UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 28, 1997 (May 14, 1997)
The Price REIT, Inc.
(Exact name of registrant as specified in charter)
Maryland 1-13432 52-1746059
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
7979 Ivanhoe Avenue, Suite 524, La Jolla, California 92037
(Address of Principal Executive Offices) (Zip Code)
(619)551-2320
(Registrant's Telephone Number, Including Area Code)
None
(Former name or former address, if changed since last report.)
The Price REIT, Inc. hereby amends Item 7 of its Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 28, 1997 to file the
(i) audited statement of revenue over specific operating expenses for the
Smoketown Stations Center (ii) unaudited pro forma condensed financial
information and (iii) consent of independent auditors.
Item 7. Financial Statements and Exhibits
(a) Financial Statement of Property Acquired
Smoketown Stations Center
Report of Independent Auditors
Statement of Revenue Over Specific
Operating Expenses
Notes to Statement of Revenue Over
Specific Operating Expenses
(b) Pro Forma Financial Information
The Price REIT, Inc.
Pro Forma Condensed Balance Sheet as of
March 31, 1997
The Price REIT, Inc.
Pro Forma Condensed Statement of Income for
the year ended December 31, 1996
The Price REIT, Inc.
Pro Forma Condensed Statement of Income for
the three months ended March 31, 1997
(c) Exhibits
The following exhibit is filed with this report on Form 8-K/A.
Exhibit No.
23.1 Consent of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment No. 1 to Form 8-K filed on Form 8-K/A
to be signed on its behalf by the undersigned hereunto duly authorized.
The Price REIT, Inc.
(Registrant)
Date: July 24, 1997 By: /GEORGE M. JEZEK/
-----------------
George M. Jezek
Executive Vice President,
Chief Financial Officer and Secretary
Report of Independent Auditors
The Board of Directors and Stockholders
The Price REIT, Inc.
We have audited the accompanying statement of revenue over specific operating
expenses of the Smoketown Stations Center (the "Center") for the year ended
December 31, 1996. The statement is the responsibility of the Center'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 is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the basis of
accounting used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement of revenue over specific operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K of The Price
REIT, Inc. as described in Note 2, and is not intended to be a complete
presentation of the Center's revenue and expenses.
In our opinion, the statement of revenue over specific operating expenses
referred to above presents fairly, in all material respects, the revenue over
specific operating expenses of the Center, as described in Note 2, for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
San Diego, California
June 24, 1997
Smoketown Stations Center
Statement of Revenue Over Specific Operating Expenses
(In Thousands)
Year Ended Three Months Ended
December 31, March 31,
1996 1997 1996
--------------------------------
(Unaudited)
Revenue
Rental income $5,756 $1,469 $1,301
Specific Operating Expenses (Note 2)
Rental operations, maintenance and
management 670 158 209
Real estate taxes 599 150 150
--------------------------------
1,269 308 359
--------------------------------
Excess of Revenue over Specific
Operating Expenses $4,487 $1,161 $942
================================
See accompanying notes.
Smoketown Stations Center
Notes To Statement of Revenue Over
Specific Operating Expenses
Year ended December 31, 1996
1. Acquisition and Significant Accounting Policies
ORGANIZATION
The Price REIT, Inc. (the "Company") acquired the Smoketown Stations Center (the
"Center") on May 14, 1997. The Center is a 483,000 rentable square-foot
shopping center located in Woodbridge, Virginia, which was built in phases
between 1991 and 1995.
RENTAL INCOME
Rental income is recorded on a straight-line basis over the lives of the tenant
leases.
USE OF ESTIMATES
The preparation of the Center's statement of revenue over specific operating
expenses requires management to make estimates and assumptions that affect the
reported amounts of revenue and specific expenses during the reporting period.
Due to uncertainties inherent in the estimation process, it is possible that
actual results could differ from these estimates.
2. Basis of Presentation
The statement of revenue over specific operating expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of The Price REIT, Inc. and is
not intended to be a complete presentation of the Center's revenue and expenses.
The statement of revenue over specific operating expenses excludes depreciation,
amortization and certain other expenses of the Center which are not comparable
with the future operations of the Center.
In the opinion of management, the unaudited financial information contains all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the statements of revenue over specific operating expenses
of the Center.
Property taxes have not been adjusted to reflect the estimated reassessed value
of the Center after acquisition by the Company.
The statement contains no provision for income taxes because the Company intends
to continue to qualify as a real estate investment trust ("REIT") under both
Federal and state statutes. A REIT is not taxed on income distributed to its
stockholders, and the Company plans to distribute substantially all of its
taxable income to its stockholders.
3. Rental Income
The Center is generally leased to tenants under noncancellable operating leases
with remaining terms ranging from one to 18 years. Certain leases contain
renewal options and provisions for percentage rental income based on a
percentage of gross sales of the tenant in excess of a specified amount. During
1996, $10,000 of percentage rents are included in rental income. The leases
generally contain provisions for predetermined fixed increases in rent and
require the tenants to reimburse the owner for substantially all operating
expenses of the properties.
Future minimum rental income due under the terms of the operating leases is as
follows (in thousands):
1997 $5,007
1998 5,001
1999 4,841
2000 4,669
2001 4,550
Thereafter 28,466
The following tenants account for greater than 10% of total revenues in 1996 (in
thousands):
Revenue
-------
Lowe's Home Centers $938
Best Buy 589
The Price REIT, Inc.
Pro Forma Condensed Balance Sheet
March 31, 1997
(Unaudited)
The following unaudited pro forma condensed balance sheet has been presented as
if the purchases of the Arboretum Crossing Center, which was previously reported
on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto), and Smoketown
Stations Center (collectively, the "Centers") occurred on March 31, 1997. The
unaudited pro forma condensed balance sheet should be read in conjunction with
the condensed consolidated financial statements included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and Current
Report on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto). In
management's opinion, all adjustments necessary to reflect the purchase of the
Centers and related significant transactions have been made. The unaudited pro
forma condensed balance sheet is not necessarily indicative of what the actual
financial position would have been at March 31, 1997, nor does it purport to
present the future financial position of the Company.
The Price REIT, Inc.
Pro Forma Condensed Balance Sheet
March 31, 1997
(Unaudited)
The The
Company Pro Forma Company
Historical Adjustments Pro Forma
----------------------------------------
(In Thousands)
Assets
Rental property, net $419,842 $ 69,872 (a) $489,714
Investments in joint ventures 19,227 - 19,227
Other assets 28,905 (9,872)(a) 19,033
----------------------------------------
$467,974 $ 60,000 $527,974
========================================
Liabilities and Stockholders'
Equity
Liabilities $175,938 $ 60,000(a) $235,938
Stockholders' Equity 292,036 - 292,036
----------------------------------------
$467,974 $ 60,000 $527,974
========================================
See accompanying proforma adjustments.
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Balance Sheet
March 31, 1997
(Unaudited)
(In Thousands)
(a) Record the acquisitions of the Arboretum Crossing Center and Smoketown
Stations Center from operating cash and draws from the Company's unsecured
line of credit as follows:
Paid from
------------------
Acquisition Line
Date Property Name Cost Cash of Credit
------------- ------------------------- -----------------------------
April 1, 1997 Arboretum Crossing Center $23,372 $9,372 $14,000
May 14, 1997 Smoketown Stations Center 46,500 500 46,000
-----------------------------
$69,872 $9,872 $60,000
=============================
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
The following unaudited pro forma condensed statement of income for the year
ended December 31, 1996 has been presented as if the Smoketown Stations Center
and 1997 Acquired Properties were acquired on January 1, 1996. The 1997 Acquired
Properties include Westgate Market, Broadmoor Village, Richardson Plaza,
Cityplace Market, Wendover Ridge Center and Arboretum Crossing Center that were
previously presented in the Company's Current Report on Amendment No. 1 to Form
8-K dated April 16, 1997 filed with the Securities and Exchange Commission. The
unaudited pro forma condensed statement of income should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
1996 and Current Report on Form 8-K dated April 16, 1997 (and Amendment No. 1
thereto). In management's opinion, all adjustments necessary to reflect the
above acquisitions and related significant transactions have been made. The
unaudited pro forma condensed statement of income is not necessarily indicative
of what actual results of operations would have been had the acquisitions and
related transactions actually occurred as of January 1, 1996, nor does it
purport to represent the results of operations of the Company for future
periods.
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
Pro Forma Adjustments
---------------------
The 1997 Smoketown The
Company Acquired Stations Company
Historical Properties Center Pro Forma
---------------------------------------------------
(In thousands, except per share amounts)
REVENUE
Rental income $51,292 $4,581(a) $5,756(a) $61,629
Other income 3,033 - - 3,033
---------------------------------------------------
54,325 4,581 5,756 64,662
EXPENSES
Rental operations 9,909 1,163(b) 1,159(b) 12,231
General and administrative 3,550 - - 3,550
Depreciation 11,876 1,259(c) 1,353(c) 14,488
Interest 12,071 236(d) 3,494(d) 15,801
---------------------------------------------------
37,406 2,658 6,006 46,070
---------------------------------------------------
Net income (loss) $16,919 $1,923 $ (250) $18,592
===================================================
PER SHARE DATA
Net income per share $ 1.98 $ 1.83
====== ======
Weighted average number
of share outstanding 8,560 10,160(e)
====== ======
OTHER DATA
Number of properties at
end of period 24 31
====== ======
See accompanying proforma adjustments.
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands)
(a) Record the rental income of the 1997 Acquired Properties and Smoketown
Station Center (the "Properties").
(b) Record the rental operating expenses of the Properties less property
management fees (as the Company self-manages its properties) as follows:
1997 Smoketown
Acquired Stations
Properties Center
-----------------------
Rental operations $1,272 $1,269
Less: management fees (109) (110)
-----------------------
$1,163 $1,159
=======================
(c) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as follows:
Smoketown
1997 Acquired Properties Stations Center
-------------------------------------------------
Years Cost Depreciation Cost Depreciation
---------------------------------------------------------
Land - $18,824 $ - $14,694 $ -
Land improvements 15 3,949 188 3,022 202
Buildings 25 37,380 1,071 28,784 1,151
--------------------------------------------
$60,153 $1,259 $46,500 $1,353
============================================
(d) Record the additional interest expense resulting from the acquisitions of
the Properties with the proceeds from the unsecured line of credit,
using the Company's weighted average interest rate on its unsecured line
of credit for the year ended December 31, 1996 of 7.595%.
(e) Includes the issuance of 1.6 million shares of common stock sold on
January 22, 1997.
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Three Months Ended March 31, 1997
(Unaudited)
The following unaudited pro forma condensed statement of income for the three
months ended March 31, 1997 has been presented as if the Smoketown Stations
Center and the 1997 Acquired Properties were acquired on January 1, 1997. The
1997 Acquired Properties include Westgate Market, Broadmoor Village, Richardson
Plaza, Cityplace Market, Wendover Ridge Center and Arboretum Crossing Center.
The unaudited pro forma condensed statement of income should be read in
conjunction with the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 and Current Report on Form 8-K dated April 16, 1997 (and
Amendment No. 1 thereto). In management's opinion, all adjustments necessary to
reflect the above acquisitions and related significant transactions have been
made. The unaudited pro forma condensed statement of income is not necessarily
indicative of what actual results of operations would have been had the
acquisitions and related transactions actually occurred as of January 1, 1997,
nor does it purport to represent the results of operations of the Company for
future periods.
The Price REIT, Inc.
Pro Forma Condensed Statement of Income
For the Three Months Ended March 31, 1997
(Unaudited)
Pro Forma Adjustments
-----------------------
The 1997 Smoketown The
Company Acquired Stations Company
Historical Properties Center Pro Forma
--------------------------------------------------
(In thousands, except per share amounts)
REVENUE
Rental income $14,108 $ 1,348(a) $ 1,469(a) $16,925
Other income 1,200 - - 1,200
--------------------------------------------------
15,308 1,348 1,469 18,125
Expenses
Rental operations 2,744 173(b) 283(b) 3,200
General and administrative 954 - - 954
Depreciation 3,139 375(c) 338(c) 3,852
Interest 3,025 245(d) 805(d) 4,075
--------------------------------------------------
9,862 793 1,426 12,081
--------------------------------------------------
Net income $ 5,446 $ 555 $ 43 $ 6,044
==================================================
PER SHARE DATA
Net income per share $ 0.53 $ 0.57
====== ======
Weighted average number
of shares outstanding 10,297 10,670
====== ======
OTHER DATA
Number of properties at
end of period 29 31
====== ======
See accompanying proforma adjustments.
The Price REIT, Inc.
Pro Forma Adjustments to Condensed Statement of Income
For the Three Months Ended March 31, 1997
(Unaudited)
(In Thousands)
(a) Record the rental income of the Properties prior to acquisition by the
Company.
(b) Record the rental operating expenses of the Properties less property
management fees (as the Company self-manages its properties) prior to
acquisition by the Company as follows:
1997
Acquired Smoketown
Properties Stations Center
------------------------------
Rental operations $182 $308
Less: management fees (9) (25)
------------------------------
$173 $283
==============================
(c) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as follows:
Smoketown
1997 Acquired Properties Stations Center
----------------------------------------------
Years Cost Depreciation Cost Depreciation
--------------------------------------------------------
Land - $18,824 $ - $14,694 $ -
Land improvements 15 3,949 66 3,022 50
Buildings 25 37,380 374 28,784 288
------------------------------------------------
$60,153 440 $46,500 $338
Less amount included in the
company historical (65)
--------
$ 375
========
(d) Record the additional interest expense resulting from the acquisitions
of the Properties with the proceeds from the unsecured line of credit,
using the Company's weighted average interest rate on its unsecured
line of credit for the three months ended March 31, 1997 of7.0%.
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors and Stockholders
The Price REIT, Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-75548; Form S-8 No. 33-87812; Form S-3 No. 333-16787 and
related Prospectus) of The Price REIT, Inc. for the registration of 500,000
shares of its common stock; 600,000 shares of its common stock; and an
aggregate maximum total of $175,000,000 of debt securities, preferred stock,
common stock, and warrants for the purchase of its preferred stock or common
stock, respectively, of our report dated June 24, 1997 with respect to the
statement of revenue over specific operating expenses of the Smoketown Stations
Center of The Price REIT, Inc. included in its Current Report on Amendment
No. 1 to Form 8-K dated May 28, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
San Diego, California
July 22, 1997
