SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 27, 2003
ENTERTAINMENT PROPERTIES TRUST
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 1-13561 43-1790877
(State or other jurisdiction (Commission file number) (IRS Employer
of incorporation) Identification Number)
30 West Pershing Road, Suite 201, Kansas City, Missouri 64108
(Address of Principal Executive Office) (Zip Code)
(816) 472-1700
Registrant's telephone number, including area code
TABLE OF CONTENTS
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
EXHIBITS
23.1 Authorization of Independent Auditors
SIGNATURES
This amendment to our current report on Form 8-K amends our current report dated
October 27, 2003 and filed with the Securities and Exchange Commission on
November 12, 2003.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Joint Venture Interest in New Roc Associates, L.P.
On November 12, 2003, we filed a current report on Form 8-K reporting our
acquisition of the general partnership interest and Class A limited partnership
interest in New Roc Associates, L.P., a New York limited partnership (the
"Partnership"), which owns an approximately 450,000 square foot multi-tenant
entertainment retail center in New Rochelle, New York called New Roc City (the
"Property").
This amendment to that report is being filed solely to include the financial
statements and pro forma financial information contained in Item 7 below.
We are not aware of any material factors relating to the Property other than
those discussed in our current report filed on November 12, 2003 that would
cause the historical financial information presented in Item 7 to be not
necessarily indicative of future results. Please note that, for purposes of
reconciling the information contained in Note 2 to the statements of revenues
and certain expenses for the year ended December 31, 2002 and nine months ended
September 30, 2003 (unaudited) included in Item 7(a) with the information in our
current report on Form 8-K filed on November 12, 2003 and incorporated by
reference herein, the information contained in Note 2 is based upon total
rentals paid by tenants at the Property, whereas the information contained in
Item 2, paragraph 17 of our Form 8-K filed November 12, 2003 is based upon base
rentals paid by the tenants identified in that paragraph.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Property Acquired
Independent auditors' report 5
Statements of revenues and certain expenses for the year ended
December 31, 2002 and the nine months ended September 30, 2003
(unaudited) 6
Notes to statements of revenues and certain expenses 7
INDEPENDENT AUDITORS' REPORT
Board of Directors
New Roc Associates, LP
Valhalla, NY
We have audited the accompanying statement of revenues and certain expenses of
New Roc Associates, LP (the "Partnership") for the year ended December 31, 2002.
The statement of revenue and certain expenses is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on the
financial statement 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 financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was 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
Entertainment Properties Trust) as described in Note 1 and is not intended to be
a complete presentation of the New Roc Associates, LP revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
present fairly, in all material respects, the gross revenues and certain
expenses described in Note 1 of New Roc Associates, LP for the year ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.
/s/ BDO Seidman LLP
BDO SEIDMAN LLP
New York, New York
December 12, 2003
NEW ROC ASSOCIATES, LP
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Nine months ended
Year ended September 30, 2003
December 31, 2002 (unaudited)
REVENUES (NOTES 2 AND 3):
Base rental $ 8,844,023 6,647,735
Operating cost reimbursements 2,084,486 1,197,792
Percentage rent 452,551 573,656
---------- ---------
TOTAL REVENUES 11,381,060 8,419,183
OPERATING EXPENSES:
Bad debts (NOTE 3) 1,162,502 216,740
Real estate taxes 683,406 491,240
Repairs and maintenance 603,823 490,695
Security 598,471 468,851
Utilities 60,233 72,435
Insurance 405,598 303,000
Marketing 324,579 110,329
Other selling, general and
administrative 444,263 197,222
---------- ---------
TOTAL OPERATING EXPENSES 4,282,875 2,350,512
---------- ---------
INCOME BEFORE INTEREST EXPENSE 7,098,185 6,068,671
INTEREST EXPENSE (NOTE 4) 3,342,610 2,263,825
---------- ---------
EXCESS OF REVENUES OVER CERTAIN EXPENSES $ 3,755,575 $3,804,846
SEE ACCOMPANYING NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
ORGANIZATION AND FORMATION
New Roc Associates, LP (the "Partnership") is a New York
limited partnership that was formed in October 1994 to
acquire, own, develop and maintain a 450,000 square foot
entertainment center located in New Rochelle, New York (the
"Project"). Construction commenced on the Project in
December 1997 and the center officially opened for business
on June 1, 1999.
On October 27, 2003 LC New Roc, Inc., the general partner
("General Partner"), and the limited partners of the
Partnership entered into a transaction to sell a portion of
their partnership interests, constituting control of the
Partnership, to entities owned by Entertainment Properties
Trust ("EPR"), a publicly-held real estate investment trust.
1. SUMMARY OF BASIS OF ACCOUNTING
SIGNIFICANT
ACCOUNTING
POLICIES The Partnership's statements of revenues and certain
expenses have been prepared in accordance with the
requirements of Securities and Exchange Commission
Regulation S-X, Rule 3-14. Accordingly, related party
interest, depreciation of fixed assets and amortization of
financing and tenant acquisition costs have not been
recorded since these items are not deemed to be comparable
with the future operations of the Project.
The statement for the nine months ended September 30, 2003
is unaudited and reflects all adjustments (consisting only
of normal recurring adjustments), which are, in the opinion
of management, necessary for a fair presentation of the
operating results for the interim period presented. The
results of operations for the nine months ended September
30, 2003 are not necessarily indicative of the results for
the entire fiscal year ending December 31, 2003
USE OF ESTIMATES
The preparation of a statement of revenues and certain
expenses in conformity with generally accepted accounting
principles in the United States of America requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
REVENUE RECOGNITION
Rental income is recognized on a straight-line basis over
the terms of the tenants' lease agreements. Percentage rent
is recognized in the period when the sales breakpoints are
reached. The majority of leases provide for reimbursement to
the Partnership of the tenant's share of operating expenses,
insurance and real estate taxes which are recorded on the
accrual basis.
2. RENTAL
REVENUES The Partnership leases space to various national and local
companies. As of December 31, 2002, 15 tenants lease
approximately 96% of the gross leasable square footage of
the Project, including three tenants occupying approximately
52% of space, which accounted for approximately 62% of total
revenues in 2002.
The leases include scheduled base rent increases over their
respective terms. Rental income includes $633,113 and
$582,746 for the year ended December 31, 2002 and the nine
months ended September 30, 2003, respectively, representing
the excess of base rental income on a straight-line basis
over amounts currently due pursuant to the lease agreements.
Future minimum rentals under the noncancellable terms of
tenants' operating leases excluding tenant reimbursements of
operating expenses and contingent rentals based on tenants'
sales volume, as of December 31, 2002 for each of the next
five years are as follows:
THIRD PARTY AFFILIATES(a) TOTAL
-----------------------------------------------------------
2003 $ 6,165,340 $ 2,119,520 $ 8,284,860
2004 6,326,416 2,119,520 8,445,936
2005 6,556,352 2,131,520 8,687,872
2006 6,560,929 2,191,520 8,752,449
2007 6,595,291 2,196,789 8,792,080
THEREAFTER 70,788,001 6,985,311 77,773,312
-----------------------------------------------------------
$ 102,992,329 $17,744,180 $120,736,509
-----------------------------------------------------------
(a) See Note 3b
3. RELATED PARTY
TRANSACTIONS The Partnership has entered into a number of transactions
and agreements with various affiliated entities. A summary
of each follows:
(a) PROPERTY MANAGEMENT - Property management services are
provided by New Roc Management, LLC, which is owned by
the General Partner. New Roc Management, LLC provides
all tenant services and administrative services for
which it receives a fee equal to 3% of gross revenues.
(b) The Partnership leased 166,000 square feet in 2002 and
201,000 square feet in 2003 to affiliated companies.
Lease revenues from these tenants for the year ended
December 31, 2002 and the nine months ended September
30, 2003 were $2,043,023 and $1,686,273, respectively.
In addition, bad debt expense for 2002 includes
approximately $860,000 from affiliated entities that
are no longer in business.
4. MORTGAGES MORTGAGE PAYABLE TO DEUTSCHE BANK ALEX BROWN
The first mortgage on the Project in the principal amount of
$66,000,000 matures April 9, 2004, has three one-year
renewal options and requires monthly payments of interest
only based on the one-month LIBOR rate plus 2.5%.
MORTGAGE PAYABLE TO EMPIRE STATE DEVELOPMENT CORPORATION
The second mortgage in the principal amount of $4,000,000 is
guaranteed by the General Partner and bears interest at
5.5%. This loan was required to be converted to permanent
financing in April 2002; however, to date, the Partnership
has not amended the terms of the loan with its lender.
5. COMMITMENTS
AND
CONTINGENCIES
(a) In connection with the original development of the
Project, the Partnership entered into a transaction
with the City of New Rochelle Industrial Development
Agency ("IDA"), whereby the title to the land was
transferred to the IDA and the Partnership leased the
land back pursuant to a lease agreement dated January
30, 1999 (the "Lease"). The Lease provides that the
Partnership pays base rent in the amount of one dollar
($1.00) on the commencement date, which constitutes the
entire amount of base rent due.
Further, the Lease provides that the Partnership pays
additional rent amounts due with respect to payments in
lieu of Real Estate Taxes ("PILOT") negotiated with the
IDA.
The PILOT payments are equal to the greater of $370,000
per year or $1.00 per square foot of net leaseable area
plus $25,000. The term of the Lease runs to January 30,
2018 at which time the Partnership is required to
purchase the IDA's interest in the land by paying any
rental payments then due plus one dollar ($1.00).
Future minimum ground lease payments are:
YEARS ENDING:
-----------------------------------------
2003 $ 370,000
2004 370,000
2005 370,000
2006 370,000
2007 370,000
THEREAFTER 3,700,000
-----------------------------------------
$5,550,000
-----------------------------------------
(b) The Partnership is involved in various legal actions
and claims arising in the ordinary course of its
business. Management believes that current litigation
and claims will be resolved without any material effect
on the Partnership's financial statement.
(b) Pro Forma Financial Information
ENTERTAINMENT PROPERTIES TRUST
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEETS
SEPTEMBER 30, 2003
(Dollars in thousands)
Pro Forma
Entertainment
Properties
Trust with
Entertainment New Roc
Properties New Roc Pro Forma Associates, LP
Trust Associates, LP Adjustments
ASSETS
Rental properties, net $ 742,658 $ 93,495 $ 8,215 (1) $ 844,368
Cash and cash equivalents 107,314 774 (25,000) (2) 83,088
Other assets 40,475 4,717 (2,437) (3) 42,755
--------- -------- --------- ---------
Total assets $ 890,447 $ 98,986 $ 19,222 $ 970,211
========= ======== ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Common dividend payable $ 9,827 $ - $ - $ 9,827
Preferred dividend payable 1,366 - - 1,366
Other liabilities 1,588 895 (492) (4) 1,991
Long-term debt 439,152 70,000 - 509,152
--------- -------- --------- ---------
Total liabilities 451,933 70,895 (492) 522,336
Minority interest 15,375 - 9,361 (5) 24,736
Shareholders' equity 423,139 28,091 (28,091) (6) 423,139
--------- --------- --------- ---------
Total liabilities and shareholders'
equity $ 890,447 $ 98,986 $(19,222) $ 970,211
========= ======== ========= =========
NOTES:
(1) Purchase accounting adjustment for the fair value of the land and building
at September 30, 2003.
(2) Purchase of interest in New Roc Associates, LP.
(3) Adjustment for seller affiliate receivables. Per section 1.5.4(b)
"Adjustments at Closing" of the Limited Partnership Interest Purchase
Agreement dated October 27, 2003, the Company shall have no right to
collect any receivables from any affiliate of the seller after closing. Any
such accounts receivables will be assigned to seller.
(4) Adjustment for accounts payable related to period prior to closing (October
27, 2003). Payables due by seller.
(5) Minority interest calculated as of September 30, 2003 with pro forma
adjustments.
ENTERTAINMENT PROPERTIES TRUST
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
(Dollars in thousands except per share data)
Pro Forma
Entertainment
Properties Trust
Entertainment New Roc Pro Forma with New Roc
Properties Trust Associates, LP Adjustments ASSOCIATES, LP
---------------- -------------- ----------- ----------------
Rental revenue $71,610 $11,381 $ - $82,991
Other income - - - -
------- ------- ------- -------
Total income $71,610 $11,381 $ - $82,991
======= ======= ======= =======
Property operating 201 3,838 - 4,039
expense
General and 3,341 444 - 3,785
administrative expense
Interest expense, net 24,475 3,343 - 27,818
Depreciation and 12,862 3,723 47 (1) 16,632
amortization
------- ------- ------- -------
Income before minority 30,731 33 (47) 30,717
interest and income
from joint venture
Gain on sale of real 202 - - 202
estate
Equity in income from 1,421 - - 1,421
joint venture
Minority interest (1,195) - 4 (2) (1,191)
------- ------- ------- -------
Net income $31,159 $33 $(43) 31,149
Preferred dividend (3,225) - - (3,225)
requirements
------- ------- ------- -------
Net income available to $27,934 $33 $(43) $27,924
common shareholders ======= ======= ======= =======
Basic net income per 1.66 1.66
common share ==== ====
Diluted net income per 1.64 1.64
common share ==== ====
Shares used for
computation:
Basic 16,791 16,791
Diluted 17,762 17,762
(1) Depreciation adjustment related to increase in building value per purchase
accounting FMV adjustment at 1/1/02.
(2) Minority interest expense is 28.6% of Partnership net income less pro forma
adjustments.
ENTERTAINMENT PROPERTIES TRUST
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Dollars in thousands except per share data)
Pro Forma
Entertainment
Properties Trust
Entertainment New Roc Pro Forma with New Roc
Properties Trust Associates, LP Adjustments Associates, LP
---------------- -------------- ----------- ----------------
Rental revenue $ 64,808 $ 8,419 - $ 73,227
Other income 1,195 - - 1,195
---------- ---------- -------- ----------
Total revenue 66,003 8,419 - 74,422
Property operating expense 398 2,153 - 2,551
General and administrative expense 3,629 197 - 3,826
Interest expense, net 22,363 2,264 - 24,627
Depreciation and amortization 11,631 2,874 26 (1) 14,531
---------- ---------- -------- ----------
Income before minority interest and
income from joint venture 27,982 931 (26) 28,887
Equity in income from joint venture 299 - - 299
Minority interest (1,125) - (259) (2) (1,384)
---------- ---------- -------- ----------
Net income $ 27,156 931 (285) 27,802
Preferred dividend requirements (4,097) - - (4,097)
---------- ---------- --------
Net income available to common shareholders 23,059 931 (285) 23,705
========== ========== ======== ==========
Basic net income per common share 1.34 1.38
========== ==========
Diluted net income per common share 1.31 1.36
========== ==========
Shares used for computation:
Basic 17,189 17,189
Diluted 18,456 18,456
NOTES:
(1) Depreciation adjustment related to increase in building value per purchase
accounting FMV adjustment at 1/1/03.
(2) Minority interest expense is 28.6% of partnership net income less pro forma
adjustments.
(c) Exhibits
10.1 Limited Partnership Interest Purchase Agreement dated October 27,
2003 among EPT New Roc GP, Inc., EPT New Roc, LLC, LRC
Industries, Inc., DKH - New Roc Associates, L.P., LC New Roc Inc.
and New Roc Associates, L.P.*
10.2 Second Amended and Restated Agreement of Limited Partnership of
New Roc Associates, L.P.*
23.1 Authorization of Independent Auditors
* previously filed with our current report on Form 8-K dated October
27, 2003, as filed with the Securities and Exchange Commission on
November 12, 2003 and incorporated by reference herein.
SIGNATURE
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.
ENTERTAINMENT PROPERTIES TRUST
Date: January 12, 2004
By /S/ DAVID M. BRAIN
-------------------------------------
David M. Brain
President and Chief Executive Officer