-----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, DJZV/7CqxttgVGthS/7tWGBjdGgzvTmoY173DJuB2t8VgoVKFuWnrNlbXjQbA+Fa 1ujepDOF0Lkjcwf9iv1z0Q== 0000950134-98-005880.txt : 19980714 0000950134-98-005880.hdr.sgml : 19980714 ACCESSION NUMBER: 0000950134-98-005880 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 ITEM INFORMATION: FILED AS OF DATE: 19980713 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT INC CENTRAL INDEX KEY: 0000778437 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 756335572 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09016 FILM NUMBER: 98664864 BUSINESS ADDRESS: STREET 1: 6210 N BELTLINE RD STREET 2: STE 170 CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 9727566000 MAIL ADDRESS: STREET 1: 6220 N BELTLINE ROAD STREET 2: SUITE 205 CITY: IRVING STATE: TX ZIP: 75063 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT DATE OF NAME CHANGE: 19931203 FORMER COMPANY: FORMER CONFORMED NAME: TRAMMELL CROW REAL ESTATE INVESTORS DATE OF NAME CHANGE: 19931203 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): April 30, 1998 AMERICAN INDUSTRIAL PROPERTIES REIT (Exact Name of Registrant as Specified in its Charter) TEXAS 1-9016 75-6335572 (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Incorporation or Organization) Identification Number) 6210 NORTH BELTLINE ROAD, SUITE 170, IRVING, TEXAS 75063 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (972) 756-6000 2 The undersigned Registrant hereby amends its Current Report on Form 8-K dated April 30, 1998, which was filed with the Securities and Exchange Commission on May 14, 1998, to include the financial statements required by Item 7(a) and the pro forma financial information required by Item 7(b). ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements: See Index to Financial Statements and Pro Forma Financial Information appearing on page F-1 of this Form 8-K/A. (b) Pro Forma Financial Information: See Index to Financial Statements and Pro Forma Financial Information appearing on page F-1 of this Form 8-K/A. (c) Exhibits The following exhibit is filed with this report: Exhibit Number Description 23.1 Consent of Ernst & Young LLP 3 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. AMERICAN INDUSTRIAL PROPERTIES REIT By: /s/ CHARLES W. WOLCOTT ------------------------------------------ Charles W. Wolcott President and Chief Executive Officer July 7, 1998 4 INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION FINANCIAL STATEMENTS SPIEKER PROPERTIES PORTFOLIO Report of Independent Auditors F-2 Combined Historical Summary of Gross Income and Direct Operating Expenses F-3 Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses F-4 NORTH AUSTIN OFFICE BUILDING Report of Independent Auditors F-7 Historical Summary of Gross Income and Direct Operating Expenses F-8 Notes to Historical Summary of Gross Income and Direct Operating Expenses F-9 PRO FORMA FINANCIAL INFORMATION F-12 Pro forma condensed consolidated balance sheet as of December 31, 1997 F-14 Pro forma condensed consolidated statements of operations for the year ended December 31, 1997 F-16 Pro forma condensed consolidated statements of operations for the three months ended March 31, 1998 F-19
F-1 5 Report of Independent Auditors Board of Trust Managers American Industrial Properties REIT We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (the "Combined Historical Summary") of the Spieker Properties Portfolio, which is comprised of six industrial properties (the "Properties"), as described in Note 1 for the year ended December 31, 1997. This Combined Historical Summary is the responsibility of the Properties' management. Our responsibility is to express an opinion on this Combined Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Combined Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of American Industrial Properties REIT, as described in Note 1, and is not intended to be a complete presentation of the income and expenses of the Properties. In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the combined gross income and direct operating expenses of the Spieker Properties Portfolio, as described in Note 1, for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Ernst & Young LLP Dallas, Texas April 7, 1998, except for Note 5 as to which the date is May 6, 1998 F-2 6 Spieker Properties Portfolio Combined Historical Summary of Gross Income and Direct Operating Expenses
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, 1998 1997 --------------- ------------ (Unaudited) GROSS INCOME Rental $1,263,799 $4,773,233 Reimbursements 195,537 752,696 Other 19,317 47,682 ---------- ---------- Total gross income 1,478,653 5,573,611 DIRECT OPERATING EXPENSES Repairs and maintenance 122,699 510,437 Utilities and other property operating 85,382 438,159 General and administrative 16,228 139,462 Real estate taxes 131,203 487,293 Management fees 33,613 144,856 ---------- ---------- Total direct operating expenses 389,125 1,720,207 ---------- ---------- Excess of gross income over direct operating expenses $1,089,528 $3,853,404 ========== ==========
See accompanying notes. F-3 7 Spieker Properties Portfolio Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses Year Ended December 31, 1997 and Three Months Ended March 31, 1998 (Unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION Spieker Properties Portfolio is not a legal entity but rather a combination of affiliated properties that have common ownership. The accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (the "Combined Historical Summary") include the accounts of six industrial properties located in the southwestern United States (the "Properties"). The Properties are owned by Spieker Properties, a publicly traded real estate investment trust. The Properties are as follows:
Total Property Square Feet - ----------------------------------------------------------------------------- Arizona Black Canyon Tech Center (Phoenix) 100,000 Tucson Tech Center (Tucson) 115,030 Colorado Springs, Colorado Academy Pointe Atrium II 90,766 Aerotech 75,892 New Mexico Broadbent (Albuquerque) 59,296 Texas Summit Center (Austin) 96,950 ------- Portfolio total 537,934 =======
The accompanying Combined Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of American Industrial Properties REIT. The Combined Historical Summary is not intended to be a complete presentation of income and expenses of the Properties for the year ended December 31, 1997, and the three months ended March 31, 1998, as certain costs such as depreciation, amortization, interest, and other debt service costs have been excluded. These costs are not considered to be direct operating expenses. F-4 8 Spieker Properties Portfolio Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses (continued) 1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED) INTERIM UNAUDITED FINANCIAL INFORMATION The accompanying interim unaudited Combined Historical Summary has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and was prepared on the same basis as the Combined Historical Summary for the year ended December 31, 1997. In the opinion of management of the Properties, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for this interim period have been made. The excess of combined gross income over direct operating expenses for such interim period is not necessarily indicative of the excess of gross income over direct operating expenses for the full year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of the Properties' Combined Historical Summary in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts included in the Combined Historical Summary and accompanying notes thereto. Actual results could differ from those estimates. REVENUE RECOGNITION Minimum rents are recognized on a straight-line basis; as such, the rental revenues for leases which contain rent abatements and contractual increases are recognized on a straight-line basis over the initial term of the related lease. Property operating cost recoveries from tenants of common area maintenance, real estate taxes and other recoverable costs, are recognized in the period when the recoveries are earned. CAPITALIZATION POLICY Ordinary repairs and maintenance are expensed as incurred; major replacements and improvements are capitalized. F-5 9 Spieker Properties Portfolio Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses (continued) 3. OPERATING LEASES The Properties have operating leases representing potential future receipts with terms ranging from one to seven years. The minimum future rentals under operating leases as of December 31, 1997 are as follows: 1998 $ 4,672,383 1999 3,816,215 2000 3,389,968 2001 2,750,847 2002 1,846,384 Thereafter 513,626 ----------- $16,989,423 ===========
4. SUBSEQUENT EVENT On May 6, 1998, the Properties were sold for a combined purchase price of $43.5 million to American Industrial Properties REIT. F-6 10 Report of Independent Auditors Board of Trust Managers American Industrial Properties REIT We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (the "Historical Summary") of North Austin Office Building (the "Property"), as described in Note 1 for the year ended December 31, 1997. This Historical Summary is the responsibility of the Property's management. Our responsibility is to express an opinion on this Historical Summary based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion. The Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of American Industrial Properties REIT, as described in Note 1 and is not intended to be a complete presentation of the income and expenses of the Property. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses of North Austin Office Building, as described in Note 1, for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Ernst & Young LLP Dallas, Texas May 15, 1998 F-7 11 North Austin Office Building Historical Summary of Gross Income and Direct Operating Expenses
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, 1998 1997 ------------ ------------ (unaudited) GROSS INCOME Rental $ 697,606 $2,528,018 Reimbursements 261,918 1,109,935 Other -- 45,296 ---------- ---------- Total gross income 959,524 3,683,249 DIRECT OPERATING EXPENSES Repairs and maintenance 28,272 64,292 Utilities and other property operating 264,734 1,160,047 Real estate taxes 60,969 233,520 Management fees 29,393 109,630 ---------- ---------- Total direct operating expenses 383,368 1,567,489 ---------- ---------- Excess of gross income over direct operating expenses $ 576,156 $2,115,760 ========== ==========
See accompanying notes. F-8 12 North Austin Office Building Notes to Historical Summary of Gross Income and Direct Operating Expenses Year Ended December 31, 1997 and Three Months Ended March 31, 1998 (unaudited) 1. ORGANIZATION AND BASIS OF PRESENTATION North Austin Office Building (the "Property") is a commercial office building containing approximately 260,000 square feet located in Austin, Texas. The building was 98% occupied by five tenants, with one tenant occupying 44% of the net rentable square feet at March 31, 1998. Under the terms of its lease, the tenant is required to pay base rent of $92,805 per month until May 2007. The accompanying Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of American Industrial Properties REIT. The Historical Summary is not intended to be a complete presentation of income and expenses of the Property for the year ended December 31, 1997, and the three months ended March 31, 1998, as certain costs such as depreciation, amortization, interest, and other debt service costs have been excluded. These costs are not considered to be direct operating expenses. Additionally, income from the buy-out of a tenant's lease has been excluded, as this income is not comparable to the future operations of the property. INTERIM UNAUDITED FINANCIAL INFORMATION The accompanying interim unaudited Historical Summary has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and was prepared on the same basis as the Historical Summary for the year ended December 31, 1997. In the opinion of management of the Property, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for this interim period have been made. The excess of gross income over direct operating expenses for such interim period is not necessarily indicative of the excess of gross income over direct operating expenses for the full year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of the Historical Summary in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect F-9 13 North Austin Office Building Notes to Historical Summary of Gross Income and Direct Operating Expenses (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) the reported amounts included in the Historical Summary and accompanying notes thereto. Actual results could differ from those estimates. REVENUE RECOGNITION Minimum rents are recognized on a straight-line basis; as such, the rental revenues for leases which contain rent abatements and contractual increases are recognized on a straight-line basis over the initial term of the related lease. Property operating cost recoveries from tenants of common area maintenance, real estate taxes and other recoverable costs are recognized in the period when the recoveries are earned. CAPITALIZATION POLICY Ordinary repairs and maintenance are expensed as incurred; major replacements and improvements are capitalized. 3. MANAGEMENT FEES The Property is managed by a third party. The management fee is 3.0% of gross revenue collected. 4. OPERATING LEASES The Property's minimum future rentals under operating leases as of December 31, 1997 are as follows: 1998 $ 2,742,231 1999 2,667,952 2000 2,350,908 2001 2,352,803 2002 2,352,803 Thereafter 10,418,473 ----------- $22,885,170 ===========
F-10 14 North Austin Office Building Notes to Historical Summary of Gross Income and Direct Operating Expenses (continued) 5. SUBSEQUENT EVENT On April 30, 1998, the Property was sold for approximately $22.2 million to American Industrial Properties REIT. F-11 15 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA FINANCIAL INFORMATION (IN THOUSANDS) The following Pro Forma Condensed Consolidated Balance Sheet of American Industrial Properties REIT (the "Trust") as of March 31, 1998 has been prepared as if each of the following transactions had occurred as of March 31, 1998: (i) the acquisition of the Spieker Properties Portfolio (as defined in the Historical Summary included elsewhere herein), a group of six industrial properties (the "Spieker Portfolio"); and (ii) the acquisition of North Austin Office Building ("North Austin"). The following Pro Forma Condensed Consolidated Statement of Operations of the Trust for the year ended December 31, 1997 has been prepared as if each of the following transactions had occurred as of January 1, 1997: (i) the acquisition of 15 industrial real estate properties (the "1997 Acquisitions"); (ii) the sale of 2 industrial real estate properties (the "1997 Dispositions"); (iii) the merger (the "Merger") with four publicly traded real estate limited partnerships (the "RELPs"); (iv) the acquisition of the Spieker Portfolio; (v) the acquisition of North Austin; and (vi) the acquisition, through AIP Operating, L.P., a limited partnership in which the Trust has a 99% controlling ownership interest, of Spring Valley #6 on February 11, 1998 (together with North Austin, the "1998 Acquisitions"). The following Pro Forma Condensed Consolidated Statement of Operations of the Trust for the three months ended March 31, 1998 has been prepared as if each of the following transactions had occurred as of January 1, 1997: (i) the acquisition of the Spieker Portfolio; and (ii) the 1998 Acquisitions. The Pro Forma Financial Information of the Trust has been prepared using the purchase method of accounting for the Merger and the property acquisitions, whereby the assets and liabilities of the RELPs and the properties were adjusted to estimated fair market value, based upon preliminary estimates, which are subject to change as additional information is obtained. The allocations of purchase costs are subject to final determination based upon estimates and other evaluations of fair market value. Therefore, the allocations reflected in the following Pro Forma Financial Information may differ from the amounts ultimately determined. Such Pro Forma Financial Information is based in part upon (i) the Consolidated Financial Statements of the Trust for the year ended December 31, 1997 included in the Trust's Annual Report on Form 10-K for the year ended December 31, 1997; (ii) the Consolidated Financial Statements of the Trust for the three months ended March 31, 1998 included in the Trust's Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1998; (iii) the Financial Statements of USAA Real Estate Income Investments I Limited Partnership for the year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated January 20, 1998; (iv) the Financial Statements of USAA Real Estate Income Investments II Limited Partnership for the year ended June 30, 1997 and the six months ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated January 20, 1998; (v) the Financial Statements of USAA Income Properties III Limited F-12 16 Partnership for the year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated January 20, 1998; (vi) the Financial Statements of USAA Income Properties IV Limited Partnership for the year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated January 20, 1998; (vii) the Combined Historical Summary of Merit Texas Properties Portfolio for the nine months ended September 30, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated October 17, 1997; (viii) the Historical Summary of Commerce Center for the year ended May 31, 1997 and the three months ended August 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated November 25, 1997; (ix) the Historical Summary of Spring Valley #6 Industrial Property for the year ended December 31, 1997 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated February 11, 1998; (x) the Combined Historical Summary of Skyway and Central Park Industrial Properties for the six months ended June 30, 1997 filed with the Trust's Current Report on Form 8-K, dated March 23, 1998; (xi) the Historical Summary of Inverness Industrial Property for the nine months ended September 30, 1997 filed with the Trust's Current Report on Form 8-K, dated March 23, 1998; (xii) the Combined Statement of Revenues and Certain Expenses of Corporex Plaza and Presidential Plaza for the nine months ended September 30, 1997 filed with the Trust's Current Report on Form 8-K, dated March 23, 1998; (xiii) the Historical Summary of Avion Industrial Property for the nine months ended September 30, 1997 filed with the Trust's Current Report on Form 8-K, dated March 23, 1998; (xiv) the Combined Historical Summary of Spieker Properties Portfolio for year ended December 31, 1997 and the three months ended March 31, 1998 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated April 30, 1998; and (xv) the Historical Summary North Austin Office Building for year ended December 31, 1997 and the three months ended March 31, 1998 filed with Amendment No. 1 to the Trust's Current Report on Form 8-K, dated April 30, 1998. The Pro Forma Financial Information is presented for information purposes only and is not necessarily indicative of the financial position or results of operations of the Trust that would have occurred if such transactions had been completed on the dates indicated, nor does it purport to be indicative of future financial position or results of operations. In the opinion of the Trust's management, all material adjustments necessary to reflect the effect of these transactions have been made. F-13 17 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of March 31, 1998 (In thousands) (Unaudited)
Trust Recent Spieker Pro Historical (A) Transactions (B) Portfolio (C) Forma ---------- ------------ --------- --------- ASSETS Real estate, net $ 255,093 $ 22,276 $ 43,507 $ 320,876 Cash - unrestricted 18,844 (6,404) (11,328) 1,112 Cash - restricted 1,401 -- -- 1,401 Other assets, net 6,807 199 387 7,393 --------- --------- --------- --------- $ 282,145 $ 16,071 $ 32,566 $ 330,782 ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage notes payable $ 121,845 $ 15,498 $ 32,154 $ 169,497 Notes payable to affiliates 7,200 -- -- 7,200 Accrued interest payable 268 -- -- 268 Accounts payable, accrued expenses and other 6,123 573 301 6,997 Tenant security deposits 1,294 -- 111 1,405 --------- --------- --------- --------- 136,730 16,071 32,566 185,367 Minority interests 7,294 -- -- 7,294 Shareholders' equity: Shares of beneficial interest ($0.10 par value) 1,120 -- -- 1,120 Additional paid-in capital 242,497 -- -- 242,497 Less Shares in treasury, at cost (1,019) -- -- (1,019) Accumulated distributions (60,457) -- -- (60,457) Accumulated loss from operations and extraordinary gains (losses) (47,331) -- -- (47,331) Accumulated net realized gain on sales of real estate 3,311 -- -- 3,311 --------- --------- --------- --------- 138,121 -- -- 138,121 --------- --------- --------- --------- $ 282,145 $ 16,071 $ 32,566 $ 330,782 ========= ========= ========= =========
F-14 18 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 (In thousands) (Unaudited) (A) Represents the historical financial position of the Trust as of March 31, 1998. (B) Represents adjustments for the acquisition of North Austin. The acquisition was financed with cash of $6,404 and borrowings on the Trust's acquisition line of credit (the "Credit Facility") of $15,498. The Credit Facility bears interest at the 30-day LIBOR rate plus 1.75%, with a maturity of one year. (C) Represents adjustments for the acquisition of the Spieker Portfolio. The acquisition was financed with cash of $11,328 and borrowings on the Credit Facility of $32,154. The Credit Facility bears interest at the 30-day LIBOR rate plus 1.75%, with a maturity of one year. F-15 19 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1997 (In thousands, except per share data) (Unaudited)
Trust Recent RELPS RELPS Historical (A) Transactions (B) Historical (C) Adjustments (D) Adjustments (E) ---------- ------------ ---------- ----------- ----------- INCOME Rents and tenant reimbursements $ 12,201 $ 12,212 (G) $ 11,888 $ 2,036 (I) $ -- (730)(H) (1,894)(J) Equity in earnings of joint venture -- -- (108) 264 (I) -- (156)(K) Interest and other income 546 70 (G) 527 (527)(L) -- (164)(H) -------- -------- -------- ------- -------- 12,747 11,388 12,307 (277) -- -------- -------- -------- ------- -------- EXPENSES Property operating expenses 4,315 4,216 (G) 5,560 43 (I) -- (201)(H) (391)(J) Depreciation and amortization 3,157 1,760 (G) 4,003 1,014 (I) (2,790)(M) (87)(H) (309)(J) Interest expense 5,778 4,630 (G) 3,089 1,388 (I) (1,022)(N) (256)(H) (907)(J) General and administrative 2,504 -- 1,518 63 (I) -- (121)(J) -------- -------- -------- ------- -------- Total expenses 15,754 10,062 14,170 780 (3,812) -------- -------- -------- ------- -------- Gain (loss) from operations before minority interest (3,007) 1,326 (1,863) (1,057) 3,812 Minority interest -- -- -- 208 (I) -- -------- -------- -------- ------- -------- Income (loss) from operations $ (3,007) $ 1,326 $ (1,863) $ (849) $ 3,812 ======== ======== ======== ======= ======== Income (loss) from operations per share: Basic and diluted $ (0.91) ======== Weighted average number of Common Shares outstanding 3,317 ======== Spieker Pro Forma Portfolio (F) Total --------- -------- INCOME Rents and tenant reimbursements $ 5,526 $ 41,239 Equity in earnings of joint venture -- -- Interest and other income 48 500 ------- -------- 5,574 41,739 ------- -------- EXPENSES Property operating expenses 1,720 15,262 Depreciation and amortization 857 7,605 Interest expense 2,762 15,462 General and administrative -- 3,964 ------- -------- Total expenses 5,339 42,293 ------- -------- Gain (loss) from operations before minority interest 235 (554) Minority interest -- 208 ------- -------- Income (loss) from operations $ 235 $ (346) ======= ======== Income (loss) from operations per share: Basic and diluted $ (0.03) ======== Weighted average number of Common Shares outstanding 11,193 (O) ========
F-16 20 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1997 (In thousands, except per share data) (Unaudited) (A) Represents the historical results of operations of the Trust for the year ended December 31, 1997. Certain reclassifications have been made to the historical statements of operations of the Trust to conform to the pro forma financial information presentation. In addition, excludes gain on sale of real estate of $2,163 and extraordinary gain on extinguishment of debt of $2,643. (B) Represents adjustments for the 1997 Acquisitions, the 1997 Dispositions, and the 1998 Acquisitions. (C) Represents the combined historical results of operations of the RELPs acquired in connection with the Merger. (D) Represents adjustments (i) to eliminate the historical results of operations of a real estate property which, in conjunction with the Merger, was sold by the RELP to an affiliate, and (ii) to consolidate one real estate partnership that had been accounted by the RELP on the equity method. (E) Represents adjustments (i) resulting from the Merger, including adjustments to depreciation for the Trust's new basis and incremental general and administrative costs estimated to be incurred by the Trust as a result of the recent growth, and (ii) the elimination of non-recurring interest recorded by the Trust. (F) Represents adjustments for the acquisition of the Spieker Portfolio, based on historical operating results. Depreciation is based on the allocation of the purchase price, with buildings depreciated using the straight-line method over a 40 year period. Interest expense is based on the borrowings incurred at the related interest of 7.45% (the average 30-day LIBOR rate plus 1.75% during the year ended December 31, 1997). (G) Represents adjustments for the 1997 Acquisitions and the 1998 Acquisitions, based on historical operating results. Depreciation is based on the allocation of the purchase price, with buildings depreciated using the straight-line method over a 40 year period. Interest expense is based on the borrowings incurred at the related interest rates, which range from 7.25% (fixed rate under mortgage notes payable) to 7.45% (the average 30-day LIBOR rate plus 1.75% during the year ended December 31, 1997). (H) Represents adjustments to remove the historical results of operations of the 1997 Dispositions. F-17 21 (I) Represents adjustments, based on historical operating results, for the investment in USAA Chelmsford Associates Joint Venture (the "Joint Venture"), accounted by the RELP on the equity method, which is consolidated by the Trust due to an amendment to the joint venture agreement subsequent to the Merger providing the Trust with control over the major decisions of the Joint Venture. (J) Represents adjustments to eliminate the historical results of operations of a real estate property which, in conjunction with the Merger, was sold by the RELP to an affiliate. (K) Represents adjustment to eliminate the equity in earnings of a joint venture. In connection with the Merger, the interest in the joint venture was sold by the RELP to an affiliate. (L) Represents adjustments to eliminate interest income as a result of cash distributions to the RELP limited partners prior to the Merger. (M) Represents adjustment to reduce the depreciation of real estate acquired in the Merger. This adjustment represents increased depreciation resulting from the allocation of purchase price, reduced by the use of a 40 year period by the Trust, rather than a 30 year period, as had been the practice by the RELPs. (N) Represents adjustment to eliminate interest expense accrued by the Trust related to the notes payable convertible into Common Shares of Beneficial Interest of the Trust (the "Common Shares"). The amount of non-recurring interest expense represents the difference between the market trading price of $11.88 per Common Share on February 26, 1997, the date of issuance of the modified notes, which contained the convertibility option, and the $10.00 conversion price. (O) The pro forma weighted average shares outstanding includes 9,817 Common Shares outstanding at December 31, 1997 and 1,376 Common Shares issued in February 1998. Diluted earnings per share are the same as basic earnings per share as the Trust has a loss from operations. F-18 22 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Three Months Ended March 31, 1998 (In thousands, except per share data) (Unaudited)
Trust Recent Spieker Pro Forma Historical (A) Transactions (B) Portfolio (C) Total ---------- ------------ --------- --------- INCOME Rents and tenant reimbursements $ 8,499 $ 1,137 $ 1,460 $ 11,096 Interest and other income 227 -- 19 246 -------- -------- -------- -------- 8,726 1,137 1,479 11,342 -------- -------- -------- -------- EXPENSES Property operating expenses 2,498 405 389 3,292 Depreciation and amortization 1,616 118 214 1,948 Interest expense 2,663 342 598 3,603 General and administrative 794 -- -- 794 -------- -------- -------- -------- Total expenses 7,571 865 1,201 9,637 -------- -------- -------- -------- Gain (loss) from operations before minority interest 1,155 272 278 1,705 Minority interest (57) -- -- (57) -------- -------- -------- -------- Income (loss) from operations $ 1,098 $ 272 $ 278 $ 1,648 ======== ======== ======== ======== Income (loss) from operations per share: Basic and diluted $ 0.10 $ 0.15 ======== ======== Weighted average number of Common Shares outstanding 10,618 11,193 (D) ======== ========
F-19 23 AMERICAN INDUSTRIAL PROPERTIES REIT PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Three Months Ended March 31, 1998 (In thousands, except per share data) (Unaudited) (A) Represents the historical results of operations of the Trust for the three months ended March 31, 1998. Certain reclassifications have been made to the historical statements of operations of the Trust to conform to the pro forma financial information presentation. (B) Represents adjustments for the 1998 Acquisitions, based on historical operating results. Depreciation is based on the allocation of the purchase price, with buildings depreciated using the straight-line method over a 40 year period. Interest expense is based on the borrowings incurred at the related interest rates, which range from 7.28% (fixed rate under mortgage notes payable) to 7.44% (the average 30-day LIBOR rate plus 1.75% during the three months ended March 31, 1998). (C) Represents adjustments for the acquisition of the Spieker Portfolio, based on historical operating results. Depreciation is based on the allocation of the purchase price, with buildings depreciated using the straight-line method over a 40 year period. Interest expense is based on the borrowings incurred at the related interest rate of 7.44% (the average 30-day LIBOR rate plus 1.75% during the three months ended March 31, 1998). (D) The pro forma weighted average shares outstanding represents 11,193 Common Shares outstanding at March 31, 1998. Diluted earnings per share are the same as basic earnings per share as the outstanding options to acquire Common Shares have an exercise price greater than the average market price per Common Share during the period and, therefore, the effect would be anitdilutive. F-20 24 EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit Number Description - ------- ----------- 23.1 Consent of Ernst & Young LLP
EX-23.1 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the inclusion in this Current Report on Form 8-K, dated April 30, 1998, filed with the Securities and Exchange Commission by American Industrial Properties REIT ("AIP") of our reports (i) dated April 7, 1998, except for Note 5 as to which the date is May 6, 1998, with respect to the audit of the Combined Historical Summary of Gross Income and Direct Operating Expenses of the Spieker Properties Portfolio for the year ended December 31, 1997; and (ii) dated May 15, 1998 with respect to the audit of the Historical Summary of Gross Income and Direct Operating Expenses of North Austin Office Building for the year ended December 31, 1997. We further consent to the incorporation by reference of such reports in AIP's Registration Statement on Form S-3 (No. 333-46699), AIP's Registration Statement on Form S-3 (No. 333-48555), and AIP's Registration Statement on Form S-3 (No. 333-52879), all filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Ernst & Young LLP Dallas, Texas July 7, 1998 -----END PRIVACY-ENHANCED MESSAGE-----