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 (Date of earliest event reported): June 24, 1998
(February 25, 1998)
ESSEX PROPERTY TRUST, INC.
(Exact name of Registrant as
Specified in its Charter)
Maryland
(State or Other Jurisdiction
of Incorporation)
1-13106
(Commission File Number)
77-0369576
(IRS Employer Identification No.)
925 East Meadow Drive
Palo Alto, CA 94303
(650) 494-3700
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
<PAGE>
Item 5. OTHER EVENTS.
Essex Property Trust, Inc. hereby amends Item 7 of its Current Report on Form
8-K filed with the Securities and Exchange Commission on May 15, 1998 (the
"Report"), to provide additional information relating to certain pro forma
adjustments. No significant changes have been made to Item 5 of the Report,
which has been included herein for convenience only.
The following operating properties were acquired or are to be acquired by Essex
Portfolio, L.P., the "Operating Partnership" as to which Essex Property Trust,
Inc. owns a controlling general partner interest. References to the "Company"
include Essex Property Trust, Inc. and the Operating Partnership.
1998 Acquisitions
- -----------------
On February 25, 1998, the Company acquired Mirabella Apartments, a 608 unit
apartment community located in Newbury Park, California, for a contract price of
$50.5 million. In connection with the transaction, the Company entered into a
variable rate $25.0 million loan that matures in February 2000. Prometheus
Southern California II, L.P., a California limited partnership, was the
arms-length unrelated third party seller of the property.
On March 3, 1998, the Company acquired Wimbledon Woods, a 560 unit apartment
community located in Hayward, California, for a contract price of $44.0 million.
W.P. Hayman, Limited Partnership, a Michigan limited partnership, was the
arms-length unrelated third party seller of the property.
On April 1, 1998, the Company acquired Bunker Hill Towers, a 456 unit apartment
high-rise community located in Los Angeles, California, for a contract price of
approximately $36.5 million. In connection with the transaction the Company
assumed an approximate $18.4 million, 7.39% fixed rate loan. The loan matures in
November 2007. Brilliant Future, Inc., a California corporation, was the
arms-length unrelated third party seller of the property.
On April 3, 1998, the Company acquired Cochran Apartments, a 58 unit apartment
community located in Los Angeles, California, for a contract price of $5.4
million. Metric Institutional Apartment Fund II, a California limited
partnership, was the arms-length unrelated third party seller of the property.
These acquisitions were funded with the net proceeds from the Company's February
1998 Perpetual Preferred Units offering, loans secured by the properties as
indicated above, the Company's lines of credit and proceeds from the disposition
of the Company's three retail shopping centers.
1998 Pending Acquisitions
- -------------------------
In January 1998, the Company approved the acquisition of Mt. Sutro Terrace
Apartments, a 99 unit apartment building located in San Francisco, California
for a contract price of $10.3 million. Mt. Sutro Terrace Associates is the
arms-length unrelated third party seller of the property. The contract price is
$10.3 million and the closing of the acquisition is expected to occur no later
than September 1998.
This acquisition is subject to negotiation of final terms of purchase and
customary closing conditions. Accordingly, there can be no assurance that this
acquisition will be completed. If this transaction is completed, the Company
anticipates funding the acquisition with the Company's lines of credit.
1998 Dispositions
- -----------------
On February 25, 1998, the Company sold Canby Square, Garrison Square, and Powell
Villa, three retail shopping centers located in the Portland, Oregon
metropolitan area for a net sales price of $15.8 million. An entity consisting
of Western Seven Trees Investors, a California limited partnership and Western
Las Hadas Investors, a California limited partnership was the related party
purchaser of the properties.
Page 2 of 15
<PAGE>
In all of the acquisition and disposition transactions, the purchase price was
based on a number of factors, including historical and projected rental income,
appropriate capitalization rates for similar properties, market comparables,
prevailing market conditions in the area and extensive due diligence studies
including review of financial operations and physical inspections.
Page 3 of 15
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS. Page
----
(a) Financial Statements
- --- --------------------
Independent Auditors' Report 5
Combined Statement of Revenues and Certain Expenses
of Wimbledon Woods Bunker Hill Towers for the Year
Ended December 31, 1997. 6
Notes to Combined Statement of Revenues and Certain
Expenses of Wimbledon Woods and Bunker Hill Towers
for the Year Ended December 31, 1997. 7
(b) Pro Forma Consolidated Financial
- --- ------------------------------------------
Information - Unaudited
-----------------------
Pro Forma Consolidated Balance Sheet as of
December 31, 1997. 9
Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1997. 10
Notes to Pro Forma Consolidated Financial
Information. 11
(c) Exhibits
- --- --------
23.1 Consent of Independent Auditors' 15
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 hereunto duly authorized.
ESSEX PROPERTY TRUST, INC.
June 24, 1998 By: /s/ Mark J. Mikl
------------------
Mark J. Mikl
Controller
Page 4 of 15
<PAGE>
Independent Auditors' Report
The Board of Directors
Essex Property Trust, Inc.:
We have audited the accompanying Combined Statement of Revenues and Certain
Expenses (the Statement) of Wimbledon Woods and Bunker Hill Towers for the year
ended December 31, 1997. The Statement is the responsibility of management. Our
responsibility is to express an opinion on the 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 is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall Statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement was prepared to comply with the requirements of Rule
3-14 of Regulation S-X of the Securities and Exchange Commission and excludes
certain expenses, described in note 1, that would not be comparable to those
resulting from the proposed future operations of the properties. It is not
intended to be a complete presentation of the operations of the properties.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenues and certain expenses, as described in note 1, of
Wimbledon Woods and Bunker Hill Towers for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
March 31, 1998
Page 5 of 15
<PAGE>
WIMBLEDON WOODS AND BUNKER HILL TOWERS
Combined Statement of Revenues and Certain Expenses
Year ended December 31, 1997
Revenues:
Rental income $ 9,966,394
Other 745,367
---------------
10,711,761
Certain expenses:
Salaries 1,419,290
Utilities 1,361,129
Interest 1,359,760
Maintenance and repairs 872,701
Real estate taxes 608,530
Administrative 266,861
Insurance 243,838
Advertising 96,865
----------------
6,228,974
----------------
Revenues in excess of certain expenses $ 4,482,787
================
See accompanying notes to combined statement of revenues and certain expenses.
Page 6 of 15
<PAGE>
WIMBLEDON WOODS AND BUNKER HILL TOWERS
Notes to Combined Statement of Revenues and Certain Expenses
December 31, 1997
(Dollars in Thousands)
(1) Properties and Accounting Presentation
The Combined Statement of Revenues and Certain Expenses has been
prepared in accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission and relates to the 1997 operations
of Wimbledon Woods, a 560 unit apartment community located in Hayward,
California, and Bunker Hill Towers, a 456 unit apartment high-rise
community located in Los Angeles, California.
The following represents the date each property was acquired:
Property Date
-------- ----
Wimbledon Woods March 3, 1998
Bunker Hill Towers April 1, 1998
In accordance with Rule 3-14, expenses are presented exclusive of
depreciation, management fees, interest on loans not assumed and income
taxes as these expenses would not be comparable to the proposed future
operations of the properties.
The acquisition of the properties may result in a new valuation for
purposes of determining future property tax assessments.
Rental revenue is recognized on the accrual basis of accounting. Tenant
leases are generally for a one year period or less. Acquisition
mortgage debt assumed was approximately $18,400 with an interest rate
of 7.39%
(Continued)
Page 7 of 15
<PAGE>
WIMBLEDON WOODS AND BUNKER HILL TOWERS
Notes to Combined Statement of Revenues and Certain Expenses
(Dollars in Thousands)
(2) Estimated Taxable Operating Results and Cash to be Made Available by
Operations (unaudited)
Estimated Taxable Operating Income and Cash Available by Operations for
the twelve months ended December 31, 1997 are shown below. However,
Essex Property Trust, Inc. (the Company) has and believes it will
continue to qualify as a real estate investment trust (REIT) under
Sections 856 to 860 of the Internal Revenue Code of 1986, as amended.
The Company also believes that current distributions to shareholders
will equal or exceed 100% of its taxable income. Depreciation expense
of $2,380 was estimated considering the purchase price of each property
and the appropriate income tax depreciation method using a 27 1/2 year
depreciable life for the buildings.
Taxable Operating Income for Essex Property Trust, Inc. ("Registrant")
is estimated income subject to taxation before the dividends paid
deduction. Taxable income for Wimbledon Woods and Bunker Hill Towers
is estimated based on their combined revenues in excess of certain
expenses in the accompanying financial statement less estimated
depreciation's expense. The dividends paid deduction is estimated
based on Registrants policy of paying dividends which exceed 100% of
taxable income. Estimated Cash To Be Made Available By Operations
reflects Registrants' 1997 cash from operating activities. Cash To Be
Made Available By Operations from the combined operations of Wimbledon
Woods and Bunker Hill Towers is estimated to be the same as revenues
in excess of certain expenses in the accompanying financial statement.
Wimbledon
Woods and
Bunker Hill
Registrant Towers Combined
---------- ------------ --------
Year ended December 31, 1997
---------------------------------------
Estimated taxable operating income $ 21,800 2,103 23,903
Estimated dividends paid deduction (21,800) (2,103) (23,903)
---------- ------------ --------
Estimated tax expense $ - - -
========== ============ ========
Estimated cash available by operations $ 43,671 4,483 48,154
========== ============ ========
Page 8 of 15
<PAGE>
<TABLE>
ESSEX PROPERTY TRUST, INC.
Pro Forma Consolidated Balance Sheet
As of December 31, 1997
(Unaudited)
(Dollars in thousands, except per share amounts)
Pro Forma Adjustments
---------------------------------
Acquisition and Disposition
Historical (1) Equity Transactions Transactions Pro Forma
---------- ------------------- ------------ -----------
<S> ............................................................. <C> <C> <C> <C>
ASSETS
Real estate
Rental properties (2) (3)
Land and land improvements .................................. $ 182,416 $ 29,340 $ (2,545) $ 209,211
Buildings and improvements .................................. 548,571 117,360 (9,731) 656,200
--------- --------- --------- ---------
730,987 146,700 (12,276) 865,411
Less accumulated depreciation ................................. (58,040) -- 1,436 (56,604)
--------- --------- --------- ---------
672,947 146,700 (10,840) 808,807
Investments ................................................... 2,347 -- -- 2,347
27,422 -- -- 27,422
--------- --------- --------- ---------
702,716 146,700 (10,840) 838,576
Cash and cash equivalents (2) (3) ............................... 4,282 (16,000) 15,842 4,124
6,093 -- -- 6,093
9,264 -- -- 9,264
8,602 -- -- 8,602
3,838 -- -- 3,838
4,040 -- -- 4,040
--------- --------- --------- ---------
$ 738,835 $ 130,700 $ 5,002 $ 874,537
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable (2) ...................................... $ 248,997 $ 43,400 $ -- $ 292,397
Lines of credit (2) ............................................. 27,600 29,025 -- 56,625
Accounts payable and accrued liabilities ........................ 21,337 -- -- 21,337
Dividends payable ............................................... 9,189 -- -- 9,189
Deferred gain (4) ............................................... -- -- 5,002 5,002
Other liabilities ............................................... 4,208 -- -- 4,208
--------- --------- --------- ---------
Total liabilities ............................................. 311,331 72,425 5,002 388,758
Minority interests (2) (5) ...................................... 28,589 58,275 -- 86,864
STOCKHOLDERS' EQUITY
8.75% convertible preferred stock, series 1996A,
$.0001 par value, 1,600,000 authorized,
issued and outstanding ...................................... 1 -- -- 1
Common stock, $.0001 par value, 668,400,000
shares authorized, 16,614,687 shares issued
and outstanding ........................................... 2 -- -- 2
Excess stock, $.0001 par value, 330,000,000 shares
no shares issued or outstanding................................ -- -- -- --
Additional paid in capital .................................... 430,804 -- -- 430,804
Accumulated deficit ........................................... (31,892) -- -- (31,892)
--------- --------- --------- ---------
Total stockholders' equity ................................. 398,915 -- -- 398,915
--------- --------- --------- ---------
$ 738,835 $ 130,700 $ 5,002 $ 874,537
========= ========= ========= =========
See accompanying notes to pro forma consolidated financial information.
Page 9 of 15
</TABLE>
<PAGE>
<TABLE>
ESSEX PROPERTY TRUST, INC.
Pro Forma Consolidated Statement of Operations
For the ear ended December 31, 1997
(Unaudited)
(Dollars in thousands, except per share amounts)
Pro Forma Adjustments
-----------------------------------------
Acquisition Disposition
Historical Transactions (6) Transactions (7) Pro Forma
------------- ------------- ------------ -------------
<S> .................................................... <C> <C> <C> <C>
Revenues
Rental ............................................... $ 79,936 $ 17,211 $ 2,298 $ 94,849
Interest and other income ............................ 4,633 923 4 5,552
------------ ------------ ------------ ------------
84,569 18,134 2,302 100,401
------------ ------------ ------------ ------------
Expenses
Property operating expenses
Maintenance and repairs ............................ 6,814 1,595 253 8,156
Real estate taxes .................................. 6,340 1,610 129 7,821
Utilities .......................................... 5,074 1,903 170 6,807
Administrative ..................................... 5,514 2,137 7 7,644
Advertising ........................................ 1,225 239 -- 1,464
Insurance .......................................... 859 324 27 1,156
Depreciation and amortization ...................... 13,992 5,228 22 19,198
------------ ------------ ------------ ------------
39,818 13,036 608 52,246
------------ ------------ ------------ ------------
Interest ............................................. 12,659 6,414 -- 19,073
Amortization of deferred financing costs ............. 509 -- -- 509
General and administrative ........................... 2,413 -- -- 2,413
Loss from hedge termination .......................... 138 -- -- 138
------------ ------------ ------------ ------------
55,537 19,450 608 74,379
------------ ------------ ------------ ------------
Income before gain on sales of real estate,
minority interests and extraordinary item....... 29,032 (1,316) 1,694 26,022
Gain on sales of real estate ........................... 5,114 -- -- 5,114
------------ ------------ ------------ ------------
Minority interest (8) .................................. (4,469) (4,582) (185) (8,866)
------------ ------------ ------------ ------------
Income before extraordinary item ................... $ 29,677 $ (5,898) $ 1,509 $ 22,270
============ ============ ============ ============
Per share data
Basic:
Income before extraordinary item ....................... $ 1.98 $ 1.44
============ ============
Weighted average number of shares
outstanding during the period ........................ 13,644,906 13,644,906
============ ============
Diluted:
Income before extraordinary item ....................... $ 1.94 $ 1.41
============ ============
Weighted average number of shares
outstanding during the period ........................ 15,285,288 13,885,053
============ ============
See accompanying notes to pro forma consolidated financial information
Page 10 of 15
</TABLE>
<PAGE>
ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in thousands, except per share amounts)
(1) - Overview
- --------------
The Historical column of the Pro Forma Condensed Consolidated financial
information includes the accounts of the Company and Essex Portfolio, L.P. (The
"Operating Partnership", which holds the operating assets of the Company). The
Company is the sole general partner in the Operating Partnership.
Between January 1, 1998 and April 3, 1998, Essex directly acquired four
multifamily properties, totaling 1,682 units, at an aggregate contract price of
$136,400. In addition, Essex currently has one multifamily property, totaling 99
units, which would be considered a probable acquisitions at an aggregate
contract price of $10,300. During this period the Company disposed of three
retail shopping centers for a net sales price of $15,842 resulting in a net
deferred gain of $5,002. Additional information regarding these property
transactions is included in Item 5 of this Form 8-K/A filing.
On February 6, 1998, the Operating Partnership completed the sale of 1,200,000
units of its 7.875% Series B Cumulative Redeemable Preferred Units ("Perpetual
Preferred Units") to an institutional investor in a private placement, at a
price of $50.00 per unit. The net proceeds from this offering were approximately
$58,275.
On April 20, 1998, the Operating Partnership completed the sale of 400,000 units
of its 7.875% Series B Cumulative Redeemable Preferred Units to the same
institutional investor noted above, at a price of $50.00 per unit. The net
proceeds from this offering were approximately $19,500.
The unaudited pro forma condensed consolidated balance sheet as of December 31,
1997 is presented as if the property and equity transactions occurred on
December 31, 1997. The unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1997, is presented as if the property
and equity transactions stated above occurred on January 1, 1997.
Pro Forma Condensed Consolidated Balance Sheet Adjustments
- ----------------------------------------------------------
(2) Amounts reflect the pro forma adjustments for four property acquisitions
and one probable acquisition subsequent to December 31, 1997 with an
aggregate cost of $146,700. It is assumed that 80% of the increase in real
estate investment will be allocated to buildings and improvements for
purposes of depreciation.
The detail of the increase in real estate investment based on properties
acquired since December 31, 1997 is as follows:
Acquisition Date Acquisition Price
Mirabella Apartments February 25, 1998 $ 50,500
Wimbledon Woods March 3, 1998 44,000
Bunker Hill Towers April 1, 1998 36,500
Cochran Apartments April 3, 1998 5,400
Mt. Sutro Terrace Apartments Pending 10,300
---------
$ 146,700
=========
Funded by:
Cash $ 16,000
Preferred Units 58,275
Borrowings 72,425
---------
$ 146,700
=========
Page 11 of 15
<PAGE>
ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in thousands, except per share amounts)
(3) Amounts reflect pro forma adjustments for three property dispositions
subsequent to December 31, 1997 with a net sales proceeds of $15,842. Due to
the structure of the transaction, a more conservative application of
generally accepted accounting principles defers the gain on disposition.
Actual book values as of December 31, 1997 and related deferred gain for the
three retail properties sold are included as a pro forma adjustment. Actual
book values were as follows at December 31, 1997:
Canby Square $ 4,723
Garrison Square 2,919
Powell Villa 3,198
--------
$ 10,840
========
(4) Amounts reflect incremental costs of funding the acquisitions as follows:
The Mirabella Apartments acquisition was funded with a $25,000
variable rate loan and $25,500 of proceeds from the Perpetual Preferred
Units offering.
The Bunker Hill Towers acquisition was funded with $18,400 of an assumed
7.39% fixed rate loan which matures in November 2007 and $18,100 of the
Company's lines of credit and proceeds from the Perpetual Preferred Units
offering.
The Wimbledon Woods and Cochran Apartments acquisitions were funded with
the Company's lines of credit, proceeds from the sale of the three retail
shopping centers and proceeds from the Perpetual Preferred Units offering.
The Mt. Sutro Terrace Apartments acquisition is anticipated to be funded
with the Company's line of credit.
Incremental interest expense attributable to acquisition borrowings for
proforma purposes was calculated as $6,414.
(5) Amounts reflect the pro forma adjustments for the Perpetual Preferred Units
sale. The net proceeds from this sale were $58,275.
(6) Reflects the historical operations of Mirabella Apartments,Wimbledon Woods,
Bunker Hill Towers, Cochran Apartments, and Mt. Sutro for the year
ended December 31, 1997 as follows:
Page 12 of 15
<PAGE>
<TABLE>
ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in Thousands, except per share amounts)
Note (6) Continued.
Mirabella Wimbledon Bunker Hill Subtotal
Apartments Woods Towers Carried Forward
<S> .................................................... <C> <C> <C> <C>
Revenues ............................................... $ 5,795 $ 5,519 $ 5,194 $16,508
======= ======= ======= =======
Maintenance and Repairs 605 460 412 1,477
Real estate taxes 520 496 410 1,426
Utilities 472 380 981 1,833
Administrative 412 640 1,046 2,098
Advertising 142 63 34 239
Insurance 63 147 96 306
Depreciation and amortization .................... 1,800 1,568 1,301 4,669
------- ------- ------- -------
$ 4,014 $ 3,754 $ 4,280 $12,048
======= ======= ======= =======
</TABLE>
<TABLE>
Subtotal Cochran Combined
Brought Forward Apartments Mt. Sutro Total
Forward
<S> .................................................... <C> <C> <C> <C>
Revenues ............................................... $16,508 $ 616 $ 1,010 $18,134
======= ======= ======= =======
Maintenance and Repairs 1,477 68 50 1,595
Real estate taxes 1,426 59 125 1,610
Utilities 1,833 -- 70 1,903
Administrative 2,098 16 23 2,137
Advertising 239 -- -- 239
Insurance 306 8 10 324
Depreciation and amortization .................... 4,669 192 367 5,228
------- ------- ------- -------
$12,048 $ 343 $ 645 $13,036
======= ======= ======= =======
</TABLE>
The proforma amounts are based on historical data. Depreciation and
amortization expense is calculated on a proforma basis, based on
acquisition cost. Property taxes are adjusted to reflect reassessed value
of the properties upon sale. Reassessed values are estimated based on
acquisition prices.
The proforma interest expense consists of the incremental costs of
financing the properties by the mortgage loans and borrowings on the
credit facility.
Page 13 of 15
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<TABLE>
ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in Thousands, except per share amounts)
(7) Amount reflects the elimination of actual results of operations of
Canby Square, Garrison Square, and Powell Villa for the year ended
December 31, 1997.
Canby Powell Garrison Combined
Square Villa Square Total
<S> ............................................ <C> <C> <C> <C>
Revenues ....................................... $ 733 $ 826 $ 743 $ 2,302
====== ====== ====== ======
Maintenance and repairs .................. 66 121 66 253
Real estate taxes ........................ 39 48 42 129
Utilities ................................ 105 53 12 170
Administrative............................ 4 3 -- 7
Advertising............................... -- -- -- --
Insurance................................. 8 10 9 27
Depreciation and amortization............. 18 3 1 22
------ ------ ------ ------
$ 240 $ 238 $ 130 $ 608
====== ====== ====== ======
(8) The proforma adjustment for minority interest represents the effects of
the Perpetual Preferred Units and the minority interest ownership
percentage resulting from the proforma transactions.
</TABLE>
Page 14 of 15
<PAGE>
Consent of Independent Auditors'
The Board of Directors
Essex Property Trust, Inc.:
We hereby consent to the incorporation by reference of our report dated March
31, 1998 included in this Form 8-K/A into the Company's previously filed
Registration Statements No. 333-44467 and 333-21989.
KPMG Peat Marwick LLP
San Francisco, California
June 24, 1998
