SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934
Date of Report: May 22, 1997
FAC REALTY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF INCORPORATION)
1-11998 56-1819372
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
11000 Regency Parkway
Suite 300
Cary, North Carolina
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
27511
(ZIP CODE)
(919) 462-8787
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On March 27, 1997, FAC Realty, Inc. ("FAC") consummated the acquisition
of five community centers in and around Raleigh, North Carolina, from North
Hills Properties, Inc. for a total purchase price of $32.3 million. The
acquisition of a 49.5% partnership interest in a sixth center is pending
approval by the partnership.
The North Hills acquisition includes approximately 606,000 square feet
of gross leasable area ("GLA") with an average occupancy of approximately 97%.
The following is a list of the centers:
<TABLE>
<CAPTION>
CURRENT
N.C. DATE TOTAL OCCUPANCY KEY TENANTS NOI AT
PROPERTY LOCATION DEVELOPED GLA % ANCHOR OTHER MAJOR 12/31/96(1)
-------- -------- --------- --- - ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Gateway Wilson 1992 91,266 100 K-Mart Winn-Dixie $501,275
lease executed;
construction to
begin spring
1997
- -------------------------------------------------------------------------------------------------------------------------------
Eastgate Raleigh 1966 54,375 100 Books-A- Kerr Drug 361,937
Million Subway
- -------------------------------------------------------------------------------------------------------------------------------
MacGregor Cary 1986 142,655 99 N/A Eckerd Drug 1,159,787
Village Spa Health Club
- -------------------------------------------------------------------------------------------------------------------------------
Northridge Raleigh 1980 165,215 92 Winn-Dixie Ace Hardware 1,205,575
Kerr Drug
- -------------------------------------------------------------------------------------------------------------------------------
Tower Raleigh 1976 152,157 96 Food Lion Shoe Show 597,283
------- -- Big Lots Kerr Drug ----------
GRAND TOTAL 605,668 97 Baskin Robbins $3,825,857
======= == ==========
</TABLE>
1. Net operating income (NOI) is equal to revenue in excess of certain
operating expenses. Operating expenses are exclusive of any interest,
depreciation, amortization, general and administrative expenses.
Following the completion of the acquisition, FAC has 36 outlet centers
and 5 community centers. The acquisition was financed with approximately $30.5
million drawn by the Company's credit facility with Nomura Asset Capital
Corporation and the balance from available cash.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
As previously reported, FAC Realty, Inc. completed the acquisition
of certain properties from North Hills Properties, Inc. on March 27,
1997.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Set forth below is the Combined Statement of Revenue and Certain
Expenses of North Hills for the year ended December 31, 1996, as
described more fully in the notes thereto.
(B) PRO FORMA FINANCIAL STATEMENTS
The pro forma condensed consolidated statements of operations for
the years ended December 31, 1996 and 1995, which assume the North
Hills acquisition had been completed as of January 1, 1995, were
included in the consolidated financial statements and Note 12
thereto included in Form 10-K for the fiscal year ended December
31, 1996.
The pro forma condensed consolidated statements of operations for
the three months ended March 31, 1997, which assume the North
Hills acquisition had been completed as of January 1, 1995, were
included in the consolidated financial statements and Note 3
thereto included in Form 10-Q for the quarter ended March 31,
1997.
<PAGE>
A pro forma condensed consolidated balance sheet as of the end of
the most recent period is not required as the North Hills
acquistion was reflected in the consolidated balance sheet as of
March 31, 1997 included in Form 10-Q for the quarter ended March
31, 1997.
(C) EXHIBITS
2.1 Agreement of Purchase and Sale Among North Hills Properties,
Inc., Tower Properties Limited Partnership and FAC Realty,
Inc. dated March 27, 1997 (incorporated by reference to
Exhibit 2.1 to FAC Realty, Inc.'s Current Report on Form 8-K
dated April 11, 1997.)
2.2 First Amendment to Agreement of Purchase and Sale Among
North Hills Properties, Inc., Tower Properties Limited
Partnership and FAC Realty, Inc. dated March 27, 1997.
<PAGE>
SIGNATURES
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 thereunto duly authorized.
FAC REALTY, INC.
/s/ Patrick M. Miniutti
Patrick M. Miniutti
Executive Vice President and Chief Financial Officer
Date: May 22, 1997
<PAGE>
Audited Combined Financial Statement
North Hills
YEAR ENDED DECEMBER 31, 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
North Hills
Audited Combined Financial Statement
Year ended December 31, 1996
CONTENTS
Report of Independent Auditors........................................1
Audited Combined Financial Statement
Combined Statement of Revenue and Certain Expenses....................2
Notes to Combined Statement of Revenue and Certain Expenses...........3
<PAGE>
(ERNST & YOUNG LLP LOGO) o Suite 700 o Phone: 919 981 2800
3200 Beechleaf Court 27604-1063
P.O. Box 40789
Raleigh, North Carolina 27629-0789
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
FAC Realty, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of North Hills as described in Note 1 for the year ended December 31,
1996. This combined financial statement is the responsibility of North Hills'
management. Our responsibility is to express an opinion on this combined
financial 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statement. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall combined financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was prepared
using the basis of accounting described in Note 1 for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K of FAC Realty, Inc. and is not intended to be a
complete presentation of North Hills' revenue and expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenue and certain expenses described in
Note 1 of North Hills for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
March 7,1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE>
North Hills
Combined Statement of Revenue and Certain Expenses
Year ended December 31, 1996
Rental income $ 5,169,317
Certain expenses:
Utilities 63,392
Real estate taxes 380,307
Repairs and maintenance 827,605
Insurance 72,156
------------
Total certain expenses 1,343,460
------------
Revenue in excess of certain expenses $ 3,825,857
============
SEE ACCOMPANYING NOTES.
2
<PAGE>
North Hills
Notes to Combined Statement of Revenue and Certain Expenses
December 31, 1996
1. BASIS OF PRESENTATION
Presented herein is the Combined Statement of Revenue and Certain Expenses
related to the operations of five commercial real estate properties located in
and around Raleigh, North Carolina identified as North Hills.
North Hills is not a legal entity but rather a combination of the operations of
certain real estate properties expected to be acquired by FAC Realty, Inc. The
accompanying Combined Statement of Revenue and Certain Expenses includes the
accounts of the following commercial real estate properties, each of which is
wholly owned by various parties not affiliated with FAC Realty, Inc.
PROPERTY OWNER
In-service properties:
Eastgate North Hills Properties, Inc.
Gateway Plaza North Hills Properties, Inc.
MacGregor Village North Hills Properties, Inc.
North Ridge North Hills Properties, Inc.
Tower Tower Properties Limited Partnership
In accordance with Rule 3-14 of Regulation S-X, the accompanying combined
financial statement is not representative of the actual operations for the year
presented as certain expenses that may not be comparable to the expenses
expected to be incurred by FAC Realty, Inc. in the proposed future operations of
the aforementioned properties have been excluded. Expenses excluded consist of
interest, depreciation and amortization, management fees, and general and
administrative expenses not directly related to future operations.
3
<PAGE>
North Hills
Notes to Combined Statement of Revenue and Certain Expenses (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rental income is recognized on a straight-line basis over the term of
the lease. Certain lease agreements contain provisions which provide for rents
based on a percentage of sales and certain leases provide for additional rents
based on a percentage of sales volume above a specified breakpoint and
reimbursement of real estate taxes, insurance, advertising, utilities and
certain common area maintenance (CAM) costs. These additional rents are
reflected on the accrual basis.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the combined financial statement and accompanying
notes. Actual results could differ from those amounts.
3. LEASES
North Hills is being leased to tenants under operating leases that will expire
over the next 20 years.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1996 are as
follows:
TOTAL
1997 $ 4,177,893
1998 3,767,733
1999 3,497,212
2000 2,977,246
2001 2,405,127
Thereafter 22,035,632
----------
$ 38,860,843
============
4
FIRST AMENDMENT TO
AGREEMENT OF PURCHASE AND SALE
THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "First
Amendment") entered into on March 27, 1997 among NORTH HILLS PROPERTIES, INC., a
North Carolina corporation, ("NHP"), TOWER PROPERTIES LIMITED PARTNERSHIP, a
North Carolina limited partnership, ("TPL") (NHP and TPL being hereinafter
referred to as a "Seller" and collectively as "Sellers") and FAC REALTY, INC., a
Delaware corporation, or its assignee ("Purchaser");
W I T N E S S E T H:
WHEREAS, Sellers and Purchaser did, of even date, enter into a certain
Agreement of Purchase and Sale (the "Agreement", same being incorporated by this
reference herein) pursuant to which Sellers agreed to sell to Purchaser, and
Purchaser agreed to purchase from Sellers, Eastgate Shopping Center, North Ridge
Shopping Center, MacGregor Village Shopping Center, Gateway Shopping Center and
Tower Shopping Center, being retail strip shopping centers located in Raleigh,
Cary and Wilson, North Carolina; and
WHEREAS, Sellers and Purchaser desire to amend the Agreement upon the
limited terms set forth below;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, Sellers and
Purchaser do hereby agree as follows:
1. Preferential Right to Purchase at Eastgate Shopping Center. By
virtue of Paragraphs 10 and 11 of that certain Lease dated June 22, 1966 between
North Hills, Inc. (the name of which was subsequently changed to North Hills
Properties, Inc., a Seller herein), as lessor, and Shell Oil Company, as lessee,
same having been assigned by one or more assignments to Quality Oil Company,
L.L.C., ("Quality Oil"), Quality Oil has a preferential right to purchase
Eastgate Shopping Center. By letter dated February 26, 1997, a copy of which has
been delivered to Purchaser, Sellers notified Quality Oil of the pendency of the
sale of the Eastgate Shopping Center to Purchaser and the terms thereof. Quality
Oil has 30 days after its receipt of the said notice within which to exercise
its preferential purchase right. As of the date hereof, Quality Oil has not
notified Sellers either that it has elected to exercise, or that it has elected
not to exercise, its preferential purchase right. Accordingly, the preferential
purchase right is still exercisable by Quality Oil, and may be exercisable
beyond the Scheduled Closing Date set forth in the Agreement. Notwithstanding,
Purchaser hereby agrees with Sellers as follows with respect to the Quality Oil
preferential purchase right:
<PAGE>
(a) The preferential purchase right shall be deemed a
Permitted Title Exception for all purposes of the Agreement, and its
existence shall not constitute a breach or default by Sellers under any
provision of the Agreement.
(b) Purchaser may elect to acquire Eastgate Shopping Center in
accordance with the terms of the Agreement by assuming the obligations
of NHP with respect to the Quality Oil preferential purchase right. If
(i) Purchaser does so elect, (ii) Sellers waive their rights under
Section 11.02(d) of the Agreement, (iii) Purchaser or its subsidiary
proceeds to acquire Eastgate Shopping Center in assumption of NHP's
obligations with respect to the preferential purchase right and (iv)
subsequent to Purchaser's acquisition of Eastgate Shopping Center,
Quality Oil exercises its preferential purchase right, Purchaser shall
honor the exercise by Quality Oil of, and to, the preferential purchase
right, and Purchaser's failure to so perform shall be deemed to be a
claim for which Purchaser shall be liable to Sellers in accordance with
Section 13 of the Agreement. The provisions of this Section 1(b) shall
be deemed an additional warranty, representation and covenant of
Purchaser for purposes of Section 8 of the Agreement.
(c) Nothing contained in this First Amendment shall constitute
a waiver of Sellers' rights under Section 11.02(d) of the Agreement.
2. Ratification. Save and except as expressly modified and amended as
hereinabove set forth, each term, provision and condition of the Agreement is
hereby ratified and confirmed as originally written.
EXECUTED on the date and year above first written.
ATTEST: NORTH HILLS PROPERTIES, INC.
By: /s/ Carol Ter Wee By: /s/ James A. Walker
-------------------------- -------------------------
Secretary James A. Walker, President
(Corporate Seal) NHP
-2-
<PAGE>
ATTEST: TOWER PROPERTIES LIMITED
PARTNERSHIP (SEAL)
By: North Hills Properties, Inc.,
general partner
By: /s/ Carol Ter Wee By: /s/ James A. Walker
--------------------------- ----------------------------
Secretary James A. Walker, President
(Corporate Seal)
By: /s/H. Arthur Sandman (SEAL)
----------------------------
H. Arthur Sandman,
general partner
TPL
(collectively SELLERS)
ATTEST: FAC REALTY, INC.
By: /s/ Robin W. Malphrus By: /s/ C. Cammack Morton
-------------------------- ---------------------------
Robin W. Malphrus, Secretary C. Cammack Morton, President
(Corporate Seal)
PURCHASER
-3-
