--------------------------------
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 (Date of earliest event reported) July 20, 1998
------------------------
United Investors Realty Trust
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Texas 001-13915 76-0265701
- ------------------------------- ------------ -------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
5847 San Felipe, Suite 850
Houston, TX 77057
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 781-2860
<PAGE>
Item 2. Acquisition of Assets
On July 20, 1998, United Investors Realty Trust (the "Registrant") acquired the
Colony Plaza Shopping Center located in Houston, Texas (the "Property"). The
Property was purchased pursuant to a Contract of Sale dated April 17, 1998
through a wholly owned subsidiary controlled by the Trust. The Property, an
approximately 26,800 square foot community shopping center, was purchased from
Veriquest Colony Plaza One 1997 for $4,195,032. The asset was acquired with
available cash of $1,007,661 and by taking title subject to an existing loan
having a principal balance outstanding on the date of closing of $3,187,371.
Interest on this loan is payable at the rate of 7.54% per annum. This loan
matures on January 1, 2008 and may be prepaid after December 1, 2001 upon 30
days prior written notice with a yield maintenance based penalty of a minimum of
one percent of the then outstanding principal balance. The Registrant intends to
continue to operate the Property as a shopping center.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
The index to the financial information for the Colony Plaza
Shopping Center is included on page F-1 of this report.
(b) Pro Forma Financial Information.
The index to the pro forma financial information is included on
page F-1 of this report.
(c) Exhibits.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on September 30, 1998.
UNITED INVESTORS REALTY TRUST
BY: /s/ R. STEVEN HAMNER
---------------------------
R. Steven Hamner
Chief Financial Officer
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
PRO FORMA FINANCIAL INFORMATION PAGE
----
Unaudited ProForma Condensed Consolidated Balance Sheet .................. F-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the six months ended June 30, 1998 ................................. F-4
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997 ................................... F-5
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.. F-8
HISTORICAL FINANCIAL INFORMATION
Colony Plaza Shopping Center
Report of Independent Auditors - Ernst & Young LLP....................... F-12
Statement of Revenues and Certain Expenses for the six months
ended June 30, 1998 (unaudited) and for the year ended
December 31, 1997 ..................................................... F-13
Notes to Statements of Revenue and Certain Expenses ..................... F-14
F-1
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
INTRODUCTION
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 1997 and the six months ended June 30, 1998 are
presented as if the Prior Acquisitions, the Offering, and the Colony Plaza
Acquisition and the application of the net proceeds of the Offering all had
occurred on January 1, 1997.
The unaudited condensed consolidated balance sheet of United Investors Realty
Trust and Subsidiaries as of June 30, 1998 already reflects the effects of the
Prior Acquisitions and the Offering as each of these transactions occurred prior
to June 30, 1998. However, pro forma adjustments are required to the June 30,
1998 unaudited condensed consolidated balance sheet for the Colony Plaza
Acquisiton which occurred on July 20, 1998.
The unaudited pro forma condensed consolidated statements of operations should
be read in conjunction with the consolidated financial statements of United
Investors Realty Trust ("UIRT"), including the notes thereto, included in UIRT's
Registration Statement on Form S-11 dated March 5, 1998 and UIRT's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998. The pro forma condensed
consolidated statements of operations do not purport to project the Company's
results of operations as of any future date or for any future period.
F-2
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
June 30, COLONY PLAZA JUNE 30,
1998 ACQUISITION 1998
-------------- ------------- ------------
<S> <C> <C>
ASSETS
Investment real estate:
Land $ 32,149,317 $ 1,258,510 (A) $ 33,407,827
Buildings and improvements 88,854,914 2,936,522 (A) 91,791,436
-------------- --------------- ---------------
121,004,231 4,195,032 125,199,263
Less accumulated depreciation (6,004,299) - (6,004,299)
-------------- --------------- --------------
Investment real estate, net 114,999,932 4,195,032 119,194,964
Cash and cash equivalents 11,610,321 (1,002,650)(A) 10,607,671
Accounts receivable, net 1,754,539 - 1,754,539
Prepaid expenses and other assets 2,626,762 50,574 (A) 2,677,336
-------------- --------------- --------------
Total assets $ 130,991,554 $ 3,242,956 $ 134,234,510
============== =============== ==============
LIABILITIES, MINORITY INTEREST,
AND COMMON SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 40,870,225 $ 3,187,371(A) 44,057,596
Short-term notes and lines of credit 3,000 - 3,000
Accounts payable -- trade 928,015 1,942(A) 929,957
Accrued property taxes 1,469,185 34,441(A) 1,503,626
Security deposits 407,304 19,202(A) 426,506
-------------- ----------------- ------------
Total liabilities 43,677,729 $ 3,242,956 46,920,685
-------------- ----------------- ------------
Minority interest in real estate joint ventures 2,429,080 - 2,429,080
Common shareholders' equity:
Common shares of beneficial interest, no par value,
500,000,000 shares authorized, 9,514,889
issued and outstanding at June 30, 1998 85,652,642 - 85,652,642
Accumulated deficit (767,897) - (767,897)
-------------- ------------------ ------------
Total common shareholders' equity 84,884,745 - 84,884,745
Total liabilities, minority interest,
and common shareholders' equity $ 130,991,554 3,242,956 134,234,510
============== ================== ============
</TABLE>
F-3
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the six months ended June 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
UNITED INVESTORS ADJUSTMENTS
REALTY TRUST PRIOR COLONY PLAZA TOTAL
HISTORICAL(1) TRANSACTIONS(2) ACQUISITION PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Base rents $ 5,426,224 $1,843,552(A) $ 217,874(F) $ 7,487,650
Percentage rents - 26,434(A) -(F) 26,434
Expense reimbursements 1,491,896 491,166(A) 65,492(F) 2,048,554
Interest and other income 291,646 22,751(A) 6,137(F) 320,534
----------- ----------- ----------- -----------
Total revenues 7,209,766 2,383,903 289,503 9,883,172
Expenses:
Operating and maintenance 856,170 307,241(A) 44,632(F) 1,208,043
Real estate taxes 955,214 360,683(A) 32,400(F) 1,348,297
General and administrative 370,752 20,186(A) 2,975(F) 393,913
Advisory and trustee fees 321,986 114,008(C) 14,246(G) 450,240
Interest 3,990,961 510,798(B) 113,517(F) 4,615,276
Depreciation and amortization 1,188,586 388,696(A) 49,290(F) 1,626,572
----------- ---------- ----------- -----------
Total expenses 7,683,669 1,701,612 257,060 9,642,341
----------- ---------- ----------- -----------
Income (loss) before minority interest,
extraordinary item,and preferred share
distribution requirements (473,903) 682,291 32,443 240,831
Minority Interest in net income of real estate
ventures (61,462) 55,610(D) - (5,852)
----------- ---------- ----------- -----------
Income (loss) before extraordinary item and
preferred share distribution requirements (535,365) 737,901 32,443 234,979
Extraordinary item-prepayment penalties incurred on
early extinguishment of debt (232,532) 232,532(H) - -
----------- ---------- ----------- -----------
Income before preferred share distribution (767,897) 970,433 32,443 234,979
requirements
Preferred share distribution requirements (20,670) 20,670(E) - -
----------- ---------- ----------- -----------
Net income (loss) available
for common shareholders $ (788,567) $ 991,103 $ 32,443 $ 234,979
=========== =========== =========== ===========
Net income (loss) per common shareholders
(basic and diluted) $ (0.13) $ 0.02
=========== ===========
Weighted average shares outstanding
(basic and diluted) 5,904,889 9,514,889
=========== ===========
</TABLE>
(1) Includes the results of operations of all properties from their
respective dates of acquisition forward.
(2) Includes the effects of the Offering, and the results of operations of the
Prior Acquisitions from January 1, 1998 to their respective dates of
acquisition.
F-4
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
UNITED INVESTORS ADJUSTMENTS
REALTY TRUST PRIOR COLONY PLAZA TOTAL
HISTORICAL(1) TRANSACTIONS(2) ACQUISITION PRO FORMA
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Base rents $ 4,954,820 $ 9,427,904(I) $ 314,275(O) $14,696,999
Percentage rents 26,400 266,930(I) -(O) 293,330
Expense reimbursements 1,167,355 2,929,448(I) 92,477(O) 4,189,280
Interest and other income 27,278 23,023(I) 6,187(O) 56,488
----------- ------------ ----------- ------------
Total revenues 6,175,853 12,647,305 412,939 19,236,097
----------- ----------- ----------- ------------
Expenses:
Operating and maintenance 754,703 1,659,474(I) 74,935(O) 2,489,112
Real estate taxes 793,359 1,756,877(I) 63,813(O) 2,614,049
General and administrative 179,933 160,930(I) 12,346(O) 353,209
Advisory and trustee fees 345,000 519,054(J) 17,805(P) 881,859
Stock grant to Adviosr and officers 787,500 - - 787,500
Other 204,829 - - 204,829
Interest 2,435,538 1,235,715(N) 242,880(O) 3,914,133
Depreciation, amortization and ground lease 1,309,180 2,252,032(I) 98,580(O) 3,659,792
----------- ----------- ----------- ------------
Total expenses 6,810,042 7,584,082 510,359 14,904,483
Income (loss) before minority interest and
preferred share distribution requirements (634,189) 5,063,223 ( 97,420) 4,331,614
Minority interest in net income of real estate
ventures (40,894) 40,894(K) - -
(110,653(L) - (110,653)
----------- ----------- ----------- -------------
Income (loss) before preferred share distribution
requirements (675,083) 4,993,464 ( 97,420) 4,220,961
Preferred share distribution requirements (96,633) 96,633(M) - -
----------- ----------- ----------- -------------
Net income (loss) available
for common shareholders $ (771,716) $5,090,097 $ ( 97,420) $ 4,220,961
=========== =========== =========== ============
Net income (loss) per common share
(basic and diluted) $ 0.85 $ 0.44
=========== ============
Weighted average shares outstanding
(basic and diluted) 912,493 9,512,493
=========== ============
</TABLE>
(1) Does not include the effects of the Offering, the historical results
of operations of the Prior Acquisitions, or the Colony Plaza
Acquisition as these transactions were closed in 1998.
(2) Includes the effects of the Offering, and results of operations of the Prior
Acquisitions.
F-5
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - THE TRANSACTIONS
The pro forma adjustments described subsequently give effect to the following
transactions as if they were all completed on January 1, 1997 for the
accompanying unaudited condensed consolidated statements of operations for the
year ended December 31, 1997 and the six months ended June 30, 1998.
The Offering
On March 16, the Company completed its initial public offering of 7,600,000
common shares of beneficial interest. The shares were sold at $10 per share, and
offering costs aggregated approximately $6,663,354. On April 6, 1998, the
underwriters exercised their over allotment option for the purchase of
1,000,000 common shares of beneficial interest. These shares were sold at the
option price of $10 per share, with related offering cost totaling
approximately $700,000 (collectively, the "Offering"). Proceeds from the
Offering were used to retire debt of $16,392,755, acquire properties (see Prior
Acquisitions and Colony Plaza Acquisition below), redeem preferred shares for
$1,068,226, redeem convertible subordinated notes for $212,400, acquire
minority interests in real estate joint ventures for $1,457,239 and for general
corporate purposes.
The Prior Acquisitions
In conjunction with the Offering, the Company planned and completed the
acquisition of eight neighborhood shopping centers (the IPO Acquisitions), four
of which are in Houston, Texas, and one each in Dallas, Texas, Tampa, Florida,
Fort Lauderdale, Florida, and Phoenix, Arizona. Four of the IPO acquisitions
were acquired in February 1998, two were acquired in March 1998, and two were
acquired in May 1998.
The eight properties were purchased for a combined total of $72,189,429. The
Company paid cash of $43,251,946, assumed debt of $26,551,543 (with fixed
interest rates ranging from 8.25% to 10.75%), and issued partnership units with
a value of $2,385,940. With the purchase of Town 'n Country, a single purpose
partnership was formed and the Company issued partnership units to the seller of
the property. The Company has a 99% interest in the partnership, which is
consolidated for financial reporting purposes.
In addition to the IPO Acquisitions, the Company acquired the Big Curve Shopping
Center on May 27, 1998. Big Curve is a 126,400 square foot shopping center in
Yuma, Arizona, and was acquired for approximately $8,850,000, including
$5,965,129 of assumed debt.
The IPO Acquisitions and the Big Curve Acquisition, taken together hereafter are
referred to as the Prior Acquisitions.
The Colony Plaza Acquisition
The Company acquired the Colony Plaza Shopping Center (the Colony Plaza
Acquisition) on July 20, 1998. Colony Plaza is a 26,800 square foot shopping
center in Houston, Texas, and was acquired for approximately $4,195,000
including $3,187,371 of assumed debt.
NOTE 2 - PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
The pro forma adjustments to the Pro Forma Consolidated Balance sheet as of June
30, 1998, are as follows:
(A) Purchase of Colony Plaza Acquisition:
Land $1,258,510 (A)
Buildings and improvements 2,936,522 (A)
Cash and cash equivalents (1,002,650)(A)
Prepaid expenses and other assets 50,574 (A)
Mortgage notes payable 3,187,371 (A)
Accounts payable - trade 1,942 (A)
Accrued property taxes 34,441 (A)
Security deposits 19,202 (A)
F-8
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma adjustments to the Pro Forma Condensed Consolidated Statement
of Operations for the six months ended June 30, 1998, are as follows:
<TABLE>
<CAPTION>
<S> <C>
(A) Prior Acquisitions:
Base rents ......................................... $1,843,552
Percentage rents ................................... 26,434
Expense reimbursements ............................. 491,166
Other income ....................................... 22,751
Operating and maintenance .......................... 307,241
Real estate taxes .................................. 360,683
General and administrative ......................... 20,186
Depreciation ....................................... 388,696
Depreciation above reflects the increased depreciable basis of the
properties, depreciated over an estimated 30 year useful life on a straight-line
basis.
(B) Decrease in interest expense related to repayment of
mortgage debt and lines of credit with proceeds from
the Offering........................................... $ (255,739)
Interest on mortgage loans assumed in Prior
Acquisitions........................................... 766,537
-----------
$ 510,798
===========
(C) Increase in Advisory Fees related to revenue from Prior
Acquisitions........................................... $ 114,008
===========
(D) Decrease in minority interest in earnings of consolidated
partnerships........................................... $ 61,462
Increase in minority interest in earnings of consolidated
partnership (Town 'N Country).......................... (5,852)
-----------
$ 55,610
===========
(E) Decrease in preferred share distributions related to
redemption of preferred shares with proceeds from the
Offering............................................... $ 20,670
===========
(F) Purchase of Colony Plaza Acquisition:
Base rents ......................................... $ 217,874
Expense reimbursements ............................. 65,492
Other income ....................................... 6,137
Operating and maintenance .......................... 44,632
Real estate taxes .................................. 32,400
General and administrative ......................... 2,975
Depreciation ....................................... 49,290
Interest on debt assumed............................ 113,517
Depreciation above reflects the increased basis of the property,
depreciated over an estimated 30 year useful life on a straight-line basis.
(G) Increase in Advisory Fees related to revenue from
Colony Plaza Acquisition............................... $ 14,246
===========
(H) Represents elimination of the extraordinary loss from the early
extinguishment of debt because the intent of the pro forma financial
information is to reflect the expected continuing impact of certain
transactions on United Investors Realty Trust and Subsidiaries, this
non-recurring expense has been excluded from the pro forma condensed
consolidated statement of operations.
</TABLE>
F-9
<PAGE>
The pro forma adjustments to the Pro Forma Condensed Consolidated Statement
of Operations for the year ended December 31, 1997, are as follows:
<TABLE>
<S> <C>
(I) Purchase of Prior Acquisitions:
Base rents..................................$ 9,427,904
Percentage rents............................ 266,930
Expense reimbursements...................... 2,929,448
Other income................................ 23,023
Operating and maintenance................... 1,659,474
Real estate taxes........................... 1,756,877
General and administrative.................. 160,930
Depreciation................................ 2,252,032
Depreciation above reflects the increased basis of the properties,
depreciated over an estimated 30 year useful life on a straight-line basis.
(J) Increase in Advisory Fees related to revenue from Prior
Acquisitions and amendment of advisory agreement....... 519,054
===========
(K) Decrease in minority interest in earnings of consolidated
partnerships........................................... $ 40,894
===========
(L) Increase in minority interest in earnings of consolidated
partnership (Town `N Country).......................... $ (110,653)
===========
(M) Decrease in preferred dividends related to redemption of
preferred shares with proceeds from the Offering....... $ 96,633
===========
(N) Interest expense; net pro forma adjustment to interest expense is comprised
of the following:
Decrease in interest related to mortgage and
other loans repaid with IPO proceeds............. $(1,644,257)
Interest on mortgage loans assumed in Prior
Acquisitions..................................... 2,879,972
-----------
Total pro forma adjustment....................... $ 1,235,715
===========
</TABLE>
F-10
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C>
(O) Purchase of Colony Plaza Acquisition:
Base rents....................................... 314,275
Percentage rents................................. -
Expense reimbursements........................... 92.477
Other income..................................... 6,187
Operating and maintenance........................ 74,935
Real estate taxes................................ 63,813
General and administrative....................... 12,346
Depreciation and amortization.................... 98,580
Interest......................................... 242,880
Depreciation above reflects the increased basis of the properties,
depreciated over an estimated 30 year useful life on a straight-line basis.
(P) Increase in Advisory Fees related to revenue from
Colony Plaza............................................ $ 17,805
==========
</TABLE>
NOTE 3 - EARNINGS PER SHARE
Pro forma weighted average basic and diluted common shares outstanding is
calculated as follows:
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES OUTSTANDING SHARES OUTSTANDING
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -----------------
<S> <C> <C>
Total shares issued and outstanding at beginning
of period....................................... 837,489 914,889
Offering of 7,600,000 shares assumed
January 1, 1997................................. 7,600,000 7,600,000
Exercise of underwriters overallotment option
assumed January 1, 1997......................... 1,000,000 1,000,000
Grant of 75,000 shares on December 30, 1997
(assumed January 1, 1997)....................... 75,000 -
Grant of 2,400 shares on December 30, 1997...... 4 -
----------- -----------
Basic and Diluted Weighted
Average Shares Outstanding.............. 9,512,493 9,514,889
=========== ===========
</TABLE>
F-11
<PAGE>
Report of Independent Auditors
Board of Directors
United Investors Realty Trust
We have audited the accompanying Statement of Revenue and Certain Expenses of
Colony Plaza Shopping Center (the Property) for the year ended December 31,
1997. The Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement 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 Revenue and Certain Expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Revenue and Certain
Expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Current Report on Form 8-K of United
Investors Realty Trust as described in Note 1, and is not intended to be a
complete presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 1 of the Property for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Houston, Texas
July 30, 1998
F-12
<PAGE>
Colony Plaza Shopping Center
Statements of Revenue and Certain Expenses
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
-------------- ---------------
(unaudited)
<S> <C> <C>
REVENUE:
Base rents $ 217,874 $ 314,275
Expense reimbursements 65,492 92,477
Other income 6,137 6,187
----------- -----------
Total revenue 289,503 412,939
----------- -----------
EXPENSES:
Operating and maintenance 44,632 74,935
Real estate taxes 32,400 63,813
General and administrative 2,975 12,346
----------- -----------
Total expenses 80,007 151,094
----------- -----------
Revenue in excess of certain expenses $ 209,496 $ 261,845
=========== ===========
</TABLE>
See accompanying notes.
F-13
<PAGE>
Colony Plaza Shopping Center
Notes to Statements of Revenue and Certain Expenses
Year Ended December 31, 1997 and
Six Months Ended June 30, 1998 (unaudited)
1. BASIS OF PRESENTATION
The accompanying Statement of Revenue and Certain Expenses relates to the
operations of Colony Plaza Shopping Center (the "Property"), a 26,800
square-foot shopping center located in Houston, Texas. Construction of the
Property was completed and lease-up commenced in November 1996.
United Investors Realty Trust (the "Company") acquired the Property on July 20,
1998.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Current Report on Form 8-K of the
Company. The accompanying statement excludes certain items not comparable to the
proposed future operations of the Property, including primarily depreciation,
amortization, mortgage interest expense, and certain owner expenses.
Consequently, the statement is not representative of the actual operations of
the Property for the periods presented nor indicative of future operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE AND EXPENSE RECOGNITION
Revenue is recognized in the period in which it is earned. Expenses are
recognized in the period incurred.
Certain leases of the Property provide for tenant occupancy during periods for
which no rent is due or where minimum rent payments increase during the term of
the lease. The Property records rental income for the full term of each lease on
a straight-line basis.
USE OF ESTIMATES
The preparation of the Statement of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
certain expenses during the reporting period. Actual results could differ from
these estimates.
F-14
<PAGE>
COLONY PLAZA SHOPPING CENTER
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES (continued)
Year ended December 31, 1997 and
Six months ended June 30, 1998 (unaudited)
3. RENTALS
The Property has lease agreements with lease terms ranging from three years to
ten years. The leases generally provide for tenants to share in operating
expenses and real estate taxes. The total minimum rentals to be received under
such non-cancelable operating leases as of December 31, 1997, exclusive of
tenant reimbursements and contingent rentals, are as follows:
1998 $ 414,910
1999 445,503
2000 435,264
2001 417,343
2002 257,016
Thereafter 194,176
------------
$ 2,164,212
============
F-15
<PAGE>
