UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT 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):
DECEMBER 27, 2004
COMMISSION FILE NUMBER
0-28378
AMREIT
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0410050
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8 GREENWAY PLAZA, SUITE 1000,
HOUSTON, TEXAS 77046 713-850-1400
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (REGISTRANT'S TELEPHONE NUMBER)
[N/A]
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
TABLE OF CONTENTS
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Purchase of MacArthur Park Shopping Center
------------------------------------------
We previously filed a Form 8-K on December 28 dated December 27, 2004, with
regard to the acquisition of MacArthur Park Shopping Center located in Dallas,
Texas, without the requisite financial information. Accordingly, we are filing
this Form 8-K/A to include that financial information. Due to the non-related
party nature of this transaction, only Rule 3-14 audited statements for the year
ended December 31, 2003, are required. We are not aware of any material factors
relating to the acquisitions that would cause the reported financial information
not to be necessarily indicative of future operating results.
On December 27, 2004, we acquired MacArthur Park Shopping Center, a Kroger
anchored shopping center consisting of 198,443 square feet located on
approximately 23 acres for $37.8 million. The property, which was acquired from
Regency Centers, is located in Dallas, Texas at the northwest intersection of
I-635 and MacArthur Boulevard in the heart of Las Colinas. Material factors
considered by us in the acquisition include historical and prospective financial
performance of the center, credit quality of the tenancy, local and regional
demographics, location and competition, ad valorem tax rates, condition of the
property and the related anticipated level of capital expenditures required. The
purchase price consists of the assumption of $13.41 million in long term fixed
rate debt with the remainder being paid in cash. The debt bears interest at
6.17% per annum and matures in December 2008. This note is prepayable upon
payment of a fee equal to 1% of the principal balance of the note being prepaid
and the excess, if any, of the sum of the present values of all then-scheduled
payments of principal and interest under the note, over the principal amount of
the note being paid. The weighted average remaining lease term for the project's
leases is eight years. The Kroger lease term is for 20 years, containing
approximately 63,000 square feet, expiring in November 2020. The shopping center
is 100 percent occupied. Audited financial statements for the property (the
"Acquired Property"), are submitted in ITEM 9.01 below. Unaudited pro forma
condensed consolidated financial information of AmREIT and Subsidiaries and the
Acquired Property is also submitted in ITEM 9.01 below.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial statements and exhibits
are filed as part of this report:
(a) Financial statements of MacArthur Park Shopping Center:
1. Report of Independent Auditors
2. Historical Summary of Gross Income and Direct Operating Expenses for the year
ended December 31, 2003
3. Notes to Historical Summary of Gross Income and Direct Operating Expenses
(b) Pro Forma Condensed Consolidated Financial Statements (unaudited) of AmREIT
and Subsidiaries
1. Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2004
2. Pro Forma Condensed Consolidated Statement of Operations for the Nine Months
Ended September 30, 2004
3. Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 2003
(c) Exhibits:
None
INDEPENDENT AUDITORS' REPORT
The Board of Trust Managers
AmREIT:
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses (Historical Summary) of MacArthur Park Shopping Center (the
Property) for the year ended December 31, 2003. This Historical Summary is the
responsibility of the management of AmREIT. Our responsibility is to express an
opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Property's internal control
over financial reporting. Accordingly, we express no such opinion. 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 accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and for
inclusion in the Current Report on Form 8-K. The presentation is not intended to
be a complete presentation of the Property's income and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses, as described
in Note 2 of MacArthur Park Shopping Center for the year ended December 31,
2003, in conformity with accounting principles generally accepted in the United
States of America.
KPMG LLP
Dallas, Texas
March 8, 2005
MACARTHUR PARK SHOPPING CENTER
HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
AND NINE MONTHS ENDED SEPTEMBER 30, 2004
YEAR NINE MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
2003 2004
--------------- ---------------
(Unaudited)
Gross income:
Rental income $ 2,901,602 2,183,873
Tenant expense recoveries 1,234,314 939,565
--------------- ---------------
4,135,916 3,123,438
--------------- ---------------
Direct operating expenses:
Operating expenses 441,777 668,424
Real estate taxes 873,125 630,697
Insurance 78,573 44,649
Interest 827,397 620,548
--------------- ---------------
Total direct operating expenses 2,220,872 1,964,318
--------------- ---------------
Excess of gross income over direct operating expenses $ 1,915,044 1,159,120
=============== ===============
See accompanying notes to historical summary of gross income and direct
operating expenses.
MACARTHUR PARK SHOPPING CENTER
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
(1) BUSINESS
MacArthur Park Shopping Center (the Property) is located in Irving,
Texas. The Property consists of approximately 198,443 square feet of
gross leasable area and was 100% occupied at December 31, 2003. On
December 27, 2004, AmREIT acquired the Property for approximately $37.8
million.
(2) BASIS OF PRESENTATION AND COMBINATION
The Historical Summary of Gross Income and Direct Operating Expenses
(Historical Summary) has been prepared for the purpose of complying with
Rule 3-14 of the Securities and Exchange Commission Regulation S-X and
for inclusion in AmREIT's filing on Form 8-K, and is not intended to be a
complete presentation of the Property's income and expenses. The
Historical Summary has been prepared on the accrual basis of accounting.
Management of the Property is required to make estimates and assumptions
that affect the reported amounts of the income and expenses during the
reporting period. Actual results may differ from those estimates.
In the opinion of management, all adjustments necessary for a fair
presentation are of a recurring nature and have been made to the
accompanying unaudited amounts for the nine months ended September 30,
2004.
(3) GROSS INCOME
The Property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. The leases
include provisions under which the Property is reimbursed for common area
maintenance, real estate taxes, and insurance costs. Income related to
these reimbursed costs is recognized in the period the applicable costs
are incurred and billed to tenants pursuant to the lease agreements.
Certain leases contain renewal options at various periods at various
rental rates. Certain of the leases contain provisions for contingent
rentals. No contingent rent was earned during the year ended December 31,
2003.
Although certain leases may provide for tenant occupancy during periods
for which no rent is due and/or increases exist in minimum lease payments
over the term of the lease, rental income is recognized for the full
period of occupancy on a straight-line basis.
The weighted average remaining lease term for the shopping center is 9.1
years at December 31, 2003. Minimum rents to be received from tenants
under operating leases, exclusive of common area maintenance
reimbursements, which were $1.2 million for the year ended December 31,
2003 are as follows:
2004 $ 2,869,900
2005 2,827,758
2006 2,033,011
2007 1,884,016
2008 1,873,398
Thereafter 9,525,414
------------
Total $ 21,013,497
============
Adjustments to record rental income on a straight-line basis increased
gross income by $54,081 during the year ended December 31, 2003.
Following are the tenants that individually comprised 10% or more of
rental income for the year ended December 31, 2003:
Tenant % of rental income
------ ------------------
Kroger 14%
Linens 'n Things 11%
(4) DIRECT OPERATING EXPENSES
Direct operating expenses include only those costs expected to be
comparable to the proposed future operations of the Property. Repairs and
maintenance expenses are charged to operations as incurred. Costs such as
depreciation and amortization are excluded from the accompanying
Historical Summary.
(5) RELATED-PARTY TRANSACTIONS
During the year ended December 31, 2003, management fees of $134,461 were
paid or incurred. The amount was paid or owed to various entities related
to the owner of the Property either by common ownership or control.
Payments and amounts due to related parties represent amounts due under
contracts for different services provided by the related party.
(6) PROJECT FINANCING
In November 2001, a $13,410,000 note payable was entered into with a
lender, secured by the Property. The non-amortizing note bears interest
at 6.17% and matures on December 1, 2008. This note is prepayable upon
payment of a fee equal to 1% of the principal balance of the note being
prepaid and the excess, if any, of the sum of the present values of all
then-scheduled payments of principal and interest under the note, over
the principal amount of the note being paid. AmREIT assumed this note in
connection with the December 2004 acquisition of the Property.
AMREIT AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following pro forma financial statements have been prepared to provide pro
forma information with regards to the MacArthur Park Shopping Center ("the
Property") which AmREIT (the "Company") acquired from an unrelated third party.
On December 27, 2004, AmREIT acquired the Property, a Kroger-anchored shopping
center consisting of 198,443 square feet located on approximately 23 acres. The
Property, which was acquired from Regency Centers, is located in Dallas, Texas
at the northwest intersection of I-635 and MacArthur Boulevard in the heart of
Las Colinas.
The unaudited Pro Forma Condensed Consolidated Balance Sheet presents the
historical financial information of the Company as of September 30, 2004 as
adjusted for the acquisition of the Property which is assumed to have occurred
on September 30, 2004.
The accompanying unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 2003 combines the historical
operations of the Company with (i) the gross income and direct operating
expenses of Uptown prior to its acquisition in 2003, (ii) the gross income and
direct operating expenses of the properties acquired subsequent to December 31,
2003, including MacArthur Park Shopping Center, and (iii) considers the
assumption or issuance of debt, as appropriate, to acquire the properties, as if
these transactions had occurred on January 1, 2003.
The accompanying unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 2004 combines the historical
operations of the Company with (i) the gross income and direct operating
expenses of properties acquired in 2004, including the MacArthur Park Shopping
Center for the respective periods prior to their acquisition and (ii) considers
the assumption or issuance of debt, as appropriate, to acquire the properties,
as if these transactions had occurred on January 1, 2003.
The unaudited pro forma condensed consolidated financial statements have been
prepared by the Company's management based upon the historical financial
statements of the Company and of the acquired properties. These pro forma
statements may not be indicative of the results that actually would have
occurred had the acquisitions been in effect on the dates indicated or which
may be obtained in the future. In management's opinion, all adjustments
necessary to reflect the effects of the property acquisitions have been made.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the historical financial statements included in the
Company's previous filings with the Securities and Exchange Commission,
including our filing on Form 8-K on September 14, 2004 related to our two other
significant acquisitions during 2004. These properties (Plaza in the Park
Shopping Center located in Houston, Texas and Cinco Ranch Shopping Center,
located in Katy, Texas) were acquired from an unrelated third party on July 1,
2004.
AMREIT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2004
(unaudited)
(in thousands)
AmREIT MacArthur
Historical (1) Park (2) Pro Forma
--------------- --------------- ---------------
ASSETS
Property:
Land $ 58,028 $ 8,619 $ 66,647
Buildings 63,599 25,277 88,876
Tenant improvements 3,012 1,110 4,122
--------------- --------------- ---------------
124,639 35,006 159,645
Less accumulated depreciation and amortization (3,213) -- (3,213)
--------------- --------------- ---------------
Net real estate held for investment 121,426 35,006 156,432
Real estate held for sale, net 9,684 -- 9,684
Net investment in direct financing leases held for investment 19,222 -- 19,222
Intangible lease cost, net 5,293 5,578 10,871
Other assets 11,032 131 11,163
--------------- --------------- ---------------
TOTAL ASSETS $ 166,657 $ 40,715 $ 207,372
=============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 84,905 $ 38,348(3) $ 123,253
Other liabilities 3,913 2,367 6,280
--------------- --------------- ---------------
TOTAL LIABILITIES 88,818 40,715 129,533
--------------- --------------- ---------------
Minority interest 1,070 -- 1,070
Shareholders' equity 76,769 -- 76,769
--------------- --------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 166,657 $ 40,715 $ 207,372
=============== =============== ===============
The accompanying notes are an integral part of this pro forma condensed
consolidated financial statement.
AMREIT AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2004
(UNAUDITED)
(1) Reflects the historical condensed consolidated balance sheet of the Company
as of September 30, 2004. Please refer to AmREIT's historical consolidated
financial statements and notes thereto included in the Company's Quarterly
Report on Form 10-QSB for the nine months ended September 30, 2004.
(2) Reflects the acquisition of the MacArthur Park Shopping Center. The purchase
price was $37.8 million and was allocated among land, buildings, tenant
improvements, above- and below-market leases and intangible lease costs based on
the preliminary purchase price allocation performed pursuant to Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141)
The buildings are depreciated over a period of approximately 40 years.
(3) In conjunction with the acquisition of the MacArthur Park Shopping Center,
the Company assumed $13.4 million of secured debt with a fixed rate of 6.17%.
The fair value of the debt is $14.0 million based on a market interest rate of
5.0%. The debt premium of $576 thousand is being amortized over the remaining
term of the loan. Additionally, $24.3 million of the acquisition consideration
was funded through the Company's credit facility (interest rate of 4.44% on the
acquisition date).
AMREIT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(Unaudited)
(in thousands, except per share amounts)
2004 Acquisitions (2)
-------------------------
AmREIT MacArthur Pro Forma
Historical (1) Park Other Adjustments Pro Forma
-------------- ------------ ---------- ------------ ------------
Revenues
Rental income and earned income $ 7,697 $ 3,123 $ 2,860 $ 155(3) $ 13,835
Other income 7,286 -- -- 7,286
------------ ------------ ---------- ------------ ------------
Total Revenues 14,983 3,123 2,860 155 21,121
------------ ------------ ---------- ------------ ------------
Expenses
Operating and administrative 5,070 1,343 633 -- 7,046
Depreciation and amortization 1,253 -- 2,129(3) 3,382
Other expenses 6,792 -- -- 6,792
------------ ------------ ---------- ------------ ------------
Total Expenses 13,115 1,343 633 2,129 17,220
------------ ------------ ---------- ------------ ------------
Operating income 1,868 1,780 2,227 (1,974) 3,901
Interest expense (2,190) (621) (935) (1,214)(4) (4,960)
Other income 254 -- -- -- 254
------------ ------------ ---------- ------------ ------------
Income (loss) before discontinued operations (68) 1,159 1,292 (3,188) (805)
Income from discontinued operations 921 -- -- -- 921
------------ ------------ ---------- ------------ ------------
Net income $ 853 $ 1,159 $ 1,292 $ (3,188) $ 116
Distributions paid to class B and class C shareholders (3,087) -- -- -- (3,087)
------------ ------------ ---------- ------------ ------------
Net income (loss) available to class A shareholders $ (2,234) $ 1,159 $ 1,292 $ (3,188) $ (2,971)
============ ============ ========== ============ ============
Net income (loss) per common share - basic and diluted
Loss before discontinued operations (0.99) (1.22)
Income from discontinued operations 0.29 0.29
------------ ------------
Net income (loss) (0.70) (0.93)
============ ============
Weighted average common shares used to compute
net income per share, basic and diluted 3,191 3,191
============ ============
The accompanying notes are an integral part of this pro forma condensed
consolidated financial statement.
AMREIT AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(UNAUDITED)
(1) Reflects the historical condensed consolidated statement of operations of
the Company for the nine months ended September 30, 2004. Please refer to
AmREIT's historical consolidated financial statements and notes thereto included
in the Company's Quarterly Report on Form 10-QSB for the nine months ended
September 30, 2004.
(2) The historical statement of operations for the 2004 acquisitions represents
the properties' historical summary of gross income and direct operating expenses
for the periods prior to acquisition. Costs such as depreciation and
amortization were excluded from the historical summary. See Note 3 below. See
also the separate discussion of the acquisitions of our Plaza in the Park and
Cinco Ranch properties in our filing on Form 8-K on September 14, 2004. These
properties represent the other two significant property acquisitions during 2004
and were acquired from an unrelated third party on July 1, 2004.
(3) Represents the amortization of below-market leases, the depreciation of the
building (over approximately 40 years), tenant improvements (over the terms of
the respective lease agreements) and the amortization of the intangible assets
based on the preliminary purchase price allocation in accordance with SFAS No.
141.
(4) Represents the incremental interest expense related to the portion of the
acquisition consideration for the properties that was financed via the Company's
credit facility, assuming interest rates in a range of 3.25% to 4.44%, based on
the date of the properties' acquisitions. Interest expense has been reduced by
pro forma debt premium amortization of $146 thousand for the nine months ended
September 30, 2004.
AMREIT AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(Unaudited)
(in thousands, except per share amounts)
2004 Acquisitions (2)
------------------------
AmREIT 2003 (2) MacArthur Pro Forma
Historical(1) Acquisitions Park Other Adjustments Pro Forma
------------- ------------ ---------- ---------- ----------- ----------
Revenues
Rental income and earned income $ 7,584 $ 1,131 $ 4,136 $ 5,322 $ 215(3) $ 18,388
Other income 5,025 -- -- -- -- 5,025
---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 12,609 1,131 4,136 5,322 215 23,413
---------- ---------- ---------- ---------- ---------- ----------
Expenses
Operating and administrative 3,937 253 1,394 1,260 -- 6,844
Depreciation and amortization 836 -- -- -- 3,439(3) 4,275
Other expenses 4,084 -- -- -- -- 4,084
---------- ---------- ---------- ---------- ---------- ----------
Total Expenses 8,857 253 1,394 1,260 3,439 15,203
---------- ---------- ---------- ---------- ---------- ----------
Operating income 3,752 878 2,742 4,062 (3,224) 8,210
Interest expense (2,354) (414) (827) (1,907) (1,910)(4) (7,412)
Other expense (103) -- -- -- -- (103)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before discontinued operations 1,295 464 1,915 2,155 (5,134) 695
Income from discontinued operations 703 -- -- -- -- 703
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 1,998 $ 464 $ 1,915 $ 2,155 $ (5,134) $ 1,398
Distributions paid to class B and
class C shareholders (1,943) -- -- -- -- (1,943)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) available to
class A shareholders $ 55 $ 464 $ 1,915 $ 2,155 $ (5,134) $ (545)
========== ========== ========== ========== ========== ==========
Net income (loss) per common share -
basic and diluted
Loss before discontinued operations (0.23) (0.45)
Income from discontinued operations 0.25 0.25
---------- ----------
Net income (loss) 0.02 (0.20)
========== ==========
Weighted average common shares used to
compute net income per share,
basic and diluted 2,792 2,792
========== ==========
The accompanying notes are an integral part of this pro forma condensed
consolidated financial statement.
AMREIT AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)
(1) Reflects the historical condensed consolidated statement of operations of
the Company for the year ended December 31, 2003. Please refer to AmREIT's
historical consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003.
(2) The historical statement of operations for the 2003 and 2004 acquisitions
represent the properties' historical summary of gross income and direct
operating expenses for the periods prior to acquisition. Costs such as
depreciation and amortization were excluded from the historical summary. See
Note 3 below. See also the separate discussion of the acquisitions of our Plaza
in the Park and Cinco Ranch properties in our filing on Form 8-K on September
14, 2004. These properties represent the other two significant property
acquisitions during 2004 and were acquired from an unrelated third party on July
1, 2004.
(3) Represents the amortization of below-market leases, the depreciation of the
building (over approximately 40 years), tenant improvements (over the terms of
the respective lease agreements) and the amortization of the intangible assets
based on the preliminary purchase price allocation in accordance with SFAS No.
141.
(4) Represents the incremental interest expense related to the portion of the
acquisition consideration for the properties that was financed via the Company's
credit facility, assuming interest rates in a range of 3.19% to 4.44%, based on
the date of the properties' acquisitions. Interest expense has been reduced by
pro forma debt premium amortization of $226 thousand for the year ended December
31, 2003.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
AMREIT
By: /s/ Chad C. Braun
--------------------------------------
Chad C. Braun, Chief Financial Officer
Dated: March 10, 2005