Securities Exchange Act of 1934 -- Form 8-K/A
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report :
April 14, 1998
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CBL & ASSOCIATES PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12494 62-1545718
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421
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(Address of principal executive offices)
Registrant's telephone number, including area code:
(423) 855-0001
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CBL & ASSOCIATES PROPERTIES, INC.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF BURNSVILLE CENTER, BURNSVILLE, MINNESOTA
On January 30, 1998 Burnsville Minnesota, LLC a Minnesota Limited Liability
Corporation (the "Burnsville LLC"), a majority-owned subsidiary of CBL &
Associates Properties, Inc. (The "Registrant") acquired Burnsville Center, a
super regional shopping mall located in Burnsville (Minneapolis), Minnesota,
containing approximately 1,082,529 square feet of total gross leasable area
("GLA") including mall store GLA of 421,306 square feet. The property was
acquired from Corporate Property Investors ("CPI") pursuant to a Purchase and
Sale Agreement between Burnsville LLC and CPI (the "Purchase Agreement").
The assets acquired included, among other things, real property, the
buildings, improvements, and fixtures located thereon, certain lease
interests, personal property and rights related thereto.
The aggregate purchase price, including closing costs, was approximately $81
million and was determined in good faith, arms length negotiations between
Registrant and CPI, an unrelated third party. In negotiating the purchase
price the Registrant considered, among other facts, the mall's historical
and projected cash flow, the nature and term of existing leases, the current
operating costs, the physical condition of the property, and the terms and
conditions of available financing. There were no independent appraisals
obtained by the Registrant. The purchase price consisted of $81 million
in cash. The cash consideration was paid from proceeds from the Registrant's
lines of credit and proceeds from a promissory note in the amount of $60.8
million which Burnsville LLC placed with U.S. Bank National Association. The
Registrant intends to continue operating the mall as currently operated and
is leasing space therein to national and local retailers.
The description contained herein of the transaction described above does not
purport to be complete and is qualified in its entirety by reference to the
Purchase and Sale Agreement, which is filed as an exhibit to this document.
2
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ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Public Accountants F-1
Statement of revenues and certain expenses
for the year ended December 31, 1997 F-2
Notes to Financial Statements F-3
B) PRO FORMA FINANCIAL INFORMATION OF REGISTRANT
Pro forma consolidated statement of
operations for the year ended
December 31, 1997 F-4
Pro forma consolidated balance sheet as of
December 31, 1997 F-6
3
<PAGE>
A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Auditors
Board of Trustees
Corporate Property Investors
We have audited the accompanying statement of revenue and certain expenses
of Burnsville Center (the "Property"), as described in Note 2, for the year
ended December 31, 1997. This financial statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenue and
certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities
and Exchange Commission as described in Note 2 and is not intended to be a
complete presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenue and certain expenses of Burnsville
Center, as described in Note 2, for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
March 3, 1998
F-1
<PAGE>
BURNSVILLE CENTER
STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
(In Thousands)
Year Ended
December 31,
1997
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Revenues:
Minimum rent $ 7,544
Overage rent 569
Tenant reimbursements 6,646
Other Income 253
------
Total revenues 15,012
Certain Expenses:
Property operating 3,562
Real estate taxes 4,339
------
Revenues in excess of certain expenses $ 7,111
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The accompanying notes are an integral part of these statements.
F-2
<PAGE>
BURNSVILLE CENTER
NOTES TO STATEMENT OF REVENUE
AND CERTAIN EXPENSES
NOTE 1: BUSINESS
The accompanying statement of revenue and certain expenses relates to the
operations of Burnsville Center (the "Property"), a 1,082,529 square foot,
multi-tenanted regional shopping center located in Burnsville, Minnesota.
The Property was acquired by Burnsville LLC on January 30, 1998.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying statement of revenue and certain
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission ("SEC") for inclusion
in a filing with the SEC to be made by CBL & Associates Properties, Inc.
Accordingly, the statement excludes certain historical expenses which may
not be comparable with expenses to be incurred in connection with the
proposed future operations of the Property. Expenses excluded consist of
depreciation of real estate, amortization of tenant related deferred charges
and allocation of leasing and certain administrative expenses incurred by
CPI.
Revenue Recognition: Minimum rental income is recognized on a straight-line
basis over the term of the tenants' leases. Percentage rent and recoveries
from tenants are recognized as income in the period earned. Rental income
includes ($136,128) resulting from the excess of minimum rent due under the
leases during the year ended December 31, 1997 over rent recognized on a
straight-line basis.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
NOTES 3: MANAGEMENT AND LEASING FEES
The Property was managed and leased by its owner, Corporate Property
Investors, during 1997, therefore, no management and leasing fees have been
included in property expenses.
NOTE 4: PROPERTY OPERATING EXPENSES
Property operating expenses for the year ended December 31, 1997 include
approximately $1,151,461 for utilities, $1,176,495 for repairs and
maintenance, $126,770 for insurance, $744,193 for payroll, and $363,421 in
general and administrative expenses.
F-3
<PAGE>
BURNSVILLE CENTER
NOTES TO STATEMENT OF REVENUE
AND CERTAIN EXPENSES
NOTE 5: LEASES
The Property is leased to retail tenants under operating leases periods
generally range from 5 to 15 years and contain various renewal options.
Leases generally provide for minimum rentals plus percentage rentals based
on the tenants' sales volume, and also require tenants to pay a portion of
real estate taxes and other property operating expenses. At
December 31, 1997, future minimum rentals (excluding rentals applicable to
renewal option years) to be received under the above-mentioned leases are:
Years ending December 31
Amount
1998 $ 6,680,756
1999 6,188,857
2000 5,281,575
2001 4,504,030
2002 4,221,519
Thereafter 13,194,832
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Total $ 40,071,569
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F-3
<PAGE>
B) PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations are presented
as if the acquisition of Burnsville Center had taken place as of the
beginning of the year 1997. In management's opinion, all adjustments
necessary to present fairly the effects of the acquisition have been made.
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of CBL
& Associates Properties, Inc. (the "Company") would have been assuming the
Company had acquired Burnsville Center as of the beginning of each period
presented, nor do they purport to represent the results of operations for
future periods.
<TABLE>
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited And Amounts In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
CBL Burnsville Pro Forma Pro Forma
Historical Center Adjustments Consolidated
----------- ---------- ----------- ------------
REVENUES:
Rentals:
Minimum $115,640 $ 7,544 $ - $ 123,184
Percentage 3,660 569 - 4,229
Other 1,949 253 - 2,202
Tenant reimbursements 51,302 6,646 - 57,948
Management and leasing fees 2,378 - - 2,378
Interest and other 2,675 - - 2,675
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Total revenues 177,604 15,012 - 192,616
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EXPENSES:
Property operating 30,585 3,562 - 34,147
Depreciation and amortization 32,308 - 1,715(A) 34,023
Real estate taxes 14,859 4,339 - 19,198
Maintenance and repairs 10,239 - - 10,239
General and administrative 9,049 - - 9,049
Interest 37,830 - 5,287(B) 43,117
Other 330 - - 330
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Total expenses 135,200 7,901 7,002 150,103
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Income from operations 42,404 7,111 (7,002) 42,513
F-4
<PAGE>
Gain on sales of real estate
assets 6,040 - - 6,040
Equity in earnings of
unconsolidated affiliates 1,916 - - 1,916
Minority interest in earnings:
Operating partnership (13,819) - (31)(C) (13,850)
Shopping center properties (508) - - (508)
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Income before extra-
ordinary item 36,033 7,111 (7,033) 36,111
Extraordinary loss on
extinguishment of debt (1,092) - - (1,092)
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Net income 34,941 $7,111 $ (7,033) 35,019
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BASIC EARNINGS PER COMMON SHARE DATA:
Income before extraordinary
item $ 1.51 $ 1.51
Extraordinary loss on
extinguishment of debt (0.05) (0.05)
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Net income $ 1.46 $ 1.47
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Weighted average shares
outstanding 23,895 23,895
======= ======
</TABLE>
(A) Reflects depreciation expense on the Burnsville Center
acquisition computed on the straight-line method over the
estimated useful life of 40 years.
(B) Reflects interest expense associated with the $60,750
mortgage note payable and the $20,190 of borrowings
under the Company's line of credit agreement, at LIBOR
plus .9% (6.5071%) and LIBOR plus 1.0% (6.6071%),
respectively, in connection with the acquisition of Burnsville
Center.
(C) Reflects the minority interests' share of the income from
operations of Burnsville Center and the pro forma
adjustments.
F-5
<PAGE>
PROFORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet is presented as
if the acquisition of Burnsville Center had occurred as of
December 31, 1997.
The unaudited pro forma consolidated balance sheet is not
necessarily indicative of what the actual financial position would
have been at December 31, 1997, nor does it purport to represent
the future financial position of the Company.
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Unaudited And Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<C> <C> <C>
Pro Forma
CBL Acquisition Company
Historical Adjustments Pro Forma
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ASSETS: (A)
Real Estate Assets:
Land $ 164,895 $ 12,804 $ 177,699
Buildings and improvements 1,019,283 68,415 1,087,698
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1,184,178 81,219 1,265,397
Less: Accumulated depreciation (145,641) - (145,641)
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1,038,537 81,219 1,119,756
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Developments in progress 103,787 - 103,787
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Net investment in real estate assets 1,142,324 81,219 1,223,543
Cash and cash equivalents 3,124 - 3,124
Cash in escrow 66,108 - 66,108
Receivables:
Tenant, net of allowance for doubtful
accounts of $1,300 12,891 13 12,904
Other 1,121 - 1,121
Mortgage notes receivable 11,678 - 11,678
Other assets 7,779 183 7,962
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1,245,025 81,415 1,326,440
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</TABLE>
F-6
<PAGE>
<TABLE>
<C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgage and other notes payable 741,413 80,940 822,353
Accounts payable and accrued liabilities 41,978 475 42,453
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Total liabilities 783,391 81,415 864,806
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Distributions and losses in excess of
investment in unconsolidated affiliates 6,884 - 6,884
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Minority interest 123,897 - 123,897
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Commitments and contingencies - - -
Shareholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized, none issued - - -
Common stock, $0.01 par value,
95,000,000 shares authorized, 24,063,963
shares issued and outstanding at
September 30, 1997 241 - 241
Excess stock, $0.01 par value,
100,000,000 shares authorized, none
issued - - -
Additional paid-in capital 359,541 - 359,541
Accumulated deficit (28,433) - (28,433)
Deferred compensation (496) - (496)
---------- ----------- ----------
Total shareholders' equity 330,853 - 330,853
---------- ----------- ----------
$1,245,025 $81,415 $1,326,440
========== =========== ==========
</TABLE>
(A) Reflects the acquisition of Burnsville Center through the
issuance of a $60,750 mortgage note payable, borrowings of
$20,190 under the Company's line of credit agreement, and
the assumption of certain assets and liabilities.
F-7
<PAGE>
C) EXHIBITS
2.1 Purchase and Sale Agreement dated December 31, 1997 between
Corporate Property Investors A Massachusetts Business Trust
(seller) and Development Options, Inc., a Wyoming corporation
(Purchaser) (a)
2.2 Loan agreement between Burnsville Minnesota LLC and U.S. Bank
National Association dated January 30, 1999 in the amount of
$60,750,000. (b)
2.3 Consent of Ernst & Young LLP
(a) Incorporated by reference to the Company's 8-K on the acquisition
of Burnsville Center which was filed on February 13, 1998.
(b) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
<PAGE>
SIGNATURE
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.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
-----------------------------
John N. Foy
Executive Vice President,
Chief Financial Officer and
Secretary
(Authorized Officer of the
Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: April 14, 1998
<PAGE>
EXHIBITS INDEX
Exhibit:
2.1 Purchase and Sale Agreement dated December 31, 1997 between
Corporate Property Investors a Massachusetts Business Trust
(seller) and Development Options, Inc., a Wyoming corporation
(Purchaser) (a)
2.2 Loan agreement between Burnsville Minnesota LLC and U.S. Bank
National Association dated January 30, 1999 in the amount of
$60,750,000. (b)
2.3 Consent of Ernst & Young LLP
(a) Incorporated by reference to the Company's 8-K on the acquisition
of Burnsville Center which was filed on February 13, 1998.
(b) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
EXHIBIT 2.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-73376) pertaining to the Stock Incentive Plan of CBL &
Associates Properties, Inc. of our report dated March 3, 1998, with respect
to the statement of revenue and certain expenses of Burnsville Center
included in this Form 8-K/A for the year ended December 31, 1997.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-47041) of CBL & Associates Properties, Inc.
and in the related Prospectus of our report dated March 3, 1998, with
respect to the statement of revenue and certain expenses of Burnsville
Center included in this For 8-K/A for the year ended December 31, 1997.
Ernst & Young LLP
New York, New York
April 13, 1998
