Rule 424 (b) (3)
File No. 333-2572
SUPPLEMENT NO. 3
AMERICAN ASSET ADVISERS TRUST, INC.
SUPPLEMENT NO. 3 DATED OCTOBER 16, 1997
TO PROSPECTUS DATED JUNE 18, 1996
THIS SUPPLEMENT IS IN ADDITION TO AND DOES NOT REPLACE
PRIOR SUPPLEMENTS TO THE MEMORANDUM.
ATTENTION PROSPECTIVE INVESTORS
THE INFORMATION CONTAINED IN THIS SUPPLEMENT SHOULD BE READ CAREFULLY
AND CONSIDERED IN CONNECTION WITH YOUR REVIEW OF THE PROSPECTUS DATED
JUNE 18, 1996 AND SUPPLEMENT NO. 2 DATED FEBRUARY 28, 1997
THERETO.
THE PURPOSE OF THIS SUPPLEMENT IS TO SET FORTH INFORMATION
CONCERNING THE FOLLOWING:
Status of the Offering.
Recent Acquisitions and Developments.
Proposals to Amend the Company's Charter and Bylaws
to Be Voted upon at the Company's Special Meeting
of Shareholders Called for November 3, 1997.
STATUS OF THE OFFERING
As of September 30, 1997, the Company has received $6,912,555 in
gross proceeds from the sale of 674,396 shares in the Offering since it
commenced on June 18, 1996.
RECENT ACQUISITIONS AND DEVELOPMENTS
Compass Bank Credit Line. On August 1, 1997, the Company obtained
a credit line from Compass Bank of Houston, Texas (the "Compass Bank
Credit Line"). The Credit Agreement for this credit line matures
February 28, 1999. The agreement provides for unsecured borrowings up
to $7,500,000, on a revolving basis, depending on certain covenants such
as the value of unencumbered assets. The Credit Agreement bears interest
at 2% over the London Interbank Offered Rate ("LIBOR").
Office Max, Inc. - Dover, Delaware. On September 22, 1997, the
Company acquired fee simple title to an approximately 2.3 acre tract of
land located on U.S. Route 13, Dover, Delaware. The Company has begun
construction of the building which is scheduled for completion in January
1998. Office Max will operate a discount office supply store on the
completed property (the"Property"). This property is subject to a lease
with Office Max, Inc. ("Office Max"), an Ohio corporation, to commence
upon completion by the Company of a 23,500 square foot free-standing
retail building on the land.
Lease and Tenant Information. The Office Max lease is for a
term of fifteen (15) years. The base annual rent during the initial five
years is $264,375; $276,125 for the following five years; and $287,875
for the final five years. In addition to the base rent, the tenant is
required to pay all real estate taxes, hazard and liability insurance and
utilities on the Property. The tenant is also required, at its sole
expense, to keep and maintain the improvements in good repair and
appearance, except for ordinary wear and tear, and to make all structural
and nonstructural repairs of every kind which may be required to keep the
improvements in good condition, repair and appearance. Office Max has
the option to renew the lease for four (4) additional terms of five years
each.
Office Max, Inc. operates a national network of discount office
supply stores. Office Max, Inc. had total consolidated sales revenue of
$3,179,242,000 and $2,542,513,000 for the years ended January 25, 1997
and January 25, 1996, respectively. Office Max, Inc. had consolidated
net earnings of $68,805,000 and $125,763,000 for the years ended January
25, 1997 and January 25, 1996, respectively. Current assets exceeded
current liabilities at January 25, 1997 by $488,743,000 and total assets
at such date exceeded total liabilities by $1,063,564,000.
Terms of Acquisition. The Company acquired the land for
$750,000 and will expend an additional estimated $1,689,500 for
construction for the improvements. The costs to acquire the land and
construct the building will all be funded from borrowings on the Congress
Bank Credit Line.
Competitive Conditions. There is a Staples office supply
store approximately one-half mile from the Property. There is a Capital
Office Supply store approximately 3 miles from the Property.
Just for Feet - Baton Rouge, Louisiana. On June 9, 1997, the
Company completed its purchase of the Baton Rouge, Louisiana property
described in Supplement No. 2 to the Prospectus. The Company had on
February 11, 1997, entered into a joint venture with AAA Net Realty Fund
XI, Ltd., an affiliate of the Adviser, to construct on the 1.735 acre
parcel, an approximately 20,895 square foot, free-standing masonry
building. The building was completed and leased prior to acquisition to
Just for Feet, Inc. ("JFFI") which will operate a Just For Feet Shoe
Store on the property.
Lease Information. The lease to JFFI has an initial term of
fifteen years. JFFI has the option to renew the lease for two additional
terms of five years each. The Company's share of the base annual minimum
rent during the first five years of the original term of the lease is
approximately $153,275. The base annual minimum rent will be increased
at the beginning of the sixth and eleventh lease years by three times the
percentage increase in the Consumer Price Index for all Urban Consumers,
U.S. City Average, during the previous five years, limited to ten percent
each time. During the two renewal terms of the lease, the rent will be
increased using the same formula used in the sixth and eleventh years of
the lease. In addition to the base annual rent, the tenant pays all real
estate taxes and utility charges on the Property. The Company is
required to maintain and repair the foundation, structural systems
(including roof structure, roof covering, load bearing walls and floor
slabs), building exterior and masonry walls and to repair any defects
discovered during JFFI's first year of occupancy. JFFI is obligated to
otherwise maintain the Property.
JFFI is an Alabama corporation, which operates a national chain of
retail stores which sell athletic footwear and apparel and related items.
JFFI reported consolidated revenues totaled $256,397,400 and $119,819,000
and consolidated net earnings of $13,918,900 and $9,722,000 for the years
ended January 31, 1997 and January 31, 1996, respectively. JFFI had
current assets in excess of current liabilities of $167,829,200 at
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January 31, 1997, and JFFI's total assets exceeded its total liabilities
by $218,556,400 at such date.
Final Terms of Acquisition. The Joint Venture acquired the
property for a total cost of $2,806,151. The acquisition cost was paid
in cash. There is no mortgage financing on the property.
Pro Forma Financial Information. The following table presents
unaudited pro forma consolidated balance sheet for the Company giving
effect to the acquisition of the Dover, Delaware property as of June 30,
1997. Pro forma consolidated results of operations of this property are
not included as of June 30, 1997 as the building has not been completed.
Pro Forma Consolidated Balance Sheet
June 30, 1997
(Unaudited)
Historical Costs Adjustments(1) Pro Forma Total
Cash $3,020,263 ---- $3,020,263
Property and Net
Investment in Direct
Financing Leases 14,883,672 2,585,870(2) 17,469,542
Other Assets 512,163 ---- 512,163
Total Assets 18,416,098 2,585,870 21,001,968
Liabilities 199,494 2,585,870 2,785,364
Minority Interest 4,983,920 ---- 4,983,920
Shareholders' Equity 13,232,684 ---- 13,232,684
Total Liabilities and
Shareholders' Equity $18,416,098 $2,585,870 21,001,968
(1) Adjustments are reflected as if the Office Max property discussed in (2)
below was completed on June 30, 1997.
(2) Includes $750,000 of land acquisition costs, $1,689,500 of construction
costs for improvements, $24,395 of acquisition costs paid to third
parties, and $121,975 of acquisition costs paid to affiliates.
PROPOSED AMENDMENTS TO CHARTER AND BYLAWS
The Company's Board of Directors (the "Board") has called a special
shareholders meeting for November 3, 1997 to vote on certain amendments
to the Company's Charter and Bylaws. The record date for notice of the
meeting is September 23, 1997. The following amendments to the Company's
Charter and Bylaws are to be voted on at the special meeting.
1. An amendment to the Company's Charter to increase the number
of shares the Company is authorized to issue from 25,000,000 shares of
common stock, par value $.01 per share, to 110,000,000 shares, par value
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$.01 per share, 10,000,000 of which are preferred shares which may be
issued from time to time in such classes and series as the Board may
determine.
2. An amendment to the Company's Charter to allow the Company to
indemnify its directors, officers, employees and agents to the fullest
extent permitted under the corporation laws of the state of Maryland (the
"MGCL"), subject to the restrictions in the Company's Bylaws regarding
indemnification of non-Independent Directors. This proposal includes an
amendment to the Company's Bylaws to clarify the Company's ability to
indemnify its Independent Directors to the fullest extent permitted under
the MGCL.
3. An amendment to the Company's Charter to limit the liability
of the Company's directors and officers to non-monetary damages. If
approved, this amendment would permit the Company to limit the scope of
personal liability of directors and officers to the shareholders for
monetary damages except (i) to the extent that it is proved that the
director or officer actually received an improper benefit or profit or,
(ii) if a judgment or other final adjudication is entered in a proceeding
based on a finding that the director or officers action, or failure to
act, was the result of active and deliberate dishonesty and was material
to the cause of action, adjudicated in the proceeding, or (iii) if a
proceeding is brought by or in the right of the Company, indemnity may
not be made if a director is judged to be liable to the Company.
4. An amendment to the Company's Charter to:
(a) require the Board use its reasonable best efforts to
cause the Company and its shareholders to qualify for taxation as a REIT;
(b) allow the Board to authorize any agreement, contract,
arrangement or transaction with any person, corporation, or other entity
or organization where one or more of its directors, officers or
controlling persons may be a party to such agreement (i.e., such
agreements with Affiliates, so long as the procedures otherwise set forth
in the Company's Charter and/or Bylaws are followed;
(c) allow the Board to issue from time to time shares of its
stock of any class, whether now or in the future authorized, or
securities convertible into shares of such stock, for such consideration
as the Board may deem advisable, subject to such restrictions or
limitations, if any, as may be set forth in the Company's Charter or
Bylaws or in the general laws of the state of Maryland;
(d) provide that determinations by the Board made in good
faith in a manner consistent with the Company's Charter and in the
absence of actual receipt of an improper benefit and money, property or
services or active or deliberate dishonesty established by a court, shall
be final and conclusive and shall be binding upon the Company and its
shareholders; and
(e) provide that the enumeration and definition of particular
powers of the Board excluded from the Charter shall in no way be limited
or restricted by reference to or inference from the terms of any other
clause or provision of the Charter or construed or deemed by inference
or otherwise in any manner to exclude or limit the powers conferred upon
the Board under the general laws of the state of Maryland.
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5. An amendment to the Company's Charter to clarify that the vote
of the shareholders is required to approve mergers and/or reorganizations
of the Company, the sale of all or substantially all of the Company's
assets and/or the dissolution and liquidation of the Company shall be a
simple majority.
6. An amendment to the Company's Bylaws to expressly provide that
the Directors shall not receive any stated salary for the services but
that the Board may, by resolution, receive payment for services at a
fixed sum per year, per meeting and/or for specified event or service to
the Board.
7. An amendment to the Company's Bylaws to expressly provide the
following restrictions on certain transactions involving the purchase of
properties from and the sale of leased properties to the Adviser, a
Director, or an Affiliate of such person as currently set forth under the
guidelines of the North American Association of Securities Administrators
("NASAA").
(a) The Company shall not purchase property from the
Adviser, a Director, or any Affiliate of such person, unless
a majority of Directors (including a majority of Independent
Directors) not otherwise interested in such transaction
approve the transaction as being fair and reasonable to the
Company and at a price to the Company no greater than the cost
of the asset to such Advisor, Director or any Affiliate
thereof, or if the price to the Company is in excess of such
cost, that substantial justification for such excess exists
and such excess is reasonable. In no event shall the cost of
such asset to the Company exceed its current appraised value.
The foregoing restrictions notwithstanding, the Company may
acquire a property from an Adviser or its Affiliate where such
person is acting only to facilitate the Company's purchase of
the property and such person does not receive a profit from
the transaction except for the receipt of fees not otherwise
prohibited under these Bylaws;
(b) The Advisor, Director or any Affiliate thereof
shall not acquire assets from the Company unless approved by
a majority of Directors (including a majority of Independent
Directors), not otherwise interested in such transaction, as
being fair and reasonable to the Company; and
(c) The Company may lease assets to the Advisor, a
Director or any Affiliate thereof only if approved by a
majority of Directors (including a majority of Independent
Directors), not otherwise interested in such transaction, as
being fair and reasonable to the Company."
8. An amendment to the Company's Bylaws to delete the prohibition
against the Company investing in securities of, or interests in persons
or other entities engaged in real estate activities, except as otherwise
permitted in connection with joint venture investments with another
entity.
9. An amendment to the Company's Bylaws to remove restrictions on
the amount of secured and unsecured borrowings by the Company except for
the restrictions currently set forth in the Company's Bylaws whereby the
total borrowings of the Company, both secured and unsecured, may not
exceed 300% of the Company's Net Assets, as defined, on a consolidated
basis. If approved, the Company will be able to increase its secured and
unsecured borrowings, subject to the foregoing limits, and borrowings on
individual properties, subject only to the finding by the Board that such
borrowing is in the best interests of the Company.
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10. An amendment to the Company's Bylaws to expressly provide that
the Directors are not required to devote their full time to the affairs
of the Company and that any Director, Officer, employee or agent of the
Company, in his or her personal capacity or in a capacity as an
Affiliate, employee or agent of any other person or otherwise, may have
business interests and engage in business activities similar to or in
addition to those of or relating to the Company.
11. An amendment to the Company's Bylaws to:
(a) Delete from the Company's Bylaws to specify that the
Company may not issue equity securities which are redeemable at the
election of the holder of such securities, but may be redeemable at the
election of the Company;
(b) Delete the restriction from the Company's Bylaws whereby
the Company is prohibited from acquiring securities in any company
holding an investment or engaging in activities in which the Company is
prohibited to invest or engage in; and
(c) Delete the provision from the Company's Bylaws whereby
the Company is prohibited from investing in the securities of other
issuers for the purposes of exerting control.
Only shareholders as of the record date will be eligible to vote at
the Special Meeting on the foregoing measures. Accordingly, persons
purchasing their shares after September 23, 1997, will have no right to
vote at the Special Meeting on these proposals, but they will be subject
to such proposals as are approved at the Special Meeting.
End of Supplement No. 3 dated October 16, 1997
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