SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report June 26, 1998
(date of earliest event reported) (June 17, 1998)
FIRST WASHINGTON REALTY TRUST, INC.
(Exact name of registrant as specified in its Charter)
State of Maryland 0-25230 52-1879972
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporated) File No.) Identification No.)
4350 East-West Highway, Suite 400
Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 907-7800
No change
(Former name or address, if changed since last report)
<PAGE>
ITEM 5. Other Events
Risk Factors
All capitalized terms used herein but not defined shall have the
meanings assigned to them in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
Environmental Matters
General. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate may be required to investigate
and clean up hazardous or toxic substances or petroleum product releases at such
property and may be held liable to a governmental entity or to third parties for
property damage and for investigation and clean-up costs incurred by such
parties in connection with contamination. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to properly remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. In connection with the ownership (direct or indirect),
operation, management and development of real properties, the Company, the
Operating Partnership or the Management Company, as the case may be, may be
considered an owner or operator of such properties or as having arranged for the
disposal or treatment of hazardous or toxic substances and, therefore,
potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and
property. All of the Properties have been subject to a Phase I or similar
environmental audit (which involves general inspections without soil sampling or
groundwater analysis) completed by independent environmental consultants. These
environmental audits revealed the following additional potential environmental
liabilities:
Parkville Shopping Center. Petroleum has been detected in the soil
below Parkville Shopping Center arising from a release from gasoline underground
storage tanks formerly located at the site. Testing conducted at the site
indicates that the contamination is limited and is unlikely to have any effect
on human health. In addition, the previous owner of Parkville Shopping Center
has provided an indemnification for all costs and expenses to obtain closure
from the responsible regulatory authority.
The Village Shopping Center. Petroleum and a dry cleaning solvent have
been detected in the soil and groundwater below The Village Shopping Center.
Testing done at the site indicates that the contamination is limited and is
unlikely to have any effect on human health. In addition, the previous owner of
the property has provided an indemnification for all costs and expenses to
obtain closure from the responsible regulatory authority.
Management of the Company believes that environmental studies have not
revealed significant environmental liabilities that would have a material
adverse effect on the Company's business, results of operations and liquidity;
however, no assurances can be given that existing environmental studies with
respect to any of Properties reveal all environmental liabilities, that any
prior owner of a Property did not create any material environmental condition
not known to the Company, or that a material environmental condition does not
otherwise exist (or may exist in the future) as to any one or more Properties.
If such a material environmental condition does in fact exist (or exists in the
future), it could have a significant adverse impact upon the Company's financial
condition, results of operations and liquidity.
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Explanatory Note:
Pursuant to Item 7 (a)(4) of Form 8-K, this Form 8-K/A amends
the Company's Form 8-K filed on June 17, 1998 to include the
historical financial statements and proforma financial
information required by Item 7(a) and (b) with respect to a
substantial majority of the properties acquired by the Company
since January 1, 1998 referred to in such Form 8-K.
(a) Financial Statements Applicable to Real Estate Properties
Acquired.
Acquired Properties
o Report of Independent Accountants
o Combined Statements of Revenues and Certain Expenses
for the year ended December 31, 1997.
o Notes to Combined Statements of Revenues and Certain
Expenses
(b) Pro Forma Financial Information.
Pro Forma (unaudited):
o Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1997 and the three months
ended March 31, 1998.
o Notes and Management's Assumptions to the Pro Forma
Consolidated Financial Statements
(c) Exhibits
23.1 Consent of independent accountants
2
<PAGE>
SIGNATURE
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.
FIRST WASHINGTON REALTY TRUST, INC.
(Registrant)
By: /s/ James G. Blumenthal
James G. Blumenthal
Executive Vice President
Chief Financial Officer
Date: June 25, 1998
3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Acquired Properties: Page
o Report of Independent Accountants..................................F-2
o Combined Statements of Revenues and Certain Expenses for the year ended
December 31, 1997..................................................F-3
o Notes to Combined Statements of Revenues and Certain Expenses......F-4
First Washington Realty Trust, Inc. and Subsidiaries
Pro Forma (unaudited):
o Pro Forma Consolidated Statements of Operations for the year ended
December 31, 1997 and the three months ended March 31, 1998........F-6
o Notes and Management's Assumptions to the Pro Forma
Consolidated Financial Statements..................................F-8
o Consent of Independent Accountants..................... ...........F-10
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of First Washington Realty Trust, Inc.
We have audited the combined statement of revenues and certain expenses of the
Acquired Properties (as defined in footnote 1 of this statement) for the year
ended December 31, 1997. This financial statement is the responsibility of the
Acquired Properties' management. Our responsibility is to express an opinion on
this financial 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 combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Form 8-K/A of First
Washington Realty Trust, Inc., and is not intended to be a complete presentation
of the Acquired Properties' revenues and expenses and may not be comparable to
results from future operations of the Acquired Properties.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the combined revenues and certain expenses as described
in Note 1 of the Acquired Properties for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
Washington, D.C.
June 25, 1998
F-2
<PAGE>
Acquired Properties
Combined Statements of Revenues and Certain Expenses
(dollars in thousands)
Year Ended
December 31, 1997
<TABLE>
<S> <C>
Minimum Base Rents $2,694
Tenant Reimbursement Income 630
Percentage Rents 202
Other Income 5
Total Revenues 3,531
Real Estate Tax Expense 293
Recoverable Operating Expenses 368
Total Certain Expenses 661
Revenues in Excess of Certain Expenses $2,870
======
</TABLE>
The accompanying notes are an integral part of the statements
of revenues and certain expenses.
F-3
<PAGE>
NOTES TO COMBINED STATEMENTS OF
REVENUES AND CERTAIN EXPENSES
(dollars in thousands)
1. Basis of Presentation
The combined statements of revenues and certain expenses (the
"Statement") relate to the operations of the two shopping center
properties ( the "Acquired Properties") which have been acquired by
First Washington Realty Limited Partnership (the "Company"), whose
general partner is First Washington Realty Trust, Inc. The accompanying
combined statement include certain accounts of the following
properties:
Percent
Location of GLA Leased Significant Tenants
Name Property Area (sf) 3/31/98 Lease Expiration Date
Bowie Plaza Bowie, MD 104,036 98.3% Giant(2002),CVS(1998)
Watkins Park
Plaza Mitchellville, MD 112,143 98.7% Safeway(2007),CVS(2001)
------- -----
Total/Average 216,179 98.5%
======== ======
Revenues and expenses are recorded using the accrual basis of
accounting.
The accompanying combined statement is not representative of the actual
operations for the year presented as certain expenses which may not be
comparable to the expenses expected to be incurred by the Company in
the proposed future operations of the Acquired Properties have been
excluded. The Company is not aware of any material factors relating to
the Acquired Properties that would cause the reported financial
information not to be necessarily indicative of future operating
results. Expenses excluded consist of interest, depreciation and
amortization, leasing commission and management fees which in the
opinion of management, are not directly related to the future
operations of the properties.
The unaudited interim combined statements of revenues and certain
expenses of the Acquired Properties are prepared pursuant to the
Securities and Exchange Commission's rules and regulations and
generally accepted accounting principles applicable to interim
financial statements. In the opinion of management, all adjustments,
consisting solely of normal recurring adjustments, necessary for fair
presentation of the combined statements of revenues and certain
expenses for the interim period have been included. The current
period's results of operations are not necessarily indicative of
results which ultimately may be achieved for the year.
F-4
<PAGE>
Operating Leases
In addition to the minimum rent, certain tenant leases provide for the
reimbursement of certain operating expenses and/or percentage rent in
the amount of a percentage of annual gross sales in excess of a
specified base sales amount.
Minimum rents presented for the year ended December 31, 1997 contain
straight-line adjustments for rental revenue increases or abatements in
accordance with generally accepted accounting principles. The aggregate
rental revenue increases resulting from the straight-line adjustments
for the year ended December 31, 1997 were $36.
The following tenant accounted for 10% or more of the total rents for
1997:
Safeway. . . . . . . . . . $ 359
The properties are leased to tenants under operating leases with
expiration dates extending to the year 2014. Minimum future base
rentals under noncancelable operating leases as of December 31, 1997
are approximately as follows:
1998 . . . . . . . . . . . . . . . $2,714
1999 . . . . . . . . . . . . . . . . 2,355
2000 . . . . . . . . . . . . . . . . 2,198
2001 . . . . . . . . . . . . . . . . 1,749
2002 . . . . . . . . . .. . . . . . 1,331
2003 and thereafter . . .. . 4,921
-----
$15,268
F-5
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<TABLE>
For three months ended March 31, 1998
<S> <C> <C> <C> <C>
Acquired
Historical Properties Adjustments Pro Forma
(A) (unaudited)
Revenue:
Minimum rents $12,928 $347 $ $13,275
Tenant reimbursements 3,088 76 - 3,164
Percentage rents 396 31 - 427
Other income 228 (2) - 226
------- ---------- -------- ---------
Total revenues 16,640 452 - 17,092
------ -------- -------- -------
Expenses:
Property operating
and maintenance 4,143 82 11 (C) 4,236
General and administrative 837 - - 837
Interest 4,851 165 (D) 5,016
Depreciation and
amortization 3,265 - 93 (E) 3,358
------ --------- -------- --------
Total expenses 13,096 82 269 13,447
------ -------- ------- -------
Income before gain on sale
of properties, income from
Management Company,extraordinary
item, minority interest and
distribution to Preferred
Stockholders 3,544 370 (269) 3,645
Gain on sale of properties 1,683 - - 1,683
Income from Management Company 280 - - 280
------ -------- --------- -------
Income before extraordinary item,
minority interest and distributions
to Preferred Stockholders 5,507 370 (269) 5,608
Extraordinary item - loss on early
extinguishment of debt (358) - - (358)
-------- ---------- --------- ---------
Income before minority interest and
distributions to Preferred
Stockholders 5,149 370 (269) 5,250
Income allocated to minority interest(1,065) - 46 (F) (1,019)
------- ---------- ------- --------
Income before distributions to
Preferred Stockholders 4,084 370 (223) 4,231
Distributions to Preferred
Stockholders (1,410) - - (1,410)
------- ---------- ----------- --------
Income allocated to Common
Stockholders $2,674 $370 ($223) $2,821
========= ======= ======== ========
Earnings per Common Share - Basic
Income before extraordinary item $0.41 $0.43
Extraordinary item (0.05) (0.05)
----------- -----------
Net income $0.36 $0.38
========== ==========
Earnings per Common Share - Diluted
Income before extraordinary item $0.41 $0.43
Extraordinary item (0.05) (0.05)
---------- ----------
Net income $0.36 $0.38
========= ==========
Shares of Common Stock,
in thousands - Basic 7,380 7,380
Dilutive effect of employee
stock option 101 101
---------- -----------
Shares of Common Stock,
in thousands - Diluted 7,481 7,481
========= ==========
</TABLE>
The accompanying notes and management assumptions are an integral part of these
consolidated pro forma financial statements.
F-6
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<TABLE>
Year Ending December 31, 1997
<S> <C> <C> <C> <C>
Acquired Other
Historical Properties Adjustments Pro Forma
(B) (unaudited)
Revenues:
Minimum rents $43,857 $2,694 $ - $46,551
Tenant reimbursements 9,506 630 - 10,136
Percentage rents 1,060 202 - 1,262
Other income 1,211 5 - 1,216
----- ------ ------ --------
Total revenues 55,634 3,531 - 59,165
------ ------- ------ -------
Expenses:
Property operating and
maintenance 13,522 661 87 (C) 14,270
General and administrative 3,363 - - 3,363
Interest 18,416 - 1,239 (D) 19,655
Depreciation and amortization 11,172 - 686 (E) 11,858
------ ------- ------ --------
Total expenses 46,473 661 2,012 49,146
------ -------- ------ --------
Income before gain on sale of
properties, income from
Management Company, extraordinary
item, minority interest and
distributions to Preferred
Stockholders 9,161 2,870 (2,012) 10,019
Gain on sale of properties 549 - - 549
Income from Management Company 433 - - 433
------ ------- ------ --------
Income before extraordinary item,
minority interest and distributions
to Preferred Stockholders 10,143 2,870 (2,012) 11,001
Extraordinary item - Loss on
early extinguishment of debt (954) - - (954)
--------- ------- -------- --------
Income before minority interest
and distributions
to Preferred Stockholders 9,189 2,870 (2,012) 10,047
Income allocated to minority interest (1,579) - (178) (F) (1,757)
--------- -------- ------- --------
Income before distributions to
Preferred Stockholders 7,610 2,870 (2,190) 8,290
Distributions to Preferred
Stockholders (5,641) - - (5,641)
--------- -------- ------- --------
Income allocated to Common
Stockholders $1,969 $2,870 ($2,190) $2,649
======= ======= ======== =======
Earnings per Common Share - Basic
Income before extraordinary item $0.52 $0.64
Extraordinary item (0.17) (0.17)
------ --------
Net income $0.35 $0.47
====== ======
Earnings per Common Share - Diluted
Income before extraordinary item $0.51 $0.63
Extraordinary item (0.17) (0.17)
------- --------
Net income $0.34 $0.46
====== ======
Shares of Common Stock,
in thousands - Basic 5,663 5,663
Dilutive effect of employee
stock options 67 67
------- --------
Shares of Common Stock,
in thousands - Diluted 5,730 5,730
===== ======
</TABLE>
The accompanying notes and management assumptions are an integral part of
these consolidated pro forma financial statements.
F-7
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
1. Basis of Presentation:
The accompanying unaudited Pro Forma Consolidated Statements of
Operations are presented as if:
(i) For the year ending December 31, 1997, a substantial majority
of properties acquired in 1998, i.e., Bowie Plaza and Watkins
Park Plaza (together the "Acquired Properties") had been
consummated as of January 1, 1997;
(ii)For the three months ending March 31, 1998, a substantial
majority of the properties acquired in 1998, i.e., Bowie Plaza
and Watkins Park Plaza (together the "Acquired Properties")
had been consumated as of January 1, 1998.
These pro forma consolidated financial statements should be read in
conjunction with the historical financial statements and notes thereto.
In management's opinion, all adjustments necessary to reflect the
effects of the acquisition of the Acquired Properties have been made.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of what the actual results of operations of the
Company would have been assuming the acquisition of the Acquired
Properties had been completed as of January 1, 1997, nor are they
indicative of the results of operations for future periods.
F-8
<PAGE>
2 Adjustments to Pro Forma Consolidated Statement of Operations:
(A) Reflects operations of the Acquired Properties prior to their
acquisition by the company for the three months ended March
31, 1998.
(B) Reflects the historical 1997 operations of the Acquired
Properties.
(C) Reflects the net increase in property operating maintenance
costs relating to management fees to be incurred.
(D) Reflects the increase in interest expense relating to the
Mortgage Notes and line of credit draws used to finance the
acquisition of the Acquired Properties.
(E) Reflects the increase in depreciation and amortization.
Depreciation is calculated using the straight-line method over
31.5 years. It is assumed that 80% of the acquisition cost
basis is allocated to the building.
(F) Reflects limited partner's interest in the Operating
Partnership as follows:
Three Months
Ended Year Ended
March 31, 1998 Dec 31, 1997
<TABLE>
<S> <C> <C>
Pro forma income before
distributions and minority interest $5,250 $10,047
====== =======
Less: Distributions to Preferred
Stockholders $1,410 $5,641
Less: Distributions to Preferred
Unitholders 262 1,046
-------- ---------
Income available to Common Shareholders $3,578 $3,360
====== ======
Income allocated to common
minority interest (21.2%) $757 $711
======= =======
Total income allocated to
minority interest $1,019 $1,757
====== ======
</TABLE>
F-9
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
First Washington Realty Trust, Inc. and Subsidiaries on Form S-3 (File No.
333-24017) of our report dated June 25, 1998, on our audit of the combined
Statement of Revenues and Certain Expenses for the Acquired Properties (as
defined in footnote No. 1 of that statement) for the year ended December 31,
1997, which report is included in this Form 8-K/A.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
June 26, 1998
F-10
<PAGE>
