-----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, REL+tzY1mZXfUCBU7aMITl4avBzJ6aiSytWb8n/M3JaWQcrdMcGKkM76nnj1Fyqf WGsBr2AsD5tnWYIpiNJrrg== 0000912057-96-027542.txt : 19961202 0000912057-96-027542.hdr.sgml : 19961202 ACCESSION NUMBER: 0000912057-96-027542 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961126 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961126 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOLL REAL ESTATE GROUP INC CENTRAL INDEX KEY: 0000840216 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 020426634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17189 FILM NUMBER: 96672100 BUSINESS ADDRESS: STREET 1: 4343 VON KARMAN AVENUE STREET 2: NULL CITY: NEWPORT BEACH STATE: CA ZIP: 92660- BUSINESS PHONE: 7148333030 MAIL ADDRESS: STREET 1: 4343 VON KARMAN AVENUE CITY: NEWPORT BEACH STATE: CA ZIP: 92660- FORMER COMPANY: FORMER CONFORMED NAME: BOLSA CHICA CO/ DATE OF NAME CHANGE: 19921229 FORMER COMPANY: FORMER CONFORMED NAME: HENLEY GROUP INC/DE/ DATE OF NAME CHANGE: 19910415 FORMER COMPANY: FORMER CONFORMED NAME: HENLEY NEWCO INC DATE OF NAME CHANGE: 19900109 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K 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 26, 1996 KOLL REAL ESTATE GROUP, INC. (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Jurisdiction of Incorporation) 0-17189 02-0426634 (Commission File Number) (I.R.S. Employer Identification No.) 4343 Von Karman Avenue, Newport Beach, California 92660 (Address of principal executive offices) (Zip Code) (714) 833-3030 (Registrant's Telephone Number, Including Area Code) Not Applicable (Former Name or Former Address, if Changed Since Last Report) Item 5. OTHER EVENTS On November 26, 1996, the Registrant issued a press release, a copy of which is attached hereto and is incorporated herein by reference. Certain projected financial information was prepared by the Registrant and made available, on a confidential basis, to certain of the Registrant's security holders during discussions with such parties regarding the proposed transaction described in the attached press release. Certain of such information provided is attached hereto and is incorporated herein by reference. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Projected Financial Information (c) Exhibits: Exhibits No. Description ------------ ----------- 99.1 Press Release, issued November 26, 1996. 99.2 Projected Financial Information dated August 1, 1996. 2. 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. KOLL REAL ESTATE GROUP, INC. Date: November 26, 1996 By /s/ Raymond J. Pacini ------------------------------ Raymond J. Pacini Executive Vice President and Chief Financial Officer 3. EX-99.1 2 EXHIBIT 99.1 EXHIBIT 99.1 PRESS RELEASE DATED NOVEMBER 26, 1996 [LETTERHEAD] NEWS RELEASE November 26, 1996 Contacts: Raymond J. Pacini, Chief Financial Officer, Koll Real Estate Group, Inc., 714-833-3030 x291 and Wilbur L. Ross, Senior Managing Director, Rothschild Inc., 212-403-3581 KOLL REAL ESTATE GROUP, INC. AND REPRESENTATIVES OF ITS BONDHOLDERS REACH AGREEMENT TO DELEVERAGE COMPANY, EXCHANGE DEBT FOR EQUITY PLAN WOULD GIVE BONDHOLDERS 90 PERCENT OF EQUITY IN THE RECAPITALIZED COMPANY NEWPORT BEACH, Calif. -- Koll Real Estate Group, Inc. (NASDAQ: KREG) announced today that it has reached an agreement with representatives of certain of the holders of its 12% senior-subordinated and subordinated pay-in-kind debentures due 2002 (the "Debentures") to de-leverage the Company's capital structure through a voluntary exchange of approximately $194 million face amount of debt for equity (the "Exchange Offer"). Senior-subordinated holders will receive approximately 4,525 shares (before consolidation of the preferred and common stock and before the proposed reverse split discussed below) for each $1,000 principal amount currently outstanding. Subordinated holders will receive approximately 2,262 shares (before consolidation and reverse split) for each $1,000 principal amount currently outstanding. A 100% acceptance rate for the Exchange Offer would result in 90% of the Company's equity, in the form of newly issued shares of common stock, being held by the Debentureholders (approximately 80% by senior-subordinated and 10% by subordinated). The remaining 10% of the Company's equity would be owned, in the aggregate, by current ***MORE*** November 26, 1996 Page 2 of 5 preferred and common stockholders. A condition to closing the Exchange Offer will be that a minimum of 90% of the face amount outstanding of the Debentures are tendered to the Company. "Upon completion of this transaction the Company will be virtually debt-free", said Donald M. Koll, the Company's Chairman and Chief Executive Officer . "The prospects for residential and commercial development, and in particular the Bolsa Chica project, have never been better during this decade and a clean balance sheet will allow the Company to realize its full potential." "The bondholders are accepting stock because we have great confidence in the Company's value and because this deal fairly allocates those values among the security holders", commented Wilbur L. Ross, Senior Managing Director of Rothschild Inc., financial advisors to the committee of bondholders. The Company expects to solicit the consent of its common and preferred stockholders to the Exchange Offer and to the consolidation of the preferred and common stock into a single class of common stock. Since the preferred stock became convertible in July 1994, over 3.6 million shares of preferred stock have already been voluntarily converted into common stock. In addition, all stockholders will be asked to approve a reverse stock split, and the common stockholders will be asked to elect six new directors who have been nominated by a committee of the Debentureholders and to elect four of the Company's existing directors to be nominated by the Company. The Debentures were first issued in 1989, when the Company was spun-off from The Henley Group, Inc. Interest on the Debentures is currently paid "in- kind" through the **MORE** November 26, 1996 Page 3 of 5 issuance of additional Debentures (i.e. a non-cash expense). The Debentures are payable in common stock at maturity in March 2002, subject to certain conditions. Mr. Koll said that public focus on the Company's continued reporting of operating losses due to its overleveraged capital structure has overshadowed management's achievements since Koll first became involved with the Company in 1990. These achievements include: - Obtained State and County approval for a up to 3,300 unit residential development and wetlands restoration project at Bolsa Chica in Orange County, CA. - Generated more than $260 million in cash from the sale of real estate and other assets; - Retired over $115 million in senior bank debt; - Used proceeds from asset sales to entitle and develop its California residential properties, primarily Bolsa Chica, Rancho San Pasqual and Fairbanks Highlands; and - Retired $53 million face amount of Debentures in 1993 in exchange for the Company's equity interest in Lake Superior Land Company (timberlands in Michigan and Wisconsin). Mr. Koll said that the Exchange Offer for the Debentures is part of the Company's overall plan to maximize asset values. In addition to deleveraging its capital structure, the Company will continue to: - Maximize the value of its residential land holdings; - Capitalize on its expertise in entitlement projects by selling development services to other land owners; **MORE** November 26, 1996 Page 4 of 5 - Expand its commercial development business with emphasis on developing relationships with corporate clients throughout the U.S.; and - Grow its international development services business, particularly in China and the Pacific Rim. Mr. Koll further stated that "We are pleased with the continued progress on the restoration and development of Bolsa Chica." The Bolsa Chica plan will phase out oil production in the 1,100 acre tract abutting the seaside in Orange County and create one of the largest urban wetland ecosystems in the U.S. Up to 3,300 homes are planned as part of this new community on approximately 390 acres near the new wetland ecosystem. The plan is estimated to generate $1.2 billion in new economic activity and create more than 10,000 new jobs in Southern California during its construction period. The Company is also continuing to work closely with various state and federal agencies, led by the California State Resources Agency, the California State Lands Commission and the U.S. Department of the Interior in an effort to complete the proposed sale of approximately 880 lowland acres owned by the Company at Bolsa Chica to the California State Lands Commission for $25 million. If the sale is completed, the Company would forego the opportunity to develop any homes in the lowlands. Under either scenario, more than 1,100 acres, or approximately 75 percent of the site, will be devoted to the restoration, creation and preservation of wetlands, open space, parks and trails. Under either scenario, infrastructure construction for the residential community of up to 2,500 homes on the Bolsa Chica mesa, including 25 acres of community parks, a 106 acre regional park and 13 miles of public access trails, is expected to begin in the second half of 1997. **MORE** November 26, 1996 Page 5 of 5 During the last 18 months KREG has experienced a significant improvement in its commercial real estate development business throughout the U.S. and the Pacific Rim. The Company is currently developing a number of build-to-suits for corporate clients in the U.S. including Airborne Express, Associates Capital, Currency Systems International, Del Monte Foods, Electronic Data Systems, Frito Lay, Hunt Wesson, PetSmart, Phillips Driscopipe, Sierra Health Services and Sterling Electronics. KREG recently completed the development of a manufacturing facility and distribution center for Nokia (cellular phones) in Reynosa, Mexico. The Company has also commenced a few speculative industrial projects in selective markets where current supply is limited, such as Rancho Cucamonga and Carlsbad, California. In the Pacific Rim, Koll Asia Pacific Development Services ("KAPDS", a joint venture between KREG and an affiliate) and its joint venture partner, Charoen Pokphand Group, recently broke ground on a 1.3 million square foot regional shopping center in Shanghai, China. KAPDS is also developing a 2.1 million square foot regional shopping mall and entertainment complex southwest of Taipei in Taiwan, Republic of China. Koll Real Estate Group provides commercial and residential real estate development services on a national and international basis. It holds a large residential land inventory in Southern California, including the Bolsa Chica property. A registration statement relating to the Exchange Offer is being prepared and will be filed with the Securities and Exchange Commission. The common stock will not be exchanged for the Debentures nor will offers to exchange be made or accepted prior to the time the registration statement becomes effective. This press release does not constitute an offer to exchange or the solicitation of an offer to exchange nor will there be any exchange of these securities in the state in which such offer, solicitation or exchange would be unlawful prior to registration or qualification under the securities law of any such state. *** END*** EX-99.2 3 EXHIBIT 99.2 EXHIBIT 99.2 PROJECTED FINANCIAL INFORMATION DATED AUGUST 1, 1996 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The following projected information included herein is forward looking in nature and involves risks and uncertainties that could significantly impact the ability of the Registrant to achieve its currently anticipated goals and objectives. These risks and uncertainties include, but are not limited to, litigation or appeals of regulatory approvals (including pending litigation challenging the California Coastal Commission approval of the Registrant's Bolsa Chica project, projected information with respect to which is set forth below) and availability of adequate capital, financing and cash flow. In addition, future values may be adversely affected by increases in property taxes, increases in the costs of labor and materials and other development risks such as the demand for housing generally and the supply of competitive products. Real estate properties do not constitute liquid assets and, at any given time, it may be difficult to sell a particular property for an appropriate price. Other significant risks and uncertainties are discussed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and its Quarterly Reports on Form 10-Q for the quarters ended June 30, 1996 and September 30, 1996. The following projected financial information included herein was not prepared with a view towards compliance with published guidelines of the Securities and Exchange Commission or the American Institute of Certified Public Accountants regarding forecasts or generally accepted accounting principles. The projected information necessarily makes numerous assumptions with respect to timely resolution of the pending Bolsa Chica litigation, industry performance, general business and economic conditions, taxes, and other matters, many of which are beyond the Registrant's control. The Registrant believes that while all of its assumptions are reasonable, such projected information and assumptions are not necessarily indicative of current values or future performance, which may be significantly less favorable or more favorable than as reflected in the projected information and assumed by the Registrant in its preparation of such information. Although the projected information represents the best estimate of the Registrant (for which the Registrant believes it has a reasonable basis as of the time of the preparation thereof) of the results of operations of the Registrant, it represents only an estimate, and actual results may vary considerably from the projected information included herein. KOLL REAL ESTATE GROUP, INC. Management Base Case Projected Income Statements ($ in 000s) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROJECTED FISCAL YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------- 1996 1997 1998 1999 2000 ----------------------------------------------------------------------- Revenue $35,990 $49,383 $85,359 $111,213 $105,533 Cost of Sales 35,242 47,699 71,929 86,731 86,591 ----------------------------------------------------------------------- Gross Operating Margin 748 1,684 13,430 24,482 18,942 General & Administrative Expenses 5,685 5,255 5,518 5,794 6,084 Interest Expense 24,645 1,686 125 0 0 Other Expense (Income) (612) (3,562) (1,794) (6,053) (2,328) ----------------------------------------------------------------------- Pre-tax Income (Loss) (28,971) (1,695) 9,581 24,741 15,187 Provision for Income Taxes 26,289 (a) 0 3,928 10,144 6,227 ----------------------------------------------------------------------- Net Income (Loss) ($55,260) ($1,695) $5,653 $14,597 $8,960 ----------------------------------------------------------------------- -----------------------------------------------------------------------
___________________________________________________________________ (a) Loss of deferred tax attributes due to Section 382 limitations. KOLL REAL ESTATE GROUP, INC. Management Base Case Projected Balance Sheet ($ in 000s) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
ACTUAL PROJECTED FISCAL YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 1995 1996 (a) 1997 (b) 1998 (b) 1999 (b) 2000 (b) ---------- --------------------------------------------------------------------- ASSETS Cash and Invested Assets $7,385 $1,220 $26,782 $77,733 $134,954 $196,924 Real estate held for development or sale 28,087 17,588 5,460 3,810 3,853 3,853 Operating properties, net 5,000 0 0 0 0 0 Bolsa Chica 220,000 224,716 195,830 152,759 89,588 23,146 Other assets 11,693 9,999 9,387 8,775 8,163 7,551 ---------- --------------------------------------------------------------------- Total Assets $272,165 $253,522 $237,460 $243,077 $236,558 $231,473 ---------- --------------------------------------------------------------------- ---------- --------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $8,653 $6,053 $6,053 $6,053 $6,053 $6,053 Long-term debt 189,712 204,977 0 0 0 0 Other liabilities 44,432 68,384 63,641 63,606 42,489 28,444 ---------- --------------------------------------------------------------------- Total Liabilities 242,797 279,414 69,694 69,659 48,542 34,497 ---------- --------------------------------------------------------------------- Stockholders' equity 29,368 (25,892) 167,766 173,419 188,016 196,976 ---------- --------------------------------------------------------------------- Total liabilities and stockholders' equity $272,165 $253,522 $237,460 $243,077 $236,558 $231,473 ---------- --------------------------------------------------------------------- ---------- ---------------------------------------------------------------------
______________________________________________________________ (a) Prior to the effect of the proposed Exchange Offer. (b) Pro forma for the Exchange Offer at a 100% acceptance rate. KOLL REAL ESTATE GROUP, INC. Management Base Case Projected Cash Flow Statements ($ in 000s) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROJECTED FISCAL YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- 1996 1997 1998 1999 2000 --------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income (Loss) ($55,260) ($1,695) $5,653 $14,597 $8,960 Depreciation and Amortization 752 752 752 752 752 Non-cash Interest Expense 22,198 0 0 0 0 (Gain) Loss on Asset Sales (1,162) 0 0 0 0 Non-cash Expenses / Cost of Sales 25,648 37,678 60,730 74,767 73,934 Investments in Land Held for Development (a) (13,703) 3,335 (16,008) (11,639) (7,492) (Increase) / Decrease in Other Assets 22,434 (4,743 (36) (21,116) (14,045) --------------------------------------------------------------------- Cash Provided (Used) by Operating Activities 908 35,327 51,091 57,361 62,110 Cash Provided (Used) by Investing Activities (140) (140) (140) (140) (140) Cash Provided (Used) by Financing Activities (6,933) (9,625) 0 0 0 --------------------------------------------------------------------- Net Increase (Decrease) in Cash & Cash Equivalents ($6,165) $25,563 $50,951 $57,221 $61,970 --------------------------------------------------------------------- ---------------------------------------------------------------------
_________________________________________________________ (a) Include inflows from Special Assessment District financings. KOLL REAL ESTATE GROUP, INC. MAJOR MODELING ASSUMPTIONS MANAGEMENT BASE CASE - AUGUST 1, 1996 MAJOR ASSUMPTIONS BOLSA CHICA Mesa Land development begins during 1Q97 (assumes timely resolution of outstanding litigation). Absorption of Mesa lots over a four year period (1998-2001). Cumulative percent of total lots sold as follows: 1998 1999 2000 2001 ---- ---- ---- ---- 27% 60% 93% 100% Range of initial home prices (including premiums) and sizes as follows: Sq. Ft. Price Price/ Sq. Ft. -------- --------- ------- High 3,200 $595,000 $186 Low 1,100 $179,000 $163 Average 1,700 $286,000 $168 The associated Lot Price, including view premium, for the High and Low initial home price is $257,000 and $56,000, respectively. Inflation assumed as follows: 1996 1997 1998 & Thereafter ------- ------- ---------- Home Prices 0.0% 3.0% 7.0% Costs 2.0% 3.0% 3.5% Lowlands Sale at $25.0 million. Home Builder Profit The Company is assumed to capture 25% of the projected home builder profit, estimated at 8.0% of the initial home price, through joint ventures or in-house home building. 1 KOLL REAL ESTATE GROUP, INC. MAJOR MODELING ASSUMPTIONS MANAGEMENT BASE CASE - AUGUST 1, 1996 BOLSA CHICA (CONTD.) Financial Results Specific Bolsa Chica financial performance, including the sale of the Lowlands and participation in Home Builder Profit, as follows ($ in millions): 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- Revenues $0 $25 $67 $85 $70 Cost of Goods Sold 0 25 60 75 74 ---- ---- ---- ---- ---- Gross Margin $0 $0 $7 $10 ($4) Net Investment* ($5) $4 ($16) ($12) ($7) * Reflects inflows from Assessment District financing in 1997 and 1998. EAGLE CREST Lot Sales Proceeds from lot sales as follows ($ in millions): 1996 1997 1998 ----- ----- ------ $11.0 $12.7 $1.8 Sale of Golf Course Sale at $4.9 million net in 1996. Gross Margin Sales at break-even. FAIRBANKS Sale at $7.25 million in the second half of 1996. Gross Margin Sale generates $1 million of gross margin. 2 KOLL REAL ESTATE GROUP, INC. MAJOR MODELING ASSUMPTIONS MANAGEMENT BASE CASE - AUGUST 1, 1996 COMMERCIAL DEVELOPMENT BUSINESS Projections for 1996 of $10.4 million of revenues, $9.5 million of expenses, and $1.3 million of equity participations. Thereafter, assumes 10% annual revenue growth and 4% annual expense growth; equity participation is assumed to equal 20% of annual revenue. GENERAL & ADMINISTRATIVE EXPENSES Recurring general and administrative expenses are forecast to grow at a 5% annual rate from 1997 through 2000 and held constant thereafter. NOMURA LOAN Repayments equal to 90% of net proceeds from sale of Eagle Crest and Fairbanks real estate. Interest calculated based on a beginning of period balance and a rate of 10.0%. Assumes the Company exercises 1-year extension option. BOLSA CHICA CONSTRUCTION FINANCING Assumes Revolving Construction Facility of $25 million is established during 1996. Funds are borrowed as needed to maintain zero cash balance. Interest expense calculated at a rate of 10.0% and uses an estimated maximum average balance, which is based on an average of the prior year's ending balance and the current year's maximum potential draw. An unused line fee of 0.5% is also assumed. OTHER LIABILITIES Payments on such liabilities assumed as follows ($ in millions): 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- $2.3 $4.7 $1.9 $8.0 $0.5 TAX ATTRIBUTES Assumes limitations based on IRC Section 382(b). Annual limitation calculation assumes a value of the old loss corporation of $25.0 million (the current stock market value) times the long-term tax-exempt rate of 6.0%, for an annual limitation of $1.5 million per annum. 3 -----END PRIVACY-ENHANCED MESSAGE-----