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 1943
Date of Report (date of earliest event reported) DECEMBER 3, 1998
FRANKLIN SELECT REALTY TRUST
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 1-12709 94-0395938
State or other Commission File Number IRS Employer
jurisdiction of Identification Number
incorporation
2000 ALAMEDA DE LAS PULGAS, SAN MATEO, CA 94404
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 650/312 3000
ITEM 5. OTHER EVENTS.
On December 3, 1998, Tanon Manufacturing, Inc. ("TMI"), the sole tenant
of a building (the "Property") located in Fremont, California owned by
F.S.R.T., L.P. ("FSRT"), a limited partnership in which Franklin Select
Realty Trust (the "Company") is the general partner and owner of a majority
interest, filed a bankruptcy petition under Chapter 11 of the United States
Bankruptcy Code with the United States Bankruptcy Court for the Northern
District of California. TMI and FSRT are parties to a lease dated as of
February 12, 1993 (the "Lease") pursuant to which TMI leases the Property.
Based on the Company's financial statements for the fiscal quarter ended
September 30, 1998, the Company's share of the rent from TMI pursuant to the
Lease represented approximately seven percent (7%) of the Company's gross
revenues, approximately fifteen percent (15%) of funds from operations and
approximately twenty-six percent (26%) of net income during the first nine
months of 1998. TMI has not paid rent due on November 1, 1998 and December
1, 1998. Total rent due for each of these months is approximately $100,000,
including operating expense reimbursements.
The current term of the Lease expires on April 30, 2003 and there is
one five-year renewal option. The current base rental rate for the Property
pursuant to the Lease is approximately $8.16 per square foot per year on a
net lease basis. The Company estimates that the market base rental rate for
the Property may be between $12 and $14.40 per square foot per year on a net
lease basis.
Under applicable bankruptcy law, if the Lease were considered to be in
effect at the time the bankruptcy petition was filed, the Lease may be
treated as an executory contract. If it were treated as an executory
contract, TMI would have the option to assume or reject it. TMI has not yet
formally indicated its intention with respect to the Lease. If TMI assumes
the Lease, it would be required to cure all defaults, including paying unpaid
rent. If TMI rejects the Lease, the Company would have a claim against TMI
for damages, including unpaid rent then due. If TMI rejects the Lease, the
Company intends to pursue all available remedies and to re-lease the Tanon
Building. If the Company re-leases the Tanon Building, it is likely to incur
costs for tenant improvements, leasing commissions and other costs and
expenses, which it would seek to recover from TMI.
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 heretofore duly authorized.
Dated: December 14, 1998 FRANKLIN SELECT REALTY TRUST
By: /S/ DAVID P. GOSS
David P. Goss
President
