SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
(X) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FAC REALTY TRUST INCORPORATED
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[FAC REALTY TRUST INCORPORATED LOGO APPEARS HERE]
REPORT TO OUR SHAREHOLDERS
As our shareholders already know, it has been FAC Realty Trust's goal over the
past twelve months to aggressively reposition the Company to achieve increased
profitability and to enhance shareholder value. We have implemented several
initiatives to accomplish these goals and are pleased to share with you the
measurable results. We plan to continue building upon this momentum and to turn
in even stronger performances in the years to come.
A SHOPPING CENTER REIT
The decision to diversify our portfolio was one of the key elements necessary to
achieve our objectives. We concentrated our efforts on shifting the Company's
investment focus toward building a significant share of community shopping
centers in our portfolio. Since our first acquisition of five regional community
shopping centers in March, 1997, we have made tremendous strides toward our goal
of becoming a retail shopping center REIT. In fact, in January of this year, the
National Association of Real Estate Investment Trusts (NAREIT) reclassified the
Company as a strip shopping center company.
In addition to our diversification strategy, we are especially excited about our
current proposed acquisition which we believe reinforces our position in this
particular sector. On February 25, 1998, we announced the execution of
definitive agreements to acquire $100 million in assets from related entities of
Konover & Associates South, a privately held real estate development firm based
in Boca Raton, Florida.
[TWO PIE CHARTS APPEAR BELOW WITH THE FOLLOWING INFORMATION:]
PROPERTY TYPE BY NET OPERATING INCOME PROPERTY TYPE BY LEASABLE AREA
- ------------------------------------- ------------------------------
12/31/97 12/31/97
-------- --------
FACTORY OUTLET 59% FACTORY OUTLET 41%
COMMUNITY CENTER 41% COMMUNITY CENTER 59%
PROFORMA PROFORMA
-------- --------
FACTORY OUTLET 43% FACTORY OUTLET 25%
COMMUNITY CENTER 57% COMMUNITY CENTER 75%
(1) Proforma assumes the completion of the Rodwell/Kane and Konover
transactions.
THE ACQUISITION OF KONOVER & ASSOCIATES SOUTH
The purchase will include 11 community shopping centers totaling approximately
2.0 million square feet and valued at nearly $100 million. The Konover portfolio
expands our community center presence in our target market -- the southeastern
United States -- and strengthens our tenant base with leading retailers such as
Winn-Dixie, Kroger, Eckerd Drug Store, Home Depot and Food Lion.
We believe that the union of these two companies creates a powerful platform for
growth and positions our combined organization as a major player in our target
marketplace. Both companies have highly experienced management teams possessing
distinct expertise and long-standing tenant and retail industry relationships.
We plan to leverage the complementary strengths of the two companies and
increase our market share by investing in community shopping centers anchored by
leading grocery and drugstore chains that offer the potential for strong
returns. We will also target existing properties that may be undervalued and
significantly enhance their profitability through renovations, expansion and
remerchandising, all of which are expected to contribute to higher rental rates.
We believe that the blending of retail store formats has created new
opportunities for shopping center companies with diversified portfolios such as
ours.
Due to the significance of the transaction, the Board of Directors has
recommended that the shareholders approve changing the name of the Company to
"Konover Property Trust." We will remain listed on the NYSE and if the name
change is approved by the shareholders, change the Company's ticker symbol from
FAC to KPT.
<PAGE>
OUR NEW CHAIRMAN
By consummating this transaction, we are not simply acquiring assets, but also
gaining a well-established and seasoned team of shopping center specialists. In
particular, Simon Konover, founder of Konover & Associates, has agreed to become
Chairman of the Board of our company upon completion of the transaction.
We are delighted that Simon Konover, who has a very powerful presence in our
industry and is highly respected in the shopping center industry for his
knowledge and integrity, has selected this company as a partner. Although Mr.
Konover will not be involved in the day to day operations, we believe his strong
strategic relationships with lenders and more importantly, long-standing
relationships with national, regional and local tenants will benefit our
Company.
DETAILS OF THE TRANSACTION
The purchase equates to approximately $24 million in equity consisting of the
issuance of operating partnership (OP) units at $9.50 per unit, and/or cash,
plus the assumption of approximately $76 million in debt. At closing, $17
million of the equity will be paid in the form of OP units or cash. The
remaining $7 million will be paid in cash over a three-year period, at an
interest rate of 7.75% per annum.
LAZARD FRERES AFFILIATE COMMITS TO STRATEGIC INVESTMENT
Coinciding with the Konover announcement, on February 24, 1998, we received a
commitment from Prometheus Southeast Retail, LLC (PSR), a real estate investment
affiliate of Lazard Freres Real Estate Investors (Lazard), to make a $200
million strategic investment in our company, at a purchase price of $9.50 per
share. The investment, which would constitute a change of control of the
Company, is subject to the approval of the shareholders. Lazard's investment
would be made in stages over a two-year period, allowing the Company to draw
down capital, as needed, to fund its future acquisition and development plans,
as well as to retire debt. Upon completion of funding, PSR would own a 59%
equity interest in the Company on a fully diluted basis.
Like most significant negotiated transactions, there are both advantages and
disadvantages to the Lazard investment, all of which are detailed in the
Company's proxy statement. As the transaction would involve the sale of a
controlling interest in the Company, the matter is one of the most important to
come before the shareholders. Therefore, I urge you to review your proxy
information carefully and to participate in the upcoming annual meeting. Please
contact us directly if you have any questions as you review your proxy
materials.
Our accomplishments over the last 12 months reinforce our belief that the
Company is positioned to be a major player in the retail property marketplace
and that our management team can successfully achieve our goals for the
continued, sustainable expansion and growth of the Company. As your President
and CEO, I am proud to share with you the successes and results of our labor and
to be a part of our Company's evolution.
Sincerely,
/s/ C. Cammack Morton
C. Cammack Morton
President & Chief Executive Officer
FIRST QUARTER HIGHLIGHTS
o Increased total revenue by 16.8% to $13.9 million in 1998 from $11.9
million in 1997
o Increased FFO 16.6% to $4.5 million in 1998 from $3.9 million in 1997
o Increased FFO per share by 14.8%
o Completed the acquisition of 7 shopping centers from the Rodwell/Kane
portfolio
o Classified as a strip shopping center company by NAREIT
o Reduced floating rate debt by $75 million
o Obtained equity commitment of $200 million from an affiliate of Lazard
Freres at $9.50 per share
o Executed agreements to purchase $100 million of assets from related
entities Konover & Associates South
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
March 31, 1998 December 31, 1997
(Unaudited) (Audited)
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS (in thousands)
Income-producing properties:
Land $88,822 $81,233
Buildings and improvements 337,887 292,726
Deferred leasing and other charges 21,975 21,366
- ---------------------------------------------------------------------------------------------------------------------------
448,684 395,325
Accumulated depreciation and amortization (53,871) (50,134)
- ---------------------------------------------------------------------------------------------------------------------------
394,813 345,191
Properties under development 6,886 6,456
Properties held for sale 12,454 12,490
- ---------------------------------------------------------------------------------------------------------------------------
Income-producing properties, net 414,153 364,137
Other Assets:
Cash and cash equivalents 11,924 4,872
Restricted cash 2,871 3,858
Tenant and other receivables 7,524 7,167
Deferred charges and other assets 13,238 8,851
Investment in joint ventures 4,438 4,283
Notes receivable 14,602 10,458
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $468,750 $403,626
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt on income properties $263,194 $232,575
Other unsecured notes 141 197
Capital lease obligations 1,044 1,131
Accounts payable and other liabilities 9,760 6,796
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 274,139 240,699
- ---------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Minority interest 8,744 -
Common stock, 2,350,000 shares issued subject to a limited put option 22,325
- ---------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Convertible preferred stock, Series A, 5,000,000 shares authorized, 800,000
issued and outstanding 19,162 19,162
Stock purchase warrants 9 9
Common stock, $0.01 par value, 45,000,000 shares authorized, 11,926,566 and
11,904,182 issued and outstanding, respectively 119 119
Additional paid-in-capital 146,167 145,332
Accumulated Deficit (1,517) (1,416)
Deferred compensation - Restricted Stock Plan (398) (279)
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 163,542 162,927
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $468,750 $403,626
- ---------------------------------------------------------------------------------------------------------------------------
March 31, March 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO DATA:
Total GLA 6,392 5,471
Weighted average GLA 5,564 4,872
Number of properties 49 41
GLA under contract for purchase 2,160(1) 0
Number of properties under contract for purchase 13 0
Occupancy
Operating, exclusive of assets held for sale 91.2% 89.0%
All operating properties 89.3% 86.3%
</TABLE>
(1) Includes the Konover assets announced February 24, 1998, and two assets
remaining to close in the Rodwell/Kane acquisition
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended
March 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
(Unaudited)
OPERATING DATA:
Rental revenues $13,929 $11,922
Property operating costs 4,149 3,473
- -----------------------------------------------------------------------------------------------------------------
9,780 8,449
Depreciation and amortization 3,973 4,063
General and administrative 1,527 2,288
Interest 4,381 3,534
Extraordinary item:
Loss on early extinguishment of debt - 986
- -----------------------------------------------------------------------------------------------------------------
Net Income (loss) $ (101) $ (2,422)
- -----------------------------------------------------------------------------------------------------------------
Per common share data:
Loss before extraordinary item $ (0.01) $ (0.12)
Extraordinary item - (0.08)
- -----------------------------------------------------------------------------------------------------------------
Net loss $ (0.01) $ (0.20)
- -----------------------------------------------------------------------------------------------------------------
Weighted average common
shares outstanding 11,954 11,836
- -----------------------------------------------------------------------------------------------------------------
OTHER DATA:
EBITDA $ 8,550 $ 7,563
- -----------------------------------------------------------------------------------------------------------------
Funds from Operations (FFO):
Net income (loss) $ (101) $ (2,422)
Adjustments:
Straight line rent 460 (114)
Depreciation and amortization 3,833 3,999
Compensation under stock awards 297 52
Unusual items:
Non-recurring administrative costs - 100
Merger termination costs - 1,250
Extraordinary item:
Loss on early extinguishment of debt - 986
- -----------------------------------------------------------------------------------------------------------------
Funds from Operations $ 4,489 $ 3,851
- -----------------------------------------------------------------------------------------------------------------
Weighted average diluted shares(1) 14,477 14,058
- -----------------------------------------------------------------------------------------------------------------
Funds from Operations Per Share $ 0.31 $ 0.27
- -----------------------------------------------------------------------------------------------------------------
(1) Shares calculated in accordance with Financial Accounting Standard No. 128.
Funds Available for Distribution/Reinvestment:
Funds from operations $ 4,489 $ 3,851
Adjustments
Non-recurring administrative costs - (100)
Merger termination - (1,250)
Capitalized tenant allowances (248) (243)
Capitalized leasing costs (512) (203)
Recurring capital expenditures (63) (212)
- -----------------------------------------------------------------------------------------------------------------
Funds Available for Distribution/Reinvestment $ 3,666 $ 1,843
- -----------------------------------------------------------------------------------------------------------------
Funds Available for
Distribution/Reinvestment Per Share $ 0.25 $ 0.13
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company cautions that the calculation of Funds from Operations (FFO) and
Funds Available for Distribution/Reinvestment (FAD/FAR) may vary from entity to
entity and, as such, the presentation of FFO and FAD/FAR by the Company may not
be comparable to other similarly titled measures of other reporting companies.
FFO and FAD/FAR do not represent cash generated from operating activities in
accordance with generally accepted accounting principles; are not necessarily
indicative of cash available to fund cash needs; and should not be considered as
an alternative to cash flow as a measure of liquidity.
[FAC REALTY TRUST INCORPORATED LOGO APPEARS HERE]
11000 Regency Parkway, Suite 300, Cary, NC 27511
(919) 462-8787 fax (919) 462-8799 http://www.facrealty.com
