Section 1: 8-K/A (DALLAS PORTFOLIO)
--------------------------------
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) December 31, 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 December 31, 1998, United Investors Realty Trust (the "Company") acquired a
portfolio of five neighborhood shopping centers in the Dallas/Fort Worth area
(the "Dallas Portfolio"). The properties, which are located in Hurst, Garland,
Richardson, Plano, and Arlington, Texas, were acquired from various unrelated
partnerships, all of which were controlled by Today Realty Advisors, Inc., for
consideration of approximately $24.9 million. The purchase was funded with
approximately $17 million in assumed debt, $7.5 million from the Company's
revolving line of credit, and 43,000 downREIT units valued at $9.50 per unit.
The assumed debt has a weighted average interest rate of 7.81% and the revolving
line of credit has a one-year fixed rate of 6.7%. The downREIT units are
convertible into shares of the Company. The Properties have an aggregate gross
leaseable area of over 460,000 square feet, of which the Company acquired
approximately 282,000 square feet.
The Hurst property and the Garland property, which are owned by the Company,
contain approximately 47,000 square feet and approximately 33,000 square feet,
respectively, and were 100% leased at December 31, 1998.
The Company entered into capital leases for the Richardson and Plano properties
and has a bargain purchase option to acquire the fee estate for each of these
for one dollar. The Richardson property contains approximately 117,000 square
feet, of which approximately 62,000 square feet is owned and occupied by
Albertson's Supermarkets. The remaining square footage was approximately 86%
leased at December 31, 1998. The Plano property contains approximately 144,000
square feet, of which approximately 62,000 is owned and operated by Albertson's
Supermarkets. The remaining square footage was 100% leased at December 31, 1998.
The Company purchased a 99% Limited Partnership interest in the Arlington
property. The general partner has entered into a trust agreement pursuant to
which it holds its 1% partnership interest in trust for the benefit of the
Company. The Company also holds an option to purchase the fee estate of this
Arlington property for one dollar. The property contains approximately 123,000
square feet, of which approximately 58,000 square feet is owned and occupied by
Kroger. The remaining square footage was approximately 99% leased at December
31, 1998.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
The index to the historical financial information for the Dallas
Portfolio 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 March 16, 1999.
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
----
Consolidated Balance Sheet at December 31, 1998.......................... F-3
Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1998 .................................. F-4
Notes to Unaudited Pro Forma Consolidated Statement of
Operations............................................................. F-5
HISTORICAL FINANCIAL INFORMATION
Dallas Portfolio
Report of Independent Auditors - Ernst & Young LLP....................... F-8
Combined Historical Summary of Gross Income and Direct Operating Expenses
for the year ended December 31, 1998................................... F-9
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses............................................................... F-10
F-1
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
INTRODUCTION
The unaudited pro forma consolidated statement of operations for the year ended
December 31, 1998 is presented as if the Prior Acquisitions, the Offering, the
Dallas Portfolio Acquisition and the application of the net Proceeds of the
Offering, as further described on page F-5, all had occurred on January 1, 1998.
The historical consolidated balance sheet of United Investors Realty Trust and
Subsidiaries as of December 31, 1998, located on page F-3, already reflects the
effects of the Prior Acquisitions, the Offering, the Dallas Portfolio
Acquisition, and the application of the net proceeds of the Offering as each of
these transactions occurred on or prior to December 31, 1998.
The unaudited pro forma consolidated statement 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 Annual
Report on Form 10-K for the year ended December 31, 1998. The pro forma
consolidated statement of operations does 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
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
HISTORICAL
DECEMBER 31,
1998
----------
<S> <C>
Investment real estate:
Land........................................................... $ 44,290,975
Buildings and improvements..................................... 114,716,718
Property under development..................................... 1,321,823
-----------
160,329,516
Less accumulated depreciation.................................. (7,434,343)
-----------
Investment real estate, net.................................... 152,895,173
Cash and cash equivalents........................................ 5,486,095
Accounts receivable, net of allowance of $120,333 and $41,771
in 1998 and 1997, respectively................................. 2,733,070
Prepaid expenses and other assets................................ 3,509,771
-----------
Total assets........................................... $164,624,109
===========
LIABILITIES, MINORITY INTEREST, REDEEMABLE
PREFERRED SHARES AND COMMON SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable......................................... $ 55,248,437
Capital lease obligations...................................... 9,914,054
Construction note payable...................................... 1,221,393
Short-term notes and line of credit............................ 7,500,000
Accounts payable -- trade...................................... 1,761,208
Accrued property taxes......................................... 2,516,291
Security deposits.............................................. 722,421
Distributions payable.......................................... 2,045,702
-----------
Total liabilities...................................... 80,929,506
-----------
Minority interest in consolidated partnership.................... 2,825,284
-----------
Commitments and Contingenicies
Common shareholders' equity:
Common shares of beneficial interest, no par value,
500,000,000 shares authorized, 9,514,889 and 914,889 shares
issued and 9,434,889 and 914,889 outstanding at December 31,
1998 and 1997,respectively .................................... 86,571,108
Accumulated deficit............................................ (5,701,789)
------------
Total common shareholders' equity...................... 80,869,319
------------
Total liabilities, minority interest, redeemable
preferred shares and common shareholders'
equity......................................... $164,624,109
===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1998
Table 1:
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------
UNITED INVESTORS DALLAS
REALTY TRUST PRIOR PORTFOLIO TOTAL
HISTORICAL(1) ACQUISITIONS(2) ACQUISITION PRO FORMA
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Base rents $13,231,250 $2,621,461(A) $2,882,625(F) $18,735,336
Percentage rents 322,633 26,434(A) - 349,067
Expense reimbursements 3,769,885 715,896(A) 920,906(F) 5,406,687
Interest and other income 426,402 40,089(A) 14,940(F) 481,431
----------- ----------- ----------- -----------
Total revenues 17,750,170 3,403,880 3,818,471 24,972,521
Expenses:
Operating and maintenance 2,162,250 482,025(A) 523,863(F) 3,168,138
Real estate taxes 2,485,915 483,385(A) 510,795(F) 3,480,095
General and administrative 1,016,508 40,846(A) 51,153(F) 1,108,507
Advisory and trustee fees 794,043 161,732(C) 185,821(G) 1,141,596
Interest 6,079,889 871,860(B) 1,854,720(F) 8,806,469
Depreciation and amortization 2,907,855 550,750(A) 578,917(F) 4,037,522
----------- ---------- ----------- -----------
Total expenses 15,446,460 2,590,598 3,705,269 21,742,327
----------- ---------- ----------- -----------
Income before minority interest,
extraordinary item,and preferred share
distribution requirements 2,303,710 813,282 113,202 3,230,194
Minority Interest in consolidated partnerships (126,111) 47,350(D) (14,194)(I) (92,955)
----------- ---------- ----------- -----------
Income before extraordinary item and
preferred share distribution requirements 2,177,599 860,632 99,008 3,137,239
Extraordinary item-prepayment penalties incurred on
early extinguishment of debt (232,532) 232,532(H) - -
----------- ---------- ----------- -----------
Income before preferred share distribution 1,945,067 1,093,164 99,008 3,137,239
requirements
Preferred share distribution requirements (20,670) 20,670(E) - -
----------- ---------- ----------- -----------
Net income available for
common shareholders $1,924,397 $1,113,834 $ 99,008 $ 3,137,239
=========== =========== =========== ===========
Net income per common shareholders
(basic and diluted) $ 0.25 $ 0.33
=========== ===========
Weighted average shares outstanding
(basic and diluted) 7,702,709 9,503,805
=========== ===========
</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
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
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, 1998 for the
accompanying unaudited proforma consolidated statement of operations for the
year ended December 31, 1998.
The Offering
On March 16, the Company completed its initial public offering of 7,600,000
common shares of beneficial interest, at $10 per share. On April 6, 1998, the
underwriters exercised their over allotment option for the purchase of 1,000,000
common shares of beneficial interest, at the option price of $10 per share
(collectively, the "Offering"). Net proceeds from the Offering, in the amount of
approximately $79 million, 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 $8,860,000, including
$5,965,129 of assumed debt. The Company acquired the Colony Plaza Shopping
Center 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. The Company acquired the Highland Square Shopping
Center on September 22, 1998. Highland Square is a 64,171 square foot shopping
Center in Sugar Land, Texas (a suburb of Houston), and was acquired for
approximately $7,685,600, including $4,436,456 of assumed debt.
The IPO Acquisitions, the Big Curve Acquisition, the Colony Plaza Acquisition,
and the Highland Square Acquisition taken together hereafter are referred to as
the Prior Acquisitions.
The Dallas Portfolio Acquisition
The Company acquired a portfolio of five neighborhood centers in the Dallas/Fort
Worth area on December 31, 1998. The properties, which are located in Hurst,
Garland, Richardson, Plano, and Arlington, Texas, were purchased for a combined
total of approximately $24.9 million. The purchase was funded with approximately
$17 million in assumed debt, $7.5 million from the Company's revolving line of
credit, and 43,000 downREIT units. The Company entered into capital leases for
the Richardson and Plano properties and purchased a 99% Limited Partnership
interest in the Arlington property. The Hurst and Garland properties were
purchased outright.
F-5
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NOTE 2 - PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The pro forma adjustments to the Pro Forma Condensed Consolidated Statement
of Operations for the year ended December 31, 1998, are as follows:
Table 4
(A) Purchase of Prior Acquisitions:
Base rents ......................................... $2,621,461
Percentage rents ................................... 26,434
Expense reimbursements ............................. 715,896
Other income ....................................... 40,089
Operating and maintenance .......................... 482,025
Real estate taxes .................................. 483,385
General and administrative ......................... 40,846
Depreciation ....................................... 550,750
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........................................... 1,127,599
-----------
$ 871,860
===========
(C) Increase in Advisory Fees related to revenue from Prior
Acquisitions........................................... $ 161,732
===========
(D) Decrease in minority interest in earnings of consolidated
partnerships........................................... $ 126,111
Increase in minority interest in earnings of consolidated
partnership (Town 'N Country).......................... (78,761)
-----------
$ 47,350
===========
(E) Decrease in preferred share distributions related to
redemption of preferred shares with proceeds from the
Offering............................................... $ 20,670
===========
(F) Purchase of Dallas Portfolio Acquisition:
Base rents ......................................... $2,882,625
Expense reimbursements ............................. 920,906
Other income ....................................... 14,940
Operating and maintenance .......................... 523,863
Real estate taxes .................................. 510,795
General and administrative ......................... 51,153
Depreciation ....................................... 578,917
Interest on debt and capital lease obligations...... 1,854,720
Depreciation above reflects the increased basis of the property,
depreciated over an estimated 30 year useful life on a straight-line basis.
Interest expense represents interest on capital lease obligations and
mortgage debt assumed of approximately $17 million at a weighted average
interest rate of 7.81%, plus interest on the line of credit borrowings of $7.5
million at an interest rate of 6.7%.
(G) Increase in Advisory Fees related to revenue from
Dallas Portfolio Acquisition.............................. $ 185,821
===========
F-6
<PAGE>
UNITED INVESTORS REALTY TRUST AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(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.
(I) Increase in minority interest in earnings of consolidated
partnerships.............................................. $ (14,194)
Table 6
NOTE 3 - EARNINGS PER SHARE
Pro forma weighted average basic and diluted common shares outstanding is
calculated as follows:
Table 7
<TABLE>
<CAPTION>
PRO FORMA
WEIGHTED AVERAGE
SHARES OUTSTANDING
DECEMBER 31, 1998
------------------
<S> <C>
Total shares issued and outstanding at beginning
of period....................................... 914,889
Offering of 7,600,000 shares assumed
January 1, 1997................................. 7,600,000
Exercise of underwriters overallotment option
assumed January 1, 1997......................... 1,000,000
Grant of 75,000 shares on December 30, 1997
(assumed January 1, 1997)....................... -
Grant of 2,400 shares on December 30, 1997...... -
Repurchase of 5,000 shares on September 18, 1998 (1,438)
Repurchase of 5,000 shares on September 21, 1998 (1,397)
Repurchase of 5,000 shares on October 7, 1998... (1,178)
Repurchase of 5,000 shares on October 28, 1998.. (890)
Repurchase of 5,000 shares on October 29, 1998.. (877)
Repurchase of 3,000 shares on October 30, 1998.. (518)
Repurchase of 3,000 shares on November 2, 1998.. (493)
Repurchase of 5,000 shares on November 12, 1998. (685)
Repurchase of 5,000 shares on November 13, 1998. (671)
Repurchase of 2,500 shares on November 18, 1998. (301)
Repurchase of 2,500 shares on November 19, 1998. (295)
Repurchase of 2,500 shares on November 23, 1998. (267)
Repurchase of 1,500 shares on November 24, 1998. (156)
Repurchase of 5,000 shares on December 1, 1998.. (425)
Repurchase of 5,000 shares on December 4, 1998.. (384)
Repurchase of 5,000 shares on December 7, 1998.. (342)
Repurchase of 5,000 shares on December 9, 1998.. (315)
Repurchase of 5,000 shares on December 15, 1998. (233)
Repurchase of 5,000 shares on December 16, 1998. (219)
----------
Basic and Diluted Weighted
Average Shares Outstanding.............. 9,503,805
===========
</TABLE>
F-7
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
United Investors Realty Trust
We have audited the accompanying Combined Historical Summary of Gross Income and
Direct Operating Expenses (the Combined Historical Summary) of the Dallas
Portfolio described in Note 1 (the Properties) for the year ended December 31,
1998. The Combined Historical Summary is the responsibility of the Properties'
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 Combined Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Combined Historical Summary. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Combined
Historical Summary. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying Combined Historical Summary 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 Properties' revenue and expenses.
In our opinion, the Combined Historical Summary of Gross Income and Direct
Operating Expenses referred to above presents fairly, in all material respects,
the historical gross income and direct operating expenses described in Note 1 of
the Properties for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
Houston, Texas
March 12, 1999
F-8
<PAGE>
THE DALLAS PORTFOLIO
COMBINED HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT
OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1998
Table 8
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
Base rents $2,882,625
Expense reimbursements 920,906
Other income 14,940
-----------
Total revenue 3,818,471
-----------
EXPENSES:
Operating and maintenance 523,863
Real estate taxes 510,795
General and administrative 51,153
-----------
Total expenses 1,085,811
-----------
Gross income in excess of direct operating
expenses $2,732,660
===========
</TABLE>
See accompanying notes.
F-9
<PAGE>
THE DALLAS PORTFOLIO
NOTES TO THE COMBINED HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1998
1. BASIS OF PRESENTATION
On December 31, 1998, United Investors Realty Trust (the "Company") acquired
five neighborhood shopping centers in the Dallas/Ft. Worth area
(the "Properties").
The Properties acquired are as follows:
<TABLE>
<CAPTION>
<S>
Location Square Footage Owned by the Company
- -------- -----------------------------------
<C> <C>
Hurst, TX 47,000
Garland, TX 33,000
Richardson, TX 55,000
Plano, TX 82,000
Arlington, TX 65,000
-------
282,000
=======
</TABLE>
The accompanying Combined Historical Summary of Gross Income and Direct
Operating Expenses (the Combined Historical Summary) relates to the operations
of the Properties and 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
Properties, including primarily depreciation, amortization, mortgage interest
expense, and certain owner expenses. Consequently, the statement is not
representative of the actual operations of the Properties for the period
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 Properties 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 accompanying statement reflects rental income for the term of
each lease on a straight-line basis.
USE OF ESTIMATES
The preparation of the Combined Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of gross income and direct
operating expenses during the reporting period. Actual results could differ from
these estimates.
F-10
<PAGE>
THE DALLAS PORTFOLIO
NOTES TO THE COMBINED HISTORICAL SUMMARY OF GROSS
INCOME AND DIRECT OPERATING EXPENSES (continued)
Year Ended December 31, 1998
3. RENTALS
The Properties have 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 in excess of specified base amounts. The total
minimum rentals to be received under such non-cancelable operating leases as of
December 31, 1998, exclusive of tenant reimbursements and contingent rentals,
are as follows:
1999 $ 2,826,076
2000 2,342,172
2001 1,913,786
2002 1,441,917
2003 957,427
Thereafter 1,788,367
------------
$11,269,745
============
F-11
