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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) August 8, 1997
-----------------------------
Prime Retail, Inc.
------------------
(Exact name of registrant as specified in its charter)
Maryland 0-23616 52-1836258
- ---------------------------------- ---------------- -------------------
(State of other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
- ------------------------------------------ ---------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
--------------
No Change
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(Former name or former address, if changed since last report)
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<PAGE>
PRIME RETAIL, INC.
ITEM 2: Acquisition or Disposition of Assets
As reported on Form 8-K filed with the Securities and Exchange
Commission on February 13, 1997, Prime Retail, Inc. (the "Company") acquired Oak
Creek Factory Outlets, Bend Factory Outlets and The Factory Outlets at Post
Falls (the "Benderson Acquired Properties") for an aggregate purchase price of
$37.3 million. These centers were purchased by the Company from an unrelated
third party. The Company financed the purchase with loan proceeds from a
financial institution and a $4.0 million promissory note issued to the seller.
In accordance with the terms of its joint venture partnership agreement,
the Company intends to purchase the 25% ownership interest of its joint venture
partner in Buckeye Factory Shops Limited Partnership (the "Buckeye Acquisition")
for $23.1 million (including the repayment of $22.6 million of mortgage
indebtedness relating to such property). The Company intends to finance the
transaction, if consummated, with available cash, borrowings under existing
credit facilities, and proceeds from potential financings.
Financial statements of the Benderson Acquired Properties and the
Buckeye Acquisition are included in this Form 8-K.
ITEM 5: Other Events
None
<PAGE>
ITEM 7: Financial Statements and Exhibits
The following financial statements, unaudited pro forma financial
information and exhibits are filed as part of this report:
A. Financial statements of the real estate acquired, prepared pursuant to
Rule 3.14 of Regulation S-X:
PAGE
----
(1)(i) Audited statement of revenue and certain expenses of the
Benderson Acquired Properties
Report of Independent Auditors 6
Statement of Revenue and Certain Expenses for the year
ended December 31, 1996 7
Notes to the Statement of Revenue and Certain Expenses 8
(ii) Audited statement of revenue and certain expenses of Buckeye
Factory Shops Limited Partnership
Report of Independent Auditors 10
Statement of Revenue and Certain Expenses for the year
ended December 31, 1996 11
Notes to the Statement of Revenue and Certain Expenses 12
B. Unaudited pro forma financial information required pursuant
to Article 11 of Regulation S-X:
PAGE
----
(1) Pro Forma Consolidated Balance Sheet-- June 30, 1997 14
Pro Forma Consolidated Statement of Operations--
Year ended December 31, 1996 16
Pro Forma Consolidated Statement of Operations--
Six months ended June 30, 1997 18
The unaudited pro forma consolidated balance sheet as of June
30, 1997 is based on the unaudited historical financial statements of
the Benderson Acquired Properties, the Buckeye Acquisition and the
Company after giving effect to the acquisitions and certain adjustments
as described in the accompanying notes to the unaudited pro forma
financial statements.
<PAGE>
The unaudited pro forma consolidated statement of operations for
the year ended December 31, 1996 is based, in part, on the audited
historical statements of revenue and certain expenses of the Benderson
Acquired Properties and the Buckeye Acquisition and the audited
historical financial statements of the Company after giving effect to
the acquisitions and certain adjustments as described in the
accompanying notes to the unaudited pro forma financial statements.
The unaudited pro forma consolidated statement of operations for
the six months ended June 30, 1996 is based, in part, on the unaudited
historical statements of revenue and certain expenses of the Benderson
Acquired Properties and the Buckeye Acquisition and the unaudited
financial statements of the Company after giving effect to the
acquisitions and certain adjustments as described in the accompanying
notes to the unaudited pro forma financial statements.
The unaudited pro forma financial statements have been prepared
by the Company based upon the statements of revenue and certain
expenses of the Benderson Acquired Properties and the Buckeye
Acquisition (filed with this report under Item 7(a)). These unaudited
pro forma financial statements may not be indicative of the results
that actually would have occurred if the acquisitions had been in
effect on the dates indicated or which may be obtained in the future.
The unaudited pro forma financial statements should be read in
conjunction with the audited statements of revenue and certain expenses
and notes of the Benderson Acquired Properties and the Buckeye
Acquisition, the financial statements of the Company included in its
Annual Report on Form 10-K for the year ended December 31, 1996 and the
unaudited financial statements of the Company on Form 10-Q for the six
months ended June 30, 1997.
C. Exhibits in accordance with the provisions of Item 601 of Regulation
S-K:
Exhibit 23. Consent of Independent Auditors 21
<PAGE>
PRIME RETAIL, INC.
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.
PRIME RETAIL, INC.
(Registrant)
Dated: August 8, 1997
By: /s/ Robert P. Mulreaney
-----------------------
Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
<PAGE>
Report of Independent Auditors
To the Owners of Shoppes of Oak Creek,
Post Falls Factory Outlets and Bend Factory Outlets
We have audited the statement of revenue and certain expenses of the Benderson
Acquired Properties (the "Properties") as described in Note 2 for the year ended
December 31, 1996. This statement of revenue and certain expenses is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this statement of revenue and certain expenses 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 statement of revenue and certain
expenses. An audit also includes assessing the basis of accounting used and the
significant estimates made by management, as well as evaluating the overall
presentation of the statement of revenue and certain expenses. We believe that
our audit of the statement of revenue and certain expenses 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 Properties' revenue and expenses.
In our opinion, the statement of revenue and certain expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 2 of the Benderson Acquired Properties for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Baltimore, Maryland
January 17, 1997
<PAGE>
Benderson Acquired Properties
Statement of Revenue and Certain Expenses
Year ended
December 31,
1996
----------------------
Revenue:
Base rents $4,771,371
Tenant reimbursements 2,159,091
Percentage rents 114,991
Other revenue 66,541
----------------------
Total revenue 7,111,994
Expenses:
Property operating 1,743,253
Real estate taxes 358,449
----------------------
Total expenses 2,101,702
----------------------
Revenue in excess of certain expenses $5,010,292
======================
See accompanying notes.
<PAGE>
Benderson Acquired Properties
Notes to the Statement of Revenue and Certain Expenses
Note 1 Business
The accompanying statement of revenue and certain expenses includes the combined
operations of the following factory outlet center properties (the "Properties")
owned by a party unaffiliated with Prime Retail, Inc.:
Approximate
Gross Leasable
Property Name Location Area (sq. ft)
- --------------------------------- ------------------ ---------------
Oak Creek Factory Outlets Sedona, Arizona 82,000
The Factory Outlets at Post Falls Post Falls, Idaho 179,000
Bend Factory Outlets Bend, Oregon 97,000
--------
358,000
========
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. The statement is not representative of the actual
operations of the Properties for the period presented nor indicative of future
operations as certain expenses, consisting of interest expense, depreciation and
management fees have been excluded.
A summary of unaudited expenses is as follows:
Year ended
December 31,
1996
----------------------
Interest expense $1,523,762
Depreciation and amortization 834,026
Management fees 71,571
----------------------
Total unaudited expenses $2,429,359
======================
Revenue Recognition
Rental revenue is recognized as income in the period earned.
<PAGE>
Benderson Acquired Properties
Notes to the Statement of Revenue and Certain Expenses
Note 2 Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the statement of revenue and certain expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
Note 3 Rentals
The Company has entered into tenant leases with terms from one to ten years. The
leases provide for tenants to share in increases in operating expenses and real
estate taxes in excess of base amounts, as defined.
<PAGE>
Report of Independent Auditors
To the Partners
Buckeye Factory Shops Limited Partnership
We have audited the statement of revenue and certain expenses of Buckeye Factory
Shops Limited Partnership (the "Project") as described in Note 2 for the year
ended December 31, 1996. This statement of revenue and certain expenses is the
responsibility of the Project's management. Our responsibility is to express an
opinion on this statement of revenue and certain expenses 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 statement of revenue and certain
expenses. An audit also includes assessing the basis of accounting used and the
significant estimates made by management, as well as evaluating the overall
presentation of the statement of revenue and certain expenses. We believe that
our audit of the statement of revenue and certain expenses 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 Project's revenue and expenses.
In our opinion, the statement of revenue and certain expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 2 of the Buckeye Factory Shops Limited Partnership for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Baltimore, Maryland
January 30, 1997
<PAGE>
Buckeye Factory Shops Limited Partnership
Statement of Revenue and Certain Expenses
Year ended
December 31,
1996
----------------------
Revenue:
Base rents $176,217
Tenant reimbursements 108,568
Other revenue 1,500
----------------------
Total revenue 286,285
Expenses:
Property operating 121,923
General and administrative 28,527
----------------------
Total expenses 150,450
----------------------
Revenue in excess of certain expenses $135,835
======================
See accompanying notes.
<PAGE>
Buckeye Factory Shops Limited Partnership
Notes to the Statement of Revenue and Certain Expenses
Note 1 Business
The Partnership was formed for the purpose of constructing and managing a retail
factory outlet center in Medina, Ohio (the "Project"). The Project consists of
approximately 204,000 square feet of gross leasable area and was substantially
completed and ready for occupancy on November 1, 1996. The Project was developed
during 1996, and therefore, there were no operating results for the period
January 1, 1996 through October 31, 1996.
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. The statement is not representative of the actual
operations of the Project for the period presented nor indicative of future
operations as certain expenses, consisting of interest expense, depreciation and
management fees have been excluded.
A summary of unaudited expenses is as follows:
Year ended
December 31,
1996
----------------------
Interest expense $ 53,919
Depreciation and amortization 74,139
Management fees 6,867
----------------------
Total unaudited expenses $134,925
======================
Revenue Recognition
Rental revenue is recognized as income in the period earned.
<PAGE>
Buckeye Factory Shops Limited Partnership
Notes to the Statement of Revenue and Certain Expenses
Note 2 Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the statement of revenue and certain expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
Note 3 Rentals
The Company has entered into tenant leases with terms from one to ten years. The
leases provide for tenants to share in increases in operating expenses and real
estate taxes in excess of base amounts, as defined.
<PAGE>
<TABLE>
Pro Forma Consolidated Balance Sheet
Prime Retail, Inc.
June 30, 1997
(Unaudited)
(000's)
<CAPTION>
Buckeye
Prime Factory Pro Forma
Retail, Inc.[A] Shops[B] Adjustments Pro Forma
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investment in rental property, net $ 634,618 $ 23,110 $ 470 [C] $ 658,198
Cash and cash equivalents 985 419 (22,642)[D] (21,800)
(470)[C]
(92)[E]
Restricted cash 47,346 527 47,873
Accounts receivable, net 7,424 389 7,813
Deferred charges, net 18,906 1,550 (640)[F] 19,816
Due from affiliates, net 1,313 (226)[G] 1,087
Investment in partnerships 5,729 (2,748)[H] 2,981
Other assets 1,231 8 1,239
----------------- ---------------- ---------------- ----------------
Total assets $ 717,552 $ 26,003 $ (26,348) $ 717,207
================= ================ ================ ================
Liabilities and Shareholders' Equity
Bonds payable $ 32,900 $ 32,900
Notes payable 501,539 $ 22,642 $ (22,642)[D] 501,539
Accrued interest 3,584 92 (92)[E] 3,584
Real estate taxes payable 4,944 20 4,964
Construction costs payable 1,402 1,402
Due to affiliates, net 226 (226)[G]
Accounts payable and other liabilities 15,114 288 15,402
----------------- ---------------- ---------------- ----------------
Total liabilities 559,483 23,268 (22,960) 559,791
Shareholders' equity:
Senior Preferred Stock 23 23
Convertible Preferred Stock 30 30
Common Stock 158 158
Additional paid-in capital 197,074 (653)[I] 196,421
Distributions in excess of net income (39,216) (39,216)
Partners' capital 2,735 (2,748)[H]
(640)[F]
653 [I]
----------------- ---------------- ---------------- ----------------
Total shareholders' equity 158,069 2,735 (3,388) 157,416
----------------- ---------------- ---------------- ----------------
Total liabilities and shareholders'
equity $ 717,552 $ 26,003 $ (26,348) $ 717,207
================= ================ ================ ================
=================================================================================================================================
</TABLE>
See accompanying notes to pro forma consolidated balance sheet.
<PAGE>
Notes to Pro Forma Consolidated Balance Sheet
Prime Retail, Inc.
June 30, 1997
(Unaudited)
Balance Sheet Adjustments:
[A] Historical consolidated balance sheet of Prime Retail, Inc.
(the "Company"), including the Benderson Acquired
Properties, as of June 30, 1997.
[B] Historical balance sheet of Buckeye Factory Shops as of June
30, 1997.
[C] To adjust cost basis of rental property for the acquisition
of Buckeye Factory Shops.
[D] Reflects the repayment of pre-acquisition notes payable of
Buckeye Factory Shops.
[E] Reflects the repayment of accrued interest related to the
pre-acquisition notes payable of Buckeye Factory Shops.
[F] Reflects the write-off of unamortized deferred financing
costs related to the notes payable of Buckeye Factory Shops
being repaid.
[G] Reflects the elimination of receivables and payables between
the Company and Buckeye Factory Shops.
[H] Reflects the elimination of the Company's investment in
Buckeye Factory Shops.
[I] Reflects the reclassification of partners' capital to
additional paid-in capital for Buckeye Factory Shops.
<PAGE>
<TABLE>
Pro Forma Consolidated Statement of Operations
Prime Retail, Inc.
For the Year Ended December 31, 1996
(Unaudited)
(000's, except per share information)
<CAPTION>
Buckeye Benderson
Prime Factory Acquired Pro Forma
Retail, Inc.[A] Shops[B] Properties[C] Adjustments Pro Forma
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues
Base rents $ 54,710 $ 176 $ 4,771 $ 59,657
Percentage rents 1,987 115 2,102
Tenant reimbursements 25,254 109 2,159 27,522
Income from investment partnerships 1,239 $ (1)[D] 1,238
Interest and other 5,850 1 67 (7)[E] 5,911
----------------- ---------------- ---------------- ---------------- -----------------
Total revenues 89,040 286 7,112 (8) 96,430
Expenses
Property operating 20,421 122 1,743 22,286
Real estate taxes 5,288 358 5,646
Depreciation and amortization 19,256 74 834 (155)[F] 20,009
Corporate general and administrative 4,018 4,018
Interest 24,485 54 1,524 1,240 [G] 27,303
Management fees 7 72 (7)[E]
(72)[H]
Other charges 8,586 28 8,614
----------------- ---------------- ---------------- ---------------- -----------------
Total expenses 82,054 285 4,531 1,006 87,876
----------------- ---------------- ---------------- ---------------- -----------------
Income before minority interests
and extraordinary item 6,986 1 2,581 (1,014) 8,554
Loss allocated to minority interests 2,092 (608)[I] 1,484
----------------- ---------------- ---------------- --------------- -----------------
Income before extraordinary item 9,078 1 2,581 (1,622) 10,038
Extraordinary item - loss on early
extinguishment of debt, net of
minority interests in the amount
of $3,263 (1,017) (1,017)
----------------- ---------------- ---------------- ---------------- -----------------
Net income 8,061 1 2,581 (1,622) 9,021
Income allocated to preferred
shareholders 14,236 14,236
----------------- ---------------- ---------------- ---------------- -----------------
Net loss applicable to common shares $ (6,175) $ 1 $ 2,581 $ (1,622) $ (5,215)
================= ================ ================ ================ =================
Per common share:
Loss before extraordinary item $ (0.63) $ (0.51)
Extraordinary item (0.12) (0.12)
----------------- -----------------
Net loss $ (0.75) $ (0.63)
================= =================
Weighted average common shares
outstanding 8,221 8,221
================= =================
=================================================================================================================================
</TABLE>
See accompanying notes to pro forma consolidated statement of operations.
<PAGE>
Notes to Pro Forma Statement of Operations
Prime Retail, Inc.
For the Year Ended December 31, 1996
(Unaudited)
Statement of Operations Adjustments:
[A] Historical consolidated statement of operations of Prime
Retail, Inc. (the "Company") for the year ended December 31,
1996.
[B] Historical statement of operations of Buckeye Factory Shops
for the year ended December 31, 1996.
[C] Historical statement of operations of the Benderson Acquired
Properties for the year ended December 31, 1996.
[D] Reflects the elimination of the Company's income from
investment partnerships for Buckeye Factory Shops.
[E] Reflects the elimination of the Company's income
attributable to management fees charged to Buckeye Factory
Shops.
[F] To adjust depreciation expense attributable to the
acquisition of Buckeye Factory Shops and the Benderson
Acquired Properties to conform with the Company's
depreciation and amortization policy.
[G] To adjust interest expense for changes resulting from the
issuance of debt to finance the acquisition of the Benderson
Acquired Properties and the repayment of pre-acquisition
notes payable of Buckeye Factory Shops.
[H] Reflects the elimination of the management fees incurred by
the Benderson Acquired Properties.
[I] To adjust loss allocated to minority interests resulting
from pro forma adjustments related to the acquisition of
Buckeye Factory Shops and the Benderson Acquired Properties.
<PAGE>
<TABLE>
Pro Forma Consolidated Statement of Operations
Prime Retail, Inc.
For the Six Months Ended June 30, 1997
(Unaudited)
(000's, except per share information)
<CAPTION>
Buckeye Benderson
Prime Factory Acquired Pro Forma
Retail, Inc.[A] Shops[B] Properties[C] Adjustments Pro Forma
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues
Base rents $ 37,072 $ 1,301 $ 592 $ 38,965
Percentage rents 1,390 57 7 1,454
Tenant reimbursements 17,918 636 211 18,765
Loss from investment partnerships (60) $ 38 [D] (22)
Interest and other 5,055 20 15 (82) [E] 5,008
----------------- ---------------- ---------------- ---------------- ----------------
Total revenues 61,375 2,014 825 (44) 64,170
Expenses
Property operating 13,655 504 181 14,340
Real estate taxes 4,789 204 49 5,042
Depreciation and amortization 12,871 599 104 17 [F] 13,591
Corporate general and administrative 2,619 2,619
Interest 18,872 601 191 (504) [G] 19,160
Management fees 82 (82) [E]
Other charges 1,493 75 3 1,571
----------------- ---------------- ---------------- ---------------- ----------------
Total expenses 54,299 2,065 528 (569) 56,323
----------------- ---------------- ---------------- ---------------- ----------------
Income (loss) before minority interests 7,076 (51) 297 525 7,847
Income allocated to minority interests (5,263) (5,263)
----------------- ---------------- ---------------- ---------------- ----------------
Net income (loss) 1,813 (51) 297 525 2,584
Income allocated to preferred shareholders 6,186 6,186
----------------- ---------------- ---------------- ---------------- ----------------
Net loss applicable to common shares $ (4,373) $ (51) $ 297 $ 525 $ (3,602)
================= ================ ================ ================ ================
Net loss per common share $ (0.29) $ (0.24)
================= ================
Weighted average common shares
outstanding 15,073 15,073
================= ================
=================================================================================================================================
</TABLE>
See accompanying notes to pro forma consolidated statement of operations.
<PAGE>
Notes to Pro Forma Statement of Operations
Prime Retail, Inc.
For the Six Months Ended June 30, 1997
(Unaudited)
Statement of Operations Adjustments:
[A] Historical consolidated statement of operations of Prime
Retail, Inc. (the "Company") for the six months ended June
30, 1997, including operating results of the Benderson
Acquired Properties for period from February 13, 1997
through June 30, 1997.
[B] Historical statement of operations of Buckeye Factory Shops
for the six months ended June 30, 1997.
[C] Historical statement of operations of the Benderson Acquired
Properties for the period from January 1, 1997 through
February 12, 1997.
[D] Reflects the elimination of the Company's loss from
investment partnerships for Buckeye Factory Shops.
[E] Reflects the elimination of the Company's income
attributable to management fees charged to Buckeye Factory
Shops.
[F] To adjust depreciation expense attributable to the
acquisition of Buckeye Factory Shops and the Benderson
Acquired Properties to conform with the Company's
depreciation and amortization policy.
[G] To adjust interest expense for changes resulting from the
issuance of debt to finance the acquisition of the Benderson
Acquired Properties and the repayment of pre-acquisition
notes payable of Buckeye Factory Shops.
<PAGE>
EXHIBIT INDEX
Exhibit
-------
Consent of Independent Auditors 23
<PAGE>
EXHIBIT 23
----------
Consent of Independent Auditors
We consent to the use of our reports dated January 17, 1997 and January 30,
1997, with respect to the statements of revenue and certain expenses of the
Benderson Acquired Properties and Buckeye Factory Shops Limited
Partnership, respectively, for the year ended December 31, 1996, in the
Current Report on Form 8-K of Prime Retail, Inc. dated August 8, 1997.
Ernst & Young LLP
Baltimore, Maryland
August 8, 1997
