SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
SEPTEMBER 16, 1998
KONOVER PROPERTY TRUST, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 001-11998 561819372
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
11000 REGENCY PARKWAY, SUITE 300
CARY, NORTH CAROLINA 27511
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 462-8787
<PAGE>
Item 2: Acquisition or Disposition of Assets
On September 16, 1998, Konover Properties, Inc. (the "Company") acquired a
shopping center in Mobile, Alabama from Konover & Associates South, a privately
held real estate development firm based in Boca Raton, Florida, and certain of
its affiliates. Subsequent to September 16, 1998, the Company closed on three
additional properties. These are located in West Palm Beach, Florida, Stuart,
Florida and Durham, North Carolina. These acquisitions were made pursuant to the
terms of the previously announced Master Agreement by and among the Company, KPT
Properties, L.P. (previously "FAC Properties, L.P."), Konover Management South
Corp. and the other parties set forth therein dated June 30, 1998 (the "Master
Agreement"). With these acquisitions, the Company has now purchased eight of the
ten shopping centers to be acquired pursuant to the Master Agreement. The
following table sets forth certain information regarding the acquired
properties.
<TABLE>
<CAPTION>
<S> <C>
Purchase Percent
Price leased
(in Square at Acquisition Form of
Name Location millions) Footage 9/30/98 Date Ownership
- ---------------------------------------------------------------------------------------------------------
Long-term
South Cobb Festival Smyrna, GA $ 0.5 81,000 100% 8/11/98 leasehold
Oakland Park Oakland Park, FL
Festival $ 5.4 132,242 83% 8/11/98 Fee
Petersburg, VA
Food Lion Plaza $ 2.1 50,280 97% 8/11/98 Fee
Lenoir Festival
Centre Lenoir, NC $ 7.8 144,239 100% 8/31/98 Fee
Mobile Festival
Centre Mobile, AL $ 30.0 522,478 93% 9/16/98 Fee
Durham Festival Durham, NC $ 8.5 132,225 100% 10/2/98 Fee
West Palm
Lake Pointe Centre Beach, FL $ 14.5 118,197 86% 10/30/98 Fee
Square One Stuart, FL $ 11.1 196,228 99% 11/18/98 Fee
------- ------- ------ -------- ---
Total or Average $ 79.9 1,376,889 94%
</TABLE>
The aggregate purchase price for the eight acquired shopping centers
consisted of the initial assumption of $58.3 million of fixed-rate indebtedness
(of which $7.8 million was paid at closing), $18.7 million in cash (including
the $7.8 million debt payment) and the issuance of 300,694 limited partnership
interests ("Units") of KPT Properties, L.P. The source of the cash portion of
the acquisition price was the Company's working capital. The purchase price for
the acquisition was determined as a result of arms-length negotiation between
the Company and the sellers, with the Units being valued at $9.50 per share. All
of the acquired properties are held directly or indirectly, by KPT Properties,
L.P., the operating partnership through which the Company conducts substantially
all of its operations.
Mr. Simon Konover, chairman of the board of directors of the Company, and
Fred Steinmark,
-2-
<PAGE>
an executive vice president, are affiliates of the sellers.
Item 7: Financial Statements, Pro forma Financial Information, and Exhibits.
a) Financial statements of business acquired.
Konover and Associates South
Report of Independent Public Accountants
Combined Statement of Revenue and Certain Expenses
Notes to Combined Statement of Revenue and Certain Expenses
b) Pro forma financial information.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September
30, 1998 is set forth in the Company's Current Report on Form 10-Q dated
November 16, 1998
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1997
Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the Nine months ended September 30, 1998
c) Exhibits
10.1 Amended and Restated Master Agreement dated June 30, 1998
by and among FAC Realty Trust, Inc., FAC Properties L.P.,
Konover Management South Corp., and the other signatories
to this Master Agreement contained therein (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
period ending June 30, 1998).
23.1 Consent of Arthur Andersen, LLP
-3-
<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 hereunto duly authorized.
KONOVER PROPERTY TRUST, INC.
Date: November 30, 1998 By: /s/ Sona A. Thorburn
--------------------------------------------
Name: Sona A. Thorburn
Title: Vice President, Chief Accounting Officer
<PAGE>
Konover and Associates South
Financial Statements as of December 31, 1997
Together with Report of Independent Public Accountants
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Konover Property Trust, Inc.:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Konover & Associates South as described in Notes 1 and 2 for the
year ended December 31, 1997. This combined financial statement is the
responsibility of Konover & Associates South 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 Konover Property Trust, Inc. and is not intended to
be a complete presentation of Konover & Associates South 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
Notes 1 and 2 of Konover & Associates South for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen, LLP
Raleigh, North Carolina,
April 24, 1998.
<PAGE>
Konover & Associates South
Combined Statement of Revenue and Certain Expenses
For the Year Ended December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Rental income $8,828
------
Certain expenses:
Repairs and maintenance 768
Utilities 245
Insurance 199
Real estate taxes 914
Rent expense 27
------
Total certain expenses 2,153
------
Revenue in excess of certain expenses $6,675
======
</TABLE>
The accompanying notes to financial statements
are an integral part of this document.
<PAGE>
Konover & Associates South
Notes to Combined Statement of Revenue and Certain Expenses
For the Year Ended December 31, 1997
1. Description of Properties:
The Konover & Associates South properties consist of the eight closed community
shopping centers located in Florida, North Carolina, Virginia, Alabama and
Georgia and contain approximately 1,400,000 square feet.
2. Basis of Presentation:
Konover & Associates South is not a legal entity but rather a combination of the
operations of certain real estate properties expected to be acquired by Konover
Property Trust, Inc. (formerly FAC Realty Trust, Inc.). The accompanying
Combined Statement of Revenue and Certain Expenses includes the accounts of the
community shopping center properties, each of which is wholly owned by various
parties not affiliated with Konover Property Trust, Inc. at the date of entering
into the agreement to purchase such properties.
In accordance with Rule 3-14 of Regulation S-X, the accompanying combined
financial statement is not representative of the actual operations for the
periods presented as certain revenue and expenses, which may not be comparable
to those expected to be incurred by Konover Property Trust, Inc. in the proposed
future operations of the aforementioned properties, have been excluded. Interest
income has been excluded from revenue. Expenses excluded consist of depreciation
and amortization, management fees, general and administrative and interest
expenses not directly related to future operations. Management is not aware of
any other material factors that would cause the accompanying Combined Statement
of Revenue and Certain Expenses to not be indicative of the future operations of
Konover.
3. 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.
<PAGE>
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.
4. Leases:
The Konover & Associates South properties are being leased to tenants under
operating leases that will expire through 2033.
Expected future minimum rents to be received over the next five years and
thereafter from tenants for leases in effect at December 31, 1997, are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $ 8,997
1999 8,409
2000 7,659
2001 6,960
2002 5,985
Thereafter 40,967
--------
$78,977
========
</TABLE>
Konover & Associates South leases the land for one shopping center. Annual
expense related to this lease is approximately $27,000 through 2026.
<PAGE>
Pro Forma Information
The following sets forth unaudited pro forma financial information for Konover
Property (the Company) as of September 30, 1998 and December 31, 1997, after
giving effect to the acquisition of community shopping centers from Konover &
Associates South (the Transaction) as described in Note 1 hereto.
The unaudited Pro Forma Condensed Consolidated Statements of Operations for the
nine months ended September 30, 1998 and for year ended December 31, 1997 is
presented as if the Transaction had occurred as of the beginning of each period
presented.
In management's opinion, all material adjustments necessary to reflect the
transaction described above are presented in the pro forma adjustments columns,
which are further described in the notes to the unaudited pro forma financial
information.
The unaudited Pro Forma Condensed Consolidated Balance Sheet and the unaudited
Pro Forma Condensed Consolidated Statements of Operations should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto. The unaudited Pro Forma Condensed Consolidated Balance is not
necessarily indicative of what the actual financial position of the Company
would have been at September 30, 1998, nor does it purport to represent the
future financial position of the Company. The unaudited Pro Forma Condensed
Consolidated Statements of Operations are not necessarily indicative of what the
actual results of operations of the Company would have been assuming the
aforementioned transactions had been consummated as of the beginning of the
respective periods, nor does it purport to represent the results of operations
for future periods.
<PAGE>
Konover Property Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Year Ending December 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical (A) Adjustments(B) Consolidated
(Audited) (Unaudited) (Unaudited)
----------------------------------------------
<S> <C> <C> <C>
Revenues 53,726 8,828 (1) 62,554
Property Operating Expenses 15,671 2,153 (1) 17,824
General and Administrative 6,397 320 (2) 6,717
Depreciation and Amortization 15,652 1,640 (3) 17,292
Interest Expense 16,436 4,230 (4) 20,666
Extraordinary loss on extinguishment of
debt 986 986
-------------------------------------------
Net (loss) income (1,416) 485 (931)
===========================================
</TABLE>
Adjustments:
(A) Reflects the Company's historical condensed consolidated statements of
operations for the year ended December 31, 1997 (audited)
(B) Reflects the unaudited pro forma adjustments for the purchases of the
acquired properties from Konover:
(1) the historical operating activity of the acquired properties
(2) the increase in general and administrative costs associated with the
management and operations of the acquired properties
(3) the depreciation expense based on the new accounting basis of the
properties based on a 39 year life
(4) Reflects the additional interest expense on debt of $50,530 at
interest rates ranging between 7.4% and 9.2%
<PAGE>
Konover Property Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
Nine Months Ending September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical (A) Adjustments (B) Consolidated
----------------------------------------------
<S> <C> <C> <C>
Rental Revenues 50,683 2,569 (1) 53,252
Property Operating Expenses 14,952 462 (1) 15,414
General and Administrative 5,330 240 (2) 5,570
Depreciation and Amortization 14,470 410 (3) 14,880
Interest Expense 16,260 1,057 (4) 17,317
Loss on sale of real estate 353 353
--------------------------------------------
Net income (loss) (682) 400 (282)
============================================
</TABLE>
Adjustments:
(A) Reflects the Company's historical condensed consolidated statements of
operations for the nine months ended September 30, 1998. The historical
results of the Company include the results of the acquired properties from
April 1, 1998.
(B) Reflects the unaudited pro forma adjustments for the purchases of the
acquired properties from Konover:
(1) the historical operating activity of the acquired properties
(2) the increase in general and administrative costs associated with the
management and operations of the acquired properties
(3) the depreciation expense based on the new accounting basis of the
properties based on a 39 year life
(4) Reflects the additional interest expense on debt of $50,530 at
interest rates ranging between 7.4% and 9.2%
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying Unaudited Condensed Consolidated Pro Forma Financial
Statements of Konover Property Trust, Inc. (the Company) have been
prepared in accordance with the instructions to Form 8-K and do not
include all of the information and notes required by generally accepted
accounting principals for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included. For further information, refer to the consolidated
financial statements and notes thereto for the year ended December 31,
1997, included in the Company's form 10-K dated April 15, 1998.
Exhibit 23.1
ARTHUR ANDERSEN
Consent of Independent Public Accountant
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated April 24, 1998, included in the
Registration Statement (Form S-8 No. 333-3240) pertaining to the 1996 Restricted
Stock Plan, 1995 Outside Directors' Stock Award Plan, and 1993 Employee Stock
Incentive Plan for Konover Property Trust, Inc. and the Registration Statement
(Form S-8 No. 333-29491) pertaining to the 1996 Restricted Stock Plan, 1995
Outside Directors' Stock Award Plan, 1993 Employee Stock Incentive Plan, and
Qualified Employee Stock Purchase Plan for Konover Property Trust, Inc. It
should be noted that we have not audited any financial statements of the Company
subsequent to December 31, 1997, or performed any audit procedures subsequent to
the date of report.
/s/Arthur Andersen, LLP
Raleigh, North Carolina
November 30, 1998
