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): April 16, 1997 (January
16, 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)
The Price REIT, Inc. hereby amends Item 7 of its Current Report on Form 8-
K filed with the Securities and Exchange Commission on April 16, 1997 to file
the (i) audited statement of revenue over specific operating expenses for the
Arboretum Crossing Center and (ii) unaudited pro forma condensed financial
information.
Item 7. - Financial Statements and Exhibits
(a) Financial Statement of Property Acquired
Arboretum Crossing 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
December 31, 1996
The Price REIT, Inc. Pro Forma Condensed Statement of Income for
the year ended December 31, 1996
(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: May 9, 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 Arboretum Crossing Center (the "Center") of The Price REIT,
Inc. for the period from October 3, 1996 (inception) through 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
period from October 3, 1996 (inception) through December 31, 1996, in
conformity with generally accepted accounting principles.
/ Ernst & Young LLP/
San Diego, California
April 10, 1997
The Price REIT, Inc.
Arboretum Crossing Center
Statement of Revenue Over Specific Operating Expenses
Period from October 3, 1996 (Inception)
through December 31, 1996
(In Thousands)
REVENUE
Rental income $ 242
SPECIFIC OPERATING EXPENSES (Note 2)
Rental operations, maintenance and management 14
Real estate taxes 43
--------
57
--------
Excess of Revenue over Specific Operating Expenses $ 185
========
See accompanying notes.
Notes To Statement of Revenue Over
Specific Operating Expenses
Period from October 3, 1996 (Inception)
through December 31, 1996
1. Organization and Significant Accounting Policies
The Price REIT, Inc. (the "Company") acquired the Arboretum Crossing Center
(the "Center") on April 1, 1997. The Center is a newly constructed 182,000
square-foot shopping center located in Austin, Texas, which was completed and
commenced operations on October 3, 1996 (inception).
Rental Income
Rental income is recorded on a straight-line basis over the lives of the
leases.
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.
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.
Use of Estimates
The preparation of the Company'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 reasonably
possible that actual results could differ from these estimates.
3. Rental Income
The Center is leased under noncancellable operating leases with remaining
terms ranging from one to 21 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, there were
no percentage rents. The leases generally contain provisions for increases in
rents based on the Consumer Price Index and require the tenant to reimburse
the owner for substantially all operating expenses of the properties.
Future minimum rental income due under the terms of noncancellable operating
leases is as follows (in thousands):
1997 $ 1,923
1998 2,581
1999 2,581
2000 2,581
2001 2,580
Thereafter 24,194
The following tenants account for greater than 10% of total revenues
(in thousands):
Circuit City $81
Cost Plus, Inc. 49
Baby Superstore 34
Party City of Austin 26
Pro Forma Condensed Balance Sheet
December 31, 1996
(Unaudited)
The following unaudited pro forma condensed balance sheet has been presented
as if the purchase of the Westgate Market, Broadmoor Village, Richardson
Plaza, Cityplace Market, Wendover Ridge Center and Arboretum Crossing Center
(collectively referred to as the "Properties"), and the sale of 1.6 million
shares of common stock on January 22, 1997 occurred on December 31, 1996. The
unaudited pro forma condensed balance sheet should be read in conjunction with
the consolidated financial statements included in the Company's December 31,
1996 Form 10-K. In management's opinion, all adjustments necessary to reflect
the purchase of the Properties, sale of common stock 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 December 31, 1996, nor does it purport to present the future financial
position of the Company.
The The
Company Pro Forma Company
Historical Adjustments Pro Forma
---------- ----------- ---------
(In Thousands)
ASSETS
Rental property, net $ 380,482 $ 60,153 (b) $ 440,635
Cash and cash equivalents 11,369 56,790 (a) 22,006
(46,153)(b)
Other assets 36,220 36,220
--------- --------- ---------
$ 428,071 $ 70,790 $ 498,861
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ 191,089 $ 14,000 (b) $ 205,089
Stockholders' Equity 236,982 56,790 (a) 293,772
--------- --------- ---------
$ 428,071 $ 70,790 $ 498,861
========= ========= =========
Forma Adjustments to Condensed Balance Sheet
December 31, 1996
(Unaudited)
(In Thousands)
(a) Record the sale of 1.6 million shares of common stock on January 22, 1997.
Gross proceeds at $37 5/8 per share $ 60,200
Costs of issuance (3,410)
---------
Net proceeds $ 56,790
=========
(b) Record the acquisition of the Properties between January 16, 1997 and
April 1, 1997 from operating cash and a draw of $14,000 from the Company's
unsecured line of credit.
Property Name Cost
------------- -------
Westgate Market $ 9,800
Broadmoor Village 4,750
Richardson Plaza 8,506
Cityplace Market 8,750
Wendover Ridge Center 4,975
Arboretum Crossing Center 23,372
-------
$60,153
=======
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 1) the Properties excluding
Arboretum Crossing Center had been acquired and the sale of stock occurred on
January 1, 1996, and 2) Arboretum Crossing Center was acquired on October 3,
1996, the date it was completed and commenced operations. The unaudited pro
forma condensed statement of income and related notes should be read in
conjunction with the Company's December 31, 1996 Form 10-K. 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 Arboretum The
Company Crossing Pro forma Company
Historical Center Adjustments Pro forma (e)
---------- --------- ----------- -------------
(In thousands, except per share amounts)
REVENUE
Rental income $ 51,292 $ 242 $ 4,339 (a) $ 55,873
Other income 3,033 - - 3,033
---------- --------- ---------- ----------
54,325 242 4,339 58,906
EXPENSES
Rental operations 9,909 57 1,106 (b) 11,072
General and
administrative 3,550 - - 3,550
Depreciation 11,876 - 1,259 (c) 13,135
Interest 12,071 - 236 (d) 12,307
---------- --------- ---------- ----------
37,406 57 2,601 40,064
---------- --------- ---------- ----------
Net income $ 16,919 $ 185 $ 1,738 $ 18,842
========== ========= ========== ==========
PER SHARE DATA
Net income per share $ 1.98 $ 1.85
========== ==========
Weighted average
number of shares
outstanding 8,560 10,160
========== ==========
OTHER DATA
Number of properties
at end of period 24 30
========== ==========
Forma Adjustments to Condensed Statement of Income
For the Year Ended December 31, 1996
(Unaudited)
(In Thousands)
(a) Record the rental income of the Properties excluding Arboretum
Crossing Center.
(b) Record the rental operating expenses of the Properties excluding
Arboretum Crossing Center less property management fees (as the
Company self-manages its properties), as follows:
Rental operations $ 1,214
Less: management fees (108)
---------
$ 1,106
=========
(c) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as follows:
Cost
---------------------
Properties
Excluding
Arboretum Arboretum Years Depreciation
---------------------------------------------
Land $ 7,727 $ 11,097 - $ -
Land improvements 1,507 2,442 15 188
Buildings 14,138 23,242 25 1,071
---------------------- -------------
$ 23,372 $ 36,781 $ 1,259
====================== =============
(d) Record the additional interest expense resulting from the acquisition
of Arboretum Crossing Center 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 period from October 3, 1996
(inception) through December 31, 1996 of 6.75%.
(e) The pro forma results reflect a complete year for the Properties
excluding Arboretum Crossing Center, which was completed and
commenced operations on October 3, 1996. Arboretum Crossing
Center had an average occupancy of 49% during the short period.
During April 1997, the month Arboretum Crossing Center was
acquired by the Company, it was 98% occupied.
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;
Amendment No. 1 to 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 April 10, 1997, with respect to the statement of revenue
over specific operating expenses of the Arboretum Crossing Center
of The Price REIT, Inc. included in its Current Report on
Amendment No. 1 to Form 8-K dated April 16, 1997, filed with the
Securities and Exchange Commission.
/ Ernst & Young LLP/
San Diego, California
May 9, 1997
