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) November 13, 2000
SECURITY CAPITAL GROUP INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
1-13355
(Commission File Number)
36-3692698
(I.R.S. Employer Identification No.)
125 Lincoln Avenue 87501
(Address of Principal Executive Offices) (Zip Code)
(505) 982-9292
(Registrant's Telephone Number, Including Area Code)
Item 9. Regulation FD Disclosure
On November 14, 2000, the Registrant provided an Investor Memorandum
dated November 13, 2000 to certain investors and included a copy of that
memorandum on its website. The Registrant is also furnishing the Investor
Memorandum to the Securities and Exchange Commission ("Commission") as an
exhibit to this Form 8-K. Unless the Registrant at some future time
determines to incorporate this Form 8-K into a report, proxy statement or
registration statement filed with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), this report on Form 8-K is not
deemed "filed" for purposes of Section 18 of the Exchange Act or subject to
the liabilities of that section or Section 11 of the Securities Act and
shall not be deemed incorporated by reference into any registration
statement filed under the Securities Act.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
None
(b) Pro Forma Financial Statements.
None
(c) Exhibits.
Exhibit No. Document Description
99.1 Investor Memorandum dated November 13, 2000
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 hereunto duly authorized.
SECURITY CAPITAL GROUP INCORPORATED
Dated: November 14, 2000 By: /s/ Jeffrey A. Klopf
Jeffrey A. Klopf
Senior Vice President and
Secretary
EXHIBIT 99.1
SECURITY CAPITAL INVESTOR MEMORANDUM
NOVEMBER 13, 2000
Forward Looking Statements
Certain information in this presentation contains forward looking
statements under federal securities laws. These statements are based on current
expectations, estimates and projection about the industry and markets in which
Security Capital operates, management's beliefs and assumptions made by
management. Forward looking statements are not guarantees of future performance
and involve certain risks and uncertainties that are difficult to predict.
Actual operating results may be affected by changes in national and local
conditions, competitive market conditions, and conditions in the securities
markets, and therefore may differ materially from what is expressed or
forecasted in this presentations.
Analysts' Reports
Certain information in this presentation refers to financial analysts'
reports. Security Capital does not endorse the views of any financial analysts
and any reference to these reports in this presentation should not be viewed as
indicating that Security Capital agrees with any of these reports as of the date
of preparation of any report, the date of distribution of any report or any
other date.
SCZ STOCK PRICE DECLINE RESULTS IN STRATEGY REEVALUATION
Included here is a chart showing SCZ's stock price from its initial public
offering in September 1997 through March 1999.
Reasons for Decline:
o Conversion of $723 million of 12% Convertible Debentures linked to $1.25
Billion of SCZ stock into the Public Stock Market.
o Earnings Expectation Missed for Q3 1998.
o Overall Price Decline in REIT Stocks.
o Holding Company vs. Operating Company.
o Stock Price Decline brings focus to the "SCZ Complex Structure".
SCZ's NEW STRATEGY AND IMPLEMENTATION
o Simplify Structure and Eliminate Public / Private
Market Discount
o Ultimately Concentrate Capital Only in Privately Owned Sustainable
"Leadership" Operating Businesses
o Continue to Opportunistically Sell or Reposition Investments
in Businesses Not Meeting New Operating Company Criteria
o Size Overhead to Meet New Business Strategy
o Attract New Key Long-Term Strategic Shareholders
o Continue to Buy Undervalued SCZ Stock
o Continued Solid / Predictable Earnings (EBDADT) Growth
SCZ STOCK PRICE DECLINE RESULTS IN A NEW STRATEGY AND IMPLEMENTATION
Included here is a chart showing SCZ's stock price from March 1999 through
November 10, 2000.
SCZ: A COMPLEX STRUCTURE WITH THREE TIERS OF UNREALIZED VALUE.
Tier 3 SECURITY CAPITAL GROUP
Unrealized
NAV/OP.CO. Value
Tier 2 SC-US REALTY: 40.6% SC-EUROPEAN: 34.6%
Unrealized
NAV/OP.CO.Value CarrAmerica (43.5%) Interparking S.A.(73.6%)
Storage USA (43.5%) Access S.A. (100%)
Regency (60.2%) EuroOffice (100%)*
City Center Retail (99.9%) City&West End (99.3%)
CWS Communities (94.1%) London and Henley(95.6%)
Urban Growth Property (98.8%)
InterPark (5.5%)
Tier 1 SCZ DIRECTLY OWNED
Unrealized Archstone (29.1%)
NAV/OP.CO. Value ProLogis (30.5%)
BelmontCorp (100%)
Homestead (100%)
Percentage shown indicates direct and indirect ownership interest.
* EuroOffice if comprised of Akeler Holdings S.A. and Bernheim-Comofi S.A.
IMPLEMENTATION OF SCZ STRATEGY
o $1.2 Billion of Capital Transactions Closed Since Sept. 1999
-$329 Million Sale of Strategic Hotel Capital
-Repurchased $294+ Million of SCZ Stock and $80.5 Million
of Convertible Debentures Retiring 23.6 million shares (17.3% of Shares
Outstanding in August 1999)
-$416 Million Sale of Archstone Stock
-Restructuring and Privatization of Homestead
o 14 New Key Strategic Shareholders Buy 35%+ of SCZ Stock
o Overhead Sized to Meet New Business Strategy
o Sept. 26, 2000, Announced $1.4 Billion Business Combination with
SC-U.S. Realty (Controlling $9.87 Billion of Assets)
o Continued Strong Earnings (EBDADT) Growth
NEW STRATEGY IMPLEMENTATION
Stock Buybacks:
ANNOUNCED COMPLETED
Archstone $550 million $522 million
S.C. U.S.Realty $250 million $212 million
Security Capital $650 million $294 million
Regency Realty $65 million $65 million
Storage USA $42 million $42 million
CarrAmerica 150 million $71 million
TOTAL $1,707 million $1,206 million
NEW STRATEGY IMPLEMENTATION
Managed Third-Party Capital to Drive New Growth
o Storage USA $180 Million Joint Venture with Fidelity
and $400 Million Joint Venture with General Electric
o ProLogis $2.7 Billion European Fund and $556 Million
Joint Venture with New York State Common Retirement Fund
o Archstone $237 Million Joint Venture with First Islamic Bank
o CarrAmerica $675 Million Asset / Development
Joint Venture with New York Teachers' Retirement System
o Additional Initiatives to be Announced
NEW STRATEGY IMPLEMENTATION: SIMPLIFY STRUCTURE
The following is a chart which shows ownership interest, and the numbers
preceding an entity show important steps in simplification of structure.
SECURITY CAPITAL GROUP
SCG directly 7- SC-US Realty(2) SC-European
owned 40.6% 34.6%
1 - Strategic Hotel CarrAmerica (43.5%) Interparking SA (73.6%)
2 - Homestead (100%) Storage USA (43.5%) Access SA (100%)
ProLogis (30.5%) Regency (60.2%) EuroOffice (100%)(4)
BelmontCorp (100%) 4 - City Center Retail(99.9%) City&West End (99.3%)
3 - Archstone (29.1%) CWS Communities (94.1%) 6 - London and Henley(95.6%)
5 - Urban Growth (98.8%) (3)
InterPark (5.5%)(3)
(1) The Capital Division comprises 98.7% of SCZ's assets. Management feels that
SCZ's stock will respond principally with a rationalization of the Capital
Division. The Financial Services Division, not shown on this chart, is key
to SCZ's ongoing strategy.
(2) Discussed below under "Combination of SCZ and SC-U.S. Realty"
(3) Anticipated merger to be consummated by Q1 2001.
(4) EuroOffice is comprised of Akeler Holdings S.A. and Bernheim-Comofi S.A.
SCZ FINANCIAL HIGHLIGHTS
Strong per-share earnings growth -- based on aggressive management action
and strong operating fundamentals.
Included here are graphics showing an increase in EBDADT per share from
$.48 per share for the third quarter of 1999 to $.75 per share for the third
quarter of 2000 (a 56.3% increase) and an increase in EBDADT per share from
$1.39 for the nine months ended September 30, 1999 to $1.93 for the nine months
ended September 30, 2000 ( a 38.8% increase.)
Strong Balance Sheet Creates Financial Flexibility
o Free cash flow for the four quarters ended September 30, 2000 was $105.5
million, an increase of 167.1% from the four quarters ended September 30,
1999.
o The ratio of cash flow to fixed charges for the four quarters ended
September 30, 2000, was 2.78 compared to 2.65 as of June 30, 2000.
o $930 million of long-term debt average life of 12.3 years at an average
fixed rate of 7.2% (Leverage of 21.6%).
Included here are graphics which show total capitalization at December 31,
1999 (after reduction for accounts payable and other liabilities) of $3,420
million, consisting of $2,351 million of equity, $978 million of long-term debt
and $91 million of short-term debt and total capitalization at September 30,
2000 (after reduction for accounts payable and other liabilities) of $4,186
million, consisting of $3,256 million of equity, and $930 million of long-term
debt.
SCZ FINANCIAL HIGHLIGHTS
Continued Solid Earnings Growth
<TABLE>
Strong Embedded Growth CAPITAL DIVISION (as of September 30, 2000)
19.9% Prestabilized
$4.5 billion of Assets
<CAPTION>
<S> <C> <C> <C> <C>
% Prestabilized $ of Assets
Archstone 22%
BelmontCorp 100% 17.2% $1.9 Billion
$5.5 Billion of assets Homestead Village 0%
sold/contributed to ProLogis 12%
JVs in the past 24
months.
CarrAmerica 7%
City Center Retail 100%
CWS Communities 43%
InterPark 0% 18.6% $1.8 Billion
Regency Realty 20%
Storage USA 25%
Urban Growth 8%
Access S.A. 30%
City & West End SA 31%
EuroOffice* 69% 39.8% $0.8 Billion
Interparking (BC SA) 0%
London and Henley 56%
* EuroOffice is comprised of Akeler Holdings SA and Bernheim-Comofi SA.
</TABLE>
SCZ FINANCIAL HIGHLIGHTS
Q3 2000 investment return analysis:
Q3 1999(1) Q3 2000(1)
Weighted Average Investment Yield(2) 9.8% 12.5%
Return on Invested Capital(3) 9.9% 13.2%
Return on Equity(4) 10.6% 15.2%
o Investment yield - strong property performance and stabilization of
assets of investees
o ROIC - Expense controls improve overall margins
o ROE - Expense controls and stock buyback improve returns
(1) Returns reflect annualized Q3 results.
(2) Calculated as Equity in EBDADT (before special items) divided by total
investment cost.
(3) Calculated as total earnings (before special items) for the Capital and
Services Divisions less taxes and expenses (G&A, Capital and Services
Division) before depreciation and interest divided by total capital
cost.
(4) Calculated as EBDADT (before special items), divided by equity at cost.
GLOBAL CAPITAL MANAGEMENT GROUP
Significant outperformance with $2.2 billion of assets under management.
Included here is a chart which shows the value of $100 million invested
since December 1995 (inception of Global Capital Management Group) through
September 2000 using the Security Capital Real Estate Securities U.S. Composite,
showing a value of $223 million at September 2000, against the Wilshire Real
Estate Securities Index, showing a value of $164 million at September 30, 2000.
Also included is a chart which shows an average annual rate of return from
December 31, 1995 to September 30, 2000 of 19.6% (net of fees) for the Security
Capital Real Estate Securities U.S. Composite and 11.0% for the Wilshire Real
Estate Securities Index.
CONSISTENT OUTPERFORMANCE ACROSS $2.2 BILLION OF ASSETS UNDER MANAGEMENT.
Included here is a chart which shows the average annual rate of return from
inception through September 30, 2000, for various accounts or managed entities
against Wilshire Index for same periods.
SECURITY CAPITAL: THE FUTURE
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL DIVISION: FINANCIAL SERVICES DIVISION:
100%/High percentage ownership Leading real estate capital management services organization
real estate operating/service businesses o Global Capital Management Group
o High ROI businesses which produce S&P - Mutual funds/separate accounts
competitive returns - Managed entities
- Privately owned sustainable
"Leadership" businesses
- Produce substantial third-party
customer service income
- Managed third-party capital
- Create measurable brand value
o Leading operating/service platform
in respective niche.
</TABLE>
Financial Services Division: Leading real estate capital management services
organization.
o Global Capital Management Group
- Mutual funds/separate accounts
- Managed entities
COMBINATION OF SCZ AND SC-U.S. REALTY
The Expected Benefits for Both Companies Include:
o A Simplified Combined Company with a Stronger Market Profile
- Eliminate a Tier of Discount and Unrealized Value
- Eliminate a Complex Structural Relationship
o Increased Liquidity and Financial Flexibility
o Significant Step towards an Operating Company Structure
o Enhanced Opportunities Including Monetization or Consolidation of
Existing Businesses
o Significant Stock Repurchases -- $450 Million Currently Authorized
PRO FORMA FINANCIAL IMPACT OF TRANSACTION
Consistent with SEC requirements, pro forma results based on only $200
million of share purchases and excludes anticipated expense savings.
The adjusted pro forma results shown below reflect the additional $250
million of stock repurchases authorized by SCZ's Board and anticipated expense
savings.
<TABLE>
<CAPTION>
For the six months ended June 30, 2000:
<S> <C> <C> <C> <C> <C>
Adjusted Increase from Actual
Actual Pro Forma Pro Forma(1) to Adjusted Pro Forma
Per Share
Diluted EBDADT $1.17 $1.12 $1.21 $0.04
Net Asset Value $22.66 $25.54 $26.10 $3.44
(1) Assumes completion of an additional $250 million of stock repurchases using
SCZ's closing stock price on September 22, 2000 of $19.0625 and
approximately $8 million of annual expense savings.
</TABLE>
PRO FORMA FINANCIAL IMPACT OF TRANSACTION
Consistent with SEC requirements, based on only $200 million of share purchases
and excludes anticipated expense savings.
12 months ended Six months ended
Dec. 31, 1999 June 30, 2000
SCZ Actual Pro Forma SCZ Actual Pro Forma
Cash Flow From Operations $60,337 $119,567 $93,002 $155,521
Cash Flow / Share $0.51 $0.75 $0.85 $1.04
Reported NAV / Share $17.99 $20.60 $22.66 $25.54
Cash Flow Coverage Ratio 2.16x 2.41x 2.65x 2.68x
Leverage Ratio(1) 30.7% 34.9% 27.6% 29.1%(2)
(1) Calculated as total debt to fair value of assets.
(2) 25.4% as of August 31, 2000.
EQUITY MARKET CAPITALIZATION
Included is a chart which shows the equity market capitalization, based on
September 30, 2000 valuation, of SC U.S. Realty ($1.5 billion), Security Capital
($2.5 billion), Vornado ($3.2 billion), combined SC U.S. Realty and Security
Capital ($3.2 billion), Spieker ($4.5 billion), Boston Properties ($4.6
billion), Simon Properties (%6.4 billion), Equity Residential ($7.8 billion) and
Equity Office ($11.4 billion).
PRO FORMA STRUCTURE POST-TRANSACTION
Security Capital Group (combined company)
Total assets: $6,070 MM (as of September 30, 2000)
Capital Division: 98.7% of assets Financial Services Division:
Public Companies: Ownership Global Capital Management Group
Archstone 29% - Mutual funds/separate accounts
CarrAmerica 44% - Managed entities
$26.2 ProLogis 31%
Billion Regency 60%
Storage USA 44%
Private Companies:
Belmont 100%
CWS Communities 94%
Homestead Village 100%
InterPark 99%
SC-European 35%
