<PAGE>
FORM 10-K/A
AMENDMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 1-14166
MERIDIAN INDUSTRIAL TRUST, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 94-3224765
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
455 MARKET STREET
17TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 281-3900
------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $0.001 PER NEW YORK STOCK EXCHANGE
SHARE WARRANTS TO PURCHASE COMMON AMERICAN STOCK EXCHANGE
STOCK
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 3, 1997 was $188,489,238, computed by reference to the
closing sales price of the common stock reported on the New York Stock Exchange
and by excluding Common Stock and Series B Preferred Stock owned by directors,
executive officers and principal shareholders (i.e., holders of 5% or more of
the registrant's voting stock).
The registrant had 13,596,370 shares of Common Stock outstanding on March
3, 1997.
<PAGE>
The purpose of this Form 10-K/A is to amend the Company's Form 10-K and
Form 10-K/A No. 1 for the year ended December 31, 1996 to include the historical
combined financial statements of the Merged Trusts for the period from January
1, 1996 to February 23, 1996 and for each of the three years in the period ended
December 31, 1995. The Merged Trusts consist of Meridian Point Realty Trust
IV Co., Meridian Point Realty Trust VI Co. and Meridian Point Realty Trust VII
Co. which were merged into the Company on February 23, 1996.
- 1 -
<PAGE>
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PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 16, 1997.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 16, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 16, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual stockholders' meeting to be
held on May 16, 1997.
- 2 -
<PAGE>
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PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS. The following Company financial statements are
filed as part of this report:
PAGE
----
MERIDIAN INDUSTRIAL TRUST, INC.
Report of Independent Public Accountants. . . . . . . . . . . .F-1
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Operations . . . . . . . . . . . . .F-3
Consolidated Statements of Stockholders' Equity (Deficit) . . .F-4
Consolidated Statements of Cash Flows . . . . . . . . . . . . .F-5
Notes to Consolidated Financial Statements. . . . . . . . . . .F-6
MERGED TRUSTS
Report of Independent Public Accountants. . . . . . . . . . . .F-23
Historical Combined Balance Sheets. . . . . . . . . . . . . . .F-24
Historical Combined Statements of Operations. . . . . . . . . .F-25
Historical Combined Statements of Stockholders' Equity. . . . .F-26
Historical Combined Statements of Cash Flows. . . . . . . . . .F-27
Notes to Historical Combined Financial Statements . . . . . . .F-29
(a) (2) FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules are filed as part of this report:
PAGE
----
MERIDIAN INDUSTRIAL TRUST, INC.
Valuation and Qualifying Accounts . . . . . . . . . . . . . . .F-17
Real Estate and Accumulated Depreciation. . . . . . . . . . . .F-18
MERGED TRUSTS
Historical Combined Valuation and Qualifying Accounts . . . . .F-39
Historical Combined Real Estate and Accumulated Depreciation. .F-40
(a) (3) EXHIBITS.
NO. DESCRIPTION
- --- -----------
2.1(1) Amended and Restated Agreement and Plan of Merger among the Trusts and
the Company dated as of November 10, 1995.
2.2(1) Amended and Restated Asset Purchase Agreement between Trust 83 and the
Company dated as of November 10, 1995.
3.1(2) The Company's Third Amended and Restated Articles of Incorporation.
3.2(2) The Company's Second Amended and Restated Bylaws.
4.1(2) Specimen share certificate. (See also restrictions contained in
Exhibits 3.1 and 3.2)
10.1(2) Amended and Restated Employee and Director Incentive Stock Plan of the
Company.
- 3 -
<PAGE>
10.2(3) First Amendment to Amended and Restated Employee and Director
Incentive Stock Plan of the Company.
10.3(1) MPP Agreement among MPP, the Company, Milton K. Reeder, Sierra Real
Estate Equity Trust 84 Co. and the Trusts dated as of May 31, 1995.
10.4(2) Amendment No. 1 to MPP Agreement among MPP, the Company, Milton K.
Reeder, Sierra Real Estate Equity Trust 84 Co. and the Trusts dated
February 22, 1996.
10.5(2) MPP Termination Agreement among MPP, the Company and Meridian Point
Realty Trust VIII Co. dated February 22, 1996.
10.6(2) Amended and Restated Investor Rights Agreement among the Company,
Hunt, USAA, Trust 83, Ameritech and OTR dated as of February 23, 1996.
10.7(2) Amended and Restated Excepted Holder Agreement between the Company and
Hunt dated as of February 23, 1996.
10.8(2) Amended and Restated Excepted Holder Agreement between the Company and
USAA dated as of February 23, 1996.
10.9(2) Excepted Holder Agreement between the Company and Ameritech dated as
of February 23, 1996.
10.10(2) Excepted Holder Agreement between the Company and OTR dated as of
February 23, 1996.
10.11(1) Amended and Restated Stockholders' Agreement among the Company, the
Trusts, USAA, Allen J. Anderson, C.E. Cornutt, Peter O. Hanson, Robert
E. Morgan, John S. Moody, James M. Pollak, Kenneth N. Stensby and Lee
W. Wilson dated as of November 10, 1995.
10.12(2) Warrant Agreement between the Company and the First Chicago Trust
Company of New York dated as of February 23, 1996.
10.13(1) Form of Indemnification Agreement signed by the Company and certain
directors, officers, employees and agents of the Company.
10.14(1) Stock Purchase Agreement among the Company, Ameritech and OTR dated as
of December 20, 1995.
10.15(3) First Amended and Restated Revolving Credit Agreement dated March
19,1996 among the Company, The First National Bank of Boston, Texas
Commerce Bank National Association, and Nationsbank of Texas, NA.
10.16(2) Guaranty of payment and performance by DFW Nine in connection with the
Revolving Credit Agreement among the Company, The First National Bank
of Boston, Texas Commercial Bank National Association and Nationsbank
of Texas, N.A. dated February, 1996.
10.17(3) Amended and Restated Loan Administration Agreement between The
Prudential Insurance Company of America and the Company, IndTennco
Limited Partnership, Metro-Sierra Limited Partnership, and Progress
Center/Alabama Limited Partnership dated as of February 23, 1996.
10.18(2) Agreement of Limited Partnership of DFW Nine dated April 15, 1987.
10.19(2) Amendment No. 1 to Agreement of Limited Partnership of DFW Nine dated
June 1, 1987.
10.20(2) Assignment of General Partnership Interests and Agreement regarding
DFW Nine dated February, 1996.
- 4 -
<PAGE>
10.21(3) Assignment of Limited Partnership Interest in MIT Unsecured L.P.
(formerly known as DFW Nine) dated December 31, 1996.
10.22(2) Agreement of Limited Partnership of Progress Center/Alabama Limited
Partnership dated December 3, 1987.
10.23(2) First Amendment to Agreement of Limited Partnership of Progress
Center/Alabama Limited Partnership dated June 29, 1990.
10.24(3) Assignment of Limited Partnership Interest in MIT Secured L.P.
(formerly known as Progress Center/Alabama Limited Partnership) dated
December 31, 1996.
10.25(1) Consulting Agreement among the Trusts, Hunt Realty Corporation and the
Company effective as of January 1, 1995.
10.26(1) Form of employment letters signed by the Company and, respectively,
Allen J. Anderson, Milton K. Reeder, Dennis D. Higgs, Jaime Suarez and
Robert A. Dobbin, each dated November 14, 1995, together with summary
of economic terms for each such employment letter.
10.27(2) Employment letter signed by Celeste Woo dated November 14, 1996.
10.28(2) Employment letter signed by Peter Harmon dated January 30, 1996.
10.29(2) Form of Incentive Stock Option Agreement to be signed by the Company
and certain officers and employees participating in the Company's
Stock Plan.
10.30(2) Form of Nonstatutory Stock Option Agreements to be signed by the
Company and certain directors, officers, employees and agents
participating in the Company's Stock Plan.
10.31(2) Form of Nonstatutory Stock Option Agreement to purchase shares of the
Company's Common Stock at $12.00 per share signed by Messrs. Anderson
(100,000 shares), Reeder (20,000 shares), Higgs (45,000 shares), Keith
(15,000 shares), Suarez (10,000 shares) and Dobbin (1,400 shares).
10.32(2) Stock Purchase Agreement among Meridian Industrial Trust, Inc. and
Messrs. Anderson, Reeder, Higgs, Keith, Suarez and Dobbin.
10.33(2) Form of Promissory Note used in connection with the purchase the
Company's Common Stock signed by Messrs. Anderson ($200,000), Reeder
($40,000), Higgs ($90,000), Keith ($30,000) and Suarez ($20,000).
10.34(2) Note Purchase Agreement between the Company and The First National
Bank of Boston dated as of February 13, 1996.
10.35(2) Security Agreement and Assignment of Account to The First National
Bank of Boston from the Company dated February 13, 1996.
10.36(1) Option Agreement between the Company and USAA Real Estate Company
dated as of November 21, 1995, including the form of USAA Warrant
attached.
10.37(2) Warrant issued to USAA to purchase Common Stock of the Company dated
February 23, 1996.
10.38(2) The Company's Dividend Reinvestment Plan.
21.1(2) Subsidiaries of the Company.
23.1(3) Consent of Independent Public Accountants
- 5 -
<PAGE>
27.1(3) Financial Data Schedule
- --------------------------------------------
(1) Filed with the Company's Registration Statement No. 333-00018 on January 3,
1996, and incorporated herein by reference.
(2) Filed with the Company's Amendment No. 1 to Registration Statement No.
333-02322 on March 25, 1996, and incorporated herein by reference.
(3) Filed with this Report.
(b) REPORTS ON FORM 8-K.
The following Form 8-K reports were filed during the quarter ended December
31, 1996:
Forms 8-KA Amendment No. 1 to the Company's Current Report on Form 8-K
dated September 30, 1996 (this Form 8-KA was filed on December 13, 1996).
(c) The exhibits listed in Item 14(a)(3) above are submitted as part of this
report.
(d) The financial statement schedules listed in Item 14(a)(2) above are
submitted as part of this report.
- 6 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: April 7, 1997 MERIDIAN INDUSTRIAL TRUST, INC.
By: /s/ Allen J. Anderson
---------------------------------------
Allen J. Anderson
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Allen J. Anderson Dated: April 7, 1997
- ------------------------------
Allen J. Anderson
Chairman, Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ Milton K. Reeder Dated: April 7, 1997
- ------------------------------
Milton K. Reeder
President and Chief Financial Officer
(Principal Financial Officer)
/s/ James Suarez Dated: April 7, 1997
- ------------------------------
James Suarez
Treasurer and Controller
(Principal Accounting Officer)
Dated: April 7, 1997
- ------------------------------
C.E. "Doc" Cornutt
Director
/s/ T. Patrick Duncan Dated: April 7, 1997
- ------------------------------
T. Patrick Duncan
Director
- 7 -
<PAGE>
Dated: April 7, 1997
- ------------------------------
Peter O. Hanson
Director
Dated: April 7, 1997
- ------------------------------
John S. Moody
Director
/s/ James M. Pollak Dated: April 7, 1997
- ------------------------------
James M. Pollak
Director
/s/ Kenneth N. Stensby Dated: April 7, 1997
- ------------------------------
Kenneth N. Stensby
Director
/s/ Lee W. Wilson Dated: April 7, 1997
- ------------------------------
Lee W. Wilson
Director
- 8 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Stockholders and Board of Directors
of Meridian Industrial Trust, Inc.:
We have audited the accompanying historical combined balance sheets of the
Merged Trusts, as defined in Note 1, as of December 31, 1995 and 1994, and the
related historical combined statements of operations, stockholders' equity and
cash flows for the period from January 1, 1996 to February 23, 1996, and for
each of the three years in the period ended December 31, 1995. These financial
statements and the schedules referred to below are the responsibility of the
Merged Trusts' management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the historical combined financial position of the Merged
Trusts as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the period from January 1, 1996 to February 23, 1996, and for
each of the three years ended December 31, 1995, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of historical combined
valuation and qualifying accounts and historical combined real estate and
accumulated depreciation are presented for the purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
San Francisco, California
May 27, 1996
F-23
<PAGE>
THE MERGED TRUSTS
HISTORICAL COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Rental Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,121 $ 262,779
Less: Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . (52,905) (47,799)
---------- ----------
217,216 214,980
Rental Property Held For Sale, Net of Accumulated Depreciation of
$2,327 at December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . -- 11,239
---------- ----------
217,216 226,219
---------- ----------
OTHER ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . 11,842 15,721
Cash Held in Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212 --
Restricted Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,551 --
Accounts Receivable, Net of Reserves of $903 and $782 at December 31,
1995 and 1994, respectively. . . . . . . . . . . . . . . . . . . . . . . . 1,944 1,882
Notes Receivable From Affiliates . . . . . . . . . . . . . . . . . . . . . . 1,470 720
Investment in Real Estate Investment Trust . . . . . . . . . . . . . . . . . 921 --
Personal Property, Net of Accumulated Depreciation of $1,542 and
$1,400 at December 31, 1995 and 1994, respectively . . . . . . . . . . . . 174 213
Capitalized Loan Fees, Lease Commissions and Other Assets, Net . . . . . . . 6,829 6,231
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 247,159 $ 250,986
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Long-Term Debt Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,599 $ 124,971
Mortgage Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,429 12,172
Bridge Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,700 --
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,963 4,339
Due To Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 469
Prepaid Rent, Tenant Deposits and Other Liabilities. . . . . . . . . . . . . 1,845 1,647
---------- ----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . 116,100 143,598
---------- ----------
Shares of Common and Preferred Stock with certain redemption rights;
par value of $0.001, 9,421,955 shares issued and outstanding at
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,684 --
---------- ----------
STOCKHOLDERS' EQUITY:
Authorized Shares:
150,000,000 shares of Common Stock and Preferred Stock authorized,
each with par value of $0.001; 14,725,328 Common Shares and
10,210,077 Preferred shares issued and outstanding at December 31,
1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 25
Additional Paid-In Capital . . . . . . . . . . . . . . . . . . . . . . . . . 225,100 225,100
Distributions in Excess of Income. . . . . . . . . . . . . . . . . . . . . . (118,750) (117,737)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 106,375 107,388
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . $ 247,159 $ 250,986
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
THE MERGED TRUSTS
HISTORICAL COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1,
1996 TO
FEBRUARY 23,
1996 1995 1994 1993
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments . . . . . . . . $ 4,997 $ 33,583 $ 34,018 $ 34,442
Interest and Other . . . . . . . . . . . . . . . . . 161 1,014 804 582
-------- --------- --------- ---------
TOTAL REVENUES . . . . . . . . . . . . . . 5,158 34,597 34,822 35,024
-------- --------- --------- ---------
EXPENSES:
Interest Expense and Amortization of Debt
Premium. . . . . . . . . . . . . . . . . . . . . . 1,506 10,005 12,117 12,949
Property Taxes . . . . . . . . . . . . . . . . . . . 812 4,971 5,231 5,285
Property Operating Costs, Including Transactions
with Related Parties of $326, $1,367, $1,486
and $1,857, respectively . . . . . . . . . . . . . 912 5,761 5,895 6,379
Legal Costs. . . . . . . . . . . . . . . . . . . . . 7 70 462 418
General and Administrative, Including
Transactions with Related Parties of $193,
$1,696, $1,426 and $1,161, respectively. . . . . . 1,155 2,942 2,958 2,477
Adjustment Due To Tenant Bankruptcy. . . . . . . . . -- -- -- 680
Provision for Decrease in Net Realizable Value . . . -- 1,140 9,001 6,496
Depreciation and Amortization. . . . . . . . . . . . 1,308 8,721 9,895 10,109
-------- --------- --------- ---------
TOTAL EXPENSES . . . . . . . . . . . . . . 5,700 33,610 45,559 44,793
-------- --------- --------- ---------
INCOME (LOSS) BEFORE LOSS ON SALE OF PROPERTIES
AND EXTRAORDINARY ITEMS. . . . . . . . . . . . . . (542) 987 (10,737) (9,769)
Loss on Sale of Properties . . . . . . . . . . . . . -- (135) (398) (224)
-------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS . . . . . . (542) 852 (11,135) (9,993)
Extraordinary Items:
Gain on Extinguishment of Debt . . . . . . . . . . . -- -- -- 69
Gain on Foreclosure of Property. . . . . . . . . . . -- -- -- 727
Expenses Incurred in Connection with
Restructuring of Long-Term Debt Facilities . . . . -- (1,865) -- --
-------- --------- --------- ---------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . $ (542) $ (1,013) $ (11,135) $ (9,197)
-------- --------- --------- ---------
-------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
THE MERGED TRUSTS
HISTORICAL COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK DISTRIBUTIONS
--------------------- --------------------- ADDITIONAL IN EXCESS OF
SHARES AMOUNT SHARES AMOUNT PAID-IN-CAPITAL INCOME
---------- ------ ---------- ------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance -- January 1, 1993 . . . . . 14,725,328 $ 15 10,210,077 $ 10 $ 225,100 $ (96,943)
Net Loss . . . . . . . . . . . . . . -- -- -- -- -- (9,197)
Preferred Distributions
Declared . . . . . . . . . . . . . -- -- -- -- -- (563)
Conversion From Temporary
Decline to Permanent Decline
in Marketable Securities . . . . . -- -- -- -- -- 69
Partial Reversal of Reserve for
Temporary Decline in
Marketable Securities. . . . . . . -- -- -- -- -- 32
---------- ----- ---------- ----- --------- ---------
Balance -- December 31,
1993 . . . . . . . . . . . . . . . 14,725,328 15 10,210,077 10 225,100 (106,602)
Net Loss . . . . . . . . . . . . . . -- -- -- -- -- (11,135)
---------- ----- ---------- ----- --------- ---------
Balance -- December 31,
1994 . . . . . . . . . . . . . . . 14,725,328 15 10,210,077 10 225,100 (117,737)
Net Loss . . . . . . . . . . . . . . -- -- -- -- -- (1,013)
---------- ----- ---------- ----- --------- ---------
Balance -- December 31,
1995 . . . . . . . . . . . . . . . 14,725,328 15 10,210,077 10 225,100 (118,750)
Net Loss . . . . . . . . . . . . . . -- -- -- -- -- (542)
---------- ----- ---------- ----- --------- ---------
Balance -- February 23,
1996 . . . . . . . . . . . . . . . 14,725,328 $15 10,210,077 $10 $225,100 $(119,292)
---------- ----- ---------- ----- --------- ---------
---------- ----- ---------- ----- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
THE MERGED TRUSTS
HISTORICAL COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1,
1996 TO DECEMBER 31,
FEBRUARY 23, --------------------------------
1996 1995 1994 1993
------------ -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (542) $ (1,013) $(11,135) $ (9,197)
Adjustments to Reconcile Net Loss to Net Cash Provided by
Operating Activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 1,166 7,718 8,839 9,278
Provision for Decrease in Net Realizable Value . . . . . -- 1,140 9,001 6,496
Adjustment Due to Tenant Bankruptcy. . . . . . . . . . . -- -- -- 680
Loss on Sale of Properties . . . . . . . . . . . . . . . -- 135 398 224
Gain on Foreclosure of Property. . . . . . . . . . . . . -- -- -- (727)
Gain on Extinguishment of Debt . . . . . . . . . . . . . -- -- -- (69)
Expenses Incurred in Connection with Restructuring of
Long-Term Debt Facilities . . . . . . . . . . . . . . -- 1,865 -- --
Amortization . . . . . . . . . . . . . . . . . . . . . . 194 1,362 1,831 1,584
Rent Adjustment. . . . . . . . . . . . . . . . . . . . . 2 46 46 433
Realized Loss on Marketable Securities . . . . . . . . . -- -- -- 80
Increase in Cash Held in Escrow. . . . . . . . . . . . . (13) (269) -- (309)
Increase in Capitalized Lease Commissions. . . . . . . . (99) (756) (1,557) (618)
(Increase) Decrease in Notes Receivable From Affiliates. -- (750) -- 56
Increase (Decrease) in Due To Affiliates . . . . . . . . 240 95 147 (51)
Net Change in receivables, payables, and other . . . . . (1,497) (2,344) (815) 366
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES. . . . (549) 7,229 6,755 8,226
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to Existing Real Estate . . . . . . . . . . (185) (3,112) (3,027) (1,780)
Increase in Cash Held in Escrow. . . . . . . . . . . . . -- (790) -- --
Investment in Real Estate Investment Trust . . . . . . . -- (921) -- --
Cash Disbursed on Sale of Property . . . . . . . . . . . -- (113) -- --
Proceeds from Sale of Property . . . . . . . . . . . . . -- -- 9,000 1,007
Reimbursements Received for Tenant Improvements. . . . . -- -- -- 150
Sale of Short-Term Investments . . . . . . . . . . . . . -- -- 25 225
Purchase of Personal Property. . . . . . . . . . . . . . -- (103) (49) (68)
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES. . . . (185) (5,039) 5,949 (466)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Disbursed Due to Debt Refinancing . . . . . . . . . -- -- (160) --
Distributions to Stockholders. . . . . . . . . . . . . . -- -- -- (563)
Principal Payments on Long-Term Debt . . . . . . . . . . (100) (27,795) (13,746) (3,470)
Principal Payments on Mortgage Notes Payable . . . . . . (42) (1,718) (284) (221)
Principal Payment on Bridge Loan . . . . . . . . . . . . (300) -- -- --
Increase in Cash Held in Escrow. . . . . . . . . . . . . -- (153) -- --
Capitalized Loan Costs . . . . . . . . . . . . . . . . . -- (1,087) (10) (442)
Proceeds From Sale of Stock. . . . . . . . . . . . . . . -- 28,007 -- --
Equity Investment Costs. . . . . . . . . . . . . . . . . -- (3,323) -- --
-------- -------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES. . . . . . . . . . . (442) (6,069) (14,200) (4,696)
-------- -------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents . . . (1,176) (3,879) (1,496) 3,064
Cash and Cash Equivalents, Beginning of Period . . . . . . 11,842 15,721 17,217 14,153
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . $ 10,666 $ 11,842 $ 15,721 $ 17,217
-------- -------- -------- --------
-------- -------- -------- --------
CASH PAID FOR INTEREST . . . . . . . . . . . . . . . . . . $ 1,468 $ 9,900 $ 11,410 $ 12,352
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
THE MERGED TRUSTS
HISTORICAL COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO FEBRUARY 23, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 1996 TO DECEMBER 31,
FEBRUARY 23, -------------------------------
1996 1995 1994 1993
------------------ -------- -------- --------
<S> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH
TRANSACTIONS:
Disposition of Properties:
Disposition of Properties, Net . . . . . . . . $ -- $ 10,082 $ 9,180 $ 14,359
Other Assets Written-Off, Net of Other
Liabilities . . . . . . . . . . . . . . . . -- 161 217 11
Pay-off of Long-Term Debt Facility . . . . . . -- 4,578 -- --
Letter Of Credit in Favor of Lender. . . . . . -- 5,551 -- --
Extinguishment of Mortgage Notes Payable and
Capitalized Lease Obligation, Net . . . . . -- -- -- 13,033
Liabilities Extinguished, Net of Other
Assets. . . . . . . . . . . . . . . . . . . -- -- -- 778
Cash Deposited in Escrow Account . . . . . . . -- -- -- 125
Interest Paid in Escrow. . . . . . . . . . . . -- 22 -- --
Acquisition of Property:
Net Book Value of Property Acquired. . . . . . -- 6,709 -- --
Proceeds Received from Bridge Loan . . . . . . -- 6,700 -- --
Other Liabilities, Net of Other Assets . . . . -- 9 -- --
Refinancing of Mortgage Note Payable:
Extinguishment of Mortgage Note Payable. . . . -- -- 1,900 --
Assumption of Mortgage Note Payable. . . . . . -- -- 2,000 --
Property Taxes Paid Through Escrow . . . . . . -- -- 140 --
Other Liabilities Extinguished . . . . . . . . -- -- 99 --
Loan Costs . . . . . . . . . . . . . . . . . . -- -- 20 --
Transfer of an Option to Purchase Property:
Net Book Value of Property . . . . . . . . . . -- -- 46 --
Assets Written-Off, Net of Other
Liabilities . . . . . . . . . . . . . . . . -- -- 167 --
Cash Held in Escrow Applied to Long-Term
Debt Facility. . . . . . . . . . . . . . . . . -- -- -- 1,215
Principal Payments on Long-Term Debt
Facilities . . . . . . . . . . . . . . . . . . -- -- -- 405
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE>
MERGED TRUSTS
NOTES TO HISTORICAL COMBINED FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 1 TO FEBRUARY 23, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) ORGANIZATION. The Merged Trusts are not a legal entity but rather a
combination of the assets, liabilities and operations of three trusts,
consisting of: (i) Meridian Point Realty Trust IV Co. ("Trust IV"), Meridian
Point Realty Trust VI Co. ("Trust VI") and Meridian Point Realty Trust VII Co.
("Trust VII"), (collectively, the "Merged Trusts"). Each of these trusts were
separate public entities for the years presented. Each trust has approved a
business combination plan whereby the Merged Trusts were merged (the "Merger")
into Meridian Industrial Trust, Inc. ("MIT") on February 23, 1996, with MIT as
the surviving entity. The historical combined balance sheets as of December 31,
1995 and 1994 and the historical combined statements of operations for the
period from January 1, 1996 to February 23, 1996, and for each of the three
years in the period ended December 31, 1995 reflect the combined historical
operations of the Merged Trusts.
Each trust included in the Merged Trusts is a self-administered, self-managed,
real estate investment trust that owns, acquires, markets and operates income
producing industrial real estate properties.
Since April 1, 1991, the Merged Trusts have operated under a self-administered
management structure in conjunction with other commonly-sponsored real estate
investment trusts. The Merged Trusts and such other real estate investment
trusts are collectively referred to herein as the "Companies." Under this
management structure, Meridian Point Properties, Inc. ("MPP"), leases employees
to the Companies at cost to perform the administrative, accounting, asset
management, and property management functions. In addition, through December 31,
1994, MPP, at cost, acted as the transfer agent for the Companies and provided
stockholder account maintenance and dividend disbursement and reinvestment
services. The reimbursements made to MPP are allocated among the Companies in
accordance with agreements between MPP and the Companies.
(b) USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(c) BASIS OF COMBINATION. These historical combined financial statements
include the assets, liabilities, revenues and expenses associated with the
operations of the Merged Trusts which are intended to be merged into MIT. All
significant intercompany balances and transactions have been eliminated in the
accompanying historical combined financial statements.
(d) INVESTMENTS IN REAL ESTATE AND DEPRECIATION METHODS. In accordance with
SFAS No. 121, investments in real estate are stated at the lower of depreciated
cost or net realizable value. Net realizable value for financial reporting
purposes: (i) is evaluated and identified quarterly by the Merged Trusts on a
property by property basis using undiscounted cash flows; (ii) is measured by
comparing the Merged Trusts' estimate of fair value based upon either sales
comparables or the net cash expected to be generated by the property (comprised
of estimated carrying costs (including interest) throughout the anticipated
holding period, plus the estimated cash proceeds from the ultimate disposition
of the property; and (iii) is not necessarily an indication of a property's
current value or the amount that will be realized upon
F-29
<PAGE>
the ultimate disposition of the property. To the extent net realizable value is
less than the carrying value of the property, a Provision for Decrease in Net
Realizable Value is recorded in the amount by which the carrying value exceeds
estimated fair value. As of December 31, 1995 and 1994, the Merged Trusts'
Investment in Real Estate is stated net of a cumulative provision for decrease
in net realizable value of $42,772 and $44,584, respectively. Investors should
consider any net realizable value provisions in evaluating realization of their
investments.
Depreciation and amortization are calculated under the straight-line method,
based upon the estimated useful lives of the assets. Property and property
additions are depreciated over 35 years. Expenditures for maintenance, repairs,
and improvements which do not materially prolong the normal useful life of an
asset are charged to operations as incurred. Tenant improvements are capitalized
and amortized under the straight-line method over the term of the related lease.
(e) CASH AND CASH EQUIVALENTS. The Merged Trusts consider all short-term
investments with an original maturity of three months or less to be cash
equivalents.
Cash paid for interest was $1,468, $9,900, $11,410 and $12,352 for the period
from January 1 to February 23, 1996, and for years ended December 31, 1995, 1994
and 1993, respectively.
(f) RENTALS FROM REAL ESTATE INVESTMENTS. Certain of the Merged Trusts'
leases relating to its properties require lessees to pay all or a portion of
real estate taxes, insurance, and operating costs ("Expense Recaptures").
Expense Recaptures of $737, $4,410, $4,900 and $4,546 for the period from
January 1 to February 23, 1996, and for the years ended December 31, 1995, 1994
and 1993, respectively, have been included in Rentals from Real Estate
Investments.
All leases are classified as operating leases. The Merged Trusts recognize
rental income on a straight-line basis over the terms of the leases. Deferred
rent receivable, included in accounts receivable, represents the excess of
rental revenue recognized on a straight-line basis over the cash received under
the applicable lease provisions.
(g) INCOME TAXES. The respective Merged Trusts elected to be treated as real
estate investment trusts ("REIT") for the tax years 1995, 1994, and 1993 under
Sections 856 to 860 of the Internal Revenue Code. Under these provisions, the
respective Merged Trusts are allowed a deduction for distributions paid to
stockholders if the respective Merged Trusts satisfy certain income, asset, and
distribution requirements.
As a result of the respective Merged Trusts' deduction for distributions paid
in 1993 and losses incurred in 1996, 1995, 1994, and 1993, the respective Merged
Trusts have no federal taxable income. Accordingly, no provision for federal
income taxes has been made in the accompanying historical combined statements of
operations for the period from January 1, 1996 to February 23, 1996 and for the
three years in the period ended December 31, 1995, 1994, and 1993.
(h) CAPITALIZED COSTS. Capitalized costs consist of loan fees and leasing
commissions. Capitalized loan fees are amortized into interest expense on a
straight-line basis over the term of the respective debt. Lease commissions are
amortized on a straight-line basis over the respective lease term and included
in depreciation and amortization expense.
2. RELATED PARTIES.
FEES AND REIMBURSEMENT
For the period from January 1, 1996 to February 23, 1996, and for the years
ended December 31, 1995, 1994 and 1993, the Merged Trusts incurred fees and
expenses for services rendered by the directors of the Merged Trusts totaling
$136, $300, $290 and $354, respectively. Such amounts were paid directly to the
directors. Since April 1, 1991, the Merged Trusts have operated under a
self-administered management structure.
F-30
<PAGE>
Cost reimbursements made to MPP are presented in the table below:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED
1996 TO DECEMBER 31,
FEBRUARY 23, -------------------------------
1996 1995 1994 1993
------------ ------- ------- -------
<S> <C> <C> <C> <C>
Reimbursements for Property and Asset Management
Costs (included in Property Operating Costs). . . . . $ 326 $ 1,367 $ 1,486 $ 1,857
Leasing Costs (included in Capitalized Lease
Commissions, Net) . . . . . . . . . . . . . . . . . -- -- -- 37
Reimbursement of Costs Incurred for Conducting the
Company's Daily Operations (included in General
and Administrative Expenses). . . . . . . . . . . . 193 1,396 1,136 807
----- ------- ------- -------
Total . . . . . . . . . . . . . . . . . . . $ 519 $ 2,763 $ 2,622 $ 2,701
----- ------- ------- -------
----- ------- ------- -------
</TABLE>
In accordance with the agreement between the Companies and MPP, these
reimbursements are allocated among the Companies based on (i) gross rental
receipts of the Companies' properties and the Companies' relative real estate
assets for property and asset management costs and (ii) proportionate time
incurred, the number of stockholders and relative real estate assets for costs
incurred in conducting the Companies' daily operations. In the opinion of
management, the allocation methodology is reasonable. Due to affiliates of $564
and $469 as of December 31, 1995 and 1994, respectively, represent unpaid
reimbursements to MPP.
NOTES RECEIVABLE FROM AFFILIATES
In connection with the internalization of management, the Merged Trusts have
made advances to MPP amounting to $720 as of both December 31, 1995 and 1994.
These advances represent two months of the estimated expenditures that would be
incurred in conducting the daily operations of the Merged Trusts and are payable
on demand. As a result of the Merger, the advances were assumed by MIT.
In 1995, the Merged Trusts advanced $750 to MIT under notes receivable to
cover certain operating expenditures. These notes receivable bear interest at a
rate of 7% per annum and are due and payable on April 15, 1996. As a result of
the Merger, the notes receivable was canceled.
3. RENTAL PROPERTIES, NET.
Rental properties are presented net of the cumulative provision for decrease
in net realizable value. Net rental properties at December 31, 1995 and 1994
consisted of the following:
1995 1994
--------- ---------
Land. . . . . . . . . . . . . . . . $ 61,364 $ 61,364
Buildings . . . . . . . . . . . . . 193,972 187,260
Capital Improvements. . . . . . . . 14,685 13,597
Construction-in-Progress. . . . . . 100 558
--------- ---------
Subtotal. . . . . . . . . . . . . . 270,121 262,779
Rental Property Held for Sale . . . -- 13,566
--------- ---------
Total. . . . . . . . . . . . . $ 270,121 $ 276,345
--------- ---------
--------- ---------
F-31
<PAGE>
The respective current and cumulative provision for decrease in net realizable
value, and the net book value as of and for the year ended December 31, 1995 are
as follows:
<TABLE>
<CAPTION>
CUMULATIVE
CURRENT PROVISION PROVISION FOR
FOR DECREASE IN NET DECREASE IN NET
PROPERTY REALIZABLE VALUE REALIZABLE VALUE NET BOOK VALUE
- ------------------------------- ------------------- ---------------- --------------
<S> <C> <C> <C>
Palisades I and II . . . . . $ -- $ 1,314 $ 2,238
Phoenix Nine . . . . . . . . -- 3,006 6,899
1550 Heil Quaker . . . . . . -- 510 3,929
Hennesy Warehouse . . . . . . -- 425 1,296
Cypress B . . . . . . . . . . -- 4,457 3,266
Chatsworth . . . . . . . . . -- 1,371 2,817
Park Ten Center . . . . . . . -- 473 1,279
Live Oak Parkway . . . . . . -- 444 4,240
Chicago 14 . . . . . . . . . -- 1,350 8,021
Nancy Ridge . . . . . . . . . -- 252 313
Birmingham I and II . . . . . -- 950 2,982
Cypress A . . . . . . . . . . -- 2,498 1,630
Cypress C . . . . . . . . . . -- 2,571 1,595
Valencia . . . . . . . . . . -- 1,900 4,811
Progress Center I . . . . . . -- 470 2,200
Marietta Trade Center . . . . -- 8,194 21,272
Port Distribution . . . . . . -- 796 3,362
Baxter . . . . . . . . . . . -- 161 1,260
Delp Distribution . . . . . . -- 1,166 5,999
Northgate 4 and 5 . . . . . . -- 1,645 1,773
Northgate 8 . . . . . . . . . -- 1,645 1,041
Las Colinas 4 and 5 . . . . . -- 1,677 1,883
Las Colinas 1 . . . . . . . . -- 773 649
Valley Branch 1 and 2 . . . . -- 1,063 1,948
Regal Empress . . . . . . . . -- 1,513 2,016
Beltline . . . . . . . . . . -- 1,218 1,825
Great Southwest 4 . . . . . . -- 930 1,355
Paradise Market Place . . . . 1,140 -- --
----------- ----------- -----------
Subtotal . . . . . . . . . 1,140 42,772 91,899
Total for all Properties
with no Cumulative
Provision for Decrease
in Net Realizable Value . -- -- 125,317
----------- ----------- -----------
Total . . . . . . . . . $ 1,140 $ 42,772 $ 217,216
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
4. FUTURE MINIMUM CONTRACTUAL RENTAL REVENUES.
Future minimum contractual rental revenues from leases in effect as of
February 23, 1996, are as follows:
1996 (pro-rated from February 23, 1996) . . . . . $ 21,575
1997 . . . . . . . . . . . . . . . . . . . . . . 18,959
1998 . . . . . . . . . . . . . . . . . . . . . . 14,014
1999 . . . . . . . . . . . . . . . . . . . . . . 11,115
2000 . . . . . . . . . . . . . . . . . . . . . . 8,406
Thereafter . . . . . . . . . . . . . . . . . . . 28,340
There are currently four major tenants comprising 9%, 4%, 4%, and 3%,
respectively, of total annual revenue of the Merged Trusts based on the
projected 1996 base rent of existing leases. These tenants have leases which are
scheduled to expire between 1997 and 2005. As of December 31, 1995, the Merged
Trusts' properties were 93% occupied. During 1996, leases covering 24% of the
Merged Trusts' leased space are scheduled to expire.
5. LONG-TERM DEBT FACILITIES.
During 1996, 1995 and 1994, the Merged Trusts had long-term financing
arrangements with a bank and an insurance company. These arrangements have
provided the Merged Trusts with financing for property acquisitions, capital
improvements and general operating needs.
F-32
<PAGE>
LONG-TERM BANK CREDIT FACILITIES.
As of December 31, 1994, the Merged Trusts collectively had $41,772
outstanding under three bank credit facilities (the "Bank Facilities"). On May
31, 1995 and July 20, 1995, the Merged Trusts made principal pay downs on the
Bank Facilities of $10,588 and $4,578 with proceeds received from equity
investments made pursuant to the Stock Purchase Agreements and with proceeds
received from the sale of the Paradise Marketplace property, respectively.
Concurrent with the stock purchase transactions discussed in Note 16, the Merged
Trusts successfully completed a restructuring of the remaining bank facility
related to Trust IV (the "Restructured Bank Facility"). In connection with the
pay down and restructuring of Bank and Insurance Company Facilities, the Merged
Trusts wrote off prepayment penalties and other costs related to restructuring
totaling $1,865 which has been recorded as an extraordinary item in the
accompanying consolidated statement of operations.
Monthly principal amortization payments of $102 are required under the
Restructured Bank Facility beginning December 31, 1995. Principal amortization
will continue until December 31, 1997, at which time the facility is scheduled
to mature. At that time, however, the facility may be extended to December 31,
1999, contingent upon Trust IV meeting certain conditions in connection with the
Merger as described below.
The $26,505 of principal outstanding at December 31, 1995 under the
Restructured Bank Facility accrues interest, which is payable monthly, at a
variable interest rate based on LIBOR plus 2.125% (7.85% at December 31, 1995).
Trust IV has the option to apportion the advance into different interest rate
contracts to mature for periods ranging from one to twelve months. Trust IV also
has the option to extend the maturity of each interest rate contract subject to
the final maturity of the facility.
As part of the refinancing, Trust IV was required to set up and contribute to
several restricted cash accounts in order to escrow (i) funds to purchase an
interest rate hedge, (ii) a capital expenditure reserve and (iii) a property tax
reserve. As of December 31, 1995, Trust IV had cash held in escrow related to
these accounts of (i) $153, (ii) $790 and (iii) $269, respectively. Subsequent
to December 31, 1995, this requirement to contribute to escrow has been
permanently waived and the funds remaining in escrow accounts have been refunded
to the Merged Trusts as a result of the Merger.
Trust IV has an interest rate cap agreement which caps the one month LIBOR at
4.5%. The rate cap was based upon $18,620 for the period July 1, 1995 to
December 31, 1995, and from January 1, 1996 through expiration on June 28, 1996,
the rate cap is based upon $11,170. The agreement provides for payments to Trust
IV to the extent that the one month LIBOR exceeds 4.5%. The agreement will be
transferred to MIT upon completion of the Merger.
LONG-TERM DEBT FACILITIES WITH AN INSURANCE COMPANY.
As of December 31, 1994, the Merged Trusts collectively had $83,199
outstanding under two long-term debt facilities with an insurance company (the
"Insurance Company Facilities"). On May 31, 1995, the Merged Trusts made
principal pay downs of $16,329 on the Insurance Company Facilities with proceeds
received from equity investments made pursuant to the Stock Purchase Agreements.
Concurrent with the stock purchase transaction, the Merged Trusts successfully
completed a restructuring of the Insurance Company Facilities into a single
credit facility for the Merged Trusts (the "Restructured Insurance Company
Facility").
Under the new terms of the Restructured Insurance Company Facility, there is a
collective outstanding advance to the Merged Trusts at December 31, 1995 of
$66,094, which bears interest at a weighted average fixed annual rate of 8.63%.
Monthly interest only payments are due until maturity on June 1, 2005.
F-33
<PAGE>
LOAN COVENANTS AND COLLATERAL.
Under the terms of the Restructured Insurance Company Facility, the respective
Merged Trusts must maintain a loan-to-value ratio equal to or below certain
levels ranging from 50% to 53%. This ratio is based on the lender's valuation of
the Merged Trusts' properties. In addition, the new agreement requires
compliance with several debt service coverage ratios at specified measurement
dates.
The Restructured Bank Facility and Restructured Insurance Company Facility are
collateralized by properties with net book values of $41,041 and $150,281
respectively.
Scheduled maturities of the Long-Term Restructured Bank and Restructured
Insurance Company Facilities as of December 31, 1995 are as follows:
1995
--------
1996 . . . . . . . . . . . . . . . . . . . . . . $ 1,212
1997 . . . . . . . . . . . . . . . . . . . . . . 25,293
1998 . . . . . . . . . . . . . . . . . . . . . . --
1999 . . . . . . . . . . . . . . . . . . . . . . --
2000 . . . . . . . . . . . . . . . . . . . . . . --
Thereafter . . . . . . . . . . . . . . . . . . . 66,094
--------
Total . . . . . . . . . . . . . . . . . $ 92,599
--------
--------
6. BRIDGE LOAN.
On November 7, 1995, Trust VI exercised its option to purchase a property
("Olive Branch II") located in Olive Branch, Mississippi, which is adjacent to
an existing property owned by Trust VI. Both properties are occupied by the same
tenant. The total acquisition cost was $6,709. Trust VI funded the acquisition
with a bridge loan in the amount of $6,700. The bridge loan bears interest at
LIBOR plus 2% (7.72% at December 31, 1995). Under the terms of the bridge loan
agreement, a principal payment of $300 was made on February 1, 1996. A principal
payment of $200 is due on April 1, 1996, respectively. The remaining outstanding
principal is due and payable on December 31, 1996.
7. MORTGAGE NOTES PAYABLE.
The following table presents information regarding the mortgage notes payable
related to assets of the Merged Trusts at December 31, 1995 and 1994.
<TABLE>
<CAPTION>
STATED DECEMBER 31,
INTEREST ANNUAL MATURITY -----------------------
NAME AND LOCATION OF PROPERTY RATE PAYMENT DATE 1995 1994
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Palisades I & II, Plano, TX . . 8.250% $ 191 02/01/99 $ 1,797 $ 1,835
Northgate 4 & 5, Dallas . . . . 9.375% 140 11/01/09 1,076 1,114
Las Colinas 4 & 5, Dallas . . . 11.000% 215 04/01/11 1,584 1,622
Las Colinas 1, Dallas . . . . . 8.906% 41 12/01/97 273 290
Valley Branch 1 & 2, Dallas . . 10.250% 203 03/01/11 1,557 1,598
Beltline, Dallas . . . . . . . 10.125% 190 01/01/01 1,463 1,502
Great Southwest, Dallas . . . . 9.750% 107 02/01/10 815 842
Birmingham II, Birmingham, AL . 13.000% -- 05/01/95 -- 1,406
Bedford Park, Bedford Park, IL 9.000% 245 01/20/99 1,864 1,938
-------- --------
SUBTOTAL . . . . . . . . . . . 10,429 12,147
Unamortized Debt Premium . . . -- 25
-------- --------
TOTAL . . . . . . . . $ 10,429 $ 12,172
-------- --------
-------- --------
</TABLE>
F-34
<PAGE>
Principal payments related to the mortgage notes payable at December 31, 1995
are due as follows:
1996 . . . . . . . . . . . . . . . . . . . $ 345
1997 . . . . . . . . . . . . . . . . . . . 615
1998 . . . . . . . . . . . . . . . . . . . 396
1999 . . . . . . . . . . . . . . . . . . . 3,523
2000 . . . . . . . . . . . . . . . . . . . 302
Thereafter . . . . . . . . . . . . . . . . 5,248
Total . . . . . . . . . . . . . . $ 10,429
---------
---------
8. DISTRIBUTIONS.
During the three-year period ended December 31, 1995, no distributions were
made, except for a one dollar per share preferred distribution made by Trust VII
in 1993 in the amount of $563. There were no distributions made by the Merged
Trusts during the period ended February 23, 1996. The Preferred Shares generally
have certain non-cumulative preferential rights to current distributions.
9. PER SHARE INFORMATION.
The Merged Trusts collectively have a total of 14,725,328 common shares
without redemptive rights outstanding at both February 23, 1996 and December 31,
1995. Also, Trust IV has 3,278,889 common shares outstanding with redemptive
rights. The accompanying statement of operations does not include per share
calculations as the Merger Agreement provides for differing exchange ratios
which render historical combined per share information not meaningful.
10. TRANSFER OF AN OPTION TO PURCHASE PROPERTY.
On January 6, 1994, Trust VII entered into an agreement to sell Lot 4 of the
Park at Woodinville in 1997. In connection with this agreement, Trust VII
received a note receivable with a principal amount of $375 from the buyer. The
note receivable bears an interest rate of 8% per annum, and both the principal
and accrued interest are due and payable on January 4, 1997. The agreement has
been recorded as a transfer of an option to purchase the lot in 1997 using the
deposit method. Under this method, the lot is recorded as part of Rental
Properties, Net. In connection with this transaction, Trust VII recognized a
provision for decrease in net realizable value totaling $120 and $528 in 1994
and 1993, respectively.
11. CAPITALIZED LEASE OBLIGATION.
One of Trust IV's property's, Mount Prospect Industrial Center, is subject to
a ground lease. This lease was recorded as a capitalized lease obligation. As of
June 30, 1993, Trust IV determined a foreclosure-in-substance had occurred on
Mount Prospect Industrial Center.
F-35
<PAGE>
12. DISPOSITION OF PROPERTIES.
On July 20, 1995, Trust VII sold the Paradise Marketplace property located in
Las Vegas, Nevada for a selling price of $10,390. Trust VII received net cash
proceeds of $10,037 after adjustments for closing costs, interest earned and
pro-rations totaling $353. The net proceeds from the sale, together with $113 of
additional funds provided by Trust VII, were placed in an escrow account
totaling $10,150 and were used to (i) pay off its Bank Facility amounting to
$4,578, (ii) make an interest payment of $22 on its Bank Facility and (iii) make
a deposit into a bank to support a letter of credit issued in favor of the
lender for Trust VII's Insurance Company Facility of $5,551. In connection with
the sale, Trust VII wrote-off free rent and unamortized lease commissions, net
of other liabilities, in the amount of $161. Trust VII incurred a loss on sale
of this property totaling $135. The property had previously been written down to
its estimated net realizable value.
On October 21, 1994, Trust VI sold the Cherry Hill property located in New
Jersey for a selling price of $452. Trust VI received net cash proceeds of $421
after deductions for closing costs and pro-rated items totaling $31. Trust VI
paid $390 of these proceeds as additional paydown on its Insurance Company
Facility and $5 in prepayment penalties. In connection with this transaction,
Trust VI recognized a loss on sale of property in the amount of $239. The
property had previously been written down to its net realizable value.
On June 30, 1994, Trust VI sold the Cooper Center and Cooper Center West
properties located in Pennsauken, New Jersey, for a selling price of $3,450.
Trust VI received net cash proceeds of $3,223 after deductions for: (i) closing
costs of $184 and (ii) pro-rated items totaling $43. In connection with this
transaction, Trust VI recognized a loss on sale of properties totaling $35. The
properties had previously been written down to their net realizable value.
On June 23, 1994, Trust VII sold the Greentree Place property located in
Marlton, New Jersey at a price of $5,600. Trust VII received net cash proceeds
of $5,355 after deductions for closing costs of $196 and pro-rated items
totaling $49. These proceeds were used to pay down the Insurance Company
Facility. Trust VII incurred a loss on sale of property in the amount of $124.
The property had previously been written down to its net realizable value.
On October 15, 1993, Trust VI sold a property located at 6387 Nancy Ridge
Drive, San Diego, California at a selling price of $329. Trust VI received net
cash proceeds of $306 after deductions for closing costs and pro-rated items
totaling $23. In connection with this sale, Trust VI recognized a gain on sale
of property in the amount of $57.
On June 10, 1993, Trust VI sold a property located at 6393 Nancy Ridge Drive,
San Diego, California. The selling price was $294, and the net proceeds to Trust
VI after prorations, closing costs and commissions of $21, totaled $272. Trust
VI incurred a loss on sale of property in the amount of $29 in connection with
this sale.
On March 19, 1993, Trust VII sold Lot 5 of the Park at Woodinville property.
The selling price of $600 was paid entirely in cash. Trust VII received net cash
proceeds of $429 after deductions for: (i) closing costs and pro-rated items
totaling $46; and (ii) an escrow holdback amounting to $125. Trust VII received
a full refund of the escrow holdback in December 1993. In connection with the
disposal of Lot 5, Trust VII recognized a loss on sale of property in the amount
of $252.
13. ADJUSTMENT DUE TO TENANT BANKRUPTCY.
In March 1993, the sole tenant at Moorpark declared bankruptcy. In connection
with the bankruptcy proceeding, the tenant rejected its existing lease with
Trust IV. As a result of such rejection, Trust IV incurred the following
non-cash write-offs: (i) $599 constituting deferred rent receivable and (ii) $81
constituting unamortized lease commissions.
F-36
<PAGE>
14. EXTINGUISHMENT OF DEBT.
The extraordinary gain on extinguishment of debt of $69 recognized in 1993
represents Trust IV's gain recognized on the foreclosure of a loan on one of its
properties. The property had previously been written down to its net realizable
value.
15. FORECLOSURE OF PROPERTY.
The extraordinary gain on foreclosure of property of $727 recognized in 1993
represents Trust IV's recognition of the foreclosure of a loan on Mount Prospect
Industrial Center. The gain is attributable to the excess write-offs of the (i)
underlying mortgage note, (ii) capitalized lease obligation, and (iii) accrued
liabilities associated with owning the property, over the net asset value of the
property. The property had previously been written down to its net realizable
value.
16. COMMITMENTS AND CONTINGENCIES.
Trust IV is the general partner of a limited partnership that owns the Phoenix
Nine properties (the "Phoenix Partnership"). It appears that activities
conducted at a property adjacent to two of the Phoenix Nine properties have
caused groundwater contamination that has extended below those two properties.
The party who appears to have conducted those activities (the "Responsible
Party") has been named the responsible party (in conjunction with another party
who previously had leased space at the adjacent property) and has administered
and borne the cost of groundwater testing to date. The Responsible Party has
agreed to indemnify the Phoenix Partnership against claims and liabilities
arising out of the groundwater contamination.
The Responsible Party is a large, publicly traded corporation, and Trust IV
believes that the Responsible Party has the financial resources that would be
required to clean up the contamination. In addition, Trust IV believes that the
owner of the adjacent property, where the contamination originated, has the
financial resources to clean up the contamination if the Responsible Party does
not adequately fulfill its remediation responsibility.
17. STOCK PURCHASE AGREEMENT.
On September 22, 1994, the Merged Trusts each entered into a separate Stock
Purchase Agreement (collectively referred to as the "Agreement") with Hunt
Realty Acquisitions, L.P. ("Hunt"). The Agreement called for the Merged Trusts
to collectively to issue 1,493,175 shares of common stock and 3,493,905 shares
of preferred stock to Hunt at $1.78 and $3.30 per share for total amounts of
$2,658 and $11,530 respectively, less reimbursement of certain expenses. In
addition, the Agreement required that the Merged Trusts enter into an agreement
satisfactory to Hunt under which, subject to further stockholder approval and
other contingencies, the Merged Trusts would merge into a newly formed
infinite-life REIT. The funding of the Hunt investment occurred on May 31, 1995.
In contemplation of the Hunt investment, the Merged Trusts' respective
stockholders approved amendments to the Merged Trusts' respective organizational
documents in March 1995. These amendments include, but are not limited to, a
reduction in the limit on the amount of the respective Merged Trusts' shares
that can be owned by any one person to 3.6% of the lesser of the number of
shares or value of any class or series of the Merged Trusts' outstanding shares.
Under the terms of the Agreement, prior to the earlier of the merger or 120
days after the occurrence of certain specified events such as the termination of
the Merged Trusts' right or obligation to merge under the Merger Agreement, the
Merged Trusts are required to refrain from taking certain actions without the
consent of Hunt and USAA, including declaring dividends, incurring certain
obligations or liabilities, selling substantially all of the Merged Trusts'
assets, selling the Merged Trusts' properties and modifying the terms of the
Merged Trusts' material contracts.
F-37
<PAGE>
Effective April 27, 1995, the Merged Trusts each entered into a separate stock
purchase agreement with USAA Real Estate Company ("USAA") to collectively issue
1,785,714 shares of the Merged Trusts' common stock and 2,649,161 shares of the
Merged Trusts' preferred stock to USAA in differing amounts of $1.96, $3.86 and
$3.91 per share ($13,819 in total). The funding of the USAA investment also
occurred on May 31, 1995.
The funds received from the Hunt and USAA stock purchase agreements were used
to pay down and restructure the Company's debt. The costs related to the stock
purchase agreements totaling $3,323 were charged against the proceeds from the
issuance of new shares.
As of December 31, 1995 and December 31, 1994, the Merged Trusts have incurred
approximately $2,601 and $371 respectively, in costs related to the Merger.
These costs are classified in Other Assets on the accompanying historical
combined balance sheets as of December 31, 1995 and December 31, 1994.
18. INVESTMENT IN REAL ESTATE INVESTMENT TRUST.
The Merged Trusts purchased 920,500 shares of MIT's Series A Preferred Stock
for $1.00 per share reflected as investment in real estate investment trust on
the accompanying historical combined balance sheet as of December 31, 1995. In
connection with the Merger, the shares of Series A Preferred Stock were
cancelled.
19. SUBSEQUENT EVENT -- MERGER.
After receiving respective stockholder approvals of the Merger Agreement on
February 22 and 23, 1996, the Merged Trusts merged into MIT. As part of the
Merger, MIT issued approximately 7.6 million shares of its common stock to the
former preferred and common stockholders of the Merged Trusts.
F-38
<PAGE>
THE MERGED TRUSTS
SCHEDULE II
HISTORICAL COMBINED VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD FROM JANUARY 1 TO FEBRUARY 23, 1996 AND
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF CHARGED TO ADDITIONS END OF
DESCRIPTION YEAR EXPENSE (DEDUCTIONS) PERIOD
- ------------------------------------------------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
1993
Reserve for Bad Debts . . . . . . . . . . . . . . . . . . $ 1,101 $ 582 $ (598) $ 1,085
Reserve for Temporary Decline in Marketable Securities . 116 -- (101) 15
1994
Reserve for Bad Debts . . . . . . . . . . . . . . . . . . 1,085 186 (489) 782
Reserve for Temporary Decline in Marketable Securities . 15 -- -- 15
1995
Reserve for Bad Debts . . . . . . . . . . . . . . . . . . 782 579 (458) 903
Reserve for Temporary Decline in Marketable Securities . 15 -- -- 15
1996
Reserve for Bad Debts . . . . . . . . . . . . . . . . . . 903 (70) -- 833
Reserve for Temporary Decline in Marketable Securities . 15 -- -- 15
</TABLE>
F-39
<PAGE>
THE MERGED TRUSTS
SCHEDULE III
HISTORICAL COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION
INITIAL COST TO -----------
COMPANY RENTAL
ENCUM- IMPROVE- RENTAL
DESCRIPTION BRANCES(1) LAND BUILDING MENTS GUARANTEES
----------- ---------- ---- -------- ----- ----------
<S> <C> <C> <C> <C> <C>
Business Service Centers:
Palisades I and II ....................... $ 1,797 $ 833 $ 3,327 $ 479 $ --
201 Regal Row ............................ -- 333 1,066 199 --
Park at Woodinville ...................... -- 3,040 9,966 503 --
Pontiac and Troy Tech II ................. -- 2,297 9,196 28 (32)
Warehouse/Distribution Buildings:
Bedford Park ............................. 1,864 435 3,289 224 --
1550 Heil Quaker ......................... -- 425 4,603 1,062 --
1600 Corporate Place ..................... -- 200 1,365 535 --
Air Park Cove and 4013 Premier ........... -- 538 3,580 474 --
Hennessey Warehouse ...................... -- 275 1,677 283 --
Chicago 14 ............................... -- 4,805 18,220 2,523 --
Lombard I ................................ -- 1,103 5,890 669 --
Birmingham I and II ...................... -- 1,154 3,217 142 --
Olive Branch I and II .................... 6,700 689 17,512 33 --
Northgate/International, Valwood 20 and
Centreport 17 .......................... -- 3,660 12,045 35 --
Great Southwest 110 ...................... -- 791 3,574 14 --
Wildwood/Pioneer ......................... -- 1,142 5,127 538 --
Baxter and Port Distribution ............. -- 497 6,110 25 (75)
Delp Distribution ........................ -- 1,285 6,745 98 --
Industrial/Flex Buildings:
Phoenix Nine ............................. -- 3,820 8,738 911 --
Cypress, B Chatsworth, and Moorpark, CA .. -- 6,200 14,211 777 --
Nancy Ridge .............................. -- 216 429 -- --
Willow Lake .............................. -- 1,004 4,297 3 (136)
Cypress A, Cypress C and Valencia ........ -- 5,310 12,120 -- --
Progress I & II Centers and 8215 Building -- 1,372 6,807 223 --
Dallas Nine .............................. 6,768 6,712 19,654 1,524 (374)
Building and Retail Shopping Centers:
San Carlos................................ -- 2,800 4,444 565 --
Live Oak Parkway ......................... -- 2,835 2,486 6 (130)
Marietta Trade Center .................... -- 12,554 20,233 1,160 (190)
Seatac and Meridian Village .............. -- 7,500 13,276 1,663 --
Retail Restaurant Building:
Park Ten Center .......................... -- 648 1,367 -- --
Other ...................................... -- -- -- 90 --
--------- --------- --------- --------- ---------
Total .............................. $ 17,129 $ 74,473 $ 224,571 $ 14,786 $ (937)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
GROSS
AMOUNT
CARRIED AT
NET END OF
REALIZABLE PERIOD
VALUE BUILDING &
WRITE- IMPROVE-
DOWNS(2) LAND MENTS Total(3)
-------- ---- ----- -------
<S> <C> <C> <C> <C>
Business Service Centers:
Palisades I and II ....................... $ (1,314) $ 570 $ 2,755 $ 3,325
201 Regal Row ............................ -- 333 1,265 1,598
Park at Woodinville ...................... -- 3,041 10,468 13,509
Pontiac and Troy Tech II ................. -- 2,291 9,198 11,489
Warehouse/Distribution Buildings:
Bedford Park ............................. -- 435 3,513 3,948
1550 Heil Quaker ......................... (510) 382 5,198 5,580
1600 Corporate Place ..................... -- 200 1,900 2,100
Air Park Cove and 4013 Premier ........... -- 538 4,054 4,592
Hennessey Warehouse ...................... (425) 215 1,595 1,810
Chicago 14 ............................... (1,350) 4,440 19,758 24,198
Lombard I ................................ -- 1,103 6,559 7,662
Birmingham I and II ...................... (950) 876 2,687 3,563
Olive Branch I and II .................... -- 689 17,545 18,234
Northgate/International, Valwood 20 and
Centreport 17 .......................... -- 3,660 12,080 15,740
Great Southwest 110 ...................... -- 791 3,588 4,379
Wildwood/Pioneer ......................... -- 1,142 5,665 6,807
Baxter and Port Distribution ............. (957) 420 5,180 5,600
Delp Distribution ........................ (1,166) 1,098 5,864 6,962
Industrial/Flex Buildings:
Phoenix Nine ............................. (3,006) 2,795 7,668 10,463
Cypress, B Chatsworth, and Moorpark, CA .. (5,828) 4,133 11,227 15,360
Nancy Ridge .............................. (252) 132 261 393
Willow Lake .............................. -- 978 4,190 5,168
Cypress A, Cypress C and Valencia ........ (6,969) 3,145 7,316 10,461
Progress I & II Centers and 8215 Building (470) 1,294 6,638 7,932
Dallas Nine .............................. (10,464) 3,994 13,058 17,052
Building and Retail Shopping Centers:
San Carlos ............................... -- 2,800 5,009 7,809
Live Oak Parkway ......................... (444) 2,529 2,224 4,753
Marietta Trade Center .................... (8,194) 9,344 16,219 25,563
Seatac and Meridian Village .............. -- 7,500 14,939 22,439
Retail Restaurant Building:
Park Ten Center .......................... (473) 496 1,046 1,542
Other ...................................... -- -- -- 90 90
--------- --------- --------- ---------
Total .............................. $ (42,772) $ 61,364 $ 208,757 $ 270,121
--------- --------- --------- ---------
--------- --------- --------- ---------
<CAPTION>
ACCUMULATED DATE OF DATE OF DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUISITION LIFE
------------ ------------ ----------- ----
<S> <C> <C> <C> <C>
Business Service Centers:
Palisades I and II ....................... $ 1,087 1981-82 08/30/85 35 years
201 Regal Row ............................ 247 1966 10/24/90 35 years
Park at Woodinville ...................... 2,647 1987-89 01/05/88 35 years
Pontiac and Troy Tech II ................. 1,902 1986-88 11/02/88 35 years
Warehouse/Distribution Buildings:
Bedford Park ............................. 903 1980 06/22/86 35 years
1550 Heil Quaker ......................... 1,651 1975 04/09/87 35 years
1600 Corporate Place ..................... 517 1975 05/07/87 35 years
Air Park Cove and 4013 Premier ........... 930 1965-78 07/02/87 35 years
Hennessey Warehouse ...................... 514 1975 06/28/87 35 years
Chicago 14 ............................... 5,862 1963-81 12/30/86 35 years
Lombard I ................................ 1,818 1986 05/27/88 35 years
Birmingham I and II ...................... 580 1980-85 12/21/89 35 years
Olive Branch I and II .................... 1,733 1990 06/29/90 35 years
Northgate/International, Valwood 20 and
Centreport 17 .......................... 2,596 1986-87 06/29/88 35 years
Great Southwest 110 ...................... 754 1972-73 09/29/88 35 years
Wildwood/Pioneer ......................... 1,294 1970 04/03/89 35 years
Baxter and Port Distribution ............. 978 1986-90 12/21/89 35 years
Delp Distribution ........................ 963 1981 06/29/90 35 years
Industrial/Flex Buildings:
Phoenix Nine ............................. 2,512 1964-84 10/15/86 35 years
Cypress, B Chatsworth, and Moorpark, CA .. 3,078 1985-86 10/20/87 35 years
Nancy Ridge .............................. 79 1983 12/29/87 35 years
Willow Lake .............................. 954 1987 03/31/88 35 years
Cypress A, Cypress C and Valencia ........ 2,422 1985-86 10/07/87 35 years
Progress I & II Centers and 8215 Building 1,658 1985-86 12/09/87 35 years
Dallas Nine .............................. 4,562 1979-84 06/30/86 35 years
Building and Retail Shopping Centers:
San Carlos ............................... 1,550 1970 06/08/86 35 years
Live Oak Parkway ......................... 513 1987-88 07/08/88 35 years
Marietta Trade Center .................... 4,291 1987-88 09/30/88 35 years
Seatac and Meridian Village .............. 3,959 1977-79 09/30/87 35 years
Retail Restaurant Building:
Park Ten Center .......................... 263 1987-88 06/23/88 35 years
Other ...................................... 88 1991 1991 17 mos
---------
Total .............................. $ 52,905
---------
---------
</TABLE>
F-40
<PAGE>
Reconciliations of cost and accumulated depreciation for the years ended
December 31, 1995, 1994, 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------- -------------------------- --------------------------
ACCUMULATED ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION COST DEPRECIATION
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year . . . . . $ 276,345 $ 50,126 $ 298,304 $ 48,812 $ 323,029 $ 45,468
Additions during period:
Capital improvements . . . . . . . . 3,112 -- 3,027 -- 1,780 --
Acquisition of property . . . . . . . 6,709(4) -- -- -- -- --
Transfer of an option to purchase
property . . . . . . . . . . . . . -- -- 166(6) -- -- --
Depreciation . . . . . . . . . . . . -- 7,577 -- 8,285 -- 8,968
Net realizable value write-downs . . . (1,140) -- (9,001) -- (6,496) --
Deletions . . . . . . . . . . . . . . . (2,444) (2,444) (2,252) (2,252) (1,961) (1,961)
Reimbursement for tenant
improvements . . . . . . . . . . . . -- -- -- -- (25) --
Tenant improvement loan . . . . . . . . (35) (10) -- -- -- --
Property dispositions . . . . . . . . . (12,426)(5) (2,344) (13,899)(7) (4,719) (18,023)(8) (3,663)
---------- ---------- ---------- ---------- ---------- ----------
Balance at end of year . . . . . . . . $ 270,121 $ 52,905 $ 276,345 $ 50,126 $ 298,304 $ 48,812
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
- ----------
(1) Properties not specifically encumbered by a mortgage note are held subject
to a promissory note secured by a first deed of trust in connection with
the long term debt facilities with a bank and an insurance company. As of
December 31, 1995, properties with a total net book value of $191,322 serve
as collateral for the outstanding indebtedness under the facilities
aggregating to $92,599.
(2) Represents the cumulative Provision for Decrease in Net Realizable Value at
December 31, 1995, which is measured by the amount by which the carrying
values of the properties exceeded their respective current estimated fair
market value.
(3) The aggregate cost for federal income tax purposes was approximately
$317,104.
(4) Olive Branch II was purchased in November 1995. The acquisition was funded
by a $6,700 bridge loan.
(5) Represents the property basis of Paradise Marketplace which was sold on
July 20, 1995.
(6) Primarily represents the closing costs incurred in connection with the
agreement to sell Lot 4 of the Park at Woodinville in 1997. The agreement
was entered into on January 6, 1994.
(7) Represents the property basis of the following properties which were all
sold in 1994: Cooper Center, Copper Center West, Cherry Hill and Greentree
Place.
(8) Represents the property basis of the following properties which were
disposed of in 1993: Mt. Prospect, 6393 and 6387 Nancy Ridge Drives, Lot 5
of the Park at Woodinville.
F-41
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our respective reports (such reports are listed below), with
respect to the financial statements of Meridian Industrial Trust, Inc. and the
historical combined financial statements of the Merged Trusts, in the
Registration Statement and the related Prospectus of Meridian Industrial Trust,
Inc. on Form S-3 filed with the Securities and Exchange Commission on or about
April 4, 1997. The reports referred to above are as follows:
- - Meridian Industrial Trust, Inc. as of December 31, 1996 and 1995 and for
the period from May 18, 1995 (inception) to December 31, 1995 and the year
ended December 31, 1996; report of independent public accountants dated
February 5, 1997.
- - Merged Trusts Historical Combined for the period from January 1, 1996 to
February 23, 1996, and as of December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995; report of independent
public accountants dated May 27, 1996.
ARTHUR ANDERSEN LLP
San Francisco, California
April 3, 1997
