UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-70654
AMERICAN ASSET ADVISERS TRUST, INC.
MARYLAND CORPORATION IRS IDENTIFICATION NO.
76-0410050
8 GREENWAY PLAZA, SUITE 824 HOUSTON, TX 77046
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. X Yes No
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H (1) (a) AND (b) OF FORM 10-Q AND IS, THEREFORE,
FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
CASH & CASH EQUIVALENTS $ 2,960,403 $ 1,564,961
ACCOUNTS RECEIVABLE 107,483 0
PROPERTY:
Escrow deposits 100,000 0
Land 2,152,103 2,152,103
Buildings 4,436,074 4,436,074
6,688,177 6,588,177
Accumulated depreciation (109,958) (81,512)
TOTAL PROPERTY 6,578,219 6,506,665
NET INVESTMENT IN DIRECT FINANCING LEASE 582,024 582,753
OTHER ASSETS:
Acquisition costs 151,767 77,761
Accrued rental income 35,147 23,845
Organization costs, net of
accumulated amortization of
$114,577 and $99,130,
respectively 290,530 214,638
TOTAL OTHER ASSETS 477,444 316,244
TOTAL ASSETS 10,705,573 8,970,623
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable 51,386 67,481
Compensation payable 150,000 150,000
Security deposit 15,050 15,050
TOTAL LIABILITIES 216,436 232,531
MINORITY INTEREST 1,591,232 1,596,169
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 25,000,000
shares authorized, 1,028,253 and
827,876 shares issued and
outstanding, respectively 10,283 8,279
Additional paid-in capital 9,237,634 7,438,368
Accumulated distributions
in excess of earnings (350,012) (304,724)
TOTAL SHAREHOLDERS' EQUITY 8,897,905 7,141,923
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,705,573 $ 8,970,623
See Notes to Consolidated Financial Statements.
AMERICAN ASSET ADVISERS TRUST, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1996 1995
REVENUES
Rental income from operating leases $ 181,331 $ 77,888
Earned income from direct financing leases 13,938 14,022
Interest income 32,303 29,572
TOTAL REVENUES 227,572 121,482
EXPENSES
Administrative 8,544 0
Amortization 15,447 15,129
Depreciation 28,446 12,334
Directors' fees 4,500 6,000
Filing fees 250 250
Legal & professional fees 10,912 8,954
Printing 2,322 1,176
Travel 885 467
Other 1,489 1,168
TOTAL EXPENSES 72,795 45,478
INCOME BEFORE MINORITY INTEREST IN
NET INCOME OF CONSOLIDATED JOINT VENTURE 154,777 76,004
MINORITY INTEREST IN NET INCOME OF
CONSOLIDATED JOINT VENTURE (37,341) (15,953)
NET INCOME $ 117,436 $ 60,051
NET INCOME PER SHARE $ 0.12 $ 0.11
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 976,309 558,271
See Notes to Consolidated Financial Statements.
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<S> <C> <C> <C>
<C>
Accumulated
Additional
Distributions
Common Paid in in Excess
of
Stock Capital Earnings
Total
Balance at December 31, 1995 $ 8,279 $ 7,438,368 $ (304,724)
$ 7,141,923
Issuance of common stock 2,004 2,001,764
2,003,768
Issuance costs (202,498)
(202,498)
Distributions (162,724)
(162,724)
Net income 117,436
117,436
Balance at March 31, 1996 $ 10,283 $ 9,237,634 $ (350,012)
$ 8,897,905
</TABLE>
See Notes to Consolidated Financial Statements.
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 117,436 $ 60,051
Adjustments to reconcile net income
to net cash flows from operating activities:
Amortization 15,447 15,129
Depreciation 28,446 12,334
Increase in accounts receivable (107,483) (5,000)
Increase (decrease) in accounts payable (16,095) 3,155
Cash receipts from direct financing lease
in excess of income recognized 729 645
Increase in escrow deposits (100,000) (75,000)
Increase in accrued rental income (11,302) 0
Increase in organization costs (91,339) (15,530)
Increase in minority interest 37,341 15,953
NET CASH FLOWS FROM OPERATING ACTIVITIES (126,820) 11,737
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate:
Accounted for under the operating method 0 (1,064)
Acquisition costs (74,006) (122,419)
NET CASH FLOWS FROM INVESTING ACTIVITIES (74,006) (123,483)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock, net of
issuance costs 1,801,270 838,074
Increase in short-term notes receivable 0 (506,363)
Distributions paid to shareholders (162,724) (84,500)
Distributions to minority interest partners (42,278) (19,252)
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,596,268 227,959
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,395,442 116,213
CASH and CASH EQUIVALENTS at beginning
of period 1,564,961 1,285,587
CASH and CASH EQUIVALENTS at end of
period $2,960,403 $1,401,800
See Notes to Consolidated Financial Statements.
AMERICAN ASSET ADVISERS TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Asset Advisers Trust, Inc. ("the Company") was incorporated on
August 17, 1993 as a Maryland corporation. The initial issuance of 20,001
shares of stock for $200,010 was to American Asset Advisers Realty
Corporation. Commencing March 17, 1994, the Company offered up to
2,000,000 additional shares of common stock together with 1,000,000
warrants. The warrants are exercisable at $9 per share between April 1997
and April 1998. The offering period terminated on March 15, 1996 with
subscriptions having been received for 1,028,253 shares.
The Company was formed with the intention to qualify and to operate as a
real estate investment trust under federal tax laws. The Company will
acquire commercial and industrial properties using invested and borrowed
funds. The selection, acquisition and supervision of the operation of
properties is managed by American Asset Advisers Realty Corporation,
("AAA"), a related party.
The consolidated financial statements include the accounts of American
Asset Advisers Trust, Inc. and its majority interest in two joint
ventures. The financial records of the Company are maintained on the
accrual basis of accounting whereby revenues are recognized when earned
and expenses are reflected when incurred. Rental income is recorded
ratably over the life of the lease.
For purposes of the statement of cash flows the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents. There has been no cash paid for income
taxes or interest during 1996 or 1995.
Real estate is leased to others on a net lease basis whereby all operating
expenses related to the properties including property taxes, insurance and
common area maintenance are the responsibility of the tenant. The leases
are accounted for under the operating method or the direct financing
method.
Under the operating method, the properties are recorded at cost. Rental
income is recognized ratably over the life of the lease and depreciation is
charged as incurred.
Under the direct financing method, properties are recorded at their net
investment. Unearned income is deferred and amortized to income over the
life of the lease so as to produce a constant periodic rate of return.
Buildings are depreciated using the straight-line method over an estimated
useful life of 39 years.
Organization costs incurred in the formation of the Company are amortized
on a straight-line basis over five years.
Syndication costs incurred in the raising of capital through the sale of
common stock is treated as a reduction of stockholders' equity.
The Company is qualified as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, and is, therefore, not subject to
Federal income taxes provided it meets all conditions specified by the
Internal Revenue Code for retaining its REIT status, including the
requirement that at least 95% of its real estate investment trust taxable
income is distributed by March 15 of the following year.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
disclosures required by generally accepted accounting principles. The
financial statements reflect all normal and recurring adjustments which
are, in the opinion of management, necessary to present a fair statement
of results for the three month periods ended March 31, 1996 and March 31,
1995.
The financial statements of American Asset Advisers Trust, Inc. contained
herein should be read in conjunction with the financial statements included
in the Partnership's annual report on Form 10-K for the year ended December
31, 1995.
2. RELATED PARTY TRANSACTIONS
20,001 shares of the Company's stock are owned by American Asset Advisers
Realty Corporation ("AAA"). The common stock of AAA is wholly owned by H.
Kerr Taylor, President and Director of the Company. In addition, the
Company has entered into an Omnibus Services Agreement with AAA whereby AAA
provides acquisition, leasing, administrative and management services for
the Company. For the three months ended March 31, 1996, $8,544 was paid to
AAA for administrative services. No fees were paid to AAA during the three
months ended March 31, 1995 for administrative services.
Certain costs have been incurred by AAA in connection with the organization
and syndication of the Company. Reimbursement of these costs become
obligations of the Company in accordance with the terms of the offering.
$51,541 of costs were incurred by AAA during the first three months of 1996
in connection with the issuance and marketing of the Company's stock. These
costs are reflected as syndication costs. No reimbursements were paid
during the first three months of 1995 for syndication costs.
Acquisition fees, including real estate commissions, finders fees,
consulting fees and any other non-recurring fees incurred in connection
with locating, evaluating and selecting properties and structuring and
negotiating the acquisition of properties are included in the basis of the
properties. $74,006 of acquisition fees were incurred and paid to AAA for
the three months ended March 31, 1996. $122,419 of acquisition fees were
incurred and paid to AAA for the three months ended March 31, 1995.
On August 22, 1995, the Board of Directors approved a special compensation
payment plan for H. Kerr Taylor in the amount of $150,000 for services
provided from August 1993 through August 1995. In connection therewith,
the Company executed a demand note payable at the earlier of July 15, 1996
or the receipt of subscriptions of $10,000,000 from the Company's stock
offering. The note shall be payable without any interest in cash or stock
depending on the availability of cash for such payment. No compensation
arrangements were considered by the Board prior to this time because the
Company had not raised sufficient funds through its stock offering, as
determined by the judgment of the Board, considered necessary for any
compensation to be granted. The compensation had not been accrued prior to
August 22, 1995 because its payment was uncertain and the level of
compensation had not been determined until the August 22, 1995 Board
meeting. As of the termination of the initial public offering, the Company
had sold in excess of $10,000,000. Although Mr. Taylor can demand payment
on the note, such demand has not been made. The decision regarding the
nature of the payment, whether in stock or cash, will be made by the Board
of Directors at the time Taylor demands payment.
No decisions as yet have been made with respect to any additional
compensation for any period after August 1995. The Board of Directors has
commissioned an external study with respect to the amount and type of
compensation which could be paid in the future to officers and/or
directors, as well as the contingencies and performance standards on which
compensation will be determined. Accordingly, the financial statements do
not include any accruals for compensation subsequent to August 1995.
On April 5, 1996, the Company entered into a joint venture with AAA Net Realty
Fund XI, Ltd. and AAA Net Realty Fund X, Ltd., affiliated partnerships, for the
purchase of a property. The Company's interest in the joint venture is 51.9%.
This property is now under construction and there will be no income produced
until construction is completed and the joint venture purchases the property.
On September 12, 1995, the Company entered into a joint venture agreement with
AAA Net Realty Fund XI, Ltd. for the purchase of a property. The Company's
interest in the joint venture is 51%.
3. MAJOR TENANTS
The following schedule summarizes total rental income by lessee for the
three months ended March 31, 1996 and 1995:
1996 1995
Tandy Corporation $27,225 $27,225
America's Favorite Chicken Co. $23,060 $22,054
Blockbuster Music Retail, Inc. $94,575 $42,631
One Care Health Industries, Inc. $50,409 $0
4. EARNINGS PER SHARE
The number of shares used in earnings per share calculations for the three
month periods ended March 31, 1996 and March 31, 1995 are based on the
weighted average number of shares of common stock outstanding and, if
dilutive, common stock equivalents (stock warrants) of the Company using
the modified treasury stock method.
5. SUBSEQUENT EVENT
The Company has recently filed a registration statement with the Securities
and Exchange Commission for the sale of additional securities. Such
offering has not commenced.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
American Asset Advisers Trust, Inc. ("the Company") was organized on August
17, 1993 to acquire, either directly or through joint venture
arrangements, undeveloped, newly constructed and existing net-lease real
estate that is located primarily on corner or out-parcel locations in
strong commercial corridors, to lease to tenants having a minimum net worth
of $40 million on a net-lease basis, to hold the properties with the
expectation of equity appreciation producing a steadily rising income
stream for its shareholders.
Liquidity and Capital Resources
The Company was organized August 17, 1993 with the intention to qualify and
to operate as a real estate investment trust under federal tax laws.
Commencing March 17, 1994, the Company offered up to 2,000,000 additional
shares of common stock together with 1,000,000 warrants. The offering
period terminated on March 15, 1996 with subscriptions having been received
for 1,028,253 shares.
On August 22, 1995, the Board of Directors approved a special compensation
payment for Mr. Taylor in the amount of $150,000. Taylor has received no
other compensation from the Company for serving as its President. In
connection with the special compensation payment, the Company executed a
demand note payable at the earlier of July 15, 1996 or the receipt of
$10,000,000 from the Company's stock offering. The note shall be payable
in cash or stock depending on the availability of cash for such payment. No
compensation arrangements were considered by the Directors prior to August
22, 1995, because in their judgment, the Company had not raised sufficient
funds to award such compensation. The compensation had not been accrued
prior to August 22, 1995 because its payment was uncertain and the level of
compensation had not been determined until the August 1995 meeting of the
Board of Directors. As of the termination of the initial public offering,
the Company had sold in excess of $10,000,000. Although Mr. Taylor can
demand payment on the note, such demand has not been made. The decision
regarding the nature of the payment, whether in stock or cash, will be made
by the Board of Directors at the time Taylor demands payment. Should the
note be paid in cash, such payment would reduce the funds from operations
available for distribution and, therefore, would decrease distributions to
shareholders.
On January 19, 1996, the Company entered into an agreement with Tucson
Oracle Limited Partnership for the purchase of a property to be constructed
in Tucson, Arizona. The property will be acquired subject to a lease with
Just For Feet, Inc. On April 5, 1996, the Company entered into a joint
venture with two affiliated partnerships for the purpose of acquiring this
property. The Company's interest in the joint venture is 51.9% and the
Company's share of the acquisition costs for the property will approximate
$1,714,697 plus $84,886 in acquisition fees to affiliates. The property is
under construction with an estimated completion date of September 1996.
Results of Operations
Revenues for the three months ended March 31, 1996 were comprised of
$195,269 from the Company's real estate operations and $32,303 from
interest income. This represented an increase of $103,359 in rental
income over the three months ended March 31, 1995 and an increase of $2,731
in interest income. The Company's rental income was generated from five
properties during the first quarter of 1996 compared to three properties
during the first quarter of 1995. The increase in activity also resulted
in a corresponding increase in expenses from $45,478 during the first
quarter of 1995 to $72,795 during the first quarter of 1996. The Company
recorded net income of $117,436 for the three months ended March 31, 1996
as compared to $60,051 for the three months ended March 31, 1995.
Revenues totaled $121,482 for the Company for the first quarter of 1995
which was comprised of $91,910 from real estate operations and $29,572 of
interest income. This rental income was generated from three properties.
Net income for the quarter totaled $60,051. No significant operations had
commenced in the first quarter of 1994. The Company's revenue of $976 for
the first quarter of 1994 was entirely from interest income and the Company
recorded a net loss of $2,415.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
Report on Form 8-K:
Form 8-K was filed on April 18, 1996 to report the acquisition of a
property through a joint venture with two affiliates which will be operated
as a Just For Feet retail store upon completion of construction of the
property.
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 Asset Advisers Trust, Inc.
(Registrant)
May 15, 1996 H. Kerr Taylor
Date H. Kerr Taylor, President
May 15, 1996 H. Kerr Taylor
Date H. Kerr Taylor, Chief Financial Officer
EXHIBIT 11
AMERICAN ASSET ADVISERS TRUST, INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
1996 1995
PRIMARY EARNINGS PER SHARE:
Weighted average number of shares of
common stock outstanding 976,309 558,271
Additional shares assuming exercise of
stock warrants (1) 0 0
Total weighted average common and
common equivalent shares outstanding 976,309 558,271
Net income $ 117,436 $ 60,051
Earnings per common and common
equivalent share $ 0.12 $ 0.11
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of shares of
common stock outstanding 976,309 558,271
Additional shares assuming exercise of
stock warrants 286,504 162,521
Total weighted average common and
common equivalent shares outstanding 1,262,813 720,792
Net income (2) $ 209,939 $ 85,633
Earnings per common and common
equivalent share $ 0.17 $ 0.12
(1) Not applicable in 1996 or 1995 as computations of primary earnings per
share exclude common stock equivalents for any period in which their
inclusion would increase the income per share amount otherwise
computed.
(2) Includes adjustment for additional interest income from assumed net
proceeds from exercise of warrants using Modified Treasury Stock
Method as follows:
1996 1995
$ 92,633 $ 25,582
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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<RECEIVABLES> 107483
<ALLOWANCES> 0
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