- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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 14, 1999
PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
Maryland 01-12846 74-2604728
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
14100 East 35th Place 80011
Aurora, Colorado (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 375-9292
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
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ITEM 5. OTHER EVENTS
This Current Report on Form 8-K/A is being filed by ProLogis Trust
("ProLogis") to amend the Current Report on Form 8-K dated as of April 14, 1999
and filed with the Securities and Exchange Commission on April 15, 1999. The
proforma financial statements filed previously reflected the proposed issuance
of $400.0 million of senior unsecured notes. On April 21, 1999, ProLogis priced
an offering of $500.0 million of senior unsecured notes that is scheduled to
close on April 26, 1999. The proforma financial statements have been updated to
reflect the actual terms of the offering. In addition, this Current Report on
Form 8-K/A reports significant changes in ProLogis' portfolio of industrial
distribution facilities during 1998 and provides proforma condensed consolidated
financial statements that reflect these acquisitions. In addition, the proforma
condensed consolidated financial statements reflect the merger of Meridian
Industrial Trust, Inc. with and into ProLogis, that was completed on March 30,
1999 and reported previously in ProLogis' Current Report on Form 8-K filed on
March 30, 1999.
Acquisitions:
On January 16, 1998, ProLogis acquired the Westbelt Business
Center #1 and #2 located in the West sub-market of the Columbus, Ohio market.
The facility is classified as light industrial and consists of 136,206 square
feet. The purchase price was approximately $3.1 million. The facility was 87%
leased on the date of purchase and 82% leased at December 31, 1998.
On March 11, 1998, ProLogis acquired the National Distribution
Center #1 and #2 located in the Route 287/I-95 sub-market of the Northern New
Jersey market. The facility is classified as bulk distribution and consists of
120,000 square feet. The purchase price was approximately $3.4 million. The
facility was 33% leased on the date of purchase and 100% leased at December 31,
1998.
On April 9, 1998, ProLogis acquired the Raines Distribution Center
#1 located in the Southeast sub-market of the Memphis, Tennessee market. The
facility is classified as bulk distribution and consists of 658,820 square feet.
The purchase price was approximately $10.9 million. The facility was 44% leased
on the date of purchase and was 85% leased at December 31, 1998.
On April 23, 1998, ProLogis acquired the Meadowlands Distribution
Center #4 - 7 located in the Meadowland sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 93,297
square feet. The purchase price was approximately $5.4 million. The facility was
43% leased on the date of purchase and at December 31, 1998.
On April 24, 1998, ProLogis acquired the North Park Distribution
Center #2 located in the Northeast sub-market of the Charlotte, North Carolina
market. The facility is classified as bulk distribution and consists of 243,200
square feet. The purchase price was approximately $5.8 million and the facility
was vacant on the date of purchase. The facility was 68% leased at December 31,
1998.
On May 7, 1998, ProLogis acquired the Interchange Distribution
Center #5 through #7 located in the Southeast sub-market of the Nashville,
Tennessee market. The facility is classified as bulk distribution and consists
of 437,552 square feet. The purchase price was approximately $8.0 million. The
facility was 100% leased on the date of purchase and was 29% leased at December
31, 1998.
On May 8, 1998, ProLogis acquired the Alameda Distribution Center
#2 located in the Tempe sub-market of the Phoenix, Arizona market. The facility
is classified as bulk distribution and consists of 96,437 square feet. The
purchase price was approximately $3.0 million. The facility was 55% leased on
the date of purchase and was 100% leased at December 31, 1998.
2
<PAGE>
On May 9, 1998, ProLogis acquired the Longjumeau Distribution
Center #1 located in the Orly Airport sub-market of the Paris, France market.
The facility is classified as bulk distribution and consists of 213,870 square
feet. The purchase price was approximately $8.2 million. The facility was 100%
leased on the date of purchase and at December 31, 1998.
On June 1, 1998, ProLogis acquired the Airpark Distribution Center
#1 through #4 located in the Southside sub-market of the Louisville, Kentucky
market. The facility is classified as bulk distribution and service center and
consists of 640,900 square feet. The purchase price was approximately $10.6
million. The facility was 54% leased on the date of purchase and 68% leased at
December 31, 1998.
On June 2, 1998, ProLogis acquired the Reynosa Industrial Center
#9 located in the Reynosa Industrial Park sub-market of the Reynosa, Mexico
market. The facility is classified as light industrial and consists of 54,364
square feet. The purchase price was approximately $1.2 million. The facility was
100% leased on the date of purchase and at December 31, 1998.
On June 15, 1998, ProLogis acquired the Meadowlands Distribution
Center #8 and #9 located in the Meadowland sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 136,890
square feet. The purchase price was approximately $6.4 million. The facility was
26% leased on the date of purchase and was 100% leased at December 31, 1998.
On July 15, 1998, ProLogis acquired the Copans Distribution Center
#2 located in the I-95 North sub-market of the Boward County, Florida market.
The facility is classified as light industrial and consists of 25,300 square
feet. The purchase price was approximately $1.1 million. The facility was 100%
leased on the date of purchase and at December 31, 1998.
On July 29, 1998, ProLogis acquired the Itasca Distribution Center
#3 located in the O'Hare sub-market of the Chicago, Illinois market. The
facility is classified as bulk distribution and consists of 165,762 square feet.
The purchase price was approximately $6.7 million. The facility was 100% leased
at the date of purchase and at December 31, 1998.
On August 5, 1998, ProLogis acquired the Earth City Industrial
Center #8, #9 and #10 located in the Earth City sub-market of the St. Louis,
Missouri market. The facility is classified as bulk distribution and light
industrial and consists of 216,451 square feet. The purchase price was
approximately $5.5 million. The facility was 96% leased at the date of purchase
and at December 31, 1998.
On August 6, 1998, ProLogis acquired the Sabal Park Distribution
Center #11 and #12 located in the Tampa East sub-market of the Tampa, Florida
market. The facility is classified as bulk distribution and light industrial and
consists of 119,554 square feet. The purchase price was approximately $4.6
million. The facility was 80% leased on the date of purchase and at December 31,
1998.
On August 31, 1998, ProLogis acquired the Executive Park
Distribution Center #3 located in the Executive Park sub-market of the Kansas
City, Missouri market. The facility is classified as bulk distribution and
consists of 41,258 square feet. The purchase price was approximately $1.7
million. The facility was 100% leased on the date of purchase and at December
31, 1998.
On October 30, 1998, ProLogis acquired the Oceanie Distribution
Center #1 located in the Orly Airport sub-market of the Paris, France market.
The facility is classified as bulk distribution and consists of 170,771 square
feet. The purchase price was approximately $7.7 million. The facility was 100%
leased on the date of purchase and at December 31, 1998.
3
<PAGE>
On November 27, 1998, ProLogis acquired Epone Distribution Center #1
located in the West submarket of Paris, France. The facility is classified as
bulk distribution and consists of 121,256 square feet. The purchase price was
approximately $4.1 million. The facility was 100% leased on the date of purchase
and on December 31, 1998.
On December 8, 1998, ProLogis acquired Elk Grove Distribution Center
#10, located in the O'Hare submarket of Chicago, Illinois. This facility is
classified as light industrial and consists of 36,840 square feet. The purchase
price was approximately $1.4 million. The facility was 100% leased at the date
of purchase and at December 31, 1998.
On December 8, 1998, ProLogis acquired Ontario Distribution Center #1 -
5 located in the LAX - Inland Empire submarket of Los Angeles, California. These
five facilities are classified as light industrial and consist of 1,474,587
square feet. The purchase price was approximately $53.8 million. Four of the
buildings were 100% leased and one building was 76% leased at the time of
purchase and at December 31, 1998.
On December 22, 1998, ProLogis acquired Commerce Distribution Center #1
located in the LAX - Commerce submarket of Los Angeles, California. This
facility is classified as bulk distribution and consists of 99,166 square feet.
The purchase price was approximately $3.7 million. The facility was vacant at
the time of purchase and at December 31, 1998.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
None
(b) Pro Forma Financial Information:
Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1998 (unaudited)
Pro Forma Condensed Consolidated Statement of Earnings
from Operations for the year ended December 31, 1998
(unaudited)
Notes to Pro Forma Condensed Consolidated Financial
Statements (unaudited)
(c) Exhibits:
3.1 Restated By-Laws of ProLogis Trust
5
<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.
PROLOGIS TRUST
By: /s/ Walter C. Rakowich
-------------------------------
Walter C. Rakowich
Managing Director and
Chief Financial Officer
(Principal Financial Officer)
Date: April 22, 1999 By: /s/ Shari J. Jones
-------------------------------
Shari J. Jones
Vice President
(Principal Accounting Officer)
6
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
The accompanying pro forma condensed consolidated financial statements
for ProLogis Trust ("ProLogis") reflect: (i) the acquisition by ProLogis of
certain industrial distribution facilities during the period from January 1,
1998 to December 31, 1998, as detailed in the Current Report on Form 8-K/A of
ProLogis filed on February 25, 1999 and dated as of December 3, 1998 and in Item
5 of this Current Report on Form 8-K and (ii) the merger of Meridian Industrial
Trust, Inc. ("Meridian") with and into ProLogis that was completed on March 30,
1999 (the "Merger").
Under the Agreement and Plan of Merger dated as of November 16, 1998,
as amended (the "Merger Agreement"), for each share of Meridian common stock
held, the holder received 1.10 ProLogis common shares ("ProLogis Common Shares")
plus $2.00 and Meridian's Series D preferred stockholders received one
comparable ProLogis cumulative redeemable preferred share (Series E). In
addition, ProLogis assumed Meridian's outstanding liabilities. The Merger will
be accounted for using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16.
The accompanying pro forma condensed consolidated financial statements
have been prepared based upon certain pro forma adjustments to the historical
financial statements of ProLogis. The pro forma adjustment to reflect the Merger
is based upon the pro forma financial statements of Meridian that were included
in the Current Report on Form 8-K filed by ProLogis on April 13, 1999 which is
referenced in the accompanying notes to the pro forma condensed consolidated
financial statements.
The accompanying pro forma condensed consolidated balance sheet has
been prepared as if: (i) fundings under secured debt agreements that occurred
subsequent to December 31, 1998 had occurred as of that date, with the proceeds
being used to repay borrowings on ProLogis' unsecured lines of credit, (ii) the
Merger had occurred as of December 31, 1998 and (iii) the proposed issuance of
$400.0 million of senior unsecured notes had occurred as of December 31, 1998.
The accompanying pro forma condensed consolidated statement of earnings
from operations for the year ended December 31, 1998 has been prepared as if:
(i) the acquisition of certain facilities acquired by ProLogis during the period
from January 1, 1998 to December 31, 1998 as detailed in the Current Report on
Form 8-K/A of ProLogis filed on February 25, 1999 and dated as of December 3,
1998 and in Item 5 of this Current Report on Form 8-K had occurred as of January
1, 1998, (ii) the assumption of certain mortgage debt associated with the
facilities noted in (i) above had occurred as of January 1, 1998, (iii) the
issuance of senior unsecured notes subsequent to December 31, 1997, necessary to
fund the pro forma acquisitions noted in (i) above, had occurred as of January
1, 1998, (iv) the Merger had occurred as of January 1, 1998 and (v) the issuance
of $500 million of senior unsecured notes had occurred as of January 1, 1998.
The pro forma condensed consolidated financial statements do not
purport to be indicative of the financial position or results of operations
which would actually have been obtained had the proposed issuance of the senior
unsecured notes, the Merger and the other transactions noted above been
completed on the dates indicated or which may be obtained in the future. The pro
forma condensed consolidated financial statements should be read in conjunction
with the historical financial statements of ProLogis as set forth in its 1998
Annual Report on Form 10-K, the historical financial statements of Meridian as
set forth in the Current Report on Form 8-K filed by ProLogis on April 13, 1999
and the pro forma financial statements of Meridian included in the Current
Report on Form 8-K also filed by ProLogis on April 13, 1999.
In management's opinion, all material adjustments necessary to reflect
the effects of the proposed issuance of the senior unsecured notes, the Merger
and other transactions noted above have been made to the pro forma condensed
consolidated financial statements.
7
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Acquisitions
-----------------------
ProLogis Purchase Pro Forma ProLogis ProLogis
ProLogis Pro Forma Pre-Merger Price Ad- Merger Ad- Post-Merger Notes As Adjusted
ASSETS Historical Adjustments Pro Forma Meridian(b)justments justments ProForma Issuance Pro Forma
------ ---------- ---------- ----------- ---------- --------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate $3,657,500 $ -- $3,657,500 $1,182,783 $260,768 $ -- $5,101,051 $ -- $5,101,051
Less accumulated depreciation 254,288 -- 254,288 35,359 (35,359) -- 254,288 -- 254,288
---------- --------- ---------- ---------- -------- ------ ---------- --------- ----------
Net real estate investment 3,403,212 -- 3,403,212 1,147,424 296,127(c) -- 4,846,763 -- 4,846,763
(d)
Investments in and advances to
unconsolidated subsidiaries
and JV 733,863 -- 733,863 45,773 (15,028)(c) -- 764,608 -- 764,608
(e)
Cash and cash equivalents 63,140 -- 63,140 17,494 -- -- 80,634 19,935 100,569
Note receivable -- -- -- 8,000 -- (f) -- 8,000 -- 8,000
Accounts receivable and other
assets 130,514 -- 130,514 36,726 (19,839)(c) -- 147,401 3,625(r) 151,026
(g)
---------- -------- ---------- ---------- -------- ------ ---------- --------- ----------
Total assets $4,330,729 $ -- $4,330,729 $1,255,417 $261,260 $ -- $5,847,406 $ 23,560 $5,870,966
========== ========= ========== ========== ======== ====== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
----------------------------
Liabilities:
Lines of credit $ 344,300 $(289,000)(a)$ 55,300 $ 316,700 $ (6,385)(h) $ -- $ 475,918 $(475,918)(r)$ --
67,581(c)
(i)
41,885(c)
(i)
837(j)
Short-term borrowings 150,000 (150,000)(a) -- -- -- -- -- -- --
Mortgage notes, assessment
bonds and securitized debt 227,804 439,000 (a) 666,804 103,190 5,200(c) -- 775,194 -- 775,194
(k)
Senior unsecured notes 1,083,641 -- 1,083,641 160,100 834(c) -- 1,244,575 499,478(r) 1,744,053
(k)
Accounts payable and other
liabilities 217,321 -- 217,321 33,194 -- -- 250,515 -- 250,515
---------- ------- ---------- --------- -------- ----- --------- ------- ----------
Total liabilities 2,023,066 -- 2,023,066 613,184 109,952 -- 2,746,202 23,560 2,769,762
Minority interest 51,295 -- 51,295 16,190 (1,304)(l) -- 66,181 -- 66,181
Shareholders equity:
Series A Preferred Shares 135,000 -- 135,000 -- -- -- 135,000 -- 135,000
Series B Convertible
Preferred Shares 188,440 -- 188,440 25,000 (25,000)(h) -- 188,440 -- 188,440
Series C Preferred
Shares 100,000 -- 100,000 -- -- -- 100,000 -- 100,000
Series D Preferred Shares 250,000 -- 250,000 50,000 -- (50,000)(p) 250,000 -- 250,000
Series E Preferred Shares 50,000 (p) 50,000 -- 50,000
Common Shares of beneficial
interest(123,415,711 shares
historical and 160,585,257
shares as adjusted proforma) 1,234 -- 1,234 32 2(h) 338 (p) 1,606 -- 1,606
(l)
Additional paid-in capital 1,907,232 -- 1,907,232 567,398 32,705(h) (338)(p)2,635,515 -- 2,635,515
(l)
142,221(c)(16,405)(q)
(m)
3,539(c)
(n)
(837)(j) --
Employee share purchase notes (25,247) -- (25,247) -- -- -- (25,247) -- (25,247)
Accumulated other comprehen-
sive income 23 -- 23 -- -- -- 23 -- 23
Distributions in excess of
net earnings (300,314) -- (300,314) (16,387) (18)(o) 16,405(q) (300,314) -- (300,314)
---------- ------- ---------- ---------- -------- ------- ---------- ------- ---------
Total shareholders'
equity 2,256,368 -- 2,256,368 626,043 152,612 -- 3,035,023 -- 3,035,023
---------- ------- ---------- ---------- -------- ------- ---------- ------- ---------
Total liabilities and
shareholders' equity $4,330,729 $ -- $4,330,729 $1,255,417 $261,260 $ -- $5,847,406 $23,560 $5,870,966
========== ======== ========== ========== ======== ======= ========== ======= ==========
</TABLE>
The accompanying notes are an integral part of the proforma condensed
consolidated financial statements.
8
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
(Unaudited)
(a) Represents the funding of three secured credit agreements subsequent to
December 31, 1998 and the use of the proceeds to repay borrowings on
ProLogis' unsecured lines of credit and short-term borrowings.
(b) Reference is made to ProLogis' Current Report on Form 8-K filed on April
13, 1999 for the source of Meridian's pre-Merger historical balance sheet
as of December 31, 1998. Certain amounts have been reclassified to conform
to ProLogis' financial statement presentation.
(c) Represents adjustments to record Meridian's pro forma assets and
liabilities at their respective purchase values based on the purchase
method of accounting. The assumed purchase price was computed as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Issuance of ProLogis Common Shares (1).................... $ 729,453
Issuance of ProLogis Series E preferred shares (2)........ 46,500
Issuance of ProLogis stock options (3).................... 3,539
Cash payments to Meridian common stockholders (4)......... 67,581
Assumption of Meridian's pro forma liabilities at
estimated fair value (5)............................... 612,833
Assumption of Meridian's pro forma minority interest
(which approximates estimated fair value) (6).......... 14,886
Transaction costs (7)..................................... 41,885
----------
Assumed purchase price $1,516,677
==========
</TABLE>
(1) Represents the value of the 37,169,546 ProLogis Common Shares
that were exchanged for 33,790,496 outstanding shares of
Meridian common stock (based on the exchange ratio of 1.10 to
one). The value of the ProLogis Common Shares is based upon
the closing price of the shares on March 30, 1999 of $19.625
per share. The outstanding shares of Meridian common stock are
calculated as follows based upon transactions that occurred
subsequent to December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Pre-Merger pro forma shares of Meridian
common stock outstanding...................... 31,697,491
Conversion of Meridian Series B preferred
stock to common stock......................... 1,623,376
Exercise of options and warrants................. 413,279
Conversion of limited partnership units.......... 55,560
Issuance of shares for directors' fees........... 790
----------
Adjusted pro forma shares of Meridian
common stock outstanding 33,790,496
==========
</TABLE>
(2) The assumed value of the ProLogis Series E preferred shares is
based upon the closing price of the Meridian Series D
preferred stock on March 30, 1999 of $23.25 per share.
(3) Represents the issuance of 1,179,768 ProLogis stock options to
the holders of 1,072,516 Meridian stock options (based on the
exchange ratio of 1.10 to one). The fair value of the new
ProLogis stock options is assumed to be $3.00 per option.
(4) Represents the cash payment to Meridian common stockholders of
$2.00 per share for the 33,790,496 Meridian shares
outstanding. The total cash payment of $67,581,000 will result
in additional interest expense of approximately $4,366,000 for
the year ended December 31, 1998. This interest expense is
included in the pro forma condensed consolidated statements of
earnings from operations as discussed in note (ee).
9
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(5) The Meridian pro forma liabilities assumed are calculated as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Meridian historical liabilities......................... $ 613,184
Fair value adjustment to mortgage notes (see note (k)).. 5,200
Fair value adjustment to senior unsecured notes (see 834
note (k))............................................
Pro forma pay down on line of credit (see note (h))..... (6,385)
---------
$ 612,833
=========
</TABLE>
(6) Meridian's historical minority interest is reduced by $1,304,000
which represents the conversion of 55,560 limited partnership units
into Meridian common stock subsequent to December 31, 1998.
(7) Represents estimated costs to be incurred by ProLogis in connection
with the Merger including severance payments and payments for stock
options and restricted stock grants of $25,393,000, banking and
professional fees of $16,292,000 and $200,000 for other costs
including printing, regulatory filing, title and transfer costs.
(d) Represents the step-up in basis of Meridian's real estate assets in
accordance with the purchase method of accounting based on the assumed
purchase price (see note (c)). The stepped-up basis indicated is less than
the estimated fair value of Meridian's real estate assets by approximately
$1.8 million of pro forma negative goodwill. Management's basis for
determining fair value estimates and the components of fair value are as
follows:
(i) Operating facilities: the application of an estimated capitalization
rate to each operating facilities estimated 1999 net operating income.
The capitalization rates were based upon market analysis and
individual property assessments;
(ii) Developments expected to be completed in the first quarter of 1999:
the application of an estimated capitalization rate to the facility's
estimated 1999 net operating income. The capitalization rates were
based upon market analysis and individual property assessments. This
value was then adjusted to reflect the estimated percentage of
completion of the facilities as of December 31, 1998;
(iii)Developments expected to be completed subsequent to the first quarter
of 1999: the actual cost of the development as of December 31, 1998
adjusted upward by a factor to reflect the step-up to estimated fair
value. Based on ProLogis' experience, the historical cost of an
internally developed facility upon completion is less than the fair
value of the facility at the time of completion;
(iv) Land held for development: the book value as of December 31, 1998 was
deemed to be the fair value because all land acquisitions occurred
within the last 12 months and the historical acquisition cost is
representative of current market conditions; and
(v) Participating mortgage note receivable included in real estate:
represents a participating mortgage note at the actual value for which
it was sold subsequent to December 31, 1998.
A summary of the fair values of Meridian's real estate assets, the
calculation of negative goodwill and the calculation of the adjustment for the
step-up in basis of Meridian's real estate assets are as follows (in thousands):
10
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C>
Operating facilities................................... $1,288,941
Developments completed in the first quarter of
1999................................................. 93,243
Developments expected to be completed subsequent
to the first quarter of 1999......................... 8,693
Land held for development.............................. 31,389
Participating mortgage note receivable................. 23,059
----------
Fair value of real estate assets....................... 1,445,325
Pro forma book value of Meridian real estate assets.... 1,147,424
----------
Preliminary adjustment for step-up in basis of real
estate assets...................................... 297,901
Pro forma book value of Meridian's total assets........ 1,255,417
Adjustment to fair value of investment in
unconsolidated subsidiary (see note (e))........... (15,028)
Adjustment to fair value of other assets (see
note (g)).......................................... (19,839)
----------
Fair value of total assets............................. 1,518,451
Pro forma purchase price (see note (c))................ 1,516,677
----------
Pro forma negative goodwill............................ $ (1,774)
==========
</TABLE>
In accordance with generally accepted accounting principles, the negative
goodwill is applied to Meridian's real estate assets. Consequently, the real
estate assets step-up adjustment is recalculated as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Preliminary adjustment for step-up in basis of
real estate assets.................................. $ 297,901
Negative goodwill..................................... (1,774)
----------
Final adjustment for step-up in basis of real
estate assets....................................... $ 296,127
==========
</TABLE>
(e) The fair value of Meridian's investment in the preferred stock of Meridian
Refrigerated, Inc., which owns refrigerated distribution companies, has
been determined based upon analysis of the fair value of the underlying
refrigeration distribution assets by applying a capitalization rate to the
assets' estimated 1999 net operating income. This analysis resulted in
reduction to Meridian's book basis of $15,028,000.
(f) Represents a note receivable to Meridian. The fair value of the note is its
outstanding principal balance at December 31, 1998 because the interest
rate of the note of 8.5% was deemed to be comparable to the interest rate
that would have been negotiated by the combined company.
(g) Represents the elimination of the following assets of Meridian that have no
future value to the combined company (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred loan costs, net.................................. $ 5,269
Costs capitalized associated with a new financial
reporting software package that will not be
implemented by the combined company and
miscellaneous fixed assets............................. 1,874
Rent leveling receivable.................................. 7,238
Capitalized leasing commissions and expenses, net......... 4,556
Costs incurred related to potential Meridian facility
acquisitions that are not planned by the combined
company................................................ 679
Other..................................................... 223
---------
Total adjustment $ 19,839
=========
</TABLE>
11
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(h) Represents the: (i) conversion of 1,623,376 shares of Meridian Series B
convertible preferred stock into shares of Meridian common stock on a one
for one basis ($1,000 aggregate par value and $24,999,000 aggregate
additional paid-in capital) that occurred subsequent to December 31, 1998
and (ii) the issuance of 413,279 shares of Meridian common stock upon the
exercise of outstanding options and warrants that occurred subsequent to
December 31, 1998 ($1,000 aggregate par value and $6,384,000 aggregate
additional paid-in capital).
The proceeds from the exercise of the Meridian options and warrants are
assumed to be used to pay down Meridian's line of credit as follows
(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
<S> <C>
7,583 options at an exercise price of $21.125 per share...... $ 160
405,696 warrants at a weighted average exercise price of
$15.34 per share........................................... 6,225
-------
Cash proceeds from assumed exercise.......................... $ 6,385
=======
</TABLE>
(i) Represents additional borrowings on ProLogis' lines of credit necessary to
fund the cash payments to Meridian stockholders described in note (c)(4)
and transaction costs described in note (c)(7).
(j) Represents costs associated with registering the ProLogis common and
preferred shares to be given to the Meridian stockholders.
(k) The adjustments to Meridian's mortgage notes payable and senior unsecured
notes reflect the premium to adjust these financial instruments to their
estimated fair value. The adjustment is based on the present value of
amounts to be paid using interest rates currently available to ProLogis for
debt obligations with similar terms and features. The borrowing rates
available to ProLogis are assumed to be comparable to the borrowing rates
available to the combined company. The adjustments are based on current
rates ranging from 7.18% to 7.31%. See note (e)(5).
(l) Represents the conversion subsequent to December 31, 1998 of 55,560 limited
partnership units into Meridian common stock (see note (c)(6)).
(m) Represents adjustment of Meridian's stockholders' equity based on the
assumed fair value of the shares and stock options to be received from
ProLogis as calculated below (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
<S> <C>
37,169,546 shares of common stock at $19.625 per
share (the per share value of the ProLogis Common
Shares issued to Meridian holders on 1.10 for one
basis as described in note (c)(1)).................... $ 729,452
2,000,000 shares of preferred stock at $23.25 per share
(the per share value of the ProLogis preferred shares
issued to Meridian holders on a one for one basis as
described in note (c)(2)).............................. 46,500
1,179,768 ProLogis stock options issued to Meridian
holders on a 1.10 for one basis as described in
note (c)(3)............................................ 3,539
Meridian's pre-Merger pro forma stockholders' equity
(assumes conversion of Meridian Series B preferred
stock, exercise of options and warrants and conversion
of limited partnership units as described in notes
(h),(l) and (o))....................................... (637,270)
----------
Total adjustment $ 142,221
==========
</TABLE>
12
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET`
(n) Represents the issuance of 1,179,768 ProLogis stock options to holders of
Meridian stock options on a 1.10 for one basis at an estimated fair value
of $3.00 per option (see note (c)(3)).
(o) Represents the recognition of expense related to the issuance of 790 shares
of Meridian common stock as fees to its directors subsequent to December
31, 1998 at an estimated per share price of $23.00 (see note (c)(1)).
(p) Represents: (i) the 1.10 for one exchange of 33,790,496 shares of Meridian
common stock ($0.001 par value) for 37,169,546 ProLogis Common Shares
($0.01 par value) (see note (c)(1)); (ii) the one for one exchange of
2,000,000 shares of Meridian Series D preferred stock for 2,000,000
comparable ProLogis Series E preferred shares ($25.00 per share stated
liquidation preference) (see note (c)(2)); and (iii) a $338,000 adjustment
for the difference between the $0.001 par value of Meridian's common stock
on an aggregate basis as compared to the $0.01 par value of ProLogis'
Common Shares on an aggregate basis related to the exchange of shares
referenced above.
(q) Represents the reclassification of $16,405,000 of Meridian's pro forma
distributions in excess of net earnings to additional paid-in capital in
accordance with purchase accounting.
(r) Represents the issuance of $500.0 million of senior unsecured notes
subsequent to December 31, 1998. ProLogis expects to close the offering of
these notes on April 26, 1999. The proceeds of the offering, net of
estimated costs of $3.6 million are assumed to be used to repay borrowings
on ProLogis' unsecured lines of credit.
13
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLDIATED STATEMENT OF EARNINGS FROM OPERATIONS
Year ended December 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Acquisitions
---------------------- Pro Forma
ProLogis Merger Adjustments ProLogis Proposed ProLogis
ProLogis Pro Forma Pre-Merger ---------------------- Post-Merger Notes As Adjusted
Historical Historical Adjustments Pro Forma Meridian(z)ProLogis(aa) Pro Forma Issuance Pro Forma
---------- ---------- ----------- ---------- ---------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Rental income $345,046 $ 9,458(t) $ -- $354,504 $123,274 $ -- $ 477,778 $ -- $ 477,778
Other real estate income 17,250 -- -- 17,250 2,236 -- 19,486 -- 19,486
Income from unconsolidated
subsidiaries and JV 2,755 -- -- 2,755 3,336 -- 6,091 -- 6,091
Foreign currency exchange
gains, net 4,992 -- -- 4,992 -- -- 4,992 -- 4,992
Interest and other income 2,752 -- -- 2,752 2,935 -- 5,687 -- 5,687
-------- -------- -------- -------- -------- ------- --------- ------ ---------
Total income 372,795 9,458 -- 382,253 131,781 -- 514,034 -- 514,034
-------- -------- -------- -------- -------- ------- --------- ------ ----------
Expenses:
Rental expenses, net of
recoveries 27,120 446(t) 188 (u) 27,754 25,366 -- (bb) 53,120 -- 53,120
General and administrative 22,957 -- -- 22,957 8,333 -- (cc) 31,290 -- 31,290
Depreciation and amortiza-
tion 100,590 -- 2,803(v) 103,393 25,293 7,734 (dd) 136,420 -- 136,420
Interest 77,650 -- 7,058(w) 84,708 25,028 4,315 (ee) 114,051 2,480(hh) 116,531
(x)
Interest rate hedge expense 26,050 -- -- 26,050 12,633 -- 38,683 -- 38,683
Other 7,983 -- -- 7,983 825 (825)(ff) 7,983 -- 7,983
-------- -------- -------- -------- -------- -------- --------- ------ ---------
Total expenses 262,350 446 10,049 272,845 97,478 11,224 381,547 2,480 384,027
-------- -------- -------- -------- -------- -------- --------- ------ ---------
Earnings from operations
before minority interest,
excluding gains on dispo-
sitions 110,445 9,012 (10,049) 109,408 34,303 (11,224) 132,487 (2,480) 130,007
Minority interest share in
earnings from operations 4,681 -- -- 4,681 1,047 -- 5,728 -- 5,728
-------- -------- -------- -------- -------- -------- --------- ------- --------
Earnings from operations,
excluding gains on
dispositions 105,764 9,012 (10,049) 104,727 33,256 (11,224) 126,759 (2,480) 124,279
Less preferred share
dividends 49,098 -- -- 49,098 6,517 (2,142)(gg) 53,473 -- 53,473
-------- -------- -------- -------- -------- ------- --------- ------- --------
Net earnings from operations
attributable to Common
Shares $ 56,666 $ 9,012 $ (10,049) $ 55,629 $ 26,739 $(9,082) $ 73,286 $(2,480) $ 70,806
======== ======== ========= ======== ======== ======= ========= ======= ========
Weighted average Common
Shares outstanding -
basic 121,721(s) -- -- 121,721(y) 31,697(y) 158,890(y) 158,890
======== ======== ======== ======== ======== ========= ========
Weighted average Common
Shares outstanding -
diluted 122,028(s) -- -- 122,028(y) 32,148(y) 158,363(y) 159,363
======== ======== ======== ======== ======== ========= ========
Per share net earnings from
operations attributable to
Common Shares:
Basic $ 0.47(s)$ -- $ -- $ 0.46(y) $ 0.84(y) $ 0.46(y) $ 0.45
========= ======== ======== ======== ======== ======== ========
Diluted $ 0.46(s)$ -- $ -- $ 0.46(y) $ 0.83(y) $ 0.46(y) $ 0.44
========= ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the proforma condensed
consolidated financial statements.
14
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
Year Ended December 31, 1998
(Unaudited)
(s) A reconciliation of the denominator used to calculate basic net earnings
per ProLogis Common Share to the denominator used to calculate diluted net
earnings per ProLogis Common Share for the year ended December 31, 1998 is
as follows (in thousands, except per Common Share amounts):
<TABLE>
<CAPTION>
Acquisitions
Net Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Net earnings from operations attributable to
ProLogis Common Shares........................ $ 56,666 $ (1,037) $ 55,629
========= ======== =========
Weighted average ProLogis Common Shares
Outstanding--basic............................ 121,721 -- 121,721
Incremental options and warrants................ 307 -- 307
--------- -------- ---------
Adjusted weighted-average ProLogis Common
Shares outstanding--diluted (1)............... $ 122,028 $ -- $ 122,028
========= ======== =========
Pershare net earnings from operations
attributable to ProLogis Common Shares:
Basic....................................... $ 0.47 $ -- $ 0.46
========= ======== =========
Diluted (1)................................. $ 0.46 $ -- $ 0.46
========= ======== =========
---------------
<FN>
(1) There were 10,055,000 weighted average Series B Preferred
Shares and 5,070,000 limited partnership units outstanding
on an as-converted basis that were not assumed to be converted
into ProLogis Common Shares for purposes of calculating diluted
earnings per ProLogis Common Share as the effect was
antidilutive.
</FN>
</TABLE>
(t) Represents historical revenues and certain expenses of the facilities
acquired by ProLogis subsequent to December 31, 1997 as detailed in the
Current Report on Form 8-K/A of ProLogis filed on February 25, 1999 and
dated as of December 3, 1998 and in Item 5 of this Current Report on Form
8-K. The total historical acquisition adjustment reflects the period from
January 1, 1998 to the respective dates of acquisition, (results of
operations after the dates of acquisition are included in ProLogis'
historical operating results). Historical acquisition revenues and certain
expenses exclude amounts which would not be comparable to the proposed
future operations of the facilities such as certain interest expense,
interest income, income taxes and depreciation.
(u) Represents the adjustment to historical property management expenses to
reflect these expenses at the level they would have been had ProLogis owned
the facilities as of January 1, 1998.
(v) Reflects the recognition of depreciation expense associated with the pro
forma acquisitions, discussed in note (t), for the periods indicated. This
depreciation adjustment is based on ProLogis' purchase cost assuming asset
lives of 30 years. Depreciation is computed using a straight-line method.
15
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
(w) Reflects the recognition of $775,000 of interest expense on mortgage debt
as if the debt had been assumed by ProLogis as of January 1, 1998. The
mortgage debt assumed in conjunction with the acquisition of certain of the
facilities acquired subsequent to December 31, 1997 discussed in note (t)
bears interest at fixed rates ranging from 8.00% to 9.50%.
(x) Represents $6,283,000 of additional interest expense on senior unsecured
notes. The adjustment assumes that the issuance of senior unsecured notes
necessary to fund the pro forma acquisitions discussed in note (t) occurred
as of January 1, 1998. The adjustment is based on a weighted average
effective interest rate of 7.03%.
(y) A reconciliation of the denominator used to calculate basic net earnings
per common share to the denominator used to calculate diluted net earnings
per common share for the periods indicated for ProLogis and Meridian on a
pre-Merger pro forma basis and for ProLogis on a pro forma post-Merger
basis is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Pre-Merger
------------------------ ProLogis
ProLogis Meridian Post-Merger
Pro Forma Pro Forma Pro Forma
--------- ---------- -----------
<S> <C> <C> <C>
Net earnings from operations attributable
to common shares............................. $ 55,629 $ 26,739 $ 73,286
========== ========== ==========
Weighted average common shares outstanding -
basic........................................ 121,721 31,697 158,890
Incremental options and warrants............... 307 451 473
---------- ---------- ----------
Adjusted weighted-average common shares
outstanding - diluted........................ 122,028 32,148 159,363 (1)(2)
========== ========== ==========
Per share net earnings from operations
attributable to common shares:
Basic.................................... $ 0.46 $ 0.84 $ 0.46
=========== ========== ==========
Diluted.................................. $ 0.46 $ 0.83 $ 0.46 (2)
========== ========== ==========
-------------
<FN>
(1) The ProLogis post-Merger pro forma weighted average common shares
outstanding reflects the following adjustments based on the assumption
that the Merger occurred as of January 1, 1998: (i) the pre-Merger
conversion of Meridian's Series B preferred stock to Meridian common
stock; (ii) the pre-Merger issuance of an additional 469,629 shares of
Meridian stock (see note (c)(1)); and (iii) the increase resulting from
the issuance of 1.10 ProLogis Common Shares for one share of Meridian
common stock.
(2) For the year ended December 31, 1998, there were 10,055,000 weighted
average ProLogis Series B Preferred Shares and 5,070,000 weighted
average limited partnership units outstanding on an as-converted basis
that were not assumed to be converted into ProLogis Common Shares for
purposes of calculating diluted earnings per ProLogis Common Share as
the effect was antidilutive.
</FN>
</TABLE>
(z) Reference is made to Meridian's Current Report on Form 8-K filed by
ProLogis on April 13, 1999 for the source of Meridian's pre-Merger pro
forma statements of earnings from operations for the year ended December
31, 1998. Meridian's pre-Merger pro forma statement of earnings from
operations gives effect to the acquisitions of real estate assets
subsequent to December 31, 1997 as if the acquisitions had occurred as of
January 1, 1998. Certain amounts have been reclassified to conform to
ProLogis' financial statement presentation.
16
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
(aa) The accompanying pro forma condensed consolidated statement of earnings
from operations for the year ended December 31, 1998 does not give effect
to the fully stabilized results of operations related to facilities under
development of both ProLogis and Meridian as of December 31, 1998.
Management believes that there will be sufficient depth of management and
personnel such that additional facilities can be developed and managed
without a significant increase in personnel or other costs. As a result,
management believes that the accretion in net earnings from operations
from the Merger reflected in the pro forma condensed consolidated
statements of earnings from operations is not indicative of the full
accretion that is expected to occur on a post-Merger basis.
(bb) During the year ended December 31, 1998, Meridian utilized the services of
third-party management companies to perform property management functions
for substantially al of its operating facilities. Meridian paid these
management companies a fee based upon the revenues generated by the
facility. ProLogis utilizes third-party management companies on a very
limited basis. Substantially all of the property management functions
related to ProLogis' operating facilities are performed by employees of
ProLogis. ProLogis expects that after consummation of the Merger, the
property management functions related to the Meridian operating facilities
acquired will be performed by ProLogis employees and that the existing
Meridian third-party management contracts will be terminated. Management of
ProLogis expects that additional employees (including property accounting
personnel) will be needed as these property management functions are
transferred from the third-party management companies. However, it is
expected that, because approximately 98% of the Meridian facilities are
located in markets where ProLogis currently owns and manages assets,
certain expense savings will be achieved. While ProLogis expects to realize
lower property management costs related to the Meridian operating
facilities than had been incurred by Meridian, no estimate of these
expected future cost savings has been included in the pro forma financial
statements. Such adjustment is not included because these costs savings are
not yet factually supportable within the SEC regulations governing the
preparation of the pro forma financial statements until such time as the
third-party agreements are terminated and the property management function
is completely transferred to ProLogis.
(cc) As a separate corporate entity, Meridian incurred general and
administrative costs as follows:
o Personnel costs and related employee benefits and expenses for the
Meridian administrative employees: These employees are not related
to the property management function, but rather perform corporate
functions specific to the Meridian corporate entity. These
functions are considered duplicative with the functions performed
currently by ProLogis employees.
o Directors' fees and costs: The Meridian corporate entity ceases
to exist after the Merger, therefore the Board of Directors will
no longer be in existence.
o Professional fees (including auditing, accounting, legal, stock
registration and consulting): These costs will not be incurred as
the Meridian corporate entity ceases to exist after the Merger.
Accordingly, there will be no entity to incur these costs and
Meridian will have no publicly traded securities.
17
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
o Office expenses (including rent and utilities): Meridian
maintained a corporate office in San Francisco, California.
ProLogis has an existing corporate office and does not intend
to maintain any additional corporate offices after the Merger.
Meridian's general and administrative costs are summarized below (in
thousands) for the year ended December 31, 1998. These costs are related to the
corporate organization as opposed to costs associated with the operations of
Meridian's real estate facilities (which are included in rental expenses and are
discussed in note (bb)). ProLogis expects that, after the Merger, a significant
portion of these expenses will be eliminated.
<TABLE>
<CAPTION>
<S> <C>
Personnel and related................ $ 4,575
Professional fees.................... 1,099
Directors' fees and expenses......... 289
Office expenses...................... 1,256
Other................................ 205
-----------
Total....................... $ 7,424
===========
</TABLE>
While the general and administrative costs noted above will not be
incurred by Meridian after the Merger, ProLogis does expect that there will be
incremental increases in certain of its corporate general and administrative
costs. ProLogis has determined these increases to be related to the following
changes in its corporate operations directly as a result of the Merger:
o Legal, auditing and accounting fees will increase because ProLogis has
acquired approximately $1.4 billion of additional real estate assets
aggregating approximately 33.5 million square feet of industrial
distribution facilities.
o Stock transfer fees, proxy solicitation and shareholder relations
costs will increase because ProLogis has issued approximately 37.2
million additional ProLogis Common Shares and 2.0 million Series E
preferred shares.
o ProLogis has added two members to its Board of Trustees resulting in
additional fees and expenses.
The incremental ProLogis costs are computed on a pro rata basis based
upon the additional pro forma revenues generated by the Merger (for accounting,
auditing and legal fees), additional shares outstanding after the Merger (for
stock transfer, proxy and shareholder relations) and the increase in the number
of trustees as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounting, auditing and legal....... $ 250
Stock transfer, proxy and
shareholder relations........... 120
Trustees' fees and expenses.......... 100
-------
Total....................... $ 470
=======
</TABLE>
18
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
While ProLogis expects that general and administrative cost savings
will result from the Merger, such savings are not yet factually supportable and
quantifiable within the SEC regulations governing the preparation of the pro
forma financial statements. Consequently, no adjustment has been made.
(dd) Represents the net increase in depreciation of real estate as a result of
the step-up in basis to record Meridian's real estate at its estimated
fair value (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Step-up in real estate basis (see note (d))............... $ 296,127
Less amount of step-up allocated to:
Developments in progress and land held for
development...................................... (21,588)
Land portion of operating facilities................. (40,947)
Participating mortgage............................... (1,560)
---------
Depreciable portion of step-up in basis................... $ 232,032
=========
Estimated annual incremental depreciation expense
based on an assumed weighted average life of
30 years............................................. $ 7,734
=========
</TABLE>
(ee) Represents the net change in interest expense as a result of the
following items (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Decrease related to the pay down on Meridian's line
of credit as a result of the exercise of options
and warrants described in note (h)(1)................. $ (418)
Decrease based on the pro forma interest rates resulting
from the adjustments of Meridian's debt to its
estimated fair value as described in note (k)(2)...... (821)
Decrease in Meridian loan cost amortization related
to the elimination of Meridian deferred loan costs
as described in note (g).............................. (1,572)
Increase related to additional borrowings on the line
of credit of $42,722 to fund the transaction and
registration costs identified in note (c) and the
assumed cash payments to Meridian stockholders
of $67,581 described in note (c)(3)................... 7,126
---------
Total adjustment.................................. $ 4,315
=========
-------------
<FN>
(1) Computed using Meridian's actual weighted average interest rate of
6.54%.
(2) Based on effective interest rates determined to be available
to the combined company (7.31% for secured mortgage notes and
7.18% for senior unsecured notes).
(3) Computed using ProLogis' actual weighted average interest rate of
6.46%.
</FN>
</TABLE>
19
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS FROM OPERATIONS
(ff) Represents the elimination of merger-related costs expensed by Meridian
in 1998.
(gg) Represents the elimination of dividends on the Meridian Series B preferred
stock that is assumed to be converted into shares of Meridian common stock
as of January 1, 1998. See note (h).
(hh) Represents the additional interest expense resulting from the issuance of
$500.0 million of senior unsecured notes expected to close on April 26,
1999, the net proceeds of which are assumed to be used to repay borrowings
on ProLogis' unsecured lines of credit, as if the issuance of the notes and
related repayment occurred as of January 1, 1998. The adjustment represents
the incremental increase in interest expense based on the weighted average
interest rate of 6.9% on the senior unsecured notes and the average
interest rate of 6.5% actually incurred by ProLogis and Meridian on their
respective unsecured lines of credit borrowings in 1998. In addition,
amortization of debt issuance costs of approximately $480,000 has been
assumed.
20
<PAGE>
EXHIBIT 3.1
PROLOGIS TRUST
RESTATED BYLAWS
ARTICLE 1.
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
Section 1.1. The Annual Meeting of Shareholders shall be held after
delivery to the Shareholders of the Annual Report described in Article 3,
Section 4, of the Declaration of Trust (the "Declaration of Trust") and within
six months of the end of each fiscal year. Annual Meetings of Shareholders shall
be held at such time, on such day and at such place, as the Trustees may from
time to time determine by resolution. Section 1.2. Special meetings of
Shareholders may be called by the Trustees, any officer of the Trust, or the
holders of not less than one-tenth (1/10th) of all the Shares entitled to vote
at the meetings.
Section 1.3. Written or printed notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, by
or at the direction of the Trustees or any officer or person calling the
meeting, to each Shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the Shareholder at his address as it appears on the
books of the Trust, with postage thereon prepaid.
Section 1.4. A majority of the Trustees may designate or elect a Trustee to
preside at any Shareholders' meeting as "Chairman of the Meeting." In the
absence of such designation or election, a managing director shall preside at
Shareholders' meetings as Chairman of the Meeting; in his absence, the Trustees
present at each meeting shall elect one of their number as Chairman of the
Meeting. Unless otherwise provided for by the Trustees, the Secretary of the
Trust shall be the secretary of such meetings.
Section 1.5. At any Shareholders' meeting the Chairman of the Meeting shall
determine the construction or interpretation of the Bylaws, or any part thereof,
and the ruling of the Chairman of the Meeting shall be final.
Section 1.6. The holders of a majority of the Shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
Shareholders. The vote of the holders of a majority of the Shares entitled to
vote and thus represented at a meeting at which a quorum is present shall be the
act of the Shareholders' meeting, unless the vote of a greater number is
required by law or the Declaration of Trust.
21
<PAGE>
Section 1.7. At each meeting of Shareholders, each outstanding Share shall
be entitled to one vote on each matter submitted to a vote in a meeting of
Shareholders. A Shareholder may vote the stock owned of record by the
stockholder, either in person or by proxy in any manner authorized by law by the
stockholder or by the stockholder's agent. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution unless
otherwise provided in the proxy. Each proxy shall be revocable unless expressly
provided therein to be irrevocable, but in no event shall it remain irrevocable
for a period of more than eleven (11) months.
Section 1.8. The Board of Trustees in advance of any meeting of
Shareholders may appoint one or more "Inspectors of Election" to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman of the Meeting may, and on the request of any
Shareholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his ability. If appointed, Inspectors of Election shall take charge of the polls
and, when the vote is completed, shall make a certificate of the result of the
vote taken and of such other facts as may be required by law.
Section 1.9. Elections for Trustees need not be by ballot unless a
Shareholder demands election by ballot at the election and before the voting
begins.
Section 1.10. (a) The right of persons in whose names Shares stand on the
record of the Trust to vote or execute consents is subject to the provisions of
this Section of the Bylaws.
(b) Shares standing in the name of any person as pledgee, trustee, or other
fiduciary may be voted and all rights incident thereto may be exercised only by
the pledgee, trustee, or other fiduciary, in person or by proxy, and without
proof of authority. However, when a trust company has caused Shares to be
registered in the name of one or more nominees of the trust company, such Shares
may be voted and all rights incident thereto may be exercised by such nominee or
nominees without proof of authority.
(c) Shares standing in the name of a person adjudged incompetent may be
voted and all rights incident thereto may be exercised only by his guardian, in
person or by proxy.
(d) Shares standing in the name of a deceased person may be voted and all
rights incident thereto may be exercised only by his executor or administrator,
in person or by proxy.
(e) Shares standing in the name of a minor may be voted and all rights
incident thereto may be exercised by his guardian, in person or by proxy, or in
the absence of such representation by his guardian, by the minor, in person or
by proxy, whether or not the Trust has notice, actual or constructive, of the
nonage or the appointment of a guardian, and whether or not a guardian has been
in fact appointed.
22
<PAGE>
(f) Shares standing in the name of a corporation, domestic or foreign, may
be voted or represented and all rights incident thereto may be exercised on
behalf of the corporation by the persons described in any of the following
subdivisions:
(1) Any officer of the corporation authorized so to do by the bylaws
of the corporation.
(2) Any person authorized so to do by resolution of the Board of
Directors or of the Executive Committee of the corporation.
(3) Any person authorized so to do by proxy or power of attorney duly
executed by the Chairman, the President or Vice President and Secretary or
Assistant Secretary of the corporation.
However, such shares may be voted or represented by the persons described
in any subdivision only in the absence of vote or representation by the persons
described in a preceding subdivision.
(g) Shares standing in the names of two or more persons shall be voted or
represented in accordance with the vote or consent of the majority of the
persons in whose names the Shares stand. If only one such person is present in
person or by proxy, he may vote all the Shares, and all the Shares standing in
the names of such persons are represented for the purpose of determining a
quorum. This bylaw applies to the voting of Shares by two or more
administrators, executors, trustees, or other fiduciaries, unless the instrument
or order of court appointing them otherwise directs.
Section 1.11. The Shares of the Trust shall be represented by certificates;
provided, however, that the Board of Trustees may provide by resolution or
resolutions that some or all of any or all classes or series of the Shares of
the Trust shall be uncertificated shares. Each certificate for Shares shall be
consecutively numbered or otherwise identified. Certificates representing Shares
shall be signed, by manual or facsimile, by or in the name of the Trust by the
Chairman of the Board or a Managing Director and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the Trust.
Where a certificate is countersigned by a transfer agent, other than the Trust
or an employee of the Trust, or by a registrar, the signatures of one or more
officers of the Trust may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued by the Trust
with the same effect as if such officer, transfer agent or registrar were such
officer, transfer agent or registrar at the date of its issue.
Section 1.12. In the event that any certificate for Shares is lost, stolen,
destroyed or mutilated, the Board of Trustees may authorize the issuance of a
new certificate of the same tenor and for the same number of Shares in lieu
thereof. The Board may in its discretion, before the issuance of such new
certificate, require the owner of the lost, stolen, destroyed or mutilated
certificate, or the legal representative of the owner, to make an affidavit or
affirmation setting forth such facts as to the loss, destruction or mutilation
as it deems necessary, and to give the Trust a bond in such reasonable sum as it
directs to indemnify the Trust.
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Section 1.13. In order that the Trust may determine the Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of Shares or for the purpose of
any other lawful action, the Trustees may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed (i) the record date for determining Shareholders entitled
to notice of or to vote at a meeting of Shareholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the date on
which the meeting is held; (ii) the record date for determining Shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Trustees adopts the resolution relating thereto.
A determination of Shareholders of record entitled to notice of or to vote
at a meeting of Shareholders shall apply to any adjournment of the meeting;
provided, however, that the Trustees may fix a new record date for the adjourned
meeting upon giving notice to the Shareholders of the adjournment and the new
record date.
Except where the Trustees fix a new record date for any adjourned meeting
as provided in the preceding paragraph; any Shareholder who was a Shareholder on
the original record date shall be entitled to receive notice of and to vote at a
meeting of the Shareholders or any adjournment thereof and to receive such
dividend or distribution even though he has since that date disposed of his
Shares, and no Shareholder becoming a Shareholder after said date shall be so
entitled to receive notice of or to vote at said meeting or any adjournment
thereof or to receive such dividend or distribution.
Notwithstanding anything in the foregoing to the contrary, the Trustees may
declare and pay dividends or other distributions to those who are Shareholders
as of a specified record date or, alternatively, to those who are or were
Shareholders at any time during any quarter, year or other applicable period
with respect to which any such dividend or distribution is paid, on the basis
that each Shareholder shall receive, with respect to each Share, that proportion
of such dividend or distribution per Share that the number of days each Share is
owned of record by such Shareholder during such quarter, year, or other
applicable period, bears to the total number of days in such quarter, year, or
other applicable period.
Section 1.14. Share records shall be kept by the Trustees, containing the
names and addresses of the Shareholders, the number of Shares held by each and
the certificate numbers. The issuance and transfer of all Shares shall be
recorded in such Share records. The persons in whose names certificates are
registered on such records shall be deemed the absolute owners of the Shares for
all purposes of the Trust; but nothing herein shall preclude the Trustee for
inquiring as to the actual ownership of Shares. Until a transfer is duly entered
on the records of the Trust, the Trustees shall not be affected by any notice of
such transfer, either actual or constructive.
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Shares shall be transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in writing upon
delivery to the Trustees or a transfer agent of the certificate or certificates
therefor, properly endorsed or accompanied by all necessary documentary stamps,
together with such evidence of the genuineness of each such endorsement,
execution or authorization and of other matters as may reasonably be required by
the Trustees or such transfer agent. Upon such delivery, the transfer shall be
recorded in the records of the Trust and a new certificate for the Shares so
transferred shall be issued to the transferee. Any person entitled to any Shares
because of the death of a Shareholder or by operation of law shall receive a new
certificate therefor upon delivery to the Trustees or a transfer agent of
satisfactory proof of the right of such person to the receipt of such Shares,
the existing certificate for such Shares and all necessary releases from
applicable governmental authorities. In case of the loss, mutilation or
destruction of any certificate for Shares, the Trustees may issue or cause to be
issued a replacement certificate on such terms and conditions as the Trustees
shall determine.
Any issuance, purchase or transfer of Shares which would operate to
disqualify the Trust as a real estate investment trust under Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland or for
purposes of Federal income tax is null and void, and such transaction will be
canceled when so determined in good faith by the Trustees.
Section 1.15. The provisions of Article 3, Subtitle 6 of the Corporations
and Associations Article of the Annotated Code of Maryland entitled 'Special
Voting Requirements' shall not apply to business combinations with Security
Capital Realty Investors Incorporated, a Delaware corporation ("REALTY"), and
its affiliates and successors, and Article 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland entitled 'Voting Rights
of Certain Control Shares' shall not apply to the Shares of the Trust acquired
by REALTY and its affiliates and successors.
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ARTICLE 2.
TRUSTEES AND TRUSTEES' MEETINGS
Section 2.1. The Board of Trustees shall initially consist of four (4)
persons and thereafter shall consist of such number of Trustees, not less than
three (3) nor more than fifteen (15), as from time to time shall be fixed by a
resolution passed by a majority of the whole Board.
Section 2.2. An annual meeting of the Trustees shall be held immediately
following the Annual Meeting of Shareholders, as provided in Article 3, Section
1, of the Declaration of Trust. Other meetings of the Trustees may be called by
the Chairman of the Board of Trustees, or any two Trustees, by written notice
which shall be given by mail or by telegram or delivered personally. Unless
otherwise specified in the notice, any and all business may be transacted at any
Trustees' meeting. The attendance of a Trustee at a meeting shall constitute a
waiver of notice of such meeting, except where such Trustee attends a meeting
for the express purpose of objecting to the transacting of any business on the
ground that the meeting has not been lawfully called or convened.
Any notice hereinabove provided for may be waived at any time, whether
before or after the event, by written waiver, a signed copy of which waiver
shall be inserted in the minute book, together with the minutes of the meeting.
Section 2.3. All meetings of the Trustees may be held within or without the
State of Texas.
Section 2.4. A majority of the Trustees may designate or elect a Trustee to
preside at Trustee's meetings. In the absence of such designation or election,
the chief executive officer shall preside at Trustee's meetings; in his absence,
the Trustees present at each meeting shall elect one of their number as
chairman.
Section 2.5. Voting at Trustees' meetings may be conducted orally, by show
of hands, or, if requested by any Trustee, by written ballot. The results of all
voting shall be recorded by the Secretary in the minute book.
Section 2.6. All other rules of conduct adopted and used at Trustees'
meetings shall be determined by the chairman whose ruling on all procedural
matters shall be final.
Section 2.7. Nothing in this Article 2 shall limit the power of the
Trustees to take action by means of a written instrument without a meeting as
provided in Article 4, Section 5, of the Declaration of Trust.
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ARTICLE 3.
OFFICERS
Section 3.1. The officers of the Trust shall be one or more Chairmen of the
Board, each of whom shall be a Trustee, one or more Managing Directors, a
Secretary and a Treasurer, who need not be Trustees, and may include such other
officers (none of whom need be Trustees) as may be determined from time to time
by the Trustees.
Section 3.2. The Chairman of the Board (or Co-Chairmen if more than one),
the Managing Directors, Secretary and Treasurer shall be elected by the Trustees
at the annual meeting of the Trustees. The Chairman of the Board (or Co-Chairmen
if more than one), the Managing Directors, Secretary and Treasurer shall hold
office until the next annual meeting of the Trustees and until their successors
have been duly elected and qualified and may be removed at any meeting by a
majority vote of the Trustees.
Section 3.3. All officers of the Trust, other than the Chairman of the
Board (or Co- Chairmen if more than one), the Managing Directors, Secretary and
Treasurer, may be elected or appointed at any meeting of the Trustees or may be
appointed by the Chairman of the Board (or Co-Chairmen if more than one). Such
officers shall hold office for any term, or indefinitely, as determined by the
Trustees or the Chairman of the Board (or Co-Chairmen if more than one), subject
to removal, with or without cause, any time by the Trustees or the chief
executive officer. The names of all such officers appointed by the Chairman of
the Board (or Co- Chairmen if more than one) shall be submitted at the next
succeeding meeting of the Trustees and recorded in the minutes of said meeting.
Section 3.4. Any officer may resign at any time by giving written notice to
the Board of Trustees or the Chairman of the Board (or Co-Chairmen if more than
one). Such resignation shall take effect at the time specified therein, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the Trustees may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
Section 3.5. The Trustees may, at their discretion, direct any officer
appointed by them to furnish at the expense of the Trust a fidelity bond
approved by the Trustees, in such amount as the Trustees may prescribe.
Section 3.6. The Chairman of the Board (or Co-Chairmen if more than one)
shall have and perform such additional duties as from time to time may be
assigned by the Board of Trustees.
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Section 3.7. The Chairman of the Board (or Co-Chairmen if more than one)
shall, subject to the control of the Board of Trustees, and in the order of
their seniority (if there be more than one), unless otherwise provided by the
Trustees, preside at all meetings of the Board of Trustees and of the
Shareholders. They shall exercise the powers and perform the duties usual to a
chief executive officer and, subject to the control of the Board of Trustees,
and in the order of their seniority (if there be more than one), shall have
general management and control of the affairs and business of the Trust; shall
appoint and discharge employees and agents of the Trust (other than the Board of
Trustees); and shall see that all orders and resolutions of the Board of
Trustees are carried into effect. The Chairman of the Board (or Co-Chairmen if
more than one), the Managing Directors, Vice Presidents and the Secretary shall
have the power to execute deeds, bonds, notes, mortgages and other contracts,
agreements and instruments of the Trust, and shall do and perform such other
duties as from time to time may be assigned to any of them by the Board of
Trustees.
Section 3.8. The Managing Directors, subject to the control of the Chairman
of the Board (or Co-Chairmen if more than one) and in the order of their
seniority, shall, in the absence or disability of the Chairman (or Co-Chairmen
if more than one), shall have general and active management of the business of
the Trust and shall see that all orders and resolutions of the Board of Trustees
are carried into effect.
Section 3.9. If chosen, the Vice Presidents, shall have such functions,
authority and duties as may be prescribed by the Board of Directors or the
Chairman of the Board (or Co- Chairmen if more than one) in the order of their
seniority (if there be more than one).
Section 3.10. The Secretary shall, if requested by the Trustees, attend all
sessions of the Board of Trustees and all meetings of the Shareholders and
record all votes and the minutes of the proceedings in a book to be kept for
that purpose. He shall, if requested, give, or cause to be given, notice of all
meetings of the Shareholders and of the Board of Trustees, and shall perform
such other duties as may be prescribed by the Board of Trustees. The Secretary
shall affix the corporate seal to any instrument requiring it, and when so
affixed, it shall be attested by the signature of the Secretary or any Assistant
Secretary or the Treasurer or an Assistant Treasurer who may affix the seal to
any such instrument in the event of the absence or disability of the Secretary.
The Secretary shall have and be the custodian of the Share records and all other
books, records and papers of the Trust (other than financial) and shall see that
all books, reports, statements, certificates and other documents and records
required by law are properly kept and filed. If authorized by the Board of
Trustees, the Secretary shall have the power to execute deeds, bonds, notes,
mortgages and other contracts, agreements and instruments of the Trust, and
shall do and perform such other duties as from time to time may be assigned to
him by the Board of Trustees.
Section 3.11. The Treasurer shall have the custody of the Trust's funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Trust and shall deposit all moneys, and
other valuable effects in the name and to the credit of the Trust, in such
depositories as may be designated by the Board of Trustees. He shall disburse
the funds of the Trust as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render to the Trustees whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the Trust.
Section 3.12. Duties of Officers may be delegated. In case of the absence
or disability of any officer of the Trust, or for any other reason that the
Board may deem sufficient, the Board may delegate, for the time being, the power
of duties, or any of them, of such office to any other officer, or to any
Trustee.
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ARTICLE 4.
COMMITTEES
Section 4.1. The Trustees may at any time, at their discretion, elect an
Executive Committee consisting of not less than three Trustees, to serve for
such terms as the Trustees may decide. The Executive Committee may exercise such
powers of the Trustees as may be delegated to it by the Trustees. Minutes of
each meeting of the Executive Committee shall be distributed by the Secretary to
all of the Trustees at or prior to the meeting of the Trustees next succeeding
such meeting of the Executive Committee. The presence in person of a majority of
its members shall be necessary to constitute a quorum for the transaction of
business at any meeting of the Executive Committee. Meetings shall be called
upon request of any member of the Executive Committee. The Trustees may appoint
from among their number such other committees as they may from time to time deem
desirable, to continue for such time and to exercise such powers as the Trustees
may prescribe.
Section 4.2. Each committee (including the Executive Committee) elected or
appointed by the Trustees may adopt such standing rules and regulations for the
conduct of its affairs as it may deem desirable, subject to review and approval
of such rules and regulations by the Trustees at the next succeeding meeting of
the Trustees. Any action permitted to be taken at any meeting of any committee
may be taken without a meeting in accordance with Article 4, Section 5, of the
Declaration of Trust.
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