-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RrznTDsDs4iCK6I9WO6IZJfqcAa8kma6Wrr1db76EFvncsakZk77qdDdKcQ9d/Fn Otjw0hGHhqyJs4B5roZB5g== 0000950152-95-001043.txt : 19950530 0000950152-95-001043.hdr.sgml : 19950530 ACCESSION NUMBER: 0000950152-95-001043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06249 FILM NUMBER: 95539398 BUSINESS ADDRESS: STREET 1: 55 PUBLIC SQUARE STREET 2: SUITE 1910 CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 2167814030 MAIL ADDRESS: STREET 1: 55 PUBLIC SQUARE SUITE 1910 CITY: CLEVELAND STATE: OH ZIP: 44113 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 10-Q 1 FIRST UNION REAL ESTATE 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ________________ For Quarter Ended March 31, 1995 Commission File Number 1-6249 -------------- ------ First Union Real Estate Equity and Mortgage Investments - - - - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-6513657 - - - - - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 1900, 55 Public Square Cleveland, Ohio 44113-1937 - - - - - --------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (216) 781-4030 -------------------- - - - - - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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 the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 18,272,537 Shares of Beneficial Interest outstanding as of March 31, 1995 ________________________________________________________________________________ ================================================================================ Total number of pages contained in this report: 9 ----- 2 PART I - FINANCIAL INFORMATION - - - - - ------------------------------ Item 1. Financial Statements. - - - - - ------- --------------------- The combined financial statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures contained herein are adequate to make the information presented not misleading. It is suggested that these combined financial statements be read in conjunction with the combined financial statements and the notes thereto included in the registrant's latest annual report on Form 10-K. The unaudited "Combined Balance Sheets" as of March 31, 1995 and December 31, 1994 and "Selected Financial Data, Combined Statements of Income and Combined Statements of Changes in Cash" for the periods ended March 31, 1995 and 1994, of the registrant, and "Notes to Combined Financial Statements," presented in the registrant's First Quarter Report, March 31, 1995, are incorporated herein by reference. These financial statements reflect, in the opinion of the registrant, all adjustments (consisting of normal recurring accruals) necessary to present fairly the combined financial position and results of operations for the respective periods in conformity with generally accepted accounting principles consistently applied. Item 2. Management's Discussion and Analysis of Financial Condition and - - - - - ------- --------------------------------------------------------------- Results of Operations. ---------------------- In January 1995, the Trust sold its 50% interests in two malls in Wilkes-Barre, Pennsylvania and Fairmount, West Virginia for $29.5 million in cash ($2 million was received in 1994), a $6 million mortgage note receivable and the assumption by the purchaser of $4.7 million in mortgage debt, resulting in a capital gain of approximately $29.9 million. Income from operations was $1.6 million for the three months ended March 31, 1995 and 1994. Income from property operations, which is rents less operating expenses and real estate taxes, increased when comparing the first three months of 1995 to the same period of 1994. This increase is primarily attributed to the acquisition of an apartment complex in August 1994 and increased occupancy and rental rates per unit from the apartment complexes in the portfolio for all of 1995 and 1994. However, this increase was partially offset by the property operating income from the two properties sold in January 1995, as mentioned above. The proceeds from this transaction were invested in short-term securities for the last two months of the first quarter of 1995. Depreciation and amortization expense increased when comparing the first quarter of 1995 to that of 1994. The apartment complex acquired in August 1994 and tenant construction costs incurred during 1994 were the primary reasons for this increase. Mortgage interest expense increased when comparing the first quarters of 1995 and 1994. This increase was caused by an increase of approximately three hundred basis points in the interest rate on a variable rate mortgage loan secured by a shopping mall in St. Cloud, Minnesota when comparing 1995 to 1994. Bank loan interest expense increased when comparing the first quarters of 1995 and 1994 due to an increase of approximately three hundred basis points in short-term interest rates from the first quarter of 1994 to that of 1995. The increase in interest rates was partially offset by the Trust repaying $17 million under its bank lines of credit in December 1994. General and administrative expenses increased when comparing the three months ended March 31, 1995 to the same period of 1994. The increase was caused by additional staffing during the last nine months of 1994 required to execute the Trust's strategic plan, and expenses associated with the long-term incentive performance plan which was adopted in April 1994. 2 3 Litigation and proxy expenses of $950,000 were incurred during the first quarter of 1995. These professional fees resulted from litigation and a proxy contest with a minority shareholder. (See Part II, Item 1, Legal Proceedings.) Net income was $30.6 million for the first quarter of 1995 and $1.6 million for the first quarter of 1994. A capital gain of $29.9 million was included in net income during the first quarter of 1995 from the sale of two malls, as noted previously. Except as noted above, there has been no material change in the Trust's financial condition from December 31, 1994. PART II - OTHER INFORMATION - - - - - --------------------------- Item 1. Legal Proceedings. - - - - - ------- ------------------ On February 3, 1995, the registrant filed a lawsuit in the United States District Court ("District Court") for the Northern District of Ohio (the "Lawsuit") against, INTER ALIA, Turkey Vulture Fund XIII, Ltd. (the "Fund"), and its Managing Partner, Richard M. Osborne ("RMO"), who claimed to beneficially own 9.3% of the outstanding shares of the registrant according to Amendment No. 5 to Schedule 13D filed by the Fund with the Securities and Exchange Commission (the "Commission") on or about May 9, 1995. The Lawsuit is described in Part I, Item 3 of the registrant's Annual Report on Form 10-K filed with the Commission on March 30, 1995. On April 12, 1995, the District Court granted registrant's motion to amend its complaint. The defendants named in registrant's First Amended and Supplemental Complaint for Injunctive Relief, Damages, and Other Relief ("Amended Complaint") are The Wolstein Group, Bert Wolstein, Scott Wolstein, Heritage Capital Corporation, and Developers Diversified Realty Corporation (the "Wolstein Defendants"), and RMO, the Fund, and Mark P. Escaja (all collectively the "Defendants"). The Amended Complaint alleges that the Defendants have, INTER ALIA, (i) filed a false and misleading Scchedule 13D and amendments thereto, or failed to file, in violation of Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations promulgated thereunder; (ii) failed to comply with the federal and state requirements for commencing a tender offer in violation of Sections 14(a) and 14(d) of the Exchange Act and Section 1707.041 of the Ohio Revised Code; (iii) manipulated the market for registrant's securities in violation of Sections 10(b) and 14(e) of the Exchange Act and Rule 10b-5; (iv) violated their obligations under registrant's Declaration of Trust and By-Laws, and their obligations of good faith and fair dealing to other shareholders of registrant; (v) disseminated false and misleading proxy statements and other solicitation materials; (vi) that certain defendants and others dealt in registrant's shares while in possession of material, non-public information relating to the commencement of a tender offer in violation of Section 14(e) of the Exchange Act; and (vii) that various Wolstein Defendants controlled persons committing the aforementioned acts or were otherwise responsible for such actions of other persons, in violation of Section 20(a) of the Exchange Act and the rules and regulations promulgated thereunder. The Amended Complaint seeks preliminary and permanent injunctive relief against the Defendants, damages in the amount of $30 million, INTER ALIA, for causing First Union to defend against an illegal proxy contest and distraction of management and business disruption, and such other and further relief as may be just and proper. On April 27, 1995, the Fund and RMO filed amended counterclaims (the "Osborne Amended Claims") in the Lawsuit against the registrant and its board of trustees alleging, INTER ALIA, (i) violations of Section 14(a) under the Exchange Act and the rules promulgated thereunder in connection with the solicitation of proxies and the distribution of proxy materials by the registrant relating to the registrant's annual meeting of shareholders held April 11, 1995 (the "Annual Meeting"), and (ii) derivative claims for alleged breach by the trustees of their fiduciary obligations. The Fund and RMO seek relief including (a) invalidation of the results of the election of trustees at the Annual Meeting, (b) an award of damages to the registrant from the trustees of $5.45 million, (c) an award of damages to the Fund and RMO from registrant and the trustees of $500,000 compensatory damages and $1 million punitive damages, and (d) invalidation of the 9.8% ownership limit contained in the registrant's by-laws and the registrant's Rights Plan. On May 8, 1995, the Wolstein Defendants filed amended counterclaims (the "Wolstein Amended Claims") against the registrant and James C. Mastandrea alleging tort claims including defamation. The Wolstein Defendants seek compensatory damages in amounts not less than $10 million for defendant Developers Diversified Realty Corporation ("DDRC") and $1 million for each of the other Wolstein Defendants and punitive damages in an amount not less than $20 million for defendant DDRC and $5 million for each of the other Wolstein Defendants. The registrant denies that any of the counterclaims are entitled to relief, has filed motions to dismiss the Wolstein Defendants' counterclaims, and is vigorously defending against all counterclaims. 3 4 Item 2. Changes in Securities. - - - - - ------ --------------------- None. Item 3. Defaults Upon Senior Securities. - - - - - ------ ------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders. - - - - - ------ --------------------------------------------------- The following matters were considered at the Annual Meeting of Shareholders held on April 11, 1995: 1. Election of Trustees --------------------
Name Total Votes For Against Abstentions ---- ----------- --- ------- ----------- Stephen R. Hardis 7,929,616 7,579,808 ----- 349,808 E. Bradley Jones 7,929,616 7,272,931 ----- 656,685 James C. Mastandrea 7,929,616 7,648,507 ----- 281,109 Steven A. Calabrese 5,139,822 5,117,542 ----- 22,280 Richard M. Osborne 5,584,097 5,561,817 ----- 22,280 James R. Webb 5,139,822 5,117,542 ----- 22,280
The three nominees proposed for re-election by the Board of Trustees of First Union Real Estate Investments -- Stephen R. Hardis, E. Bradley Jones and James C. Mastandrea -- were re-elected for three-year terms. Continuing Term Trustees ------------------------
Name Expiration of Term ---- ------------------ Otes Bennett, Jr. 1996 Allen H. Ford 1996 Daniel G. DeVos 1996 Kenneth K. Chalmers 1997 William E. Conway 1997 Russell R. Gifford 1997
2. Other Matters ------------- A shareholder proposed to disallow proxy ballots which are unmarked as an affirmative vote for the issue under consideration.
Total Votes For Against Abstentions ----------- --- ------- ----------- 13,069,438 2,991,305 6,826,184 3,251,949
Item 5. Other Information. - - - - - ------- ------------------ None. Item 6. Exhibits and Reports on Form 8-K. - - - - - ------- --------------------------------- 4 5 (a) Exhibits: --------- Exhibit (11) - Statements Re: Computation of Per Share Earnings. Exhibit (20) - First Quarter Report, March 31, 1995. Exhibit (27) - Financial Data Schedule (b) Reports on Form 8-K: -------------------- None. 5 6 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 thereunto duly authorized. First Union Real Estate Equity and Mortgage Investments ---------------------------------- (Registrant) Date: May 15, 1995 By: /s/ Gregory D. Bruhn ----------------- ---------------------------- Gregory D. Bruhn, Executive Vice President and Chief Financial Officer Date: May 15, 1995 By: /s/ John J. Dee ----------------- ---------------------------- John J. Dee, Senior Vice President-Controller (Principal Accounting Officer) 6 7 Index to Exhibits ----------------- Page Number ------ Exhibit (11) - Statements Re: Computation of Per Share Earnings ......................................... 8 Exhibit (20) - First Quarter Report, March 31, 1995 ............. 9 Exhibit (27) - Financial Data Schedule 7 EX-11 2 FIRST UNION REAL ESTATE 10-Q EXHIBIT 11 1 Exhibit 11 ---------- FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS AND ----------------------------------------------------------- FIRST UNION MANAGEMENT, INC. ---------------------------- STATEMENTS RE: COMPUTATION OF PER SHARE EARNINGS ------------------------------------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- Shares Outstanding: For computation of primary net income per share - Weighted average 18,145 18,109 ====== ====== For computation of fully diluted net income per share - Weighted average, without regard to exercise of shares under share option, restricted stock or employee incentive plans 18,100 18,109 Weighted average of outstanding shares issued under restricted stock plan 42 --- Weighted average of shares issued under employee incentive plan 3 --- ------ ------- Adjusted shares outstanding 18,145 18,109 ====== ======= Net Income $30,560 $ 1,612 ------- ------- Per Share - Primary and fully diluted: Income after litigation and proxy expenses(1) $ .04 $ .09 Capital gains(2) 1.64 ------- ------- Net income $ 1.68 $ .09 ======= ======= (1) In the three months ended March 31, 1995, the registrant incurred professional fees of $950,000, or $0.05 per share, in regard to litigation and a proxy contest with a minority shareholder. (2) In January 1995, the Trust sold its 50% interests in two shopping malls resulting in a gain of approximately $29.9 million.
8 EX-20 3 FIRST UNION REAL ESTATE 10-Q EXHIBIT 20 1 Exhibit 20 ---------- SELECTED FINANCIAL DATA -----------------------
THREE MONTHS Unaudited (In thousands, except per share data) ENDED MARCH 31, --------------------------- 1995 1994 ----------- ----------- OPERATING RESULTS Revenues $ 19,347 $ 18,917 Income from operations 1,640 1,612 Litigation and proxy expenses 950 Income after litigation and proxy expenses and before capital gains 690 1,612 Capital gains (1) 29,870 Net income 30,560 1,612 Funds from operations (2) 3,777 4,453 Dividends declared 1,827 1,811 PER SHARE Income from operations $ .09 $ .09 Income after litigation and proxy expenses and before capital gains .04 .09 Capital gains 1.64 Net income 1.68 .09 Funds from operations .21 .25 Dividends declared .10 .10 (1) In January 1995, the Trust sold its 50% interests in two malls located in Wilkes-Barre, Pennsylvania and Fairmount, West Virginia resulting in a capital gain of approximately $29.9 million. (2) The amount of funds from operations is calculated as income from operations less litigation and proxy expenses plus noncash charges for depreciation and amortization.
2 COMBINED BALANCE SHEETS -----------------------
MARCH 31, DECEMBER 31, Unaudited (In thousands, except shares) 1995 1994 ------------ ----------- ASSETS INVESTMENTS IN REAL ESTATE Land $ 44,994 $ 44,594 Buildings and improvements 377,018 391,800 ------------ ----------- 422,012 436,394 Less--Accumulated depreciation (106,484) (111,972) ------------ ----------- Total investments in real estate 315,528 324,422 MORTGAGE LOANS RECEIVABLE 41,813 35,761 OTHER ASSETS Cash and cash equivalents 33,011 2,975 Accounts receivable 3,462 4,594 Deferred charges, net 3,989 3,488 Unamortized debt issue costs 4,815 4,949 ------------ ----------- $ 402,618 $ 376,189 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage loans $ 86,018 $ 90,796 Senior notes 105,000 105,000 Bank loans 43,652 42,500 Accounts payable and accrued liabilities 17,869 16,686 Deferred obligations 10,557 10,522 Deferred capital gains and other deferred income 7,743 7,745 Shareholders' equity, including shares of beneficial interest, $1 par, unlimited authorization, outstanding 1995--18,272,537; 1994--18,262,725 131,779 102,940 ------------ ----------- $ 402,618 $ 376,189 ============ ===========
3 COMBINED STATEMENTS OF INCOME -----------------------------
Unaudited (In thousands, except per share data) THREE MONTHS ENDED MARCH 31, -------------------------- 1995 1994 ----------- ---------- REVENUES Rents $ 17,989 $ 17,651 Interest - Mortgage loans 1,072 975 - Short term investments 286 291 ----------- ---------- 19,347 18,917 ----------- ---------- EXPENSES Property operating 6,299 6,591 Real estate taxes 1,998 2,021 Depreciation and amortization 3,087 2,841 Interest--Mortgage loans 1,989 1,788 --Senior notes 2,326 2,327 --Bank loans and other 1,129 1,010 General and administrative 879 727 ----------- ---------- 17,707 17,305 ----------- ---------- INCOME FROM OPERATIONS 1,640 1,612 Litigation and proxy expenses 950 ----------- ---------- Income after litigation and proxy expenses and before capital gains 690 1,612 CAPITAL GAINS 29,870 ----------- ---------- NET INCOME $ 30,560 $ 1,612 =========== ========== PER SHARE Income from operations $ .09 $ .09 =========== ========== Income after litigation and proxy expenses and before capital gains .04 $ .09 Capital gains 1.64 ----------- ---------- Net income $ 1.68 $ .09 =========== ========== Dividends declared $ .10 $ .10 =========== ========== ADJUSTED SHARES OF BENEFICIAL INTEREST 18,145 18,109 =========== ========== NOTES TO COMBINED FINANCIAL STATEMENTS -------------------------------------- (1) Income per share of beneficial interest has been computed based on weighted average shares and share equivalents outstanding for the applicable periods. (2) In January 1995, the Trust sold its 50% intertests in two malls located in Wilkes-Barre, Pennsylvania and Fairmount, West Virginia for $29.5 million in cash ($2 million was received in 1994), a $6 million mortgage note receivable and the assumption by the purchaser of $4.7 million in mortgage debt, resulting in a capital gain of approximately $29.9 million. (3) The Trust incurred certain professional fees in regard to litigation and a proxy contest with a minority shareholder.
4 COMBINED STATEMENTS OF CHANGES IN CASH --------------------------------------
THREE MONTHS Unaudited (in thousands) ENDED MARCH 31, ------------------------- 1995 1994 ---------- ---------- CASH PROVIDED BY (USED FOR) OPERATIONS Net income $ 30,560 $ 1,612 Adjustments to reconcile net income to net cash provided by operations -- Depreciation and amortization 3,087 2,841 Capital gains (29,870) (Increase) decrease in deferred charges, net (669) 51 Increase in deferred interest on mortgage investments, net (90) (81) Increase in deferred obligations 35 30 Net changes in other assets and liabilities 4,349 2,550 ---------- ---------- Net cash provided by operations 7,402 7,003 ---------- ---------- CASH PROVIDED BY (USED FOR) INVESTING Principal received from mortgage investments 38 35 Proceeds from sale of properties 27,500 Investments in properties (3,333) (1,343) ---------- ---------- Net cash provided by (used for) investing 24,205 (1,308) ---------- ---------- CASH PROVIDED BY (USED FOR) FINANCING Increase in short term loans 1,152 Repayment of mortgage loans - Normal payments (955) (910) - Balloon payments (2,225) Issue of First Union Shares 75 Dividends paid (1,826) (3,260) Other (17) (22) ---------- ---------- Net cash used for financing (1,571) (6,417) ---------- ---------- Increase (decrease) in cash and cash equivalents 30,036 (722) Cash and cash equivalents at beginning of period 2,975 38,523 ---------- ---------- Cash and cash equivalents at end of period $ 33,011 $ 37,801 ========== ==========
EX-27 4 FIRST UNION REAL ESTATE 10-Q EXHIBIT 27
5 0000037008 FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS 1 DOLLARS 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 33,011,000 0 45,275,000 0 0 36,473,000 422,012,000 (106,484,000) 402,618,000 17,869,000 234,670,000 131,779,000 0 0 0 402,618,000 17,989,000 19,347,000 0 8,297,000 4,916,000 0 5,444,000 690,000 0 690,000 0 0 0 30,560,000 1.68 1.68
-----END PRIVACY-ENHANCED MESSAGE-----