SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 14, 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.
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, resulting in a net
gain of approximately $5.0 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 12
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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.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS. Page
(a) Financial Statements
Independent Auditors' Report 4
Combined Statement of Revenues and Certain Expenses of
Wimbledon Woods and Bunker Hill Towers for the Year
Ended December 31, 1997. 5
Notes to Combined Statement of Revenues and Certain
Expenses of Wimbledon Woods and Bunker Hill Towers
for the Year Ended December 31, 1997. 6
(b) Pro Forma Condensed Consolidated Financial Information - Unaudited
Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1997. 8
Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997. 9
Notes to Pro Forma Condensed Consolidated Financial Information. 10
(c) Exhibits
23.1 Consent of Independent Public Accountants 12
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.
May 14, 1998 By: /s/ Mark J. Mikl
----------------
Mark J. Mikl
Controller
Page 3 of 12
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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 4 of 12
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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 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 5 of 12
<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 6 of 12
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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 exceed 95% of its taxable income. Depreciation expense of
$2,590 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 95% 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 expense 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 $ 1,893 $ 23,693
Estimated dividend
paid deduction (21,800) (1,893) (23,693)
Estimated tax expense $ - - -
================= ============== =============
Estimated cash
available by operations $ 55,537 $ 4,483 $ 60,020
================= ============== =============
Page 7 of 12
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<TABLE>
ESSEX PROPERTY TRUST, INC.
Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 1997
(Unaudited)
(Dollars in thousands, except shares and per share amounts)
Pro Forma Adjustments (2)
---------------------------
Aquisition
and Equity Disposition
Historical Transactions Transactions Pro Forma
---------- ------------ ------------ ----------
<S> .................................................... <C> <C> <C> <C>
ASSETS
Real estate
Rental properties
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
Real estate under development ........................ 27,422 -- -- 27,422
----------- ---------- ----------- ---------
702,716 146,700 (10,840) 838,576
Cash and cash equivalents .............................. 4,282 (16,000) 15,842 4,124
Restricted cash ........................................ 6,093 -- -- 6,093
Notes and other related party receivables .............. 9,264 -- -- 9,264
Notes and other receivables ............................ 8,602 -- -- 8,602
Prepaid expenses and other assets ...................... 3,838 -- -- 3,838
Deferred charges, net .................................. 4,040 -- -- 4,040
----------- --------- ----------- ---------
$ 738,835 $ 130,700 $ 5,002 $ 874,537
========== ========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable ................................. $ 248,997 $ 43,400 $ -- $ 292,397
Lines of credit ........................................ 27,600 29,025 -- 56,625
Accounts payable and accrued liabilities ............... 21,337 -- -- 21,337
Dividends payable ...................................... 9,189 -- -- 9,189
Other liabilities ...................................... 4,208 -- -- 4,208
----------- --------- ----------- ---------
Total liabilities .................................... 311,331 72,425 -- 383,756
Minority interests ..................................... 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) -- 5,002 (26,890)
----------- --------- ----------- ---------
Total stockholders' equity ........................ 398,915 -- 5,002 403,917
----------- --------- ----------- ---------
$ 738,835 $ 130,700 $ 5,002 $ 874,537
========== ========== ========== =========
See accompanying notes to ProForma condensed consolidated financial information
Page 8 of 12
</TABLE>
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<TABLE>
ESSEX PROPERTY TRUST, INC.
Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 1997
(Unaudited)
(Dollars in thousands, except shares and per share amounts)
Pro Forma Adjustments (3)
-------------------------------------
Acquisition Disposition
Historical Transactions Transactions Pro Forma
-------------- ------------------------------------- ----------------
<S> ........................................ <C> <C> <C> <C>
Revenues
Rental ................................... $ 79,936 $ 18,669 $ 2,298 $ 96,307
Interest and other income ................ 4,633 754 4 5,383
------------ ------------ ------------ ------------
84,569 19,423 2,302 101,690
------------ ------------ ------------ ------------
Expenses
Property operating expenses
Maintenance and repairs ................ 6,814 2,027 253 8,588
Real estate taxes ...................... 6,340 1,606 129 7,817
Utilities .............................. 5,074 1,784 170 6,688
Administrative ......................... 5,514 1,315 7 6,822
Advertising ............................ 1,225 204 -- 1,429
Insurance .............................. 859 181 27 1,013
Depreciation and amortization .......... 13,992 5,204 22 19,174
------------ ------------ ------------ ------------
39,818 12,321 608 51,531
------------ ------------ ------------ ------------
Interest ................................. 12,659 5,358 -- 18,017
Amortization of deferred financing costs . 509 -- -- 509
General and administrative ............... 2,413 -- -- 2,413
Loss from hedge termination .............. 138 -- -- 138
------------ ------------ ------------ ------------
Total expenses ......................... 55,537 17,679 608 72,608
Income before gain on sales of real estate,
minority interests and extraordinary item 29,032 1,744 1,694 29,082
Gain on sales of real estate ............... 5,114 -- -- 5,114
Minority interest .......................... (4,469) (4,779) (185) (9,063)
------------ ------------ ------------ ------------
Income before extraordinary item ....... $ 29,677 (3,035) 1,509 25,133
============ ============ ============ ============
Per share data
Basic:
Income before extraordinary item ........... $ 1.98 $ 1.65
Weighted average number of shares
outstanding during the period ............ 13,644,906 13,644,906
============ ============
Diluted:
Income before extraordinary item ........... $ 1.94 $ 1.62
Weighted average number of shares
outstanding during the period ............ 15,285,288 15,285,288
============ ============
See accompanying notes to pro forma condensed consolidated financial information
Page 9 of 12
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<PAGE>
ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Condensed Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in thousands, except shares and 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 gain
of $5,002. Additional information regarding these property transactions is
included in Item 5 of this Form 8-K 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.
(2) - Pro Forma Condensed Consolidated Balance Sheet Adjustments
- ----------------------------------------------------------------
The pro forma condensed consolidated balance sheet as of December 31, 1997
includes 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
The pro forma condensed consolidated balance sheet as of December 31, 1997
includes pro forma adjustments for the Perpetual Preferred Units sale. The net
proceeds from this sale were $58,275.
Page 10 of 12
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ESSEX PROPERTY TRUST, INC.
Notes to Pro Forma Condensed Consolidated Financial Information
December 31, 1997
(Unaudited)
(Dollars in thousands, except shares and per share amounts)
The pro forma condensed consolidated balance sheet as of December 31, 1997
includes pro forma adjustments for three property dispositions subsequent to
December 31, 1997 with a net sales price of $15,842. Actual book values as of
December 31, 1997 for the three retail properties sold are included as a pro
forma adjustment.
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 assumed fixed
rate debt and $25,600 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.
(3) - Pro Forma Condensed Consolidated Statements of Operations Adjustments
- ---------------------------------------------------------------------------
The pro forma condensed consolidated statement of operations for the year
ended December 31, 1997 presents revenues and expenses based on historical
performance adjusted for known changes in future operations.
Page 11 of 12
<PAGE>
Consent of Independent Auditors'
The Board of Directors
Essex Property Trust, Inc.:
As independent public accountants, we hereby consent to the incorporation of our
report dated March 31, 1998 included in this Form 8-K into the Company's
previously filed Registration Statement Nos. 333-44467 and 333-21989.
KPMG Peat Marwick LLP
San Francisco, California
May 5, 1998
Page 12 of 12
