UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 1, 1998
Price Enterprises, Inc.
(Exact name of registrant as specified in charter)
Maryland 0-20449 33-0628740
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
4649 Morena Blvd., San Diego, California 92117
(Address of Principal Executive Offices) (Zip Code)
(619) 581-4600
(Registrant's Telephone Number, Including Area Code)
None
(Former name or former address, if changed since last report.)
<PAGE>
Price Enterprises, Inc. hereby amends Item 7 of its Current Report on Form 8-K
filed with the Securities and Exchange Commission on June 18, 1998 to file the
(i) audited statements of revenue over specific operating expenses for the
office complex described therein, (ii) unaudited pro forma financial
information, and (iii) consent of independent auditors.
Item 7. Financial Statements and Exhibits
(a) Financial Statement of Real Estate Property Acquired
Sacramento Office Complex
o Report of Independent Auditors
o Statements of Revenue Over Specific Operating Expenses
o Notes to Statements of Revenue Over Specific Operating Expenses
(b) Pro Forma Financial Information
o Price Enterprises, Inc. Pro Forma Balance Sheet as of March 31,
1998
o Price Enterprises, Inc. Pro Forma Statement of Income for the
year ended December 31, 1997
o Price Enterprises, Inc. Pro Forma Statement of Income for the
three months ended March 31, 1998
(c) Exhibits
The following exhibits are filed with this report on Form 8-K.
23.1 Consent of Independent Auditors
99.1 Audited Statements of Revenue Over Specific Operating Expenses of the
Sacramento Office Complex for the Year Ended December 31, 1997 and the
Period from August 15, 1996 through December 31, 1996.
99.2 Unaudited Pro Forma Balance Sheet as of March 31, 1998
99.3 Unaudited Pro Forma Statement of Income for the Year Ended December 31,
1997
99.4 Unaudited Pro Forma Statement of Income for the Three Months Ended March
31, 1998
1
<PAGE>
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.
Price Enterprises, Inc.
(Registrant)
Date: July 28, 1998 By: /s/ Jack McGrory
---------------------------------
Jack McGrory
President and Chief Executive Officer
2
<PAGE>
Exhibit Index
Exhibit No. Description
- ----------- -----------
23.1 Consent of Independent Auditors
99.1 Audited Statements of Revenue Over Specific Operating
Expenses of the Sacramento Office Complex for the Year Ended
December 31, 1997 and the Period from August 15, 1996
through December 31, 1996.
99.2 Unaudited Pro Forma Balance Sheet as of March 31, 1998
99.3 Unaudited Pro Forma Statement of Income for the Year Ended
December 31, 1997
99.4 Unaudited Pro Forma Statement of Income for the Three Months
Ended March 31, 1998
3
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-60999 and Form S-3 No. 333-50521 and related Prospectus) of
Price Enterprises, Inc. pertaining to the Price Enterprises' 1995 Combined Stock
Grant and Stock Option Plan and the Price Enterprises Directors' 1995 Option
Plan and for the registration of 1,500,000 shares of common stock, respectively,
of our report dated June 24, 1998, with respect to the statements of revenue
over specific operating expenses of the Sacramento Office Complex of Price
Enterprises, Inc. included in its Current Report on Amendment No. 1 to Form 8-K
dated May 1, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Diego, California
July 28, 1998
4
EXHIBIT 99.1
Report of Independent Auditors
The Board of Directors and Stockholders
Price Enterprises, Inc.
We have audited the accompanying statements of revenue over specific operating
expenses of the Sacramento Office Complex (the "Complex") for the year ended
December 31, 1997 and the period from August 15, 1996 through December 31, 1996.
The statements are the responsibility of the Complex's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements are 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 basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audits provide a reasonable basis for our opinion.
The accompanying statements of revenue over specific operating 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 of Price
Enterprises, Inc. as described in Note 2, and is not intended to be a complete
presentation of the Complex's revenue and expenses.
In our opinion, the statements of revenue over specific operating expenses
referred to above present fairly, in all material respects, the revenue over
specific operating expenses of the Complex, as described in Note 2, for the year
ended December 31, 1997 and the period from August 15, 1996 through December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Diego, California
June 24, 1998
5
<PAGE>
Sacramento Office Complex
Statements of Revenue Over Specific Operating Expenses
(In Thousands)
<TABLE>
<CAPTION>
Three Months Period from
Ended March 31, Year Ended August 15, 1996
------------------------- December 31, through
1998 1997 1997 December 31, 1996
---------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue
Rental revenues $1,080 $1,076 $4,518 $1,739
Specific Operating Expenses
Operating and maintenance 124 111 499 148
Property taxes 53 51 215 59
------ ------ ------ ------
177 162 714 207
------ ------ ------ ------
Excess of Revenue over Specific
Operating Expenses $ 903 $ 914 $3,804 $1,532
====== ====== ====== ======
</TABLE>
See accompanying notes.
6
<PAGE>
Sacramento Office Complex
Notes to Statements of Revenue Over
Specific Operating Expenses
1. Acquisition and Significant Accounting Policies
Organization
Price Enterprises, Inc. (the "Company") acquired the Sacramento Office Complex
(the "Complex") on May 1, 1998 from Ivanhoe-Bradshaw L.L.C.
("Ivanhoe-Bradshaw"), a California limited liability company controlled by Sol
Price. Sol Price is a significant stockholder of the Company and the father of
Robert E. Price, the Company's Chairman of the Board. Sol Price acquired his
interest in Ivanhoe-Bradshaw on August 15, 1996. The Complex is a four building,
300,000 rentable square-foot office complex located in Sacramento, California
which was completed and commenced operations in 1995.
Rental Income
Rental income is recorded on a straight-line basis over the lives of the tenant
leases.
Use of Estimates
The preparation of the Complex's statements of revenue over specific operating
expenses requires management to make estimates and assumptions that affect the
reported amounts of revenue and specific operating expenses during the reporting
period. Due to uncertainties inherent in the estimation process, it is possible
that actual results could differ from these estimates.
2. Basis of Presentation
The statements of revenue over specific operating 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 of Price Enterprises, Inc. and
are not intended to be a complete presentation of the Complex's revenue and
expenses. The statements of revenue over specific operating expenses exclude
depreciation, amortization and certain other expenses of the Complex which are
not comparable with the future operations of the Complex.
In the opinion of management, the unaudited financial information contains all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the statements of revenue over specific operating expenses
of the Complex.
Property taxes have not been adjusted to reflect the estimated reassessed value
of the Complex after acquisition by the Company.
7
<PAGE>
Sacramento Office Complex
Notes to Statements of Revenue Over
Specific Operating Expenses
(continued)
2. Basis of Presentation (continued)
The statements contain no provision for income taxes because the Company intends
to qualify as a real estate investment trust ("REIT") under both Federal and
state statutes. A REIT is not taxed on income distributed to its stockholders,
and the Company plans to distribute substantially all of its taxable income to
its stockholders.
3. Rental Income
The Complex is leased to tenants under noncancellable operating leases with
remaining terms ranging from eight to 16 years. The leases contain provisions
for predetermined fixed increases in rent and require the tenants to reimburse
the owner for substantially all operating expenses in excess of the base year
operating expenses of the property.
Future minimum rental income due under the terms of the operating leases is as
follows (in thousands):
1998 $ 4,292
1999 4,483
2000 4,628
2001 4,767
2002 4,905
Thereafter 25,407
The following tenants accounted for greater than 10% of total revenue in 1997
(in thousands):
Revenue
---------
Level One $ 2,155
AT&T Wireless 1,296
AT&T Cellular One 472
8
EXHIBIT 99.2
Price Enterprises, Inc.
Pro Forma Balance Sheet
March 31, 1998
(Unaudited)
The following unaudited pro forma balance sheet has been presented as if the
acquisitions of the Sacramento Office Complex and San Diego Self Storage,
(collectively, the "Properties") occurred on March 31, 1998. The unaudited pro
forma balance sheet should be read in conjunction with the financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998. In management's opinion, all adjustments necessary to
reflect the acquisitions of the Properties and related significant transactions
have been made. The unaudited pro forma condensed balance sheet is not
necessarily indicative of what the actual financial position would have been at
March 31, 1998, nor does it purport to present the future financial position of
the Company.
9
<PAGE>
Price Enterprises, Inc.
Pro Forma Balance Sheet
March 31, 1998
(Unaudited)
The The
Company Pro Forma Company
Historical Adjustments Pro Forma
-------------------------------------
(In Thousands)
Assets
Real estate assets, net $ 352,006 $ 53,301 (a) $ 405,307
Other assets 57,386 (23,776)(a) 33,610
--------- --------- ---------
$ 409,392 $ 29,525 $ 438,917
========= ========= =========
Liabilities and Stockholders' Equity
Liabilities $ 3,066 $ 29,525 (a) $ 32,591
Stockholders' Equity 406,326 -- 406,326
--------- --------- ---------
$ 409,392 29,525 $ 438,917
========= ========= =========
See accompanying pro forma adjustments.
10
<PAGE>
Price Enterprises, Inc.
Pro Forma Adjustments to Balance Sheet
March 31, 1998
(Unaudited)
(a) Record the acquisitions of the Properties from operating cash, draws from
the Company's unsecured line of credit and assumption of secured loan as
follows:
<TABLE>
<CAPTION>
Paid from
--------------------------------
Acquisition Line of Loan
Date Property Name Cost Cash Credit Assumed
- ----------- ------------------------- ---- ---- ------ -------
(In Thousands)
1998
----
<S> <C> <C> <C> <C>
May 1 Sacramento Office Complex $35,551 $20,976 $14,575 $ --
May 26 San Diego Self Storage 17,750 2,800 6,000 8,950
------- ------- ------- ------
$53,301 $23,776 $20,575 $8,950
======= ======= ======= ======
</TABLE>
11
EXHIBIT 99.3
Price Enterprises, Inc.
Pro Forma Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
The following unaudited pro forma statement of income for the year ended
December 31, 1997 has been presented as if the Sacramento Office Complex and San
Diego Self Storage (collectively, the "Properties") were acquired on January 1,
1997. The unaudited pro forma statement of income should be read in conjunction
with the Company's Transition Report on Form 10-K for the period from September
1, 1997 to December 31, 1997. In management's opinion, all adjustments necessary
to reflect the above acquisitions and related significant transactions have been
made. The unaudited pro forma statement of income is not necessarily indicative
of what actual results of operations would have been had the acquisitions and
related transactions actually occurred as of January 1, 1997, nor does it
purport to represent the results of operations of the Company for future
periods.
12
<PAGE>
Price Enterprises, Inc.
Pro Forma Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------------------------------------------
The Sacramento San Diego The
Company Office Self Company
Historical Complex Storage Pro Forma
---------- ------------ --------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Rental revenues $ 56,070 $ 4,518 (a) $ 1,814 (a) $ 62,402
Expenses:
Operating and maintenance 8,009 499 (b) 280 (b) 8,788
Property taxes 7,455 215 (c) 78 (c) 7,748
Depreciation and amortization 9,887 1,536 (d) 454 (d) 11,877
General and administrative 5,428 -- -- 5,428
Provision for asset impairments 2,000 -- -- 2,000
-------- -------- -------- --------
32,779 2,250 812 35,841
-------- -------- -------- --------
Operating income 23,291 2,268 1,002 26,561
Interest and other income 6,075 -- -- 6,075
Interest expense -- (987)(e) (1,212)(e)(f) (2,199)
-------- -------- -------- --------
Income (loss) before provision
for income taxes 29,366 1,281 (210) 30,437
Provision for income taxes 361 -- -- 361
-------- -------- -------- --------
Net income (loss) from continu
-ing operations 29,005 1,281 (210) 30,076
Discontinued operations (1,625) -- -- (1,625)
-------- -------- -------- --------
Net income (loss) $ 27,380 $ 1,281 $ (210) $ 28,451
======== ======== ======== ========
Net income per share from continuing operations
Basic $ 1.24 $ 1.28
Diluted $ 1.23 $ 1.28
Net income per share
Basic $ 1.17 $ 1.21
Diluted $ 1.17 $ 1.21
Weighted average number of shares outstanding
Basic 23,480 23,480
Diluted 23,497 23,497
</TABLE>
See accompanying pro forma adjustments
13
<PAGE>
Price Enterprises, Inc.
Pro Forma Adjustments to Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
(In Thousands)
(a) Record the rental revenues of the Sacramento Office Complex and San Diego
Self Storage (collectively, the "Properties").
(b) Record the operating and maintenance expenses of the Properties.
(c) Record the property taxes of the Properties.
(d) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as follows:
<TABLE>
<CAPTION>
Sacramento Office San Diego
Complex Self Storage
------------------------- -------------------------
Years Cost Deprec. Cost Deprec.
--------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Land -- $ 2,182 $ -- $ 6,387 $ --
Land improvements 25 1,965 79 2,837 113
Buildings and improvements 25 30,147 1,206 8,526 341
Furniture and equipment 5 1,257 251 -- --
------- ------- ------- -------
$35,551 $1,536 $17,750 $454
======= ======= ======= =======
</TABLE>
(e) Record the additional interest expense resulting from the acquisition of
the Properties with the proceeds from the unsecured line of credit, using
the average interest rate on the unsecured line of credit for the year
ended December 31, 1997 of 6.77%.
(f) Record the additional interest expense resulting from the assumption of the
$8,950 secured loan on San Diego Self Storage. The interest rate on the
loan is 9.0%.
14
EXHIBIT 99.4
Price Enterprises, Inc.
Pro Forma Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
The following unaudited pro forma statement of income for the three months ended
March 31, 1998 has been presented as if the Sacramento Office Complex and San
Diego Self Storage (collectively, the "Properties") were acquired on January 1,
1998. The unaudited pro forma statement of income should be read in conjunction
with the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998. In management's opinion, all adjustments necessary to reflect
the above acquisitions and related significant transactions have been made. The
unaudited pro forma statement of income is not necessarily indicative of what
actual results of operations would have been had the acquisitions and related
transactions actually occurred as of January 1, 1998, nor does it purport to
represent the results of operations of the Company for future periods.
15
<PAGE>
Price Enterprises, Inc.
Pro Forma Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------------------------------------------------
The Sacramento San Diego The
Company Office Self Company
Historical Complex Storage Pro Forma
---------- ------- ------- ---------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Rental revenues $14,486 $ 1,080 (a) $ 497 (a) $ 16,063
Expenses:
Operating and maintenance 1,845 124 (b) 99 (b) 2,068
Property taxes 1,955 53 (c) 19 (c) 2,027
Depreciation and amortization 2,489 384 (d) 113 (d) 2,986
General and administrative 789 -- -- 789
------- ------- ------ --------
7,078 561 231 7,870
------- ------- ------ --------
Operating income 7,408 519 266 8,193
Interest and other income 387 -- -- 387
Interest expense -- (237)(e) (299)(e)(f) (536)
------- ------- ------ --------
Net income (loss) $ 7,795 $ 282 $ (33) $ 8,044
======= ======= ====== ========
Net income per share from continu-
ing operations - basic and diluted $ 0.33 0.34
Net income per share - basic and
diluted $ 0.33 0.34
Weighted average number of shares
outstanding 23,740 23,740
</TABLE>
See accompanying pro forma adjustments.
16
<PAGE>
Price Enterprises, Inc.
Pro Forma Adjustments to Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
(In Thousands)
(a) Record the rental revenues of the Sacramento Office Complex and San Diego
Self Storage (collectively, the "Properties").
(b) Record the operating and maintenance expenses of the Properties.
(c) Record the property taxes of the Properties.
(d) Record the additional depreciation expense to be recognized for the
acquisition of the Properties under the straight-line method as follows:
<TABLE>
<CAPTION>
Sacramento Office San Diego
Complex Self Storage
-------------------- ------------------------
Years Cost Deprec. Cost Deprec.
----- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Land -- $ 2,182 $ -- $ 6,387 $ --
Land improvements 15 1,965 20 2,837 28
Buildings and improvements 25 30,147 301 8,526 85
Furniture and equipment 5 1,257 63 -- --
------- ------- --------- ------
$35,551 $ 384 $ 17,750 $ 113
======= ======= ========= ======
</TABLE>
(e) Record the additional interest expense resulting from the acquisition of
the Properties with the proceeds from the unsecured line of credit, using
the average interest rate on the unsecured line of credit for the three
months ended March 31, 1998 of 6.51%.
(f) Record the additional interest expense resulting from the assumption of the
$8,950 secured loan on San Diego Self Storage. The interest rate on the
loan is 9.0%.
17
