-----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, EWKOSB6mqh/wOqbwulXxzJbtn0B8kdkkNeR11GmnKe9Q6f/8KBO0uVAxS2tbkY+6 lD7MDpBTA0G9NfA0AUbh3g== 0000845613-98-000001.txt : 19980129 0000845613-98-000001.hdr.sgml : 19980129 ACCESSION NUMBER: 0000845613-98-000001 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970401 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980128 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN SELECT REALTY TRUST CENTRAL INDEX KEY: 0000845613 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 943095938 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-12708 FILM NUMBER: 98514665 BUSINESS ADDRESS: STREET 1: 1800 GATEWAY DR - STE 200 CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4153122000 MAIL ADDRESS: STREET 1: P O BOX 7777 CITY: SAN MATEO STATE: CA ZIP: 94403-7777 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN SELECT REAL ESTATE INCOME FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN CALIFORNIA REAL ESTATE FUND DATE OF NAME CHANGE: 19890307 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported) APRIL 1, 1997 Franklin Select Realty Trust - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) California 1-12708 94-0395938 - -------------------------------------------------------------------------------- State or other jurisdiction Commission File Number IRS Employer of incorporation Identification Number 1800 Gateway Drive, San Mateo, CA 94404 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (650)312-3000 Item 5. OTHER EVENTS Property Acquisitions. From April 1, 1997 through November 24, 1997, Franklin Select Realty Trust or FSRT L.P. (collectively, the "Company"), acquired a fee title interest in three properties from unrelated parties. Franklin Select Realty Trust is the sole general partner of FSRT L.P. and owns an approximate 70% interest in the partnership. On April 1, 1997, the Company acquired the Tanon Building, a 108,600 square foot R & D industrial building located in Fremont, California, from Utah State Retirement Fund, a Utah independent state agancy, for $8.51 million. The acquisition was funded by a draw on the Company's $25 million revolving credit facility with the Bank of America (the "Credit Facility"). On July 30, 1997 the Company refinanced $5.1 million of the borrowing under the Credit Facility with a fixed rate loan provided by First Nationwide Life Insurance Company. The new loan is collateralized by the property and bears monthly principal and interest payments at 8.47% per annum, based on a 25-year amortization schedule, with the remaining principal balance maturing on August 1, 2004. The property is 100% leased to Tanon Manufacturing, Inc. On June 25, 1997, the Company acquired a 12.5 acre parcel of undeveloped land located in Rancho Cordova, California, from Prospect Park Land, LLC, a California limited liability company, for $4.08 million The acquisition was funded by a draw on the Credit Facility. The Company intended to enter into a development agreement with the seller, a Sacramento, California, area developer, to develop the land with two office buildings containing approximately 216,000 square feet in total. The land purchase agreement provided that if the parties did not execute a development agreement for the land by September 23, 1997, the seller had the option until December 22, 1997, to elect to repurchase the parcel from the Company at a price equal to the sum of the Company's purchase price, its closing costs, interest expense at an annual rate of 10%, plus $100,000. A formal development agreement was not executed and on January 21, 1998 the developer repurchased the land at a price of approximately $4.5 million. The Company expects to record a gain on the sale of the land of approximately $171,000 in the first quarter of 1998. Proceeds from the sale of the land will be applied to the outstanding balance of the Credit Facility. On November 24, 1997, the Company acquired the Hathaway Business Park, an 80,800 square foot R & D industrial complex located in Fremont, California, from Hathaway Business Park, a California limited partnership, for $7.15 million. The Company funded the acquisition by assuming the existing secured loan in the amount of approximately $3.6 million, with the remainder being funded by a draw on the Credit Facility. The loan assumed by the Company bears monthly principal and interest payments at 7.75% per annum, based on a 20-year amortization schedule, with the remaining principal balance maturing on January 1, 2003. The property is 100% leased to fourteen tenants ranging in size from 3,033 square feet to 10,424 square feet. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) PRO FORMA FINANCIAL STATEMENTS The pro forma financial statements of the Company reflecting the above transactions are included on pages F-2 to F-6. (b) HISTORICAL FINANCIAL STATEMENTS The historical Summary of Gross Income for the Tanon Building is included on pages F-7 to F-9. (c) EXHIBITS 23.1 Consent of Independent Accountants FRANKLIN SELECT REALTY TRUST INDEX TO FINANCIAL STATEMENTS Pro forma financial statements PAGE Unaudited pro forma consolidated balance sheet as of September 30, 1997 F-2 Unaudited pro forma consolidated statement of operations for the nine months ended September 30, 1997 F-3 Unaudited pro forma consolidated statement of operations for the year ended December 31, 1996 F-4 Notes to pro forma financial statements F-5 Historical Summary of Gross Income for the Tanon Building Report of Independent Accountants F-7 Historical summary of gross income for the year ended December 31, 1996 F-8 Notes to historical summary of gross income F-9 F-1 FRANKLIN SELECT REALTY TRUST PRO FORMA CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 (Unaudited)
(Shares and dollars in thousands, except per share amounts) HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- ASSETS: Rental property: Land $36,635 $2,153 A $38,788 Buildings and improvements 105,462 5,015 A 110,477 142,097 7,168 149,265 Less: accumulated depreciation 19,903 - 19,903 122,194 7,168 129,362 Land held for development 4,162 (4,162) B - Rental property held for sale, net of accumulated depreciation 8,158 - 8,158 Real estate, net 134,514 3,006 137,520 Cash and cash equivalents 4,186 316 A 4,502 Mortgage-backed securities, available for sale 531 - 531 Deferred rent receivable 1,866 - 1,866 Deferred costs and other assets 2,431 96 A 2,527 $143,528 $3,418 $146,946 LIABILITIES AND STOCKHOLDERS' EQUITY: Notes and bonds payable $35,417 $3,095 C $38,512 Accounts payable and accrued expenses 1,005 - 1,005 Distributions payable 1,463 - 1,463 Other liabilities 497 152 A 649 Total liabilities 38,382 3,247 41,629 Minority interest 9,276 - 9,276 Stockholders' equity: Common stock, Series A, without par value. Stated value $10 per share; 110,000 shares authorized; 12,250 shares 103,161 - 103,161 Issued and outstanding. Common stock, Series B, without par value. Stated value $10 per share; 2,500 shares authorized; 746 shares issued and outstanding. 6,294 - 6,294 Unrealized loss on mortgage-backed securities (25) - (25) Accumulated distributions in excess of net income (13,560) 171 B (13,389) $143,528 $3,418 $146,946
The accompanying notes are an integral part of these financial statements. F-2 FRANKLIN SELECT REALTY TRUST PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (Unaudited)
(Amounts in thousands, except per share amounts) HISTORICAL ADJUSTMENTS PRO FORMA REVENUE: Rental income $12,982 863 D $13,845 Interest, dividends and other income 143 - 143 Total revenue 13,125 863 13,988 EXPENSES: Interest 1,999 594 E 2,593 Depreciation and amortization 2,968 153 F 3,121 Property operations expense 2,940 169 D 3,109 Related party expenses 1,074 53 G 1,127 Consolidation expense, net 2 - 2 General and administrative expenses 411 - 411 Minority interest 483 - 483 Total expenses 9,877 969 10,846 NET INCOME $3,248 ($106) $3,142 Earnings per weighted average Series A common share outstanding $0.27 - $0.26 Weighted average number of Series A common shares outstanding 12,250 - 12,250
The accompanying notes are an integral part of these financial statements. F-3 FRANKLIN SELECT REALTY TRUST PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (Unaudited)
(Amounts in thousands, except per share amounts) HISTORICAL ADJUSTMENTS PRO FORMA REVENUE: Rental income $13,926 1,589 D $15,515 Interest, dividends and other income 642 - 642 Total revenue 14,568 1,589 16,157 EXPENSES: Interest 886 1,264 E 2,150 Depreciation and amortization 3,440 323 F 3,763 Property operations expense 3,635 214 D 3,849 Related party expenses 1,205 99 G 1,304 Consolidation expense, net 695 - 695 General and administrative expense 642 - 642 Loss on the sale of mortgage-backed securities 151 - 151 Minority interest 107 - 107 Total expenses 10,761 1,900 12,661 NET INCOME $3,807 ($311) $3,496 Earnings per weighted average Series A common share outstanding $0.28 - $0.25 Weighted average number of Series A common shares outstanding 13,830 - 13,830
The accompanying notes are an integral part of these financial statements. F-4 FRANKLIN SELECT REALTY TRUST NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The pro forma financial statements of Franklin Select Realty Trust (the "Company"), which are unaudited, have been prepared based on the historical financial statements of the Company. From April 1, 1997 to November 24, 1997, the Company acquired three properties including the Tanon Building, the Rancho Cordova land, and the Hathaway Business Park (collectively the "Acquired Properties"). The accompanying pro forma balance sheet as of September 30, 1997, has been prepared as if the acquisition of the Acquired Properties and the probable disposition of the Rancho Cordova land had occurred on September 30, 1997. The accompanying pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 have been prepared as if the purchase of the Acquired Properties had occurred on January 1, 1996. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. The pro forma financial statements should be read in conjunction with the historical financial statements of the Company. The pro forma financial statements are not necessarily indicative of what the financial condition or the actual results of operations of the Company would have been as of and for the nine months ended September 30, 1997, or for the year ended December 31, 1996, had the property acquisitions occurred on January 1, 1996, nor do they purport to represent the financial condition or results of operations for future periods. 2. Pro Forma Adjustments A. Reflects the purchase of the Hathaway Business Park and the net proceeds from the sale of the Rancho Cordova land after application of $4.1 million to notes and bonds payable. B. Reflects the sale of the Rancho Cordova land. C. Additional notes and bonds payable reflects the new debt associated with the acquisition of the Hathaway Business Park, totaling $7.2 million, less the application of $4.1 million of net sale proceeds from the sale of the Rancho Cordova land. D. Additional rental revenue and property operations expense is attributable to the Acquired Properties. E. Additional interest expense is calculated to reflect the two new permanent loans totaling approximately $8.8 million and the aggregate draw on the Company's Credit Facility of $7.1 million in connection with the acquisition of the Tanon Building and the Hathaway Business Park, computed at the actual fixed interest rates for the permanent loans, and the weighted average interest rate in effect on actual borrowings under the Credit Facility during 1997. Because development activities had commenced at the Rancho Cordova land, interest expense incurred by the Company related to the draw on the Credit Facility for the acquisition of the land was capitalized, and is reflected under Land Held for Development on the Company's historical balance sheet as of September 30, 1997. F-5 FRANKLIN SELECT REALTY TRUST NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited) 2. Pro Forma Adjustments continued F. Additional depreciation and amortization is calculated to reflect: (1) additional depreciation on the Acquired Properties, and (2) amortization of loan costs related to the permanent loans for the Acquired Properties. Depreciation is computed using the straight-line method of cost recovery over 40 years for building and improvements. Loan costs are amortized over the terms of the related loans. G. Additional related party expense is attributable to an increase in the advisory fee to Franklin Properties, Inc. relating to the Acquired Properties. F-6 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors: We have audited the accompanying Historical Summary of Gross Income (the "Historical Summary") of the Tanon Building, Fremont, California (the "Property") for the year ended December 31, 1996. The Historical Summary is the responsibility of the Property's owner. Our responsibility is to express an opinion on the 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 basis of the accounting 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 accompanying Historical Summary was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note A. The Historical Summary is not intended to be a complete presentation of the Property's gross income and may not be comparable to results from proposed future operations of the Property. In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income as described in Note A, of the Tanon Building, for the year ended December 31, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. San Francisco, California January 12, 1998 F-7 TANON BUILDING HISTORICAL SUMMARY OF GROSS INCOME for the year ended December 31, 1996 --------------- Rental Income $792,346 The accompanying note is an integral part of the Historical Summary F-8 TANON BUILDING NOTES TO HISTORICAL SUMMARY OF GROSS INCOME for the year ended December 31, 1996 A. Property and Basis of Accounting The accompanying Historical Summary of Gross Income (the "Historical Summary") has been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and relates to the operations of the Tanon Building (the "Property"). The Property consists of one building comprising 108,600 square feet of research and development/office space located in Fremont, California. The Property is subject to a triple net lease that expires in April, 2003, and provides for Tanon Manufacturing, Inc., the tenant, to pay all expenses. Therefore, no operating expenses have been presented in the Historical Summary. Gross income includes a downward adjustment of $80,798 as a result of the straight-line rent adjustment for differences between straight-line rents and contractual rent payments. F-9 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Franklin Select Realty Trust on Form S-3 (File No. 333-38463) of our report dated January 12, 1998, on our audit of the Historical Summary of Gross Income of the Tanon Building for the year ended December 31, 1996, which report is included in this Current Report on Form 8-K/A. COOPERS & LYBRAND L.L.P. San Francisco, California January 27, 1998 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: January 27, 1998 Franklin Select Realty Trust By: /S/DAVID P. GOSS David P. Goss President -----END PRIVACY-ENHANCED MESSAGE-----