-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, At/qbBI9rjy4WIrK4jjFYhzee/LZGy1dj44YQ0HPPoZPIscCDV2StN5Ckmy3f3Jg ng2F1wkdvyclS5cqA7uPIQ== 0001104659-05-003751.txt : 20050202 0001104659-05-003751.hdr.sgml : 20050202 20050202170531 ACCESSION NUMBER: 0001104659-05-003751 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20041118 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050202 DATE AS OF CHANGE: 20050202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION REAL ESTATE EQUITY & MORTGAGE INVESTMENTS CENTRAL INDEX KEY: 0000037008 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 346513657 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06249 FILM NUMBER: 05570114 BUSINESS ADDRESS: STREET 1: 7 BULFINCH PLACE STREET 2: SUITE 500 PO BOX 9507 CITY: BOSTON STATE: MA ZIP: 02114 BUSINESS PHONE: 6175704614 MAIL ADDRESS: STREET 1: 7 BULFINCH PLACE STREET 2: SUITE 500 PO BOX 9507 CITY: BOSTON STATE: MA ZIP: 02114 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION REALTY DATE OF NAME CHANGE: 19691012 8-K/A 1 a05-2634_18ka.htm 8-K/A

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

FORM 8-K/A

(Amendment No. 1)

 

Current Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported) November 18, 2004

 

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

(Exact Name of Registrant as Specified in Its Charter)

 

Ohio

(State or Other Jurisdiction of Incorporation)

 

001-06249

 

34-6513657

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

 

 

7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts

 

02114

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

(617) 570-4614

(Registrant’s Telephone Number, Including Area Code)

 

 

 

n/a

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions

 

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFTR 230.425)

 

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 



 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

We have filed Current Reports on Form 8-K on November 23, 2004 and November 30, 2004 with regard to the acquisitions of triple net lease properties as described in such Current Reports.  The purpose of this Amendment to those Current Reports is to provide the financial information required by Article 11 of Regulation S-X.

 

Item 9.01 Financial Statements and Exhibits

 

The following financial statements and pro forma financial information are filed as part of this report.

 

(a)                                  Financial Statements of Real Estate Acquired:

 

Statement of Revenues and Certain Expenses of the Finova Properties for the year ended December 31, 2003.

 

Statement of Revenues and Certain Expenses of the 5400 Westheimer Property for the year ended December 21, 2003

 

(b)                                 Unaudited Pro Forma Financial Statements:

 

The unaudited pro forma consolidated financial statements set forth (i) the pro forma balance sheet of First Union Real Estate and Mortgage Investments (the “Company”) as of September 30, 2004, as if the acquisitions had occurred on September 30, 2004, (ii) the pro forma consolidated statement of operations for the year ended December 31, 2003, as if the acquisition had occurred on January 1, 2003, (iii) the pro forma consolidated statement of operations for the period ended September 30, 2004, as if the acquisition had occurred on January 1, 2003.  The pro forma financial statements are based upon assumptions contained in the notes to thereto and should be read in conjunction with such notes.

 

The unaudited pro forma consolidated financial statements may not necessarily reflect the results of operations or financial position of the Company which would have actually resulted had the acquisitions occurred as of the dates and for the periods indicated, nor should they be taken as indicative of the future results of operations or the future financial position of the Company.

 

3


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of

First Union Real Estate Equity and Mortgage Investments:

 

We have audited the accompanying statement of revenues and certain expenses of the properties known as the Finova Properties (the “Properties”) for the year ended December 31, 2003. This financial statement is the responsibility of the Properties’ management. Our responsibility is to express an opinion on this financial statement based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8K/A of First Union Real Estate Equity and Mortgage Investments as described in Note 1 to the financial statement and is not intended to be a complete presentation of the Properties’ revenues and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Properties for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

 

 

DELOITTE & TOUCHE LLP

 

 

Boston, Massachusetts

January 31, 2005

 

4


 

FINOVA PROPERTIES

STATEMENT OF REVENUES AND CERTAIN
EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2003

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

Rental Revenues

 

$

14,567

 

 

 

 

 

Certain Expenses:

 

 

 

 

 

 

 

Interest Expense

 

2,799

 

 

 

 

 

Revenues in Excess of Certain Expenses

 

$

11,768

 

 

See notes to the statement of revenues and certain expenses.

 

5


 

FINOVA PROPERTIES

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

 

1.             ORGANIZATION AND BASIS OF PRESENTATION

 

The accompanying Statement of Revenues and Certain Expenses includes the operations of 16 triple-net leased properties containing approximately 2.5 million gross square feet (the “Finova Properties”).  During the year ended December 31, 2003, the Finova Properties were owned by Finova Capital Corporation or its subsidiaries (“Finova”), an unaffiliated third party.

 

On November 18, 2004, FT-Fin Acquisition LLC, a Delaware limited liability company wholly-owned by First Union Real Estate Equity and Mortgage Investment (the “Company”), acquired the Finova Properties from Finova. The aggregate purchase price for the properties including closing costs was approximately $92.1 million, inclusive of the assumption of approximately $31.6 million of existing first mortgage debt on certain of the properties.

 

The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion in Form 8K/A of the Company. Accordingly, the financial statement is not representative of the Finova Properties’ actual operations for the year ended December 31, 2003 as certain expenses have been excluded, which may not be comparable to the expenses expected to be incurred in the future operations of the properties.  Expenses excluded consist of depreciation and amortization, and other costs not directly related to the future operations of the acquired Finova Properties.

 

2.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Rental Revenues - Rental revenues are recognized on a straight line basis over the terms of the related leases.

 

Interest Expense - Interest expense represents interest related to the first mortgage debt assumed as part of the acquisition.

 

Management’s Use of Estimates - The financial statement has been prepared in conformity with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

3.             OPERATING LEASES

 

Rental revenues are principally obtained from tenant operating leases. Future minimum base rental payments during the primary terms under all tenant operating leases as of December 31, 2003 are as follows:

 

Year ending December 31,

 

(in thousands)

 

 

 

 

 

2004

 

$

14,567

 

2005

 

13,972

 

2006

 

13,838

 

2007

 

13,803

 

2008

 

13,764

 

Thereafter

 

30,807

 

 

 

 

 

Total

 

$

100,751

 

 

6


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of

First Union Real Estate Equity and Mortgage Investments:

 

We have audited the accompanying statement of revenues and certain expenses of the property known as 5400 Westheimer (the “Property”) for the year ended December 31, 2003. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audits.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing that accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in Form 8K/A of First Union Real Estate Equity and Mortgage Investments as described in Note 1 to the financial statement and is not intended to be a complete presentation of the Property’s revenues and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

 

 

DELOITTE & TOUCHE LLP

 

 

Boston, Massachusetts

January 31, 2005

 

7


 

5400 WESTHEIMER PROPERTY

STATEMENT OF REVENUES AND CERTAIN
EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2003

(in thousands)

 

Revenues:

 

 

 

Rental Revenues

 

$

7,591

 

 

 

 

 

Certain Expenses:

 

 

 

Interest Expense

 

5,185

 

 

 

 

 

Revenues in Excess of Certain Expenses

 

$

2,406

 

 

See notes to the statement of revenues and certain expenses.

 

8


 

5400 WESTHEIMER PROPERTY

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES

 

1.             ORGANIZATION AND BASIS OF PRESENTATION

 

On November 22, 2004 First Union Real Estate Equity and Mortgage Investment (the “Company”) made a loan to 5400 Westheimer Holding L.P. (“Holding”) in the principal amount of $7.53 million. The loan bears interest at 8% per annum and matures on March 30, 2005. The general partner of Holding is a subsidiary of the Company. The loan was made to facilitate the acquisition by Holding of an indirect 100% ownership interest in an entity that holds title to real property located at 5400 Westheimer Court, Houston, Texas (the “5400 Westheimer Property”). The 5400 Westheimer Property is triple-net leased to an affiliate of Duke Capital LLC pursuant to a lease that is scheduled to expire in 2018 subject to early termination in 2016. The interest in the 5400 Westheimer Property was acquired subject to existing first mortgage debt of approximately $76.3 million.

 

The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion in Form 8K/A of the Company. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 2003 as certain expenses have been excluded, which may not be comparable to the expenses expected to be incurred in the future operations of the property.  Expenses excluded consist of depreciation and amortization, and other costs not directly related to the future operations of the acquired 5400 Westheimer Property.

 

2.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Rental Revenues - Rental revenues are recognized on a straight line basis over the lease term.

 

Interest Expense – Interest expense represents interest related to the first mortgage debt assumed as part of the acquisition.

 

Management’s Use of Estimates - The financial statement has been prepared in conformity with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

3.             OPERATING LEASE

 

Rental revenues are principally obtained from tenant operating leases. Future minimum base rental income under tenant operating lease as of December 31, 2003 is as follows:

 

Year ending December 31,

 

(in thousands)

 

 

 

 

 

2004

 

$

6,782

 

2005

 

6,901

 

2006

 

7,021

 

2007

 

7,144

 

2008

 

7,269

 

Thereafter

 

74,273

 

 

 

 

 

Total

 

$

109,390

 

 

9


 

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2004

 

 

 

 

 

 

 

 

 

Pro Forma Adjustments

 

(In thousands)

 

Historical
September 30, 2004

 

Finova
Properties

 

5400
Westheimer
Property

 

Pro Forma
September 30,
2004

 

 

 

 

 

(a)

 

(b)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Investment in real estate, at cost

 

 

 

 

 

 

 

 

 

Land

 

$

1,718

 

$

2,166

 

$

—

 

$

3,884

 

Buildings and improvements

 

6,274

 

81,863

 

—

 

88,137

 

 

 

7,992

 

84,029

 

—

 

92,021

 

Less - Accumulated depreciation

 

(4,405

)

—

 

—

 

(4,405

)

Investments in real estate, net

 

3,587

 

84,029

 

—

 

87,616

 

 

 

 

 

 

 

 

 

 

 

Real estate held for syndication

 

—

 

—

 

84,375

 

84,375

 

Lease intangibles

 

—

 

8,048

 

—

 

8,048

 

Cash and cash equivalents

 

1,451

 

(1,082

)

—

 

369

 

Restricted cash

 

33,980

 

(33,980

)

—

 

—

 

Loans receivable

 

5,645

 

 

 

—

 

5,645

 

Accounts receivable and prepayments, net

 

1,416

 

1,674

 

—

 

3,090

 

Investments - available for sale

 

68,711

 

—

 

(7,613

)

61,098

 

Real estate securities - available for sale

 

9,685

 

—

 

—

 

9,685

 

Other

 

588

 

712

 

—

 

1,300

 

Total Assets

 

$

125,063

 

$

59,401

 

$

76,762

 

$

261,226

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Mortgage loan

 

$

—

 

$

59,223

 

$

—

 

$

59,223

 

Mortgage loan on real estate held for syndication

 

—

 

—

 

76,762

 

76,762

 

Note payable

 

49

 

—

 

—

 

49

 

Accounts payable and accrued liabilities

 

6,331

 

178

 

—

 

6,509

 

Dividends payable

 

516

 

—

 

—

 

516

 

Deferred items

 

48

 

—

 

—

 

48

 

Liabilities of discontinued operations

 

379

 

—

 

—

 

379

 

Total Liabilities

 

7,323

 

59,401

 

76,762

 

143,486

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Convertible preferred shares of beneficial interest

 

23,131

 

—

 

—

 

23,131

 

Common shares of beneficial interest

 

31,059

 

—

 

—

 

31,059

 

Additional paid in capital

 

207,968

 

—

 

—

 

207,968

 

Accumulated other comprehensive income

 

610

 

—

 

—

 

610

 

Accumulated distributions in excess of net income

 

(145,028

)

—

 

—

 

(145,028

)

Total Shareholders’ Equity

 

117,740

 

—

 

—

 

117,740

 

Total Liabilities and Shareholders’ Equity

 

$

125,063

 

$

59,401

 

$

76,762

 

$

261,226

 

 

See notes to unaudited pro forma financial statements

 

10


 

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2003

 

 

 

 

 

Pro Forma
Adjustments

 

 

 

Pro Forma Adjustments

 

 

 

Pro Forma
Adjustments

 

 

 

(In thousands, except per share data)

 

 

 

Finova
Properties
Acquisition

 

5400 Westheimer Property
Acquisition

 

Pro
Forma
Subtotal

 

5400
Westheimer
Property

 

Pro
Forma

 

 

Historical

 

Park Plaza
Sale

 

Pro Forma

 

 

 

 

(a)

 

 

 

 

 

 

 

 

 

(f)

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rents

 

$

13,916

 

$

(12,327

)

$

1,589

 

$

14,567

(b)

$

7,591

(b)

$

23,747

 

$

(7,591

)

$

16,156

 

Sales

 

1,892

 

—

 

1,892

 

—

 

—

 

1,892

 

—

 

1,892

 

Interest and dividends

 

838

 

—

 

838

 

—

 

—

 

838

 

—

 

838

 

 

 

16,646

 

(12,327

)

4,319

 

14,567

 

7,591

 

26,477

 

(7,591

)

18,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

4,965

 

(4,116

)

849

 

—

 

—

 

849

 

—

 

849

 

Cost of goods sold

 

3,279

 

—

 

3,279

 

—

 

—

 

3,279

 

—

 

3,279

 

Real estate taxes

 

773

 

(809

)

(36

)

—

 

—

 

(36

)

—

 

(36

)

Depreciation and amortization

 

2,161

 

(1,669

)

492

 

3,388

(c)

2,777

(c)

6,657

 

(2,777

)

3,880

 

Interest

 

4,551

 

(3,667

)

884

 

5,042

(d)

5,185

(e)

11,111

 

(5,185

)

5,926

 

General and administrative

 

6,873

 

—

 

6,873

 

—

 

—

 

6,873

 

—

 

6,873

 

 

 

22,602

 

(10,261

)

12,341

 

8,430

 

7,962

 

28,733

 

(7,962

)

20,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/income from continuing operations

 

$

(5,956

)

$

(2,066

)

$

(8,022

)

$

6,137

 

$

(371

)

$

(2,256

)

$

371

 

$

(1,885

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share data –  Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations applicable to common shares of beneficial interest

 

$

(0.19

)

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average Common Shares

 

30,885

 

 

 

 

 

 

 

 

 

 

 

 

 

30,885

 

 

See notes to unaudited pro forma financial statements

 

11


 

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30. 2004

 

 

 

 

 

Pro Forma
Adjustments

 

 

 

Pro Forma Adjustments

 

 

 

Pro Forma
Adjustments

 

 

 

(In thousands, except per share data)

 

Historical

 

Park Plaza
Sale

 

Pro Forma

 

Finova
Properties
Acquisition

 

5400
Westheimer
Property
Acquisition

 

Pro
Forma
Subtotal

 

5400
Westheimer
Property

 

Proforma

 

 

 

 

 

(a)

 

 

 

 

 

 

 

 

 

(f)

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rents

 

$

1,100

 

$

—

 

$

1,100

 

$

10,925

(b)

$

5,693

(b)

$

17,718

 

$

(5,693

)

$

12,025

 

Sales

 

3,195

 

—

 

3,195

 

—

 

—

 

3,195

 

—

 

3,195

 

Interest and dividends

 

1,936

 

—

 

1,936

 

—

 

—

 

1,936

 

—

 

1,936

 

Insurance recoveries

 

1,244

 

—

 

1,244

 

—

 

—

 

1,244

 

—

 

1,244

 

Gain on sale of security available for sale

 

1,040

 

—

 

1,040

 

—

 

—

 

1,040

 

—

 

1,040

 

 

 

8,515

 

—

 

8,515

 

10,925

 

5,693

 

25,133

 

(5,693

)

19,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

570

 

—

 

570

 

—

 

—

 

570

 

—

 

570

 

Cost of goods sold

 

2,376

 

—

 

2,376

 

—

 

—

 

2,376

 

—

 

2,376

 

Real estate taxes

 

45

 

—

 

45

 

—

 

—

 

45

 

—

 

45

 

Depreciation and amortization

 

312

 

—

 

312

 

2,541

(c)

2,082

(c)

4,935

 

(2,082

)

2,853

 

Interest

 

17

 

—

 

17

 

3,719

(d)

3,819

(e)

7,555

 

(3,819

)

3,736

 

General and administrative

 

2,990

 

—

 

2,990

 

—

 

—

 

2,990

 

—

 

2,990

 

 

 

6,310

 

—

 

6,310

 

6,260

 

5,901

 

18,471

 

(5,901

)

12,570

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/income from continuing operations

 

$

2,205

 

$

—

 

$

2,205

 

$

4,665

 

$

(208

)

$

6,662

 

$

208

 

$

6,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share data - Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations applicable to common shares of beneficial interest

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations applicable to common shares of beneficial interest

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average Common Shares

 

31,059

 

 

 

 

 

 

 

 

 

 

 

 

 

31,059

 

Convertible Preferred Shares

 

4,837

 

 

 

 

 

 

 

 

 

 

 

 

 

4,837

 

Stock Options

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

Diluted weighted average Common Shares

 

35,921

 

 

 

 

 

 

 

 

 

 

 

 

 

35,921

 

 

See notes to unaudited pro forma financial statements

 

12


 

FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

 

1. Basis of presentation

 

On November 18, 2004, FT-Fin Acquisition LLC (“FT-Fin”), a Delaware limited liability company wholly-owned by First Union Real Estate Equity and Mortgage Investment (the “Company”), acquired the Finova Properties (the “Finova Properties”). The Finova Properties consist of 16 triple-net lease buildings containing a total of approximately 2.5 million gross square feet and was acquired by the Company from Finova Capital Corporation, an unrelated third party.

 

On November 22, 2004 the Company made a loan to 5400 Westheimer Holding L.P. (“Holding”) in the principal amount of $7.53 million. The loan bears interest at 8% per annum and matures on March 30, 2005. The general partner of Holding is a subsidiary of the Company. The loan was made to facilitate the acquisition by Holding of an indirect 100% ownership interest in an entity that holds title to real property located at 5400 Westheimer Court, Houston, Texas (the “5400 Westheimer Property”). The 5400 Westheimer Property is triple-net leased to an affiliate of Duke Capital LLC pursuant to a lease that is scheduled to expire in 2018 subject to early termination in 2016.

 

2. Unaudited Pro Forma Consolidated Balance Sheet

 

The unaudited pro forma balance sheet as of September 30, 2004, is based on the historical balance sheet for the Company presented in its Quarterly Report on Form 10-Q as of September 30, 2004. Significant pro forma adjustments in the unaudited pro forma consolidated balance sheet include the following:

 

(a)          Adjustments to reflect the purchase of the Finova Properties for approximately $92.1 million, including closing costs and inclusive of the assumption of approximately $31.6 million of existing first mortgage debt on certain of the properties. This acquisition was funded from the proceeds of a $27 million loan as well as $33.5 million in net proceeds realized from the sale of the Park Plaza property in June 2004 previously reported on Form 8-K on July 2, 2004, which were being held by a qualified intermediary to enable First Union to acquire the properties in a 1031 Tax-Free exchange. The Company has allocated the purchase price to real estate and lease intangibles, based on their relative fair values.

 

(b)         Adjustments to reflect the purchase of the 5400 Westheimer Property. This property is considered real estate held for syndication. On January 3, 2005, Holding completed an equity offering which reduced the Company’s investment to investor loans receivable aggregating $1.3 million, a 1% general partner interest ($80,000) and a 7% limited partner interest ($562,000).

 

3. Unaudited Pro Forma Consolidated Statements of Operations

 

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2003, includes adjustments assuming that the acquisition of the Finova Properties and the 5400 Westheimer Property occurred as of January 1, 2003, and is based on the historical statement of operations for the Company presented in its Annual Report on Form 10-K for the year ended December 31, 2003. The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2004, includes adjustments assuming that the acquisition of the Finova Properties and the 5400 Westheimer Property occurred as of January 1, 2003, and is based on the historical statement of operations for the Company presented in its Quarterly Report of Form 10-Q for the period ended September 30, 2004. Significant pro forma adjustments in the unaudited pro forma consolidated statements of operations include the following:

 

(a)          Adjustment to reflect sale of Park Plaza property on June 22, 2004.

(b)         Adjustment to reflect the historical net lease rental revenues for the Finova Properties and the 5400 Westheimer Property.

(c)          Adjustment to reflect depreciation on the Finova Properties and the 5400 Westheimer Property, based on the allocated cost of the acquisition to depreciable assets. The Company uses the straight-line method for depreciation and estimated useful life of 40 years for the properties. Allocated costs assigned to leases in place are amortized over the remaining lease life.

 

13


 

(d)         Adjustment to reflect interest expense related to the non-recourse first mortgage loans assumed in the amount of $31.6 million (fixed stated interest rates ranging from 6.45% - 11.05%) and a new loan of $27.0 million at an effective fixed interest rate at 8.55%.

(e)          Adjustment to interest expense related to the non-recourse first mortgage loan assumed in the amount of $76.1 million (fixed interest rates ranging from 5.22% - 7.5% on three different tranches).

(f)            Adjustment to remove the operations of the 5400 Westheimer Property from continuing operations as this property is considered real estate held for syndication and, accordingly, its operations will be classified as discontinued operations. On January 3, 2005, the Company completed an equity offering which reduced the Company’s investment to investor loans receivable aggregating $1.3 million, a 1% general partner interest ($80,000) and a 7% limited partner interest ($562,000).

 

14


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 1st day of February, 2005.

 

 

 

 

 

 

 

 

FIRST UNION REAL ESTATE EQUITY AND
MORTGAGE INVESTMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Thomas Staples

 

 

 

 

 

 

 

 

Thomas Staples

 

 

 

 

 

 

 

Chief Financial Officer

 

15

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