SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A No. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 24, 2000
Date of Report - date of earliest event reported)
Stonehaven Realty Trust
(Exact name of registrant as specified in charter)
Maryland 0-25074 39-6594066
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
2550 University Avenue West, Suite 240 N, St. Paul, Minnesota 55114
(Address of principal executive offices)
(651) 917-5536
(Registrant's telephone number, including area code)
Item 1, items 3 through 6, and Items 8 and 9 are not applicable
and are therefore omitted.
ACQUISITION OF ASSETS
Item 2A.
On February 24, 2000, NTLI Acquisition Corporation, a Delaware
corporation ("Subsidiary") and a wholly-owned subsidiary of
Stonehaven Realty Trust (the "Company") acquired by merger Netlink
International, Inc., a privately held Minnesota corporation which
is an Internet consulting and web development company. Subsidiary,
which is the surviving corporation, was subsequently renamed Netlink
International, Inc. ("Netlink"). The acquisition was accomplished
by exchanging 914,286 of the Company's common shares for all of the
issued and outstanding stock of Netlink valued at $4.375 per share,
or an aggregate of $4.0 million.
The selling shareholders of Netlink were Odeh A. Muhawesh, Mary
Henschel, Alan Schmidt, Ahmid Yassine, Patrick Archbold, Ann K.
Wessels, Art Curruth, Patricia Hewitt, Thomas Walker, and Sherry
Ajax, none of whom had any previous relationship with registrant.
The assets involved were those of a viable, profitable, operating
business including fixed assets, accounts receivable, intellectual
property, contracts and commitments, employees, customers, distributors
and independent sales representatives. An independent valuation of
Netlink was obtained that placed its value near $10 million. The final
exchange rate was negotiated between the parties.
Further by agreement, the Company set aside a pool of options as to
200,000 Common Shares for future award to employees of Netlink. In
connection with the acquisition, the Chief Executive Officer of Netlink,
Odeh A. Muhawesh, was appointed President of the Company and will become
a member of the Board of Trustees of the Company upon the earlier of the
Company's next Annual Meeting of Shareholders or should a vacancy arise
among the current Board of Trustees of the Company; the Chief Financial
Officer, Ann K. Wessels of Netlink, was appointed Chief Financial Officer
of the Company; and the current employment contract of the Company's Chief
Executive Officer, Duane H. Lund, was required to be extended to be
co-terminous with that of the President.
Effective February 24, 2000, the employment contract of the President
provides for an annual base salary of $120,000 and bonus at the discretion
of the Compensation Committee for a two-year period. In addition, the
Company issued to the President options as to 1.0 million Common Shares
at a price of $5.375 per share. The options are exercisable as to 500,000
shares immediately, with options as to 62,500 shares exercisable quarterly,
commencing May 24, 2000. The employment contract of the Chief Executive
Officer provides for an annual base salary of $80,000 and bonus at the
discretion of the Compensation Committee for a two-year period. In addition,
the Company issued to the Chief Executive Officer options as to 666,667 Common
Shares at a price of $6.375 per share. The options are exercisable as to
333,333 shares immediately, with options as to 41,666.75 shares exercisable
quarterly, commencing May 24, 2000.
Item 2B.
On February 29, 2000, the Company through its Operating Partnership,
Wellington Properties Investments, L.P., a Delaware limited partnership
(the "Operating Partnership") of which the Company is the sole general
partner, acquired three commercial real estate properties leased for office
purposes located in suburban Minneapolis, Minnesota (the "Plymouth
Properties"). The three properties totaling approximately 78,500 square feet
are new construction and were 100 percent leased as of February 29, 2000. The
purchase price of $6,716,000,was funded through the issuance of an aggregate of
181,629 limited partnership units ("Units") in the Operating Partnership
(valued at $4.375 per Unit,or an aggregate value of approximately $795,000),
the assumption of certain un-related third-party debt totaling approximately
$4,450,000, collateralized by such properties, with the balance paid in cash.
The properties were purchased from Plymouth Partners II, LLC of which Steven B.
Hoyt is the Chief Manager and co-owner along with his wife Michelle L. Hoyt.
Mr. Hoyt is also a Trustee of Stonehaven Realty Trust.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Report of Independent Accountants on page F-7
Combined statements of revenues and certain operating expenses of the
Plymouth Properties for the year ended December 31, 1999 and period
March 1, 1998 through December 31, 1998 are included on pages F-8 to F-10.
(b) Pro Forma Financial Information.
Pro forma financial information of the Company as of and for the year
ended December 31, 1999 is included on pages F-2 to F-6.
(c) Exhibits:
Exhibit
Number Description
#+*2.2 Agreement and Plan of Reorganization dated as of February 25,
2000, by and among the Company, NTLI Acquisition Corporation,
a Delaware corporation, Netlink International, Inc., a Minnesota
corporation and Odeh A. Muhawesh, Mary Henschel, Alan Schmidt,
Ahmad Yassine, Patrick Archbold, Ann Wessels, Art Carruth, Patricia
Hewitt, Thomas Walker and Sherry Ajax
#2.3 Contribution Agreement between Wellington Properties Trust,
Wellington Properties Investments, LP and Plymouth Partners II,
LLC and the other LP Unit Recipients dated as of February 29, 2000
#**10.1 Agreement of Limited Partnership of Wellington Properties
Investments, L.P. and Wellington Management Corporation dated as of August
31, 1998
23.1 Consent of PricewaterhouseCoopers LLP
#99.1 Text of Press Release dated February 24, 2000
#99.2 Text of Press Release dated March 9, 2000
* Confidential treatment requested as to certain portions of this exhibit.
+ Pursuant to Item 601(b)(2) of Regulation SK, certain exhibits to this
Agreement and Plan of Reorganization have been omitted. Such exhibits will
be submitted to the Securities and Exchange Commission upon request.
**Incorporated herein by reference to Exhibit B of Wellington Properties
Trust Schedule 14A filed November 6, 1998.
# Incorporated herein by reference to same exhibit number of Stonehaven
Realty Trust Form
8-K filed March 5, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 10, 2000.
STONEHAVEN REALTY TRUST
By: /s/ Duane H. Lund
Duane H. Lund
(Chief Executive Officer)
STONEHAVEN REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
I. PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
OF THE COMPANY
Pro Forma Condensed Consolidating Balance Sheet
at December 31, 1999 F-3
Pro Forma Condensed Consolidating Statement of Operations
for the Year Ended December 31, 1999 F-4
Notes and Management's Assumptions to Pro Forma
Condensed Consolidating Financial Information F-5
II. PLYMOUTH PROPERTIES
Report of Independent Accountants F-7
Combined Statements of Revenues and Certain Expenses
For the Year Ended December 31, 1999 and the
Period March 1, 1998 through December 31, 1998 F-8
Notes to Combined Statements of Revenues and Certain Expenses
For the Year Ended December 31, 1999 and the
Period March 1, 1998 through December 31, 1998 F-9
STONEHAVEN REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the unaudited pro forma condensed consolidating
balance sheet of Stonehaven Realty Trust (the "Company") and its consolidated
affiliates, including Wellington Properties Investments, LP (the "Operating
Partnership") as of December 31, 1999, and the unaudited pro forma condensed
consolidating statement of operations for the year ended December 31, 1999.
The pro forma condensed consolidating financial information is presented as
if the following transactions had been consummated on the earlier of the
actual date of consummation or December 31, 1999, for balance sheet purposes,
and at January 1, 1999, for purposes of the statement of operations.
1999 Transactions:
* On November 16, 1999, the Company disposed of Maple Grove Apartments.
2000 Transactions:
* On February 24, 2000, the Company acquired the assets of NETLink
International, Inc., ("Netlink") a privately held Internet consulting and web
development company in exchange for the issuance of 914,286 common shares of
the Company and the assumption of debt in the amount of $1,240,000.
* On February 29, 2000, the Company acquired, through the Operating
Partnership, three commercial real estate properties (the "Plymouth
Properties"). The total purchase price of approximately $6,716,000 was
funded by: (a) the issuance of 181,629 limited partnership units ("Units")
in the Operating Partnership; (b) the assumption of debt aggregating
approximately $4,450,000; and (c) the balance paid in cash.
Stonehaven Realty Trust
Pro Forma Condensed Consolidating Balance Sheet
At December 31, 1999
(Unaudited)
(Dollars in thousands)
Historical Netlink Plymouth Pro Forma
Consolidated Pro Forma Properties Consolidated
Adjustments Adjustments Pro Forma
(A) (B) (C)
Assets
Net investments in real estate $33,787 $- $6,746 $40,533
Cash and cash equivalents 2,893 191 (1,501) 1,583
Marketable securities 5,188 - - 5,188
Accounts receivable 3 431 - 434
Goodwill - 4,499 - 4,499
Other assets 1,215 119 - 1,334
Total assets $43,086 $5,240 $5,245 $53,571
Liabilities and shareholders' equity
Liabilities
Mortgage loans payable $19,291 $- $4,450 $23,741
Other liabilities 1,420 1,240 - 2,660
Total liabilities 20,711 1,240 4,450 26,401
Minority interests 7,836 - 795 8,631
Shareholders' equity
Preferred shares 11 - - 11
Common shares 14 9 - 23
Additional paid in capital 20,765 3,991 - 24,756
Accumulated deficit (6,251) - - (6,251)
Total shareholders'equity 14,539 4,000 - 18,539
Total liabilities and
shareholders' equity $43,086 $5,240 $5,245 $53,571
See accompanying notes and management's assumptions to pro forma financial
statements.
Stonehaven Realty Trust
Pro Forma Condensed Consolidating Statement of Operations
For the Year Ended December 31, 1999
(Unaudited)
(Dollars in thousands, except per share data)
Historical Maple Grove Plymouth Pro Forma Pro Forma
Consolidated Apartments Netlink Properties Adjustments Consolidated
(A) (B) (C) (D)
Revenues:
Consulting
services $- $- $2,161 $- $- $2,161
Hardware sales - - 2,220 - - 2,220
Software development
sales - - 1,417 - - 1,417
Base rents 5,260 (2,381) - 557 - 3,436
Tenant reimbursements
and other 1,636 79 - 140 - 1,855
Total revenues 6,896 (2,302) 5,798 697 - 11,089
Expenses:
Costs of sales - - 4,401 - - 4,401
Property operating 2,718 (919) - 136 - 1,935
Interest 2,557 (917) - - 343 (E) 1,983
Depreciation and
amortization 1,210 (543) - - 1,634 (F) 2,301
Management fees 334 (112) - 35 - 257
General and
administrative 801 (23) 1,219 - - 1,997
Abandoned project
pursuit costs and
termination fees 3,563 - - - - 3,563
Total expenses 11,183 (2,514) 5,620 171 1,977 16,437
Loss from operations
before equity in
income of
unconsolidated
subsidiary and loss
allocated to minority
interests (4,287) 212 178 526 (1,977) (5,348)
Equity in income of
unconsolidated
subsidiary 10 - - - - 10
Loss allocated to
minority interests 2,722 - - - 127 (G) 2,849
Income (loss) from
operations (1,555) 212 178 526 (1,850) (2,489)
Earnings per share:
Basic and Diluted (1.14) (1.09)
Weighted average number
of shares:
Basic and Diluted 1,361,309 2,275,595
See accompanying notes and management's assumptions to pro forma financial
statements
STONEHAVEN REALTY TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
PRO FORMA CONDENSED CONSOLIDATING
FINANCIAL INFORMATION
(Dollars in thousands, except share/unit and per share/per unit amounts)
1. Basis of Presentation:
Stonehaven Realty Trust (the "Company") is a self-administered Maryland real
estate investment trust. As of December 31, 1999, the Company's portfolio
included one residential and three commercial real estate properties leased
for office purposes. These pro forma condensed consolidating financial
statements should be read in conjunction with the historical financial
statements and notes thereto of the Company and the Plymouth Properties. In
management's opinion, all adjustments necessary to reflect the effects of
the disposition of the Maple Grove apartments, the acquisition of Netlink
and the acquisition of the Plymouth Properties have been made.
2. Adjustments to Pro Forma Condensed Consolidating Balance Sheet:
(A) Reflects the historical consolidated balance sheet of the Company as of
December 31, 1999.
(B) Reflects the acquisition of Netlink in exchange for the issuance of
914,286 Common Shares valued at $4.375 per share, or an aggregate of $4.0
million. The acquisition was accounted for using the purchase method of
accounting. Assets acquired of cash ($191), accounts receivable ($431)
and other ($119), net of liabilities assumed ($1,240), resulted in goodwill
recorded at $4,499.
(C) Reflects the acquisition of the Plymouth Properties plus capitalized
costs of $30 in exchange for: (a) the issuance of 181,629 Units in the
Operating Partnership (valued at $4.375 per Unit, or an aggregate of $795);
(b) the assumption of debt totaling $4,450; and (b) cash payments of
$1,501. The acquisition was accounted for using the purchase method of
accounting.
3. Adjustments to Pro Forma Condensed Consolidating Statement of Operations:
(A) Reflects the historical consolidated operations of the Company.
(B) Reflects the effects of the historical operations of the Maple Grove
Apartments for the period January 1, 1999 through November 16, 1999, the
date of disposition.
(C) Reflects the historical operations of Netlink for the year ended
December 31, 1999.
(D) Reflects the historical operations of the Plymouth Properties for the
year ended December 31, 1999.
(E) Reflects interest expense on the mortgage loans assumed in connection
with the Plymouth Properties at 7.625%
(F) Reflects the increase in pro forma depreciation and amortization expense
as follows:
Amortization of goodwill in connection with the acquisition of Netlink-3
year useful life $1,500
Depreciation of Plymouth Properties' buildings over a 40-year useful
life (allocating 20% to land and 80% to depreciable basis) 134
$1,634
(G) Loss allocated to minority interests has been reflected in accordance
with the Operating Partnership Agreement. Consolidated income or loss is
allocated between the Company and the remaining partners pari passu based
upon total weighted average Common Shares and Units. The adjustments to
record the income (loss) effect in the pro forma statement of operations
was computed as follows:
For the Year
Ended
December 31,
1999
Loss from operations before loss allocated to minority interests $(5,338)
Loss allocated to minority interests based upon pro forma weighted
average common Units of 2,739,336, 2,739,336, 1,900,964 and 1,900,964
for the quarters ended March 31, 1999, June 30, 1999, September 30, 1999
and December 31, 1999, respectively (2,849)
Loss from operations allocated to Common Shareholders based upon pro forma
weighted average Common Shares of 2,263,291, 2,266,178, 2,274,577 and
2,296,867 for the quarters ended March 31, 1999, June 30, 1999, September
30, 1999 and December 31, 1999, respectively $(2,489)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Stonehaven Realty Trust and
Subsidiaries:
We have audited the accompanying combined statements of revenues and certain
expenses of the Plymouth Properties as described in Note 1 for the year ended
December 31, 1999 and the period March 1, 1998 to December 31, 1998. These
financial statements are the responsibility of the Plymouth Properties'
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in accordance with
auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying combined statements of revenues and certain expenses were
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 No. 1
dated February 24, 2000 of Stonehaven Realty Trust and is not intended to be
a complete presentation of the Plymouth Properties' revenues and expenses.
In our opinion, the financial statements referred to above presents fairly,
in all material respects, the revenues and certain expenses, described in
Note 1, of the Plymouth Properties for the year ended December 31, 1999 and
the period March 31, 1998 to December 31, 1998 in conformity with accounting
principles generally accepted in the United States.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
May 5, 2000
PLYMOUTH PROPERTIES
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
For the year ended For the period March 1, 1998 through
December 31, 1999 December 31, 1998
Revenues
Rental revenue $ 556,884 $ 185,559
Tenant recoveries 139,219 22,083
Other 1,434 4,962
Total revenues 697,537 212,604
Certain expenses
Property taxes and insurance 73,429 32,735
Repairs and maintenance 51,621 25,356
Management fees 34,805 10,382
Utilities 11,389 7,277
Total certain expenses 171,244 75,750
Revenues in excess of certain
expenses $ 526,293 $ 136,854
The accompanying notes are an integral part of the financial statements.
PLYMOUTH PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
1. Business
The accompanying combined statements of revenues and certain expenses relate
to the operations of the Plymouth Properties (the "Properties"), consisting
of the revenue and certain expenses of three commercial real estate
properties, leased for office purposes, totaling approximately 79,000 square
feet, located in suburban Minneapolis, Minnesota. The Properties are of new
construction and were placed in service March 1, 1998, September 1, 1998 and
April 1, 1999, respectively. On February 29, 2000, Stonehaven Realty Trust
(the "Company") acquired the Properties for an aggregate purchase price of
approximately $6,716,000. The properties were purchased from Plymouth
Partners II, LLC of which Steven B. Hoyt, a Trustee of the Company,
is the Chief Manager and co-owner.
2. Summary of Significant Accounting Policies
Basis of Presentation:
The accompanying combined statements of revenues and certain expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission in connection with the Company's
acquisition of the Properties. The statements are not representative of the
actual operations of the Properties for the periods presented nor indicative
of future operations as certain expenses, primarily depreciation, amortization
and interest expense, which may not be comparable to the expenses expected to
be incurred by the Company in future operations of the Properties, have
been excluded.
Revenues and Expense Recognition:
Rental revenue is recognized on a straight-line basis over the terms of the
related lease. Tenant recoveries and expenses are recognized in the period
in which they are incurred.
Use of Estimates:
Preparation of these statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and certain expenses during
each reporting period. Actual results may differ from these estimates.
PLYMOUTH PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(Continued)
Major Tenants:
For the year ended December 31, 1999, approximately 89% of the Properties'
total rental revenue was earned from three tenants, each of which
represented, individually, 40%, 28% and 21% of the total rental revenue.
Rental revenue earned from these three tenants for the year ended December
31, 1999 was approximately $221,000, 157,000 and $116,000, respectively.
During the period March 1, 1998 through December 31, 1998, approximately 92% of
the Properties' total rental revenue was earned from two tenants, each of
which represented , individually 52% and 40% of the total rental revenue.
Rental revenue earned from these two tenants for the period March 1, 1998
through December 31, 1998 was approximately $96,000 and $74,000,
respectively.
3. Rentals
Commercial space of the Properties is leased to individual and corporate
tenants. The leases expire at various times through 2009. The following is
a schedule by year of noncancelable future minimum rental income under such
operating leases.
Year Ending December 31,
2000 $ 642,083
2001 642,083
2002 642,083
2003 549,395
2004 322,455
Thereafter 432,234
The total minimum future rentals presented above do not include amounts that
may be received as tenant reimbursements.
4. Related Party Transaction
Plymouth Partners II, LLC had entered into property management agreements
with Hoyt Properties Inc., an entity controlled by Steven B. Hoyt, to serve as
the property manager of the Properties. The property manager manages the day
to day operations of the Properties and receives a management fee for this
service. Under this agreement, management fees were $34,805 for the year
ended December 31, 1999 and $10,382 for the period March 1, 1998 through
December 31, 1998.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Form 8-K/A No.1 dated February 24, 2000 of
our report dated May 5, 2000, on our audits of the combined statements of
revenues and certain expenses of the Plymouth Properties.
PricewaterhouseCoopers LLP
Chicago, Illinois
May 10, 2000
