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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 30, 1998
AMERICAN REAL ESTATE INVESTMENT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland 1-12514 84-1246585
- --------------- ------------ ------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
620 W. Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
--------------------------------------------------
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code:
(610) 834-7950
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 30, 1998, American Real Estate Investment Corporation (the "Company"),
through American Real Estate Investment, L.P. (the "Operating Partnership"), a
limited partnership of which the Company is the sole general partner and in
which the Company owns, on the date of this Current Report on Form 8-K, an
interest of approximately 58%, consummated the acquisition of the Galesi
Portfolio as described below.
The Galesi Portfolio
The Company acquired a ten building portfolio of office and industrial
facilities in Albany, New York, (collectively the "Properties") containing an
aggregate of 787,148 square feet. As of April 30, 1998, the Properties were
approximately 99.8% leased to 42 tenants. The portfolio includes:
- Columbia Circle, a strategically located office park consisting of six
one, two and three story Class A office buildings. The buildings are
approximately five years old and aggregate 330,046 square feet and are
situated on 37 acres. As of April 30, 1998, the buildings are 99%
leased to tenants such as GE, Prudential Insurance, Delmar Publishers,
Kemper Insurance, Novalis and others.
- 8 Airline Drive, a two story Class A office building completed in
1997. The building contains 60,457 square feet and is situated on 6
acres. As of April 30, 1998 the building is 98% leased to Allstate
Insurance, Nextel Communications and others.
- Northeastern Industrial Park, Buildings 8, 21 and 22 are
state-of-the-art, partially refrigerated industrial buildings totaling
396,645 square feet. As of April 30, 1998 the buildings are 100%
leased to AmeriServe, Save-A-Lot and Distribution Unlimited, Inc.
under long term leases.
Prudential Insurance, Moran Foods and Ameriserve Food Distribution each
individually occupies more than 10% of the total net rentable area of the Galesi
Portfolio.
The purchase price of the Galesi Portfolio of approximately $58,000,000
was funded through the assumption of approximately $18,000,000 in debt,
$18,500,000 from a senior secured revolving credit facility and the issuance of
1,362,940 Operating Partnership Units.
Prior to the transaction, the seller of the Properties, the Galesi
Group and its affiliates, was not affiliated with the Company or the
Operating Partnership. The Company based its determination of the purchase
price of the properties on the expected cash flow, physical condition,
location, competitive advantages, existing tenancies and opportunities to
retain and attract additional tenants. The purchase price was determined
through an arm's length negotiation between the Company and the seller.
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The table set forth below shows certain information regarding rental rates and
lease expirations for the properties (assuming that no tenants exercise renewal
or cancellation options and that there are no tenant bankruptcies or other
tenant defaults):
<TABLE>
<CAPTION>
Annualized
Rent Per
Square Annualized Leased
Number of Footage of Percentage of Rent of Square Foot
Year of Lease Expiring Expiring Total Leased Expiring of Expiring
Expiration Leases Leases Square Feet Leases Leases
- ------------- --------- ---------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1998 11 17,033 2.2% $ 162,495 $ 9.54
1999 4 26,684 3.4% 360,672 13.52
2000 5 23,808 3.0% 261,288 10.97
2001 1 1,490 0.2% 14,527 9.75
2002 6 238,419 30.3% 1,136,148 4.77
2003 5 76,136 9.7% 891,154 11.70
2004 1 104,000 13.2% 530,400 5.10
2005 3 200,475 25.5% 2,197,479 10.96
2006 5 24,657 3.1% 278,326 11.29
2007 0 -- 0.0% -- --
Thereafter 1 73,000 9.4% 481,800 6.60
--------- ------- ------ --------- ------
Total/Average 42 785,702 100.0% $6,314,289 $ 8.04
--------- ------- ------ --------- ------
--------- ------- ------ --------- ------
</TABLE>
"Annualized Rent" as shown in the above table, represents the rental rate as of
April 30, 1998 multiplied by twelve.
ITEM 5. OTHER EVENTS
On May 8, 1998, the Registrant announced in a press release attached
hereto as Exhibit 99.1 and incorporated herein by reference the closing of a
three-year $150,000,000 senior secured revoling credit facility with BankBoston,
N.A. and DLJ Capital Funding, Inc.
On May 13, 1998, the Registrant announced in a press released attached
hereto as Exhibit 99.2 and incorporated herein by reference a dividend of $.22
per common share for the first quarter ended March 31, 1998, payable on June 12,
1998 to shareholders of record on May 26, 1998.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(b) Pro Forma Financial Information
It is impracticable to file with this Form 8-K the financial statements
and pro forma financial information required by this Item 7 with regard to the
acquisitions described in Item 2 above. Those financial statements and pro forma
financial information will be filed by amendment to this Form 8-K as soon as
practicable and, in any event, within 60 days after the required filing date for
this Form 8-K.
(c) Exhibits
99.1 Press release dated May 8, 1998
99.2 Press release dated May 13, 1998
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.
AMERICAN REAL ESTATE INVESTMENT
CORPORATION
Date: May 14, 1998 By: /s/ Jeffrey E. Kelter
---------------------------
Jeffrey E. Kelter
President
Date: May 14, 1998 By: /s/ Timothy E. McKenna
----------------------------
Timothy E. McKenna
Treasurer
(Principal Financial and
Accounting Officer)
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Exhibit 99.1
FOR IMMEDIATE RELEASE
American Real Estate Investment Corporation Closes New $150 Million Secured
Credit Facility
PLYMOUTH MEETING, PA, May, 8, 1998. American Real Estate Investment Corporation
(AMEX: REA) announced today the closing of a three-year $150,000,000 senior
secured revolving credit facility with BankBoston, N.A. and DLJ Capital Funding,
Inc. This Credit Facility will be used to fund new acquisitions, capital
improvements, new development projects and for general working capital purposes.
The Credit Facility is recourse to the Company and American Real Estate
Investment, L.P., its Operating Partnership, and will be secured by
cross-collateralized and cross-defaulted first mortgage liens on certain
properties, either currently owned by the Operating Partnership or to be
acquired as the result of future transactions. The interest will accrue on
outstanding loans under the Credit Facility at a variable rate per annum equal
to the sum of a Eurodollar rate plus 1.625% per annum.
"This Credit Facility underscores the commitment of the financial community to
the continued growth and success of the Company. The line will offer us
increased flexibility to take advantage of the myriad of opportunities to
acquire and develop accretive institutional quality commercial assets in the
markets that we have targeted," stated Jeff Kelter, President of American Real
Estate Investment Corporation.
American Real Estate Investment Corporation, with headquarters in Plymouth
Meeting, Pennsylvania and regional offices in Franklin Lakes, New Jersey,
Albany, New York and Allentown, Pennsylvania, is a fully-integrated,
self-administered and self-managed real estate investment trust (REIT) focusing
on office and industrial properties in the Mid-Atlantic and Northeast states.
The Company currently owns 42 properties containing more than 4.9 million square
feet. For more information, contact Jeff Kelter at 610-834-3447 or Email:
[email protected].
This press release may contain statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the intent, belief of current expectations
of the Company, its directors, or its officers with respect to the future
operating performance of the Company and the result and the effect of legal
proceedings. Investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those in the forward looking
statements as a result of various factors. Important factors that could cause
such differences are described in the Company's periodic filings with the
Securities and Exchange Commission, including the Company's Form 10-KSB and
quarterly reports on Form 10-QSB and 10-Q.
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Exhibit 99.2
FOR IMMEDIATE RELEASE
American Real Estate Investment Corporation Announces its Dividend and a 50%
Increase in Funds From Operations Per Share for the Three Month Period Ended
March 31, 1998
PLYMOUTH MEETING, PA, May 13, 1998--American Real Estate Investment
Corporation (AMEX: REA--news) today announced its financial results for the
quarter ended March 31, 1998. For the quarter ended March 31, 1998, the
Company reported Funds From Operations ("FFO") of $2,657,000 or $.27 per
share on a diluted basis, as compared to $337,000 or $.18 per share on a
diluted basis for the same quarter in 1997, representing a 50% increase in
FFO per diluted share over the previous year. The Company's Board of
Directors also declared a dividend of $.22 per common share payable on
June 12, 1998 to shareholders of record on May 26, 1998.
For the first quarter of 1998, net income was $4,893,000 or $.87 per diluted
share, on revenues of $5,741,000, compared with net income of $408,000, or $.22
per diluted share on revenues of approximately $2,200,000, for the first quarter
of 1997. Income before minority interest for the first quarter of 1998 and 1997
was $8,510,000 and $408,000, respectively, and includes gains from sales of
multifamily residential properties of approximately $6.9 million and $403,000,
respectively.
The first quarter dividend of $.22 per common share is unchanged from the
previous dividend paid by the Company in March, 1998 for the fourth quarter of
1997. Consistent with its previous announcements, the Company intends to adjust
the amount of its quarterly dividend annually. Management anticipates that its
policy will be to review its dividend payout at the end of the second quarter,
at which time the Company will adjust the dividend amount to better reflect (i)
the increase in earnings and cash flow expected from recent acquisitions and
(ii) capital needs associated with future growth opportunities.
The first quarter of 1998 represented a period of continued growth for the
Company since its reorganization as an industrial and office REIT effective with
the transactions consummated on December 12, 1997. First quarter and recent
highlights include the following:
First Quarter 1998 Highlights
- The acquisition of 11 warehouse/distribution facilities totaling
approximately 2.1 million square feet in New York and Pennsylvania. The
properties were acquired in four separate transactions for an aggregate
purchase price of approximately $65 million.
- The Company continued to execute its strategy to dispose of multifamily
assets. On January 9, 1998, Americana Lakewood, one of the two remaining
multifamily assets, was sold for approximately $15,000,000, which generated
a gain of $6.9 million.
Recent Acquisition Activity
On April 30, 1998, the Company consummated the acquisition of a ten building
portfolio totaling approximately 790,000 square feet located in suburban Albany,
New York, for a total purchase price of approximately $58 million. The portfolio
was contributed to the Operating Partnership by The Galesi Group, a prominent
real estate owner and investment firm and partners, in exchange for the issuance
of approximately 1,362,940 partnership units and the assumption of related
indebtedness. The portfolio consists of seven Class A office buildings and three
partially refrigerated industrial facilities.
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"We are very pleased with the continued expansion of our portfolio, and its
reflection on our earnings growth. The increase in FFO we have just reported is
most indicative of the success of our acquisition program since the
reorganization of the Company into an office and industrial REIT in December,
1997. We feel confident, based on our acquisition pipeline, that this growth
will continue and accelerate. Further, we believe there exists opportunity for
internal growth as the effects of our disciplined management and marketing
programs take hold," stated Jeff Kelter, President of American Real Estate
Investment Corporation.
American Real Estate Investment Corporation, with headquarters in Plymouth
Meeting, Pennsylvania and regional offices in Franklin Lakes, New Jersey,
Albany, New York and Allentown, Pennsylvania, is a fully-integrated,
self-administered and self-managed real estate investment trust (REIT) focusing
on office and industrial properties in the Mid-Atlantic and Northeast states.
The Company currently owns 42 properties containing more than 4.9 million square
feet. For more information, contact Jeff Kelter at (610) 834-3447 or send email
to [email protected].
This press release may contain statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the intent, belief of current expectations
of the Company, its directors or its officers with respect to the future
operating performance of the Company and the result and effect of legal
proceedings. Investors are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those in the forward looking
statements as a result of various factors. Important factors that could cause
such differences are described in the Company's periodic filings with the
Securities and Exchange Commission, including the Company's Form 10-KSB and
quarterly reports on Form 10-QSB and 10-Q.
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Financial Summary For The Three Months Ended March 31,
1998 And 1997 (In thousands, except for share and per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Operating Data:
Revenue:
Rents and reimbursements $ 5,263 $ 2,163
Reimbursements revenue 168 --
Other income 310 64
------------ ------------
Total revenue 5,741 2,227
------------ ------------
Expenses:
Property expenses 824 776
General and administrative 160 228
Payroll and other compensation 118 163
Interest 1,915 897
Depreciation and amortization 932 287
------------ ------------
Total expenses 3,949 2,351
------------ ------------
Operating income (loss) 1,792 (124)
Equity in (losses) earnings from investment in partnership
and management company (162) 129
------------ ------------
Income before gain on sale of properties and minority 1,630 5
interest
Gain on sale of properties 6,880 403
Minority interest (3,617) --
Net income $ 4,893 $ 408
------------ ------------
------------ ------------
Basic Earnings Per Share $ .90 $.36
------------ ------------
------------ ------------
Weighted average common shares--basic 5,446,278 1,133,772
------------ ------------
------------ ------------
Diluted Earnings Per Share $ .87 $ .22
------------ ------------
------------ ------------
Weighted average common shares--diluted 9,802,235 1,855,263
------------ ------------
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</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
<S> <C> <C>
Real estate investments, net $ 208,788 $ 152,108
Total assets 220,743 180,955
Mortgages payable 118,343 86,501
Total liabilities 122,119 89,663
Minority interests 41,225 39,364
Stockholders' equity 57,399 51,928
</TABLE>
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FFO Summary For The Three Months Ended March 31, 1998 And 1997
(In thousands, except for share and per share data)
(unaudited)
<TABLE>
<CAPTION>
For Three Months Ended
March 31,
-----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Income before minority interest $ 8,510 $ 408
(Less) Plus:
Gains on sales of real estate (6,880) (403)
Equity in (earnings) losses from investments in 162 (129)
partnership and management company
Depreciation and amortization related to real estate 932 287
Other adjustments 53 --
FFO contribution (loss) from equity investments (120) 174
---------- ---------
Funds from Operations (1) $ 2,657 $ 337
---------- ---------
---------- ---------
Weighted average common shares--basic 5,446,278 1,133,772
---------- ---------
---------- ---------
Weighted average common shares--diluted 9,802,235 1,855,263
---------- ---------
---------- ---------
FFO per diluted common share $ 0.27 $ 0.18
---------- ---------
---------- ---------
</TABLE>
(1) The Company calculates Funds From Operations (FFO) in accordance with
the National Association of Real Estate Investment Trusts, Inc.
definition. FFO is equal to net income (loss), (computed in accordance
with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring and sales of property, plus
depreciation and amortization relating to real property, and after
adjustments from unconsolidated partnerships and joint ventures and
other adjustments.
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