amends Item 2. Acquisition or Disposition of Assets
of the Trust's Current Report on Form 8-K dated March 18, 1998 (the "Current
Report") by:
a. Deleting the table under the caption "Description of Contributed Assets" and
inserting in lieu thereof the following:
The following is a summary description of the Assets contributed to the Trust in
the Recapitalization Transactions as of March 18, 1998 (in thousands):
<TABLE>
<CAPTION>
Current Original
Number of Balance of Original Interest
Type of Underlying Borrowers Commitment Balances Ascribed Maturities Accrual
Loan/Borrower Property Type In Class Amount Outstanding Value Dates Rates(4)
- ------------- ------------- -------- ------ ----------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Senior Mortgages Office/Hotel/ 8 $ 502,114 $445,614 $449,796 1999-2004 Fixed: 8.97 to 16%
Mixed Use/ Variable: LIBOR+
Apartment 1.25 to 3.25%
Subordinated Mortgages Office/Hotel 5 175,375 155,538 184,320 2002 to 2005 Fixed 10.0 to
Resort/Planned 15.25%
Communities
Opportunistic Mortgages Office/Hotel/ 2 166,644 132,427 81,057 1999 and 2007 6.0 to 7.0%
Apartment
Unsecured Notes Office/Hotel 2 27,300 27,300 30,850 2002 and 2004 11.25% to 15.0%
Construction Loans Assisted 2 92,390 85,471 91,985 1999 and 2004 12.0 to 12.5%
Living/Resorts
Real Estate Under Hotels 1 N/A(3) N/A(3) 195,470 N/A(3) N/A(3)
Long-Term Master Lease
Loan Participations Various 3 22,656 22,534 13,660 1999 and 2000 Fixed: 7.13%
Variable: LIBOR+
.58 to 1.75%
Other Real Estate Public bonds 2 43,150 43,150 47,532 2002 and 2007 12.5 to 12.75%
Related Investments ---------- ----------
Total 25 $1,094,670
========== ==========
======================================================[SPLIT TABLE]================================================================
Interest
Type of Payment Principal Participation
Loan/Borrower Rates(4) Amortization Features
- ------------- -------- ------------ --------
<S> <C> <C> <C>
Senior Mortgages Fixed: 8.0-10.82% Yes (1) Yes (2)
Variable: LIBOR+
1.25 to 3.25%
Subordinated Mortgages Fixed 10.0 to Yes (1) Yes (2)
15.25%
Opportunistic Mortgages 6.0 to 7.0% Yes (1) Yes (2)
Unsecured Notes 11.25% to 15.0% No Yes (2)
Construction Loans 10.0 to 12.5% No No
Real Estate Under N/A(3) N/A(3) N/A(3)
Long-Term Master Lease
Loan Participation Fixed: 5.45 to Yes(1) Yes
6.40%
Variable: LIBOR+
.58 to 1.75%
Other Real Estate 12.5 to 12.75% No No
Related Investment
Total
</TABLE>
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<PAGE>
Explanatory Notes
(1) The loans require fixed payments of principal and interest resulting in
partial principal amortization over the term of the loan with the remaining
principal due at maturity. In addition, one of the loans permits additional
annual prepayments of principal of up to $1.3 million without penalty at
the borrower's option.
(2) Under some of these loans, the lender receives additional payments
representing additional interest for participation in available cash flow
from operations of the property and the proceeds, in excess of a base
amount, arising from a sale or refinancing of the property.
(3) The lease is a triple net lease of 17 hotels under which the lessee pays
all costs associated with the operation of the hotels, including real
estate taxes, insurance, utilities, services and capital expenditures. The
initial term of the lease expires on December 31, 2010, and can be extended
for up to five, five-year terms at lessee's option. Rent payments under the
lease consist of base rent and additional rent based on the amount by which
the aggregate operating revenue for any given year exceeds the aggregate
operating revenue of the twelve months ended September 30, 1996. (4) All
variable rate loans are based on 30-day LIBOR and reprice monthly.
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<PAGE>
The following summarizes information relating to concentration and significant
terms within the portfolio of assets contributed in the Recapitalization
Transactions based on ascribed values:
Concentration by size:
Ascribed
Value %
---------------------- ---------
(In thousands)
RLH (operating lease) $ 195,470 17.9%
Borrower A (senior and subordinate) 127,450 11.6%
Borrower B (senior and subordinate) 116,137 10.6%
All other loans/investments 655,613 59.9%
---------------------- ---------
$ 1,094,670 100.0%
====================== =========
The RLH operating lease is discussed in detail under "Real Estate Under
Long-Term Operating Lease" as the sole asset group in that class.
The loans to Borrower A represent five first mortgage notes and a second
mortgage residual note which are cross-collateralized by over 1.1 million square
feet of office properties located in Seattle, WA and are personally guaranteed
by the borrower. The loans mature on December 31, 1999. In addition to the five
primary assets, additional collateral includes second or third mortgages on
three office buildings also located in Seattle. The subordinated loan was
acquired at a substantial discount to its face value. Of the total principal
amount, $97 million was allocated to the first mortgage positions, while $54
million was allocated to a residual note. The $97 million first mortgage
amortizes on a 25-year schedule and bears interest at the rate of LIBOR plus 125
basis points. The second mortgage bears interest at the rate of 7%. The loans
are prepayable at any time without penalty.
The non-recourse loans to Borrower B mature on April 30, 2002, are secured by
office properties containing 1.1 million square feet located in San Diego, CA.
The loans consist of a $74.3 million variable rate senior mortgage and a $34.8
million subordinate mortgage bearing interest at 12.0%. The loans are prepayable
subject to certain yield maintenance provisions on the subordinate mortgage.
Concentration by underlying asset/collateral type:
Ascribed
Value %
------------------------ -------------
(In thousands)
Office $ 516,099 47.1%
Hotel/Resorts 379,842 34.7%
Residential 118,029 10.8%
Other 80,700 7.4%
------------------------ -------------
$ 1,094,670 100.0%
======================== =============
For this purpose, the ascribed values for certain loans secured by mixed use
property were allocated by management based on estimated relative values of the
underlying collateral components.
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<PAGE>
Concentration by location:
Ascribed
State Value %
- ------------------------------------ ----------------------------- ---------
(In thousands)
California $ 237,316 21.7%
Washington 203,273 18.6%
New York 123,352 11.3%
Texas 108,679 9.9%
Florida 91,985 8.4%
Massachusetts 60,485 5.5%
Maryland 60,440 5.5%
Colorado 59,767 5.5%
All other states, combined 85,021 7.8%
Corporate obligations 64,352 5.9%
----------------------------- ---------
$ 1,094,670 100.0%
============================= =========
Summary of recourse provisions:
Ascribed
Value %
------------------------------ --------
(In thousands)
Non-recourse - secured by
real estate $ 676,940 61.8%
Recourse (including operating
lease assets) 339,348 31.0%
Corporate obligations 64,352 5.9%
Non-recourse - secured by
partnership interests 14,030 1.3%
------------------------------ --------
$ 1,094,670 100.0%
============================== ========
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<PAGE>
Summary of prepayment terms:
<TABLE>
<CAPTION>
Ascribed
Value %
--------------------------- ----------
(In thousands)
<S> <C> <C>
Long-term operating lease - generally not prepayable $ 195,470 17.9%
Lock-out for greater than 70% of original term with yield
maintenance or other prepayment premiums on a
substantial portion of remaining term 249,670 22.8%
Lock-out for greater than 70% of original term, prepayable
thereafter without premium 24,489 2.2%
Yield maintenance 142,565 13.0%
Other prepayment premiums 129,920 11.9%
No significant prepayment protection 352,556 32.2%
--------------------------- ----------
$ 1,094,670 100.0%
=========================== ==========
The loans without substantial prepayment protection primarily represent variable
rate senior mortgages or opportunistic loans/loan participations acquired at
discounts to face values, which would result in gains upon repayment. The
properties underlying the long-term operating lease may be purchased at fair
market value by the lessee in limited circumstances, including catastrophic loss
or condemnation of the property.
</TABLE>
Summary of interest characteristics:
<TABLE>
<CAPTION>
Ascribed
Value %
--------------------------- ----------
(In thousands)
<S> <C> <C>
Fixed rate investments $ 750,511 68.6%
Variable rate investments 344,159 31.4%
--------------------------- ----------
$ 1,094,670 100.0%
=========================== ==========
</TABLE>
For this purpose, fixed rate investments include the real estate assets under
long-term operating lease under which the Trust receives a fixed annual base
rental revenue and 7.5% of annual operating revenue for the underlying leased
hotels in excess of a defined base amount. Variable rate loan investments are
generally based on 30-day LIBOR and reset monthly.
Summary of subordination and default characteristics:
The Company holds both the senior and the subordinated mortgages with respect to
the non-recourse loans to Borrower A and Borrower B. The Company has all rights
as a mortgage holder and under the uniform commercial code with respect to the
properties underlying these mortgages in the event of a default. The Company's
rights with respect to the property underlying these properties are not
subordinated to any other lender of borrowed money.
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<PAGE>
b. Adding the following paragraph after the last paragraph under the
caption "Description of Contributed Assets - Real Estate Under
Long-Term Operating Lease":
The underlying real estate is comprised of hotels as follows:
For the year ended December 31, 1997
Number of Average Average
Property Location Rooms Daily Rate Occupancy
- ----------------- --------- ---------- ---------
Sacramento, California 376 $ 67.05 77.1%
San Diego, California 300 96.36 75.4%
Sonoma, California 245 88.54 68.1%
Durango, Colorado 159 98.44 59.7%
Boise, Idaho 182 58.16 74.4%
Missoula, Montana 76 50.15 67.5%
Astoria, Oregon 124 68.02 45.2%
Bend, Oregon 75 59.34 63.8%
Coos Bay, Oregon 143 61.51 62.7%
Eugene, Oregon 137 63.45 64.3%
Medford, Oregon 186 63.80 64.8%
Pendleton, Oregon 168 65.09 52.7%
Salt Lake City, Utah 497 101.96 78.5%
Kelso, Washington 162 65.25 60.5%
Seattle, Washington 850 93.59 71.3%
Vancouver, Washington 160 81.86 67.2%
Wenatchee, Washington 149 48.42 75.0%
---------
3,989
=========
Item 7. Financial Statements and Exhibits
In response to comments received from the Securities and Exchange
Commission, the Trust hereby amends the Unaudited Pro Forma Condensed
Consolidating Financial Statements included in Item 7. Financial Statements and
Exhibits of the Current Report by:
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<PAGE>
a. Deleting the information the first two paragraphs in Note 3 -
Other Transactions with Affiliates: under the caption "1996
Share Incentive Plan" and inserting in lieu thereof the
following:
The Trust amended and restated its stock option plan to provide a means
of incentive compensation for officers, key employees, Trustees, consultants and
advisors, Stock options, restricted stock awards and other performance awards
may be granted under the Starwood Financial Trust 1996 Share Incentive Plan (the
"Plan"). Under the amended Plan, up to a maximum of 9.0% of the outstanding
Class A Shares on a fully-diluted basis, as adjusted for subsequent issuances of
Class A Shares, are reserved for issuance under the Plan. All grants of shares
under the Plan, other than automatic grants to non-employee Trustees, will be at
the sole discretion of the Board of Trustees or a specifically designated
sub-committee of such Trustees. Approximately 14,963,057 options to purchase
Class A Shares at $2.50 per share that are immediately exercisable were granted
to the Advisor under the Plan upon consummation of the Recapitalization
Transactions and future grants may be made to the Advisor or employees of the
Trust in the future.
An independent financial advisory firm estimated the value of these
options at date of grant to be approximately $0.40 per share using a
Black-Scholes valuation model. In the absence of comparable historical market
information for the Trust, the advisory firm utilized assumptions consistent
with activity of a comparable peer group of companies including an estimated
option life of five years, a 27.5% volatility rate and an estimated dividend
rate of 8.5%. Options issued to employees will be accounted for using the
intrinsic method and, accordingly, no earnings charge will be reflected for
options issued to direct employees since the exercise price approximates the
concurrent exchange transaction price at date of grant. Options issued to the
Advisor will be accounted for under the option value method and, accordingly,
result in a charge to earnings upon consummation of the Recapitalization
Transaction equal to the number of options allocated to the Advisor multiplied
by the estimated value at consummation. The charge of approximately $6.0 million
will be reflected in the Trust's first quarter 1998 financial results, however,
such charge has been excluded from the pro forma financial information presented
in this note, as it represents a non-recurring charge. Future charges may be
taken to the extent of additional option grants, which are at the discretion of
the Board of Trustees.
b. Deleting the information under the caption "Note 4 -
Adjustments to Pro Forma Consolidating Balance Sheet:" and
inserting in lieu thereof the following:
(A) In accordance with the terms of the Contribution Agreement, at
closing, cash adjustments were made to reflect cash activity from the January 1,
1998 valuation through closing. The pro forma adjustment represents the
following (in thousands):
Cash due from Mezzanine for cash activity..................$ (2,998)
Cash due from SOF IV for cash activity..................... (7,315)
Cash due to SOF IV for additional fundings and loans....... 11,418
Basis adjustment on Mezzanine assets....................... 832
Basis adjustments on SOF IV assets......................... 86,974
---------
$ 88,911
=========
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<PAGE>
Assets acquired from Starwood Mezzanine have been reflected using step
acquisition accounting at Predecessor basis adjusted to fair value to the extent
of post-transaction third-party ownership. Assets acquired from SOF IV have been
reflected at their fair market value.
c. Deleting the first paragraph under the caption "Note 5 -
Adjustments to Pro Forma Consolidating Statement of
Operations:" and inserting in lieu thereof the following:
(a) Represents the adjustment to recognize revenue on the contributed
real estate related loan investments as necessary to reflect the amortization of
the increased basis described in Note 4 (A). Such premium was computed on a
loan-by-loan basis and is to be amortized using the effective interest method
over the remaining contractual term to maturity adjusted for anticipated
prepayments, where appropriate.
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<PAGE>
SIGNATURES
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.
STARWOOD FINANCIAL TRUST
Registrant
Date: January 19, 1999 /s/ Jay Sugarman
----------------
Jay Sugarman
Chief Executive Officer and President
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