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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): March 27, 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 March 27, 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 59%, consummated the following
acquisitions:
I. The GATX Properties
The Company acquired a five building portfolio of warehouse/distribution
facilities in Liverpool, New York, containing an aggregate of 655,500 square
feet constructed on 28.0 acres. The buildings are 100% net leased to GATX
Logistics, Inc. under four leases expiring in 2001. The portfolio includes:
- 4472 Steelway Boulevard Section A-F, Liverpool, NY: constructed in
1977, the facility contains 372,500 square feet, including a 50,000
square foot cooler.
- - 4472 Steelway Boulevard Section G, Liverpool, NY: constructed in 1978,
the facility contains 64,000 square feet.
- - 4472 Steelway Boulevard Section H, Liverpool, NY: constructed in 1978,
the facility contains 96,000 square feet.
- - 4580 Steelway Boulevard South, Liverpool, NY: consisting of 2 buildings
constructed in 1972, the facility contains 123,000 square feet.
Upon the expiration of these leases in 2001, annualized rent (based upon
the rental rate in the month prior to expiration multiplied by twelve) will be
$1,769,700 and $2.70 on a per leased square foot basis.
The purchase price of the GATX Properties of approximately $13,070,000,
including closing costs, was funded through a $8,430,000 mortgage note and
cash payments of approximately $4,640,000. The mortgage note matures July 1,
1998 and requires monthly interest only payments at a rate equal to LIBOR
plus 200 basis points. It is the Company's intent to fund the maturity of
this mortgage note by the utilization of a $100,000,000 senior secured
revolving credit facility (the "Credit Facility"). The Company is in the
process of concluding final negotiations with a lender group, including DLJ
Capital Funding, Inc. and BankBoston, N.A., to enter into a three-year
$100,000,000 Credit Facility. This Credit Facility will be used to fund new
acquisitions, capital improvements, new development projects and for general
working capital purposes. The Credit Facility will be recourse to the Company
and the 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 anum equal to the sum of a Eurodollar rate
plus 1.6% per anum. The availability of loans under the Credit
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Facility will be limited to 65% of the aggregate purchase price or appraised
value of the respective properties securing the Credit Facility and will be
subject to certain stated debt service coverage ratios. The Credit Facility will
be subject to optional prepayments at any time and mandatory prepayments upon
the occurrence of certain conditions, and will contain financial covenants which
are standard for these types of revolving credit facilities. The Credit Facility
is subject to final negotiation of its terms, and therefore no assurance can be
given that this arrangement will be ultimately consummated, or if consummated,
that it will be based upon the terms described above.
The seller of the GATX Properties, TriNet Essentials Facilities X, Inc.,
is not affiliated with the Company or the Operating Partnership. The Company
based its determination of the purchase price of these 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.
II. The Double M Development Properties
The Company acquired a five building 468,309 square foot portfolio of
regional warehouse/distribution facilities in Camp Hill and Middletown, PA. The
portfolio is 88.3% occupied as of March 31, 1998 and includes:
- - Airport Corporate Center, 1011 AIP Drive, Middletown, PA: a 152,908
square foot warehouse/distribution facility constructed in 1991. The
building is 80% net leased to Bayard Sales (60%) and, DAS Distributors
(20%) with leases expiring in 2002 and 2000, respectively.
- - Airport Corporate Center, 1001 AIP Drive, Middletown, PA: a 132,588
square foot warehouse/distribution facility constructed in 1991. The
building is 100% net leased to FDA Packaging (45%), T.P.D.C., Inc.
(31%) and Reese Products (24%) with leases expiring in 2002, 2001, and
2001, respectively.
- - 2404 Gettysburg Road, Camp Hill, PA: a 124,902 square foot
warehouse/distribution facility on 10.8 acres, originally constructed
in 1993. The building is 100% leased to Ezon, Inc. (58%) and Reckitt &
Colman, Inc. (42%) with leases expiring in 2001 and 1999, respectively.
- - 2410 Gettysburg Road, Camp Hill, PA: a 33,600 square foot
warehouse/distribution facility on 3.2 acres, originally constructed in
1952 and renovated in 1993. The building is 100% leased to Purina
Mills, Inc. through 2001.
- - 2400 Gettysburg Road, Camp Hill, PA: a 24,311 square foot
warehouse/distribution facility on 1.5 acres, originally constructed in
1952 and renovated in 1993. The building was vacated in January 1998.
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The purchase price of the Double M Development Properties was approximately
$14,500,000, including closing costs, which was funded through a $9,355,000
mortgage note and cash payments of approximately $5,145,000. The mortgage note
matures July 1, 1998 and requires monthly interest only payments at a rate equal
to LIBOR plus 200 basis points. It is the Company's intent to fund the maturity
of this mortgage note by the utilization of the $100,000,000 Credit Facility.
The seller of the Double M Properties, Double M Development Company, is
not affiliated with the Company or the Operating Partnership. The Company
based its determination of the purchase price of these 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.
The table set forth below shows certain information regarding rental rates
and lease expirations for the Double M Development Properties (assuming that no
tenants exercise renewal or cancellation options and that there are no tenant
bankruptcies or other tenant defaults):
<TABLE>
<CAPTION>
Square Percentage Annualized Annualized Rent
Year of Footage of of Rent of Per Leased
Lease Number of Expiring Total leased Expiring Square Foot of
Expiration Expiring leases Leases Square Feet Leases Expiring Leases
- ---------- --------------- ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
1998 1 52,000 12.7% $ 189,800 $ 3.65
1999 0 -- -- -- --
2000 1 30,492 7.4 112,820 3.70
2001 4 177,326 43.1 656,320 3.70
2002 2 151,440 36.8 541,840 3.58
2003 0 -- -- -- --
2004 0 -- -- -- --
2005 0 -- -- -- --
2006 0 -- -- -- --
2007 0 -- -- -- --
Thereafter 0 -- -- -- --
- ------- ----- ---------- --------
Total/Weighted Average 8 411,258 100.0% $1,500,780 $ 3.65
- ------- ----- ---------- --------
- ------- ----- ---------- --------
</TABLE>
"Annualized Rent" as shown in the above table, represents the rental rate in
the month prior to expiration of the respective leases multiplied by twelve.
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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.
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: April 9, 1998 By /s/ Jeffrey E. Kelter
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Jeffrey E. Kelter
President
Date: April 9, 1998 /s/ Timothy E. McKenna
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Timothy E. McKenna
Treasurer (Chief Accounting and
Financial Officer)
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