-----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, SVEUYgedQKzVYCWbyLxkA/wgvkicKS+FHiha2L6hxgVx3Mv9jzFxjz9BoMgj2GBj cVPPfFiSIqV3ITI6qI6Svw== 0000920522-98-000008.txt : 19980518 0000920522-98-000008.hdr.sgml : 19980518 ACCESSION NUMBER: 0000920522-98-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980514 ITEM INFORMATION: FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX PROPERTY TRUST INC CENTRAL INDEX KEY: 0000920522 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 770369576 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13106 FILM NUMBER: 98621955 BUSINESS ADDRESS: STREET 1: 925 EAST MEADOW DRIVE CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 6504943700 MAIL ADDRESS: STREET 1: 925 EAST MEADOW DRIVE CITY: PALO ALTO STATE: CA ZIP: 94303 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------- FORM 8-K PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): May 14, 1998 (February 25, 1998) ESSEX PROPERTY TRUST, INC. (Exact name of Registrant as Specified in its Charter) Maryland (State or Other Jurisdiction of Incorporation) 1-13106 (Commission File Number) 77-0369576 (IRS Employer Identification No.) 925 East Meadow Drive Palo Alto, CA 94303 (650) 494-3700 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Item 5. OTHER EVENTS. The following operating properties were acquired or are to be acquired by Essex Portfolio, L.P., the "Operating Partnership" as to which Essex Property Trust, Inc. owns a controlling general partner interest. References to the "Company" include Essex Property Trust, Inc. and the Operating Partnership. 1998 Acquisitions On February 25, 1998, the Company acquired Mirabella Apartments, a 608 unit apartment community located in Newbury Park, California, for a contract price of $50.5 million. In connection with the transaction, the Company entered into a variable rate $25.0 million loan that matures in February 2000. Prometheus Southern California II, L.P., a California limited partnership, was the arms-length unrelated third party seller of the property. On March 3, 1998, the Company acquired Wimbledon Woods, a 560 unit apartment community located in Hayward, California, for a contract price of $44.0 million. W.P. Hayman, Limited Partnership, a Michigan limited partnership, was the arms-length unrelated third party seller of the property. On April 1, 1998, the Company acquired Bunker Hill Towers, a 456 unit apartment high-rise community located in Los Angeles, California, for a contract price of approximately $36.5 million. In connection with the transaction the Company assumed an approximate $18.4 million, 7.39% fixed rate loan. The loan matures in November 2007. Brilliant Future, Inc., a California corporation, was the arms-length unrelated third party seller of the property. On April 3, 1998, the Company acquired Cochran Apartments, a 58 unit apartment community located in Los Angeles, California, for a contract price of $5.4 million. Metric Institutional Apartment Fund II, a California limited partnership, was the arms-length unrelated third party seller of the property. These acquisitions were funded with the net proceeds from the Company's February 1998 perpetual preferred units offering, loans secured by the properties as indicated above, the Company's lines of credit and proceeds from the disposition of the Company's three retail shopping centers. 1998 Pending Acquisitions In January 1998, the Company approved the acquisition of Mt. Sutro Terrace Apartments, a 99 unit apartment building located in San Francisco, California for a contract price of $10.3 million. Mt. Sutro Terrace Associates is the arms-length unrelated third party seller of the property. The contract price is $10.3 million and the closing of the acquisition is expected to occur no later than September 1998. This acquisition is subject to negotiation of final terms of purchase and customary closing conditions. Accordingly, there can be no assurance that this acquisition will be completed. If this transaction is completed, the Company anticipates funding the acquisition with the Company's lines of credit. 1998 Dispositions On February 25, 1998, the Company sold Canby Square, Garrison Square, and Powell Villa, three retail shopping centers located in the Portland, Oregon metropolitan area for a net sales price of $15.8 million, resulting in a net gain of approximately $5.0 million. An entity consisting of Western Seven Trees Investors, a California limited partnership and Western Las Hadas Investors, a California limited partnership was the related party purchaser of the properties. Page 2 of 12 In all of the acquisition and disposition transactions, the purchase price was based on a number of factors, including historical and projected rental income, appropriate capitalization rates for similar properties, market comparables, prevailing market conditions in the area and extensive due diligence studies including review of financial operations and physical inspections. Item 7. FINANCIAL STATEMENTS AND EXHIBITS. Page (a) Financial Statements Independent Auditors' Report 4 Combined Statement of Revenues and Certain Expenses of Wimbledon Woods and Bunker Hill Towers for the Year Ended December 31, 1997. 5 Notes to Combined Statement of Revenues and Certain Expenses of Wimbledon Woods and Bunker Hill Towers for the Year Ended December 31, 1997. 6 (b) Pro Forma Condensed Consolidated Financial Information - Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1997. 8 Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1997. 9 Notes to Pro Forma Condensed Consolidated Financial Information. 10 (c) Exhibits 23.1 Consent of Independent Public Accountants 12 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. ESSEX PROPERTY TRUST, INC. May 14, 1998 By: /s/ Mark J. Mikl ---------------- Mark J. Mikl Controller Page 3 of 12 Independent Auditors' Report The Board of Directors Essex Property Trust, Inc.: We have audited the accompanying Combined Statement of Revenues and Certain Expenses (the Statement) of Wimbledon Woods and Bunker Hill Towers for the year ended December 31, 1997. The Statement is the responsibility of management. Our responsibility is to express an opinion on the Statement 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 Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying Statement was prepared to comply with the requirements of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and excludes certain expenses, described in note 1, that would not be comparable to those resulting from the proposed future operations of the properties. It is not intended to be a complete presentation of the operations of the properties. In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain expenses, as described in note 1, of Wimbledon Woods and Bunker Hill Towers for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Kpmg Peat Marwick LLP San Francisco, California March 31, 1998 Page 4 of 12 WIMBLEDON WOODS AND BUNKER HILL TOWERS Combined Statement of Revenues and Certain Expenses Year ended December 31, 1997 Revenues: Rental income $ 9,966,394 Other 745,367 ------------- 10,711,761 ------------- Certain expenses: Salaries 1,419,290 Utilities 1,361,129 Interest 1,359,760 Maintenance 872,701 Real estate taxes 608,530 Administrative 266,861 Insurance 243,838 Advertising 96,865 ------------- 6,228,974 ------------- Revenues in excess of certain expenses $ 4,482,787 ============= See accompanying notes to combined statement of revenues and certain expenses. Page 5 of 12 WIMBLEDON WOODS AND BUNKER HILL TOWERS Notes to Combined Statement of Revenues and Certain Expenses December 31, 1997 (Dollars in Thousands) (1) Properties and Accounting Presentation The Combined Statement of Revenues and Certain Expenses has been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and relates to the 1997 operations of Wimbledon Woods, a 560 unit apartment community located in Hayward, California, and Bunker Hill Towers, a 456 unit apartment high-rise community located in Los Angeles, California. The following represents the date each property was acquired: Property Date -------- ---- Wimbledon Woods March 3, 1998 Bunker Hill Towers April 1, 1998 In accordance with Rule 3-14, expenses are presented exclusive of depreciation, management fees, interest on loans not assumed and income taxes as these expenses would not be comparable to the proposed future operations of the properties. The acquisition of the properties may result in a new valuation for purposes of determining future property tax assessments. Rental revenue is recognized on the accrual basis of accounting. Tenant leases are generally for a one year period or less. Acquisition mortgage debt assumed was approximately $18,400 with an interest rate of 7.39% (Continued) Page 6 of 12 WIMBLEDON WOODS AND BUNKER HILL TOWERS Notes to Combined Statement of Revenues and Certain Expenses (Dollars in Thousands) (2) Estimated Taxable Operating Results and Cash to be Made Available by Operations (unaudited) Estimated Taxable Operating Income and Cash Available by Operations for the twelve months ended December 31, 1997 are shown below. However, Essex Property Trust, Inc. (the Company) has and believes it will continue to qualify as a real estate investment trust (REIT) under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended. The Company also believes that current distributions to shareholders will exceed 95% of its taxable income. Depreciation expense of $2,590 was estimated considering the purchase price of each property and the appropriate income tax depreciation method using a 27 1/2 year depreciable life for the buildings. Taxable Operating Income for Essex Property Trust, Inc. ("Registrant") is estimated income subject to taxation before the dividends paid deduction. Taxable income for Wimbledon Woods and Bunker Hill Towers is estimated based on their combined revenues in excess of certain expenses in the accompanying financial statement less estimated depreciation's expense. The dividends paid deduction is estimated based on registrants policy of paying dividends which exceed 95% of taxable income. Estimated Cash To Be Made Available By Operations reflects Registrants' 1997 cash from operating activities. Cash To Be Made Available By Operations from the combined operations of Wimbledon Woods and Bunker Hill Towers is estimated to be the same as revenues in expense of certain expenses in the accompanying financial statement. Wimbledon Woods and Bunker Hill Registrant Towers Combined ---------------- -------------- -------------- Year ended December 31, 1997 ---------------------------------------------------- Estimated taxable operating income $ 21,800 $ 1,893 $ 23,693 Estimated dividend paid deduction (21,800) (1,893) (23,693) Estimated tax expense $ - - - ================= ============== ============= Estimated cash available by operations $ 55,537 $ 4,483 $ 60,020 ================= ============== ============= Page 7 of 12 ESSEX PROPERTY TRUST, INC. Pro Forma Condensed Consolidated Balance Sheet As of December 31, 1997 (Unaudited) (Dollars in thousands, except shares and per share amounts) Pro Forma Adjustments (2) --------------------------- Aquisition and Equity Disposition Historical Transactions Transactions Pro Forma ---------- ------------ ------------ ---------- .................................................... ASSETS Real estate Rental properties Land and land improvements ......................... $ 182,416 $ 29,340 $ (2,545) $ 209,211 Buildings and improvements ......................... 548,571 117,360 (9,731) 656,200 ---------- --------- ----------- --------- 730,987 146,700 (12,276) 865,411 Less accumulated depreciation ........................ (58,040) -- 1,436 (56,604) ----------- ---------- ----------- --------- 672,947 146,700 (10,840) 808,807 Investments .......................................... 2,347 -- -- 2,347 Real estate under development ........................ 27,422 -- -- 27,422 ----------- ---------- ----------- --------- 702,716 146,700 (10,840) 838,576 Cash and cash equivalents .............................. 4,282 (16,000) 15,842 4,124 Restricted cash ........................................ 6,093 -- -- 6,093 Notes and other related party receivables .............. 9,264 -- -- 9,264 Notes and other receivables ............................ 8,602 -- -- 8,602 Prepaid expenses and other assets ...................... 3,838 -- -- 3,838 Deferred charges, net .................................. 4,040 -- -- 4,040 ----------- --------- ----------- --------- $ 738,835 $ 130,700 $ 5,002 $ 874,537 ========== ========== ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable ................................. $ 248,997 $ 43,400 $ -- $ 292,397 Lines of credit ........................................ 27,600 29,025 -- 56,625 Accounts payable and accrued liabilities ............... 21,337 -- -- 21,337 Dividends payable ...................................... 9,189 -- -- 9,189 Other liabilities ...................................... 4,208 -- -- 4,208 ----------- --------- ----------- --------- Total liabilities .................................... 311,331 72,425 -- 383,756 Minority interests ..................................... 28,589 58,275 -- 86,864 STOCKHOLDERS' EQUITY 8.75% convertible preferred stock, series 1996A, $.0001 par value, 1,600,000 authorized, issued and outstanding ............................. 1 -- -- 1 Common stock, $.0001 par value, 668,400,000 shares authorized, 16,614,687 shares issued and outstanding 2 -- -- 2 Excess stock, $.0001 par value, 330,000,000 shares no shares issued or outstanding.................... -- -- -- -- Additional paid in capital ........................... 430,804 -- -- 430,804 Accumulated deficit .................................... (31,892) -- 5,002 (26,890) ----------- --------- ----------- --------- Total stockholders' equity ........................ 398,915 -- 5,002 403,917 ----------- --------- ----------- --------- $ 738,835 $ 130,700 $ 5,002 $ 874,537 ========== ========== ========== ========= See accompanying notes to ProForma condensed consolidated financial information Page 8 of 12
ESSEX PROPERTY TRUST, INC. Pro Forma Condensed Consolidated Statement of Operations For the year ended December 31, 1997 (Unaudited) (Dollars in thousands, except shares and per share amounts) Pro Forma Adjustments (3) ------------------------------------- Acquisition Disposition Historical Transactions Transactions Pro Forma -------------- ------------------------------------- ---------------- ........................................ Revenues Rental ................................... $ 79,936 $ 18,669 $ 2,298 $ 96,307 Interest and other income ................ 4,633 754 4 5,383 ------------ ------------ ------------ ------------ 84,569 19,423 2,302 101,690 ------------ ------------ ------------ ------------ Expenses Property operating expenses Maintenance and repairs ................ 6,814 2,027 253 8,588 Real estate taxes ...................... 6,340 1,606 129 7,817 Utilities .............................. 5,074 1,784 170 6,688 Administrative ......................... 5,514 1,315 7 6,822 Advertising ............................ 1,225 204 -- 1,429 Insurance .............................. 859 181 27 1,013 Depreciation and amortization .......... 13,992 5,204 22 19,174 ------------ ------------ ------------ ------------ 39,818 12,321 608 51,531 ------------ ------------ ------------ ------------ Interest ................................. 12,659 5,358 -- 18,017 Amortization of deferred financing costs . 509 -- -- 509 General and administrative ............... 2,413 -- -- 2,413 Loss from hedge termination .............. 138 -- -- 138 ------------ ------------ ------------ ------------ Total expenses ......................... 55,537 17,679 608 72,608 Income before gain on sales of real estate, minority interests and extraordinary item 29,032 1,744 1,694 29,082 Gain on sales of real estate ............... 5,114 -- -- 5,114 Minority interest .......................... (4,469) (4,779) (185) (9,063) ------------ ------------ ------------ ------------ Income before extraordinary item ....... $ 29,677 (3,035) 1,509 25,133 ============ ============ ============ ============ Per share data Basic: Income before extraordinary item ........... $ 1.98 $ 1.65 Weighted average number of shares outstanding during the period ............ 13,644,906 13,644,906 ============ ============ Diluted: Income before extraordinary item ........... $ 1.94 $ 1.62 Weighted average number of shares outstanding during the period ............ 15,285,288 15,285,288 ============ ============ See accompanying notes to pro forma condensed consolidated financial information Page 9 of 12
ESSEX PROPERTY TRUST, INC. Notes to Pro Forma Condensed Consolidated Financial Information December 31, 1997 (Unaudited) (Dollars in thousands, except shares and per share amounts) (1) - Overview - -------------- The Historical column of the Pro Forma Condensed Consolidated financial information includes the accounts of the Company and Essex Portfolio, L.P. (The "Operating Partnership", which holds the operating assets of the Company). The Company is the sole general partner in the Operating Partnership. Between January 1, 1998 and April 3, 1998, Essex directly acquired four multifamily properties, totaling 1,682 units, at an aggregate contract price of $136,400. In addition, Essex currently has one multifamily property, totaling 99 units, which would be considered a probable acquisitions at an aggregate contract price of $10,300. During this period the Company disposed of three retail shopping centers for a net sales price of $15,842 resulting in a net gain of $5,002. Additional information regarding these property transactions is included in Item 5 of this Form 8-K filing. On February 6, 1998, the Operating Partnership completed the sale of 1,200,000 units of its 7.875% Series B Cumulative Redeemable Preferred Units ("Perpetual Preferred Units") to an institutional investor in a private placement, at a price of $50.00 per unit. The net proceeds from this offering were approximately $58,275. On April 20, 1998, the Operating Partnership completed the sale of 400,000 units of its 7.875% Series B Cumulative Redeemable Preferred Units to the same institutional investor noted above, at a price of $50.00 per unit. The net proceeds from this offering were approximately $19,500. The unaudited pro forma condensed consolidated balance sheet as of December 31, 1997 is presented as if the property and equity transactions occurred on December 31, 1997. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1997, is presented as if the property and equity transactions stated above occurred on January 1, 1997. (2) - Pro Forma Condensed Consolidated Balance Sheet Adjustments - ---------------------------------------------------------------- The pro forma condensed consolidated balance sheet as of December 31, 1997 includes pro forma adjustments for four property acquisitions and one probable acquisition subsequent to December 31, 1997 with an aggregate cost of $146,700. It is assumed that 80% of the increase in real estate investment will be allocated to buildings and improvements for purposes of depreciation. The detail of the increase in real estate investment based on properties acquired since December 31, 1997 is as follows: Acquisition Date Acquisition Price Mirabella Apartments February 25, 1998 $ 50,500 Wimbledon Woods March 3, 1998 44,000 Bunker Hill Towers April 1, 1998 36,500 Cochran Apartments April 3, 1998 5,400 Mt. Sutro Terrace Apartments Pending 10,300 The pro forma condensed consolidated balance sheet as of December 31, 1997 includes pro forma adjustments for the Perpetual Preferred Units sale. The net proceeds from this sale were $58,275. Page 10 of 12 ESSEX PROPERTY TRUST, INC. Notes to Pro Forma Condensed Consolidated Financial Information December 31, 1997 (Unaudited) (Dollars in thousands, except shares and per share amounts) The pro forma condensed consolidated balance sheet as of December 31, 1997 includes pro forma adjustments for three property dispositions subsequent to December 31, 1997 with a net sales price of $15,842. Actual book values as of December 31, 1997 for the three retail properties sold are included as a pro forma adjustment. The Mirabella Apartments acquisition was funded with a $25,000 variable rate loan and $25,500 of proceeds from the Perpetual Preferred Units offering. The Bunker Hill Towers acquisition was funded with $18,400 of assumed fixed rate debt and $25,600 of the Company's lines of credit and proceeds from the Perpetual Preferred Units offering. The Wimbledon Woods and Cochran Apartments acquisitions were funded with the Company's lines of credit, proceeds from the sale of the three retail shopping centers and proceeds from the Perpetual Preferred Units offering. The Mt. Sutro Terrace Apartments acquisition is anticipated to be funded with the Company's line of credit. (3) - Pro Forma Condensed Consolidated Statements of Operations Adjustments - --------------------------------------------------------------------------- The pro forma condensed consolidated statement of operations for the year ended December 31, 1997 presents revenues and expenses based on historical performance adjusted for known changes in future operations. Page 11 of 12 Consent of Independent Auditors' The Board of Directors Essex Property Trust, Inc.: As independent public accountants, we hereby consent to the incorporation of our report dated March 31, 1998 included in this Form 8-K into the Company's previously filed Registration Statement Nos. 333-44467 and 333-21989. KPMG Peat Marwick LLP San Francisco, California May 5, 1998 Page 12 of 12 -----END PRIVACY-ENHANCED MESSAGE-----