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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
Commission File No. 0-28378
AMERICAN ASSET ADVISERS, TRUST, INC.
(Exact name of Registrant as specified in its charter)
Maryland 76-0410050
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
8 Greenway Plaza, Suite 824
Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 850-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Shares of
Common Stock
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days: Yes X No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Registration S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or informative
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant:
No Established Trading Market
Indicate the number of shares outstanding of each of the Registrant's classes
of Common Stock, as of the latest practicable date:
1,336,282 shares of Common Stock as of March 18, 1997
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated June 18, 1996 (included in
Registration Statement No. 0-28378 of Registrant) and as supplemented
February 6, 1997 and February 28, 1997 are incorporated by reference into
Part III.
PART I
Item 1. Business
American Asset Advisers Trust, Inc. ("Registrant" or "Company") was incorporated
in the state of Maryland on August 17, 1993. Commencing March 17, 1994, the
Company offered up to 2,000,000 shares of Common Stock at $10 per share together
with 1,000,000 warrants exercisable at $9 per share, with one warrant issued
with each two shares purchased. The Company is in the process of registering
shares of Common Stock for issuance upon the exercise of the outstanding
warrants. The warrants are exercisable between March 17, 1997 and March 16,
1998. As of December 31, 1996, 504,126 warrants were outstanding. The shares
and warrants are separately transferable. The initial offering period
terminated on March 15, 1996 with gross proceeds totaling $10,082,520 (1,008,252
shares). In addition, $200,010 (20,001 shares) had previously been purchased
by American Asset Advisers Realty Corporation, ("AAA"). On June 18, 1996, the
Company commenced a follow-on offering of up to $29,250,000 (2,853,659 shares)
of additional shares of its Common Stock. The offering will terminate on
June 17, 1998, unless terminated earlier. As of December 31, 1996, gross
proceeds had been received for $1,810,886 (176,672 shares) in this second
offering bringing the total gross proceeds to $12,093,416 (1,204,925 shares).
The Company focuses on acquiring freestanding properties that are located
primarily on corner or out-parcel locations in strong commercial corridors
near traffic generators, such as major regional malls. These properties are
net-leased to tenants whose net worth is equal to or greater than $40
million. These properties, which attract a wide array of established retail
tenants, offer attractive opportunities for stable current return and potential
capital appreciation. In addition, management believes that the location and
design of properties in this niche provide flexibility in use and tenant
selection and an increased likelihood of advantageous re-lease terms.
The Company has been successful in attracting tenants that operate in
different retail segments, including Radio Shack (leased to the Tandy
Corporation), Blockbuster Music (lease guaranteed by Viacom, Inc.), Popeye's
Famous Chicken (leases guaranteed by AFC, Inc.), OneCare Health Industries,
Inc., Just For Feet, Inc. and Bank United, a Federal Savings Bank.
Properties acquired by the Company are generally newly constructed or recently
constructed as of the time of acquisition. In addition, the Company acquires
only properties that are subject to a lease in order to avoid the risks
inherent in initial leasing. The Company's leases typically provide that the
tenant bears responsibility for substantially all property costs and expenses
associated with ongoing maintenance and operation such as utilities, property
taxes and insurance. Some of the tenants' leases require that the Company is
responsible for roof and structural repairs. In these instances, the
Company normally requires warranties and/or guarantees to mitigate the potential
costs of repairs during the primary terms of the leases.
The Company's leases typically do not limit the Company's recourse against the
tenant and any guarantor in the event of a default, and for this reason are
considered "full-credit" leases. All of the Company's properties have been 100
percent leased since they were acquired by the Company.
All of the Company's business is generated from real estate operations;
therefore, the presentation of industry segment information is not applicable.
During 1996, 63% of the Company's rental income was received from three
properties, each of which individually contributed more than 15% of the rental
income for the year. During 1995, 77% of the Company's rental income was
received from three properties, each of which individually contributed more
than 15% of the rental income for the year. During 1994, each of the three
properties owned by the Company contributed more than 15% of the rental income
for the year. A breakdown of rental income by tenant is included in Note 5 to
the financial statements.
A further description of the Company's business is included in
Management's Discussion and Analysis of Financial Condition and
Results of Operations included in Item 7 of this Form 10-K.
The Objectives of the Company are:
(1) to provide regular distributions to Shareholders. The
Company has paid quarterly distributions to Shareholders since
July 1994 and intends to continue paying quarterly
distributions to Shareholders. Distribution payments may
fluctuate during the life of the Company.
(2) to provide distributions that are partially free from
current taxation. So long as the Company qualifies as a REIT,
it will generally not be taxed on taxable income to the extent
it pays distributions to the Shareholders. Company
distributions will not be currently taxable to Shareholders to
the extent the distributions exceed Company taxable income.
The Company expects to incur less taxable income (and thus
greater cash flow) because of its non-cash deductions for
depreciation. However, depreciation deductions decrease the
Company's tax basis in its properties and thus, will increase
the Company's taxable income when the Company sells these
properties.
(3) to provide Shareholders with long-term appreciation on
their investment. Management believes that the Company can
realize its objective of long-term appreciation of its
property portfolio based on the fact that most of the leases
on the properties in which the Company presently holds
interests contain, and the Company expects that most of the
leases on the additional properties that it will acquire will
contain, periodic rent escalation provisions over the original
and renewal terms of such leases. Because the Company's
properties are and are expected to continue to be valued on
the basis of their ability to produce income, the Company
believes that successive periodic rental income increases
resulting from such escalation provisions should increase the
value of the Company's properties over the long term. There
is of course no assurance the Company will in fact realize
portfolio appreciation.
(4) to provide investors with an inflation hedge. During
times of inflation, it is management's experience that
commodities such as real estate experience price increases
commensurate with increases in inflation. However, inflation
has become a less significant factor in recent years as rates
of inflation have been low. Also, real property which is
subject to long-term leases requiring fixed rents over future
years may not experience an increase in price commensurate
with inflation or commensurate with similar properties which
are not subject to such leases.
(5) to conserve capital. The Company will attempt to conserve
capital by endeavoring to continue to invest in a diversified
portfolio of quality real estate under long-term leases to
creditworthy tenants. The amount of money raised in the
offering will affect the number of properties the Company will
be able to purchase. The more properties the Company
acquires, the more diversified it will be and the less it will
be affected by any single property that does not perform as
expected.
There is no assurance these objectives can be achieved.
Properties
At December 31, 1996, the Partnership owned eight properties, four
directly and four through joint ventures, all in fee simple. Four
of these properties are located in Texas and one each in Arizona,
Georgia, Kansas and Missouri. Although the specific terms of each lease
vary, a summary of the terms of the leases is as follows:
The primary term of the leases ranges from ten to twenty years.
Five of the leases also provide for two to four five-year renewal
options. The leases are all "triple-net" leases whereby the
tenants are responsible for the property taxes, insurance and
operating costs. Annual rental income ranges from $54,056 to
$380,964. Seven of the leases provide for either percentage rents
based on sales in excess of certain amounts, periodic escalations
in the annual rental rates or both.
During 1996, three of the Company's leases each contributed more
than 15% of the Partnership's total rental income. Summarized as
follows are the significant items pertaining to each of these
leases:
OneCare Health Blockbuster Music Blockbuster Music
Industries, Inc. Retail, Inc. Retail, Inc.
Lease Term 10 Years 10 Years 10 Years
Expiration Date of Primary
Term July 2005 December 2004 April 2004
Renewal Options 2 Terms of 5 3 Terms of 5 3 Terms of 5
years each years each years each
Square Footage of
Improvements 14,000 14,047 15,158
Base Annual Rental $ 180,600 $ 187,968 $ 170,527
All of the Company's leases specify a minimum amount of insurance
coverage required to be carried by each tenant. Management of the
Company believes that the insurance policies required to be carried
by the tenants will adequately cover the replacement cost of the
properties and any personal liability losses which the tenants may
sustain.
Property Management
AAA provides management advisory services to the Company. Three of
AAA's five executive officers have an average of over 20 years of
experience in the commercial real estate business. Three of AAA's
five executive officers have worked together for over a decade in
various aspects of net-lease acquisition, funding, leasing and
management. Under the direction of the Company's Board of
Directors, AAA has responsibility for day-to-day operations of the
Company, including investment analysis, acquisitions, due
diligence, asset management and accounting services. The Company's
President and Chief Executive Officer is H. Kerr Taylor, who has
served AAA and its predecessor (H. Kerr Taylor Company) and its
affiliates for over 20 years.
The Company's Board of Directors has maximized the Company's cash
distributions to shareholders by avoiding a relatively fixed
overhead cost structure and, instead, contracting to receive
services from AAA. AAA has provided administrative staff and
facilities to the Company at a cost less than the Company would
incur in providing such personnel and administrative services
itself. At the Company's current asset and revenue levels, the
Company's Board of Directors remains of the view that it is more
economical to employ AAA to provide comprehensive advisory services
than to incur the significant personnel and administrative overhead
required to support the Company's current and anticipated
operations.
Financing - Borrowing Policies
The Company has not yet utilized any debt in connection with the
acquisition or operation of the properties, although the Board of
Directors are permitted to do so at their descretion. In no event,
however, will any borrowings exceed 50% of the fair market value of
a property at the time it is encumbered.
Sale of Properties
The Company expects to sell some or all of its properties over
time. The determination of whether a particular property should be
sold or otherwise disposed of will be made after consideration of
performance of the property and market conditions and will depend,
in part, on the economic benefits of continued ownership. In
deciding whether to sell properties, the Directors will consider
factors such as potential capital appreciation, cash flow and
federal income tax consequences. Affiliates of one or more
Directors may be selected to perform various substantial real
estate brokerage functions in connection with the sales of
properties by the Company. The Company will not sell or lease any
property to the Directors or their Affiliates.
Any net proceeds from the sale of any property may, at the election
of the Directors based upon their then current evaluation of the
real estate market conditions, either be distributed to the
Shareholders or be reinvested in other properties. A reinvestment
in other properties would be feasible only if it can be
accomplished on a tax deferred basis so that the Company will not
suffer any significant adverse tax consequences. Any properties in
which net proceeds from a sale are reinvested will be subject to
the same acquisition guidelines as properties initially acquired by
the Company.
Competitive Conditions
The properties owned by the Company are leased to fast-food and
family style restaurants, retail businesses, banks and to a medical
facility. These businesses face competition from similar
establishments within the surrounding areas.
At the time a property is sold or otherwise disposed of, the
Company will be in competition with others who are also seeking
buyers for their properties.
Employees
The overall management decisions for the day-to-day business
affairs of the Company are made by AAA under the direction of the
Board of Directors. The Company itself has officers and directors,
but no other employees.
Item 2. Properties
At March 18, 1997, the Company owned eight properties in fee
simple, four directly and four through joint ventures with related
parties. Properties are located in Texas, Georgia, Arizona,
Missouri and Kansas. In addition, the Company has entered into an
agreement for the purchase of a property to be constructed in Baton
Rouge, Louisiana. Properties are operated as retail stores, banks,
a fast food and family style restaurant and a medical facility.
Land - The Company's property sites range from approximately 34,000
to 125,000 square feet, depending upon building size and local
demographic factors. Sites purchased by the Company are in high
traffic corridors and have been reviewed for traffic and
demographic pattern and history.
Buildings - The buildings are all single tenant and are generally
rectangular. They are positioned for good exposure to traffic flow
and are constructed from various combinations of stucco, steel,
wood, brick and tile. Buildings range from approximately 2,350 to
15,000 square feet. Buildings are suitable for possible conversion
to various uses, although modifications may be required prior to
use for other operations. There are no plans for renovations or
improvements.
Leases - Tenants are companies whose net worth exceeds a minimum of
$40,000,000. Tenants are diversified by business type and are
represented by the following types of business: consumer
electronics, food, banking, consumer retail and a medical
facility.
Geographic Location - The properties are located within major
metropolitan areas-Standard Metropolitan Statistical Areas -- with
populations that exceed 250,000.
As of December 31, 1996, a total of $12,227,746 has been invested
in properties by the Company on a consolidated basis. This includes
land, building and acquisition costs. A further description of the
Company properties, including acquisition fees and certain
acquisition expenses, is included in Item 1 and in Schedule
III-Real Estate Owned and Accumulated Depreciation of this Form
10-K.
Item 3. Legal Proceedings
The Company does not have any material legal proceedings pending.
Item 4. Submission of Matters to a Vote of Security Holders
During the fiscal year ended December 31, 1996, the election of the
following directors was submitted to a vote of security holders
through the solicitation of proxies or otherwise:
Robert S. Cartwright, Jr., George A. McCanse, Jr., and H. Kerr Taylor.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 18, 1997, there were approximately 791 record holders
of 1,336,282 shares of the Company's Common Stock. No established
public trading market currently exists for the stock.
For the years ended December 31, 1996, 1995 and 1994, the Company
paid distributions of $737,277, $419,085, and $126,235,
respectively. A summary of the distributions by quarter is as
follows:
Quarter Ended 1996 1995 1994
March 31 $162,725 $ 84,500 $ 0
June 30 180,921 97,306 10,533
September 30 186,453 107,803 47,351
December 31 207,178 129,476 68,351
The second quarter of 1994 marked the beginning of the Company's
regular operations and, consequently, the beginning of regular
quarterly distribution payments. The Company intends to continue
the payment of regular quarterly distributions. There are currently
no material legal restrictions that would limit the Company's
ability to pay distributions.
For every two shares of stock acquired pursuant to the Company's
initial public offering, an investor also received one warrant.
These warrants are exercisable at $9 per share between March
17,1997 and March 16, 1998. At December 31, 1996, 504,126 warrants
were outstanding.
Item 6. Selected Financial Data
1996 1995 1994 1993(1)
Operating revenue $ 924,788 $ 495,137 $ 121,642 $ -
Net income (loss) $ 542,807 $ 163,446 $ 79,545 $ (1,325)
Per share data:
Net income (loss) $ .50 $ .24 $ .32 $ (.07)
Income before depreciation,
amortization and special
compensation (2) $ .64 $ .66 $ .51 $ .005
Distributions $ .71 $ .64 $ .35 $ .005
Total assets $ 14,126,834 $ 8,970,623 $ 5,109,739 $ 197,615
Long-term obligations $ 0 $ 0 $ 0 $ 0
(1) Represents the period from August 17, 1993, to December 31, 1993.
(2) This per share amount reflects the Company's operating
profit before deductions for depreciation, amortization and
special compensation. The special compensation authorized
in 1995 for the president (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations")
has not yet been paid. Although the special compensation
is now payable, the president has not requested payment.
At the time of such request, payment will be made in cash
or shares, depending upon the availability of cash for such
payment, at the discretion of the Board of Directors.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The Company was organized on August 17, 1993 to acquire, either
directly or through joint venture arrangements, undeveloped, newly
constructed and existing net-lease real estate that is located
primarily on corner or out-parcel locations in strong commercial
corridors, to lease on a net-lease basis to tenants having a
minimum net worth of $40 million and to hold the properties with
the expectation of equity appreciation producing a steadily rising
income stream for its Shareholders.
Liquidity and Capital Resources
The initial issuance of 20,001 shares of stock for $200,010 was to
AAA. On March 17, 1994, the Company commenced an offering of
2,000,000 Shares of Common Stock, together with 1,000,000 Warrants
(collectively "Securities"). Until the completion of the offering
in March 1996, the Securities were offered on the basis of two (2)
Shares of Common Stock and one (1) Warrant for a total purchase
price of $20.00. The Shares and Warrants are separately
transferable by an investor. The Company is in the process of
registering shares of Common Stock for issuance upon the exercise
of the outstanding warrants. Each Warrant entitles the holder to
purchase one Share for $9.00 during the period which is between
March 17, 1997 and March 16, 1998. As of December 31, 1996,
504,126 warrants were outstanding. The offering period for the
initial public offering terminated on March 15, 1996 with gross
proceeds totaling $10,082,520 (1,008,252 shares). On June 18,
1996, the Company commenced a follow-on offering of up to
$29,250,000 (2,853,659 shares) of additional shares of its common
stock. The offering will terminate June 17, 1998 unless terminated
earlier. As of December 31, 1996, gross proceeds had been received
for $1,810,886 (176,672 shares) in this second offering bringing
the total gross proceeds to $12,093,416 (1,204,925 shares).
The Company has an investment strategy of acquiring properties and
leasing them under net-leases to corporations having a minimum net
worth of $40 million, which strategy minimizes the Company's
operating expenses. The Company believes that the leases will
continue to generate cash flow in excess of operating expenses. Due
to low operating expenses and ongoing cash flow, the Company does
not believe that large working capital reserves are necessary at
this time. In addition, because all leases of the Company's
Properties are and are intended to continue to be on a net-lease
basis, it is not anticipated that a large reserve for maintenance
and repairs will be necessary. The Company intends to distribute
a significant portion of its funds from operations unless it
becomes necessary to maintain additional reserves.
On August 22, 1995, the Board of Directors approved a special
compensation payment for the president in the amount of $150,000
for services provided from August 1993 through August 1995. The
president has received no other compensation from the Company for
serving as its president. In connection with the special
compensation payment, the Company executed a demand note in the
amount of $150,000, the payment of which could not be demanded
prior to the earlier of July 15, 1996 or the receipt of $10,000,000
from the Company's initial public offering. The note is payable in
cash or shares depending on the availability of cash for such
payment. No compensation arrangements were considered by the
Directors prior to August 22, 1995, because in their judgement, the
Company had not raised sufficient funds to award such compensation.
The compensation had not been accrued prior to August 22, 1995
because its payment was uncertain and the level of compensation had
not been determined until the August 1995 meeting of the Board of
Directors. As of the termination of the initial public offering in
March 1996, the Company had raised in excess of $10,000,000.
Although the president can demand payment on the note, such demand
has not been made. The decision regarding the nature of the
payment, whether in stock or cash, will be made by the Board of
Directors at the time the president demands payment. In
consideration that no payment has been demanded by the president
for the special compensation payment, the Board of Directors
approved at its August 1, 1996 meeting the payment of interest to
the president on the outstanding note at an annual rate of 8%. This
interest payment will be paid in cash or in stock. As of December
31, 1996, $5,000 of interest has been accrued related to this note.
Should the note and interest be paid in cash, such payment would
reduce the funds from operations available for distribution and,
therefore, would decrease the distributions to shareholders.
No decisions as yet have been made with respect to any additional
compensation for any period after August 1995. The Board of
Directors commissioned an external study with respect to the amount
and type of compensation which could be paid in the future to
officers and/or directors, as well as the contingencies and
performance standards on which compensation will be determined.
The compensation portion of the study has been completed and will
be considered at such time as the Board determines in the future to
consider a new compensation arrangement. Accordingly, the financial
statements do not include any accruals for compensation subsequent
to August 1995.
As of December 31, 1996, the Company had acquired four Properties
directly and four Properties through joint ventures with related
parties and had invested $8,602,293, including certain acquisition
expenses related to the Company's investment in these properties.
These expenditures resulted in a corresponding decrease in the
Company's liquidity. On December 11, 1996, the Company entered
into an agreement for the purchase of a property to be constructed
in Baton Rouge, Louisiana. The purchase price for the property
totals approximately $2,670,000 and will be paid with funds raised
from the public offering and through a joint venture with a related
party. The Company's interest in the joint venture is 51%.
Until Properties are acquired by the Company, proceeds are held in
short-term, highly liquid investments which the Company believes to
have appropriate safety of principal. This investment strategy has
allowed, and continues to allow, high liquidity to facilitate the
Company's use of these funds to acquire properties at such time as
properties suitable for acquisition are located. At December 31,
1996, the Company's cash and cash equivalents totaled $1,616,311.
The Company made cash distributions to the Shareholders during each
quarter of 1996 and 1995 and during the last three quarters of
1994, distributing a total of $737,277, $419,085, and $126,235,
respectively, for each such fiscal year to the investors.
Inflation has had very little effect on income from operations.
Management expects that increases in store sales volumes due to
inflation as well as increases in the Consumer Price Index
(C.P.I.), may contribute to capital appreciation of the Company
Properties. These factors, however, also may have an adverse impact
on the operating margins of the tenants of the Properties.
Results of Operations
Years Ended December 31, 1996 and 1995:
During 1996, the Company acquired three Properties at an aggregate price of
$3,037,951 and also received $3,346,249 in net proceeds from the public
offering. Both of these factors contributed to an increase in total revenues
to $1,062,316 in 1996 from $623,084 in 1995. $429,651 of this increase
came from rental activities and the remaining $9,581 came from interest income.
Income from rental activities included income from the three new acquisitions
in 1996 and also included a full year of income from two Properties which were
acquired in the third quarter of 1995. Interest income resulted from earnings
on the Company's short-term money market investments.
The Company's operating expenses decreased from $367,260 in 1995 to $302,857
in 1996 primarily from a decrease in executive compensation of $150,000
discussed above partially offset by an increase in administrative expenses and
depreciation which resulted from the overall increase in the activity of the
Company.
Years Ended December 31, 1995 and 1994:
During 1995, the Company acquired its fourth and fifth Properties at an
aggregate price of $2,716,768 and also received $3,022,733 in net proceeds
from the initial public offering. Both of these factors contributed to an
increase in total revenues to $623,084 in 1995 from $159,206 in 1994.
$373,495 of this increase came from rental activities and the remaining
$90,383 came from interest income. Income from rental activities included
income from the two new acquisitions in 1995 and also included a full year of
income from three Properties which were acquired throughout the last seven
months of 1994. Each of the three Properties acquired in 1994 contributed
more than 15% of the Company's total rental income in 1995. Interest income
included $41,040 of interest received on a short-term construction loan in
addition to the income earned on the Company's short-term money market
investments.
Corresponding to the increase in revenues, expenses also increased in 1995 by
$295,966. This is attributable to an overall increase in the administrative
expenses of the Company as 1995 was the first full year of operation. In
addition, the $150,000 of compensation discussed in preceding paragraphs is
reflected in 1995 operating results.
Item 8. Financial Statements and Supplementary Data.
The response to this item is submitted in Item 14(a) of this report and is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position Held Officer Since
H. Kerr Taylor 46 President 1993
Chief Executive Officer
Director
Robert S. Cartwright, Jr. 47 Director 1993
George A. McCanse, Jr. 43 Director 1993
Phil P. Moss 66 Executive Vice President 1993
L. Larry Mangum 32 Vice President and Treasurer 1996
H. Kerr Taylor, age 46, serves as the President and Chairman of the Board of
Directors of the Company. Mr. Taylor has been an attorney since 1979, has
earned an M.B.A. at Southern Methodist University, is a real estate broker and
has over twenty years of experience as a specialist in acquiring and operating
income-producing real properties. He has been involved in the development,
analysis, marketing and management of private investment programs investing
in properties since 1975. Mr. Taylor is the president, the sole director and
the sole shareholder of AAA, a Company he founded under a predecessor name in
1983 to own and operate the net lease properties formerly owned and operated
by Mr. Taylor and Taylor affiliates.
From 1995, Mr. Taylor served as a director, and, then, as a non-voting advisory
director, of Park National Bank of Houston until February 1996, at which time
Park National Bank of Houston was purchased by Frost Bank. Mr. Taylor also has
served on the board of directors of a charitable institution. Mr. Taylor is
currently a General Partner or principal of a General Partner of eleven
limited partnerships. Mr. Taylor is a member of the Texas Association of
Realtors and the Texas Bar Association and a former member of the American Bar
Association. Mr. Taylor holds the Series 7,22,24,39 and 63 securities licenses.
Robert S. Cartwright, Jr., age 47, is currently a Professor of Computer Science
at Rice University. Professor Cartwright earned a bachelor's degree magna cum
laude in Applied Mathematics from Harvard College in 1971 and a doctoral degree
in Computer Science from Stanford University in 1977. From September 1976
until June 1980, he served as Assistant Professor of Computer Science at Cornell
University. In July 1980, he joined the faculty of Rice University as Associate
Professor of Computer Science. He was promoted to the rank of Professor in
July 1986. During his sixteen years as a faculty member at Rice University,
he has twice served as Chairman of the Computer Science Department during
1985-1986 and 1989-1990.
Professor Cartwright has compiled an extensive record of professional service.
He was a charter member of the editorial boards of LISP and Symbolic
Computation: An International Journal and ACM Letters on Programming Languages
and Systems. He has served as Program Chair of the ACM Conference on LISP and
Functional Programming and ACM Symposium on Principles of Programming Languages
and as a General Chair for the SIGPLAN Conference on Programming Language
Design and Implementation. He is currently a member of the ACM Turing Award
Committee, which selects the annual recipient of the most prestigious
international prize for computer science research. He is also a member of the
Board of Directors of the Computing Research Association and a former member
of the Computer Science Advanced Placement Committee for the Educational
Testing Service.
Professor Cartwright is an active private investor in equities, bonds, mutual
funds, and real estate. He has also served for two terms on the Rice University
Committee on Fringe Benefits, which advises the University President on
retirement plans.
George A. McCanse, Jr. , age 43, is the President of Value OnLine, Inc., an
online computer communications and data access service for the commercial
real estate valuation industry.
Mr. McCanse is a member of the Appraisal Institute (MAI designation), the
Pension Real Estate Association, and the International Council of Shopping
Centers. He is also a participating member of the Valuation
Committee of the National Council of Real Estate Investment Fiduciaries.
Mr. McCanse resides in New Canaan, Connecticut. He holds a BBA degree from
the University of Texas and has pursued graduate level study in real estate,
architecture and finance. He has also been involved in real estate investing
and development, including the acquisition and sale of over $150,000,000 of
real estate during the 1970s and 1980s.
Phil P. Moss, age 66, is the Executive Vice President of the Company and AAA.
Mr. Moss has been involved as a real estate investor in owning, operating and
managing shopping centers, office buildings, apartment projects, retail outlets
and various other properties for the past 26 years. Specifically in his
capacity with AAA, Mr. Moss has been involved in leasing and property
acquisitions for various companies since 1988. He received his B.B.A. degree
from and did graduate work at the University of Texas. He is a retired Major
in the United States Air Force.
L. Larry Mangum, age 32, serves as Vice President and Treasurer of the Company.
Mr. Mangum is the Vice President of Finance of AAA. Mr. Mangum is responsible
for the financial accounting and reporting relating to the AAA-sponsored
partnerships and their properties. He has over 9 years of accounting
experience, including four years with a public accounting firm. He previously
worked for American General Corporation, a national insurance company, from
1991-1996 as part of a team responsible for supervising their reporting
activities. Mr. Mangum received a B.B.A. degree in accounting from Stephen F.
Austin State University and subsequently earned the CPA designation.
Other individuals who are specialists in their respective fields are utilized
by AAA to perform services on behalf of the twelve Taylor sponsored public and
private real estate limited partnerships and on behalf of the Company.
These individuals are not employees of the Company nor are they employees of
the Taylor-sponsored partnerships, although they do perform various services
and activities for those partnerships.
These individuals are:
Joe Mayer, age 41, is the Chief Operating Officer of AAA. Mr. Mayer has over
twenty years of experience in business, accounting, investments and real estate
transactions. Mr. Mayer is a certified public accountant and worked for a
national public accounting firm. Mr. Mayer received his B.B.A. degree in
accounting from the University of Kentucky.
Jane Costello, age 40, is a certified public accountant and is responsible for
the tax accounting relating to the AAA-sponsored partnerships, the Company and
their properties. She has over 17 years experience as an accountant, including
over 4 years with a national public accounting firm. She has been engaged in
her own accounting practice for the past 7 years. Costello received a B.B.A.
degree in accounting from the University of Texas.
Based on a review of Forms 3 and 4 and amendments thereto furnished to
Registrant pursuant to Rule 16A-3(e) under the Securities Exchange Act of
1934 (the "Exchange Act") during its most recent fiscal year and
Form 5 and amendments thereto furnished to Registrant with respect to its
most recent fiscal year and written representations received pursuant to
Item 405(b)(2)(i) of Regulation S-K, none of the directors or officers of
Registrant or beneficial owners of more than 10% of the shares failed to file
on a timely basis reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year.
Item 11. Executive Compensation
On August 22, 1995, the Board of Directors approved a special compensation
payment for the president in the amount of $150,000 for services provided from
August 1993 through August 1995. The president has received no other
compensation from the Company for serving as its president. In connection
therewith, the Company executed a demand note in the amount of $150,000, the
payment of which could not be demanded prior to the earlier of July 15, 1996,
or the receipt of $10,000,000 from the Company's initial public offering.
The note is payable in cash or stock depending on the availability of cash for
such payment. No compensation arrangements were considered by the Board prior
to this time because the Company had not raised sufficient funds through its
stock offering, as determined by the judgment of the Board, considered
necessary for any compensation to be granted. The compensation had not been
accrued prior to August 22, 1995 because its payment was uncertain and the
level of compensation had not been determined until the August 1995 Board
meeting. As of the termination of the initial public offering in March 1996,
the Company had raised in excess of $10,000,000. Although the president can
demand payment on the note, such demand has not been made. The decision
regarding the nature of the payment, whether in stock or cash, will be made by
the Board of Directors at the time the president demands payment. In
consideration that no payment has been demanded by the president for the
special compensation payment, the Board of Directors approved at its August 1,
1996 meeting the payment of interest to the president on the outstanding note
at an annual rate of 8%. This interest payment will be paid in cash or in
stock. As of December 31, 1996, $5,000 of interest has been accrued
related to this note.
No decisions as yet have been made with respect to any additional compensation
for any period after August 1995. The Board of Directors commissioned an
external study with respect to the amount and type of compensation which
could be paid in the future to officers and/or directors, as well as the
contingencies and performance standards of which compensation will be
determined. The compensation portion of the study has been completed and
will be considered at such time as the Board determines in the future to
consider a new compensation arrangement. Accordingly, the financial statements
do not include any accruals for compensation subsequent to August 1995.
The Company paid each Director a fee of $500 for each meeting in which they
participated and, where applicable, reimbursed directors for travel expenses.
There is no other basis of compensation for the Directors. During 1996, a
total of $15,000 was paid as Directors' Fees.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 18, 1997, no person was known by the Registrant to be the
beneficial owner of more than 5% of the Units of the Registrant.
The following table sets forth, as of March 18, 1997, the beneficial ownership
interest of the Executive Officers and Directors of the Company:
Title of Class Name & Address of Amount & Nature of Percentage of Class
Beneficial Owner Beneficial Ownership
H. Kerr Taylor
5300 Mercer
Common Stock Houston, TX 77005 20,201 Shares * Less than 2%
George McCanse, Jr.
128 Orchard Street
Common Stock New Canaan, CT 06840 500 Shares Less than 1%
Robert S. Cartwright,Jr.
3310 Underwood
Common Stock Houston, TX 77025 1,250 Shares Less than 1%
Officers & Directors 21,951 Shares Less than 2%
* 200 Shares are owned directly and 20,001 Shares are beneficially owned by
AAA. The Common Stock of AAA is wholly owned by H. Kerr Taylor.
Item 13. Certain Relationships and Related Transactions
20,001 Shares of the Company's stock are owned by AAA. The Common Stock of
AAA is wholly owned by H. Kerr Taylor, President and Director of the Company.
Distributions paid to AAA totaled $14,156, $12,903 and $7,877 in 1996, 1995
and 1994, respectively.
In addition, the Company has entered into an Omnibus Services Agreement with
AAA whereby AAA provides property acquisition, leasing, administrative and
management services for the Company. $37,910, and $2,954 were incurred and
paid to AAA during 1996 and 1994, respectively, for such services.
Certain costs have been incurred by AAA in connection with the organization
and syndication of the Company. Reimbursement of these costs become obligations
of the Company in accordance with the terms of the offering. The costs to
organize the Company have been capitalized as Organization Costs. For the year
ended December 31, 1994, $58,110 in reimbursements had been incurred and paid
to AAA. In addition, $98,494 and $64,848 of costs were incurred by AAA in 1996
and 1995, respectively in connection with the issuance and marketing of the
Company's stock. These costs are reflected as issuance costs. $9,256 of these
costs were owed to AAA at December 31, 1995.
In accordance with the terms of the offering, AAA is entitled to receive
property management fees ranging from 2% to 4% of rental income from each of
the Company's properties. No payments have been made to AAA in 1996, 1995
or 1994 for property management fees and the Company has no future
obligations related to these costs.
Acquisition fees, including real estate commissions, finders fees, consulting
fees and any other non-recurring fees incurred in connection with locating,
evaluating and selecting properties and structuring and negotiating
the acquisition of properties are included in the basis of the properties.
Acquisition fees of $222,785, $232,378 and $131,077 were incurred and paid to
AAA during 1996, 1995 and 1994, respectively.
For further information see Notes 4, 7 and 8 to the financial statements and
see the MANAGEMENT AND AFFILIATE COMPENSATION section of the Company's
Prospectus dated June 18, 1996.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) (1) Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1996 and 1995
Consolidated Statements of Operations for the Years Ended December
31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December
31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1996, 1995 and 1994
(2) Financial Statement Schedules: See (d) below
(3) Exhibits See (c) below
(b) Reports on Form 8-K filed after September 30, 1996:
(1) February 26, 1997 to report the formation of a joint venture to
acquire a property subject to lease with Just For Feet, Inc.
(c) Exhibits
3 (i) Articles of Incorporation (included as Exhibit 3.1 of the Exhibits
to Registration Statement No. 33-70654 of the Company and
incorporated herein by reference).
3 (ii) Articles of Amendment to the Articles of Incorporation (included
as Exhibit 3 (ii) of the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein by
reference).
3 (iii) Amended and Restated By-Laws (included as Exhibit 3 (iii) of the
Exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and incorporated herein by reference).
3 (iv) Amended and Restated By-Laws, dated August 1, 1996.
4 (a) Subscription Agreement and Signature Page-Order Form (included
in Exhibit B to the Prospectus of Company dated March 17, 1994,
contained in Registration Statement No. 33-70654 of Company and
incorporated herein by reference).
4 (b) Form of Sales Warrant (included as Exhibit 4.3 to Registration
Statement No. 33-70654 of Company and incorporated herein by
reference).
10 (a) Omnibus Service Agreement by and between Company and American Asset
Advisers Realty Corporation (included as Exhibit 10.2 of the
Exhibits to Registration Statement No. 33-70654 of Company and
incorporated herein by reference).
10(b)(2) Lease between Ironwood Development Corporation, as landlord and
Tandy Corporation, a Delaware corporation, dated August, 1991
(included as Exhibit 10 (b) (2) of the Exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10(b)(3) Assignment and Assumption of the Lease between Ironwood Development
Corporation and American Asset Advisers Trust, Inc., dated June 14,
1994 (included as Exhibit 10 (b) (1) of the Exhibits to the
Company's Annual Report on Form 10-K for the year ended December
31, 1994, and incorporated herein by reference).
10(b)(4) Assignment of Guaranties and Warranties from Ironwood Development
Corporation to American Asset Advisers Trust, Inc., dated June 14,
1994 (included as Exhibit 10 (b) (4) of the Exhibits to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 and incorporated herein by reference).
10(b)(5) Real Estate Sales Agreement between America's Favorite Chicken
Company and AAA Net Realty Fund X, Ltd., dated June 13, 1994
(included as Exhibit 10 (b) (5) of the Exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10(b)(6) Lease (the "AFCC Lease") between AAA Net Realty Fund X, Ltd., as
landlord and America's Favorite Chicken Company, as tenant, dated
June 13, 1994 (included as Exhibit 10 (b) (6) of the Exhibits to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference).
10(b)(7) Assignment of the Agreement and the Lease form AAA Net Realty
Fund X, Ltd. to American Asset Advisers Trust, Inc (included as
Exhibit 10 (b) (7) of the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(8) First Amendment to AFCC Lease, dated July 22, 1994 (included as
Exhibit 10 (b) (8) of the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(9) Agreement for Purchase and Sale of Real Estate (the "KCBB
Contract") between KCBB, Inc. and AAA Net Realty Fund X, Ltd.,
dated October 12, 1994 (included as Exhibit 10 (b) (9) of the
Exhibits to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference).
10(b)(10) Lease (the "KCBB Lease") between KCBB, Inc., as landlord and Sound
Warehouse, Inc., as tenant, dated November 19, 1993 (included as
Exhibit 10 (b) (10) of the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(11) Guaranty of KCBB Lease by Blockbuster Entertainment Corporation
(included as Exhibit 10 (b) (11) of the Exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10(b)(12) Amendment to the KCBB Contract (included as Exhibit 10 (b) (12)
of the Exhibits to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 and incorporated herein by
reference).
10(b)(13) Joint Venture Agreement between the Company and AAA Net Realty
Fund X, Ltd., dated October 27, 1994 (included as Exhibit 10 (b)
(3) of the Exhibits to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference).
10(b)(14) Assignment and Assumption of the Lease between KCBB, Inc. and AAA
Joint Venture 94-1, dated November 11, 1994 (included as Exhibit
10 (b) (4) of the Exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and incorporated
herein by reference).
10(b)(15) Assignment from KCBB, Inc. to AAA Joint Venture 94-1, dated
November 11, 1994 (included as Exhibit 10 (b) (15) of the Exhibits
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference).
10(b)(16) Assignment from KCBB, Inc., to AAA Joint Venture 94-1 of
warranties, dated November 11, 1994 (included as Exhibit 10 (b)
(16) of the Exhibits to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference).
10(b)(17) Agreement for Purchase and Sale of Real Estate (the KCBB
Contract II") between KCBB, Inc. and the Company, dated August 9,
1995 (included as Exhibit 10 (b) (17) of the Exhibits to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 and incorporated herein by reference).
10(b)(18) Lease (the "KCBB Lease II") between KCBB, Inc., as landlord and
Blockbuster Music Retail, Inc., as tenant, dated August 9, 1995
(included as Exhibit 10 (b) (18) of the Exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10(b)(19) Amendment to Agreement for Purchase and Sale of Real Estate
Assigning Agreement to AAA Joint Venture 95-2 (included as Exhibit
10 (b) (19) of the Exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(20) Joint Venture Agreement between the Company and AAA Net Realty
Fund XI, Ltd., dated August 24, 1995 (included as Exhibit 10 (b)
(20) of the Exhibits to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference).
10(b)(21) Assignment and Assumption of the KCBB Lease II between KCBB, Inc.
and AAA Joint Venture 95-2, dated September 12, 1995 (included as
Exhibit 10 (b) (21) of the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(22) Assignment from KCBB, Inc. to AAA Joint Venture 95-2 of Contracts
and Warranties, dated September 12, 1995 (included as Exhibit 10
(b) (22) of the Exhibits to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(23) Agreement for the Purchase and Sale of Real Estate between Turner
Adreac, L.C. and the Company, dated March 31, 1995 (included as
Exhibit 10 (b) (23) of the Exhibits to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10(b)(24) Assignment of Rents, Leases and Profits from Turner Adreac, L.C.
to American Asset Advisers Trust, Inc., dated March 31, 1995
(included as Exhibit 10 (b) (24) of the Exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference).
10(b)(25) Lease (the "OneCare Lease") between Turner Adreac, L.C. and
OneCare Health Industries, Inc., a Texas non-profit corporation,
dated February 17, 1995 (included as Exhibit 10 (b) (25) of the
Exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference).
10(b)(26) Assignment and Assumption of the OneCare Lease between Turner
Adreac, L.C. and American Asset Advisers Trust, Inc., dated
September 26, 1995 (included as Exhibit 10 (b) (26) of the Exhibits
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference).
10(b)(27) Assignment of Warranties from Turner Adreac, L.C. to the Company,
dated September 26, 1995 (included as Exhibit 10 (b) (27) of the
Exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 and incorporated herein by reference).
10(b)(28) Agreement for Purchase and Sale of Real Estate between Company
and Tucson Oracle Limited Partnership (AZ LP), dated January 19,
1996 (included as Exhibit 10 (b) (28) of the Exhibits to the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 and incorporated herein by reference).
10(b)(29) First Amendment to Agreement for the Purchase and Sale of Real
Estate between Company and Tucson Oracle Limited Partnership (AZ
LP), dated June 10, 1996.
10(b)(30) Lease (the "Just For Feet Lease") between Cumberland America
Development Company,Inc. and Just for Feet, Inc., dated August
10, 1995.
10(b)(31) First Amendment to Just For Feet Lease, dated February 29, 1996.
10(b)(32) Second Amendment to Just For Feet Lease, dated May 29, 1996.
10(b)(33) Third Amendment to Just For Feet Lease, dated January, 1997.
10(b)(34) Joint Venture Agreement between the Company and AAA Net Realty Fund
X, Ltd. and AAA Net Realty Fund XI, Ltd., dated April 5, 1996.
10(b)(35) Bill of Sale and Assignment between Tucson Oracle Limited
Partnership and AAA Joint Venture 96-1, dated September 6, 1996.
10(b)(36) Joint Venture Agreement between the Company and AAA Net Realty
Fund XI, Ltd., dated August 8, 1996.
11 Statement regarding computation of per share earnings.
27 Financial Data Schedule.
Items 5, 6, 7 and 8 of Part II and Item 14 of Part IV of this Form 10-K contain
the financial statements, financial statement schedule and other financial
information. No Annual Report or proxy material has yet been provided to
security holders with respect to 1997.
(d) Financial Statements Schedules
Schedule III - Real Estate Owned and Accumulated Depreciation
SIGNATURES
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 on the 25th of March 1997 by the undersigned, thereunto duly authorized.
American Asset Advisers Trust, Inc.
/s/ H. Kerr Taylor
H. Kerr Taylor, President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ H. Kerr Taylor March 25, 1997
H. KERR TAYLOR
President, Chairman of the Board (Chief Executive
Officer and Chief Financial Officer) and Director
/s/ Robert S. Cartwright, Jr. March 25, 1997
ROBERT S. CARTWRIGHT, JR., Director
/s/ George A. McCanse, Jr. March 25, 1997
GEORGE A. McCANSE, JR., Director
/s/ L. Larry Mangum March 25, 1997
L. LARRY MANGUM, Vice President and
Treasurer (Principal Accounting Officer)
ANNUAL REPORT ON FORM 10-K
ITEMS 8, 14(a)(1) AND (2) AND 14(d)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995
AND 1994
AND FINANCIAL STATEMENT SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1996
AMERICAN ASSET ADVISERS TRUST, INC.
F-1
AMERICAN ASSET ADVISERS TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report F-3
Consolidated Balance Sheets, December 31, 1996 and 1995 F-4
Consolidated Statements of Operations for the Years Ended F-5
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity F-6
for the Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended F-7 to F-8
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the Years F-9 to F-14
Ended December 31, 1996, 1995 and 1994
FINANCIAL STATEMENT SCHEDULE:
Schedule III Consolidated Real Estate Owned and Accumulated F-15
Depreciation for the Year Ended December 31, 1996
All other financial statement schedules are omitted as the
required information is either inapplicable or is included in the
financial statements or relates notes.
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
American Asset Advisers Trust, Inc.
We have audited the accompanying consolidated balance sheets of
American Asset Advisers Trust, Inc. (the "Company") as of
December 31, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed
in the Index. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 14, 1997
F-3
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
CASH AND CASH EQUIVALENTS $ 1,616,311 $ 1,564,961
ACCOUNTS RECEIVABLE 5,119 -
PROPERTY:
Escrow deposits 75,000 -
Land 4,634,941 2,152,103
Buildings 4,435,713 4,436,074
9,145,654 6,588,177
Accumulated depreciation (195,256) (81,512)
TOTAL PROPERTY 8,950,398 6,506,665
NET INVESTMENT IN DIRECT FINANCING LEASES 3,151,797 582,753
OTHER ASSETS:
Prepaid acquisition costs 74,336 77,761
Prepaid issuance costs 101,399 -
Accrued rental income 74,625 23,845
Organization costs, net of accumulated
amortization of $160,919 and $99,130,
respectively 152,849 214,638
TOTAL OTHER ASSETS 403,209 316,244
TOTAL ASSETS $ 14,126,834 $ 8,970,623
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 36,235 $ 67,481
Compensation payable 150,000 150,000
Security deposit 15,050 15,050
TOTAL LIABILITIES 201,285 232,531
MINORITY INTEREST 3,631,847 1,596,169
SHAREHOLDERS' EQUITY
Common stock, $.01 par value,
25,000,000 shares authorized,
1,204,925 and 827,876 shares issued
and outstanding, respectively 12,049 8,279
Additional paid-in capital 10,780,847 7,438,368
Accumulated distributions in excess
of earnings (499,194) (304,724)
TOTAL SHAREHOLDERS' EQUITY 10,293,702 7,141,923
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,126,834 $ 8,970,623
See Notes to Consolidated Financial Statements
F-4
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
REVENUES
RENTAL INCOME FROM OPERATING
LEASES $ 780,768 $ 434,563 $ 93,552
EARNED INCOME FROM DIRECT
FINANCING LEASES 144,020 60,574 28,090
INTEREST INCOME 137,528 127,947 37,564
TOTAL REVENUES 1,062,316 623,084 159,206
EXPENSES
ADMINISTRATIVE 37,910 - 2,954
AMORTIZATION 61,789 61,470 35,265
COMPENSATION - 150,000 -
DEPRECIATION 113,744 66,966 14,546
DIRECTORS' FEES 15,000 16,500 10,500
INTEREST 5,000 - -
LEGAL AND PROFESSIONAL FEES 41,060 49,863 5,531
PRINTING 4,089 7,835 -
OTHER 24,265 14,626 2,498
TOTAL EXPENSES 302,857 367,260 71,294
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
CONSOLIDATED JOINT VENTURES 759,459 255,824 87,912
MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED JOINT VENTURES (216,652) (92,378) (8,367)
NET INCOME $ 542,807 $ 163,446 $ 79,545
NET INCOME PER SHARE:
PRIMARY $ .51 $ .24 $ .32
FULLY DILUTED $ .50
WEIGHTED AVERAGE COMMON &
COMMON EQUIVALENT SHARES:
PRIMARY 1,066,353 672,794 251,768
FULLY DILUTED 1,329,494
See Notes to Consolidated Financial Statements
F-5
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Accumulated
Distributions
Common Additional In Excess of
Stock Paid-In-Capital Earnings Total
Balance at December 31, 1993 $ 200 $ 199,810 $ (2,395) $ 197,615
Issuance of common stock 4,709 4,704,495 - 4,709,204
Issuance costs - (485,300) - (485,300)
Distributions ($.35 per share) - - (126,235) (126,235)
Net income - - 79,545 79,545
Balance at December 31, 1994 4,909 4,419,005 (49,085) 4,374,829
Issuance of common stock 3,370 3,366,175 - 3,369,545
Issuance costs - (346,812) - (346,812)
Distributions ($.64 per share) - - (419,085) (419,085)
Net income - - 163,446 163,446
Balance at December 31, 1995 8,279 7,438,368 (304,724) 7,141,923
Issuance of common stock 3,770 3,810,883 - 3,814,653
Issuance costs - (468,404) - (468,404)
Distributions ($.71 per share) - - (737,277) (737,277)
Net income - - 542,807 542,807
Balance at December 31, 1996 $ 12,049 $10,780,847 $ (499,194) $ 10,293,702
See Notes to Consolidated Financial Statements
F-6
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 542,807 $ 163,446 $ 79,545
Adjustments to reconcile net income
to net cash flows from operating
activities:
Amortization 61,789 61,470 35,265
Depreciation 113,744 66,966 14,546
Increase in minority interest 216,652 92,378 8,367
Decrease (increase) in accounts
receivable (5,119) 69 (69)
Increase (decrease) in accounts
payable (31,246) 66,058 1,423
Increase in compensation payable - 150,000 -
Increase in security deposits - 15,050 -
Cash receipts from direct financing
lease in excess of income recognized 1,017 2,980 100
Increase in escrow deposits (38,250) - -
Increase in accrued rental income (50,780) (23,845) -
Increase in organization costs - (20,355) (234,595)
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 810,614 574,217 (95,418)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate:
Accounted for under the operating
lease method (1,695,146) (2,715,431) (2,262,667)
Accounted for under the direct
financing lease method (1,342,805) (1,337) (584,496)
Change in prepaid acquisition costs 3,425 (77,084) (677)
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (3,034,526) (2,793,852) (2,847,840)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock, net 3,346,249 3,022,733 4,223,904
Prepaid issuance costs (101,399) - -
Distributions paid to shareholders (737,277) (419,085) (126,235)
Distributions to minority interest
partners (232,311) (104,639) (10,016)
NET CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES 2,275,262 2,499,009 4,087,653
NET INCREASE IN CASH & CASH EQUIVALENTS 51,350 279,374 1,144,395
CASH & CASH EQUIVALENTS, beginning of
period 1,564,961 1,285,587 141,192
CASH & CASH EQUIVALENTS, end of period $ 1,616,311 $ 1,564,961 $ 1,285,587
See Notes to Consolidated Financial Statements
F-7
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Escrow deposit contributed by
partner of the consolidated
joint ventures $ 36,750 $ - $ -
Minority owners share of real
estate acquired:
Accounted for under the
operating lease method $ 787,331 $ 874,943 $ 735,136
Accounted for under the
direct financing lease
method 1,227,256 - -
Total minority owners
share of real estate
acquired $2,014,587 $ 874,943 $ 735,136
See notes to Consolidated Financial Statements.
F-8
AMERICAN ASSET ADVISERS TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
American Asset Advisers Trust, Inc. ("the Company") was
incorporated on August 17, 1993 as a Maryland corporation. The
initial issuance of 20,001 shares of stock for $200,010 was to
American Asset Advisers Realty Corporation ("AAA"). Commencing
March 17, 1994, the Company offered up to 2,000,000 additional
shares of common stock together with 1,000,000 warrants. The
Company is in the process of registering shares of common stock
for issuance upon the exercise of the outstanding warrants. The
warrants are exercisable at $9 per share between March 17, 1997
and March 16, 1998. As of December 31, 1996, 504,126 warrants
were outstanding. The offering period of the initial public
offering terminated on March 15, 1996 with 1,008,252 shares being
issued. On June 18, 1996, the Company commenced a follow-on
offering of up to 2,853,659 additional shares of its common
stock. The offering will terminate June 17, 1998, unless
terminated earlier. As of December 31, 1996, 176,672 shares in
this second offering were issued, bringing the total shares
issued and outstanding to 1,204,925 shares.
The Company was formed to acquire commercial and industrial real
estate properties using invested and borrowed funds. The
selection, acquisition and supervision of the operation of the
properties is managed by AAA, a related party.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
American Asset Advisers Trust, Inc. and its four controlled joint
ventures with related parties.
BASIS OF ACCOUNTING
The financial records of the Company are maintained on the
accrual basis of accounting whereby revenues are recognized when
earned and expenses are recorded when incurred.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Cash and cash equivalents consist of demand deposits at
commercial banks and money market funds.
REAL ESTATE
Real estate is leased to others on a net lease basis whereby all
operating expenses related to the properties, including property
taxes, insurance and common area maintenance are the
responsibility of the tenant. The leases are accounted for under
the operating lease method or the direct financing lease method.
Under the operating lease method, the properties are recorded at
cost. Rental income is recognized ratably over the life of the
lease and depreciation is charged based upon the estimated useful
life of the property. Under the direct financing lease method,
properties are recorded at their net investment (see Note 3).
Unearned income is deferred and amortized to income over the life
of the lease so as to produce a constant periodic rate of return.
F-9
The Company's lease agreements do not provide for contingent rentals.
The Company obtains an appraisal on each property prior to a property's
acquisition and also performs an annual valuation update to evaluate potential
impairment for each property for which an appraisal is older than twelve months.
This valuation is based on capitalization of income for each property, a review
of current market conditions and any significant events or factors which
would indicate a potential impairment to the value of a property.
DEPRECIATION
Buildings are depreciated using the straight-line method over an
estimated useful life of 39 years.
ORGANIZATION COSTS
Organization costs incurred in the formation of the Company are
amortized on a straight-line basis over five years.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
No cash was paid for interest during 1996, 1995 or 1994.
FEDERAL INCOME TAXES
The Company is qualified as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, and is,
therefore, not subject to Federal income taxes provided it meets
all conditions specified by the Internal Revenue Code for
retaining its REIT status, including the requirement that at
least 95% of its real estate investment trust taxable income is
distributed by March 15 of the following year.
NET INCOME PER SHARE
The number of shares used in primary net income per share
calculations are based on the weighted average number of shares
of common stock outstanding. The number of shares used in the
fully diluted net income per share calculations are based on the
weighted average number of shares of common stock outstanding and
the assumption that the warrants were exercised using the
treasury stock method.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes the carrying value of financial instruments
consisting of cash, cash equivalents, accounts receivable and
liabilities approximates their fair value.
F-10
2. OPERATING LEASES
A summary of minimum future rentals, exclusive of any renewals,
under noncancellable operating leases in existence at December
31, 1996 is as follows:
1997 $ 932,543
1998 $ 936,961
1999 $ 963,178
2000 $ 988,006
2001 $ 997,043
2002-2016 $ 6,469,568
3. NET INVESTMENT IN DIRECT FINANCING LEASES
The Company's net investment in its direct financing leases at
December 31, 1996 and 1995 included:
1996 1995
Minimum lease payments receivable $ 7,441,043 $ 1,383,086
Unguaranteed residual value 1,557,904 289,209
Less: Unearned income 5,847,150 1,089,542
$ 3,151,797 $ 582,753
A summary of minimum future rentals, exclusive of any renewals,
under the noncancellable direct financing leases are summarized
as follows:
1997 $ 330,229
1998 $ 330,229
1999 $ 333,165
2000 $ 336,590
2001 $ 343,251
2002-2016 $ 5,767,559
4. MINORITY INTEREST
On September 23, 1996, the Company formed a joint venture, AAA
Joint Venture 96-2, with AAA Net Realty Fund XI, Ltd., an
affiliated partnership. The joint venture was formed for the
purpose of acquiring a parcel of land in The Woodlands, Texas
upon which the tenant, Bank United, will construct a branch bank
building at its cost. At the termination of the lease the
improvements will be owned by the joint venture. The Company's
interest in the joint venture is 51%. The minority interest is
49%.
On April 5, 1996, the Company formed a joint venture, AAA Joint
Venture 96-1, with AAA Net Realty Fund XI, Ltd. and AAA Net
Realty Fund X, Ltd., affiliated partnerships, for the purpose of
acquiring a property which is being operated as a Just For Feet
retail store in Tucson, Arizona. The property was purchased on
September 11, 1996 after construction was completed. The
Company's interest in the joint venture is 51.9%. The minority
interest is 48.1%.
On September 12, 1995, the Company formed a joint venture, AAA
Joint Venture 95-2, with AAA Net Realty Fund XI, Ltd., an
affiliated partnership, for the purpose of acquiring a property
in Wichita, Kansas on lease to Blockbuster Music Retail, Inc.
The Company's interest in the joint venture is 51%. The minority
interest is 49%.
F-11
On October 27, 1994, the Company formed a joint venture,
AAA Joint Venture 94-1, with AAA Net Realty Fund X, Ltd., an
affiliated partnership, for the purpose of acquiring a property
in Independence, Missouri on lease to Blockbuster Music Retail,
Inc. The Company's interest in the joint venture is 54.84%. The
minority interest is 45.16%.
5. MAJOR TENANTS
The Company's operations are all related to the acquisition and
leasing of commercial real estate properties. The following
schedule summarizes rental income by lessee for 1996, 1995 and
1994 under both operating lease and direct financing lease
methods of accounting:
1996 1995 1994
Tandy Corporation
(Mesquite, Texas) $ 108,900 $ 108,903 $ 59,290
America's Favorite Chicken
Company (Smyrna, Georgia) $ 91,875* $ 94,118 $ 40,173
Blockbuster Music Retail, Inc.
(Independence, Missouri
and Wichita, Kansas) $ 377,901 $ 238,906 $ 22,179
OneCare Health Industries, Inc.
(Houston, Texas) $ 201,638 $ 53,210 $ -
Just For Feet, Inc.
(Tucson, Arizona) $ 123,244 $ - $ -
Bank United (The Woodlands,
Texas and Houston, Texas) $ 21,230 $ - $ -
Total $ 924,788 $ 495,137 $ 121,642
* Decrease resulted from recognition of earned income
under the direct financing lease method of accounting.
Rental payments received remained unchanged from 1995.
6. FEDERAL INCOME TAXES
The differences between net income for financial reporting
purposes and taxable income before distribution deductions relate
primarily to temporary differences and to certain organization
costs which are amortized for financial reporting purposes only.
For income tax purposes, distributions paid to shareholders
consist of ordinary income, capital gains and return of capital
as follows:
1996 1995 1994
Ordinary Income $ 545,967 $ 342,210 $ 105,456
Capital gains - - -
Return of capital 191,310 76,875 20,779
$ 737,277 $ 419,085 $ 126,235
7. RELATED PARTY TRANSACTIONS
20,001 Shares of the Company's stock are owned by AAA. The
common stock of AAA is wholly owned by the president and director
of the Company. In addition, the Company has entered into an
Omnibus Services Agreement with AAA whereby AAA provides property
acquisition, leasing, administrative and management services for
the Company. $37,910 and $2,954 were incurred and paid to AAA
during 1996 and 1994, respectively, for such services.
F-12
Certain costs have been incurred by AAA in connection with the
organization and syndication of the Company. Reimbursement of
these costs become obligations of the Company in accordance with
the terms of the offering. The costs to organize the Company
have been capitalized as Organization Costs. For the year ended
December 31, 1994, $58,110 in reimbursements had been incurred
and paid to AAA. In addition, $98,494 and $64,848 of costs were
incurred by AAA in 1996 and 1995, respectively, in connection
with the issuance and marketing of the Company's stock. These
costs are reflected as issuance costs. $9,256 of these costs were
owed to AAA at December 31, 1995.
Acquisition fees, including real estate commissions, finders
fees, consulting fees and any other non-recurring fees incurred
in connection with locating, evaluating and selecting properties
and structuring and negotiating the acquisition of properties are
included in the basis of the properties. Acquisition fees of
$222,785, $232,378 and $131,077 were incurred and paid to AAA
during 1996, 1995 and 1994, respectively.
On August 22, 1995, the Board of Directors approved a special
compensation payment for the president in the amount of $150,000
for services provided from August 1993 through August 1995. In
connection therewith, the Company executed a demand note payable
at the earlier of July 15, 1996 or the receipt of $10,000,000
from the Company's stock offering. The note shall be payable in
cash or stock depending on the availability of cash for such
payment. No compensation arrangements were considered by the
Board prior to this time because the Company had not raised
sufficient funds through its stock offering, as determined by the
judgment of the Board, considered necessary for any compensation
to be granted. The compensation had not been accrued prior to
August 22, 1995 because its payment was uncertain and the level
of compensation had not been determined until the August 1995
Board meeting. As of the termination of the initial public
offering in March 1996, the Company had sold in excess of
$10,000,000. Although the president can demand payment on the
note, such demand has not been made. The decision regarding the
nature of the payment, whether in stock or cash, will be made by
the Board of Directors at the time the president demands payment.
In consideration that no payment has been demanded by the
president for the special compensation payment, the Board of
Directors approved at its August 1, 1996 meeting the payment of
interest to the president at an annual rate of 8%. This interest
payment will be paid in cash or in stock. As of December 31,
1996, $5,000 of interest has been accrued related to this note.
No decisions as yet have been made with respect to any additional
compensation for any period after August 1995. The Board of
Directors commissioned an external study with respect to the
amount and type of compensation which could be paid in the future
to officers and/or directors, as well as the contingencies and
performance standards on which compensation will be determined.
The compensation portion of the study has been completed and will
be considered at such time as the Board determines in the future
to consider a new compensation arrangement. Accordingly, the
financial statements do not include any accruals for compensation
subsequent to August 1995.
In accordance with the terms of the Company's public offering, up
to 15% of the gross offering proceeds will be used to pay
aggregate selling commissions and other issuance costs incurred
by the Company. Any excess costs incurred by the Company are the
obligation of AAA. At December 31, 1996, $101,399 of such costs
had been incurred by the Company in excess of the amount allowed
from the offering proceeds. AAA's obligation to fund such costs
is dependent upon future proceeds from the public offering.
See Note 4 for joint venture agreements with related parties.
F-13
8. PROPERTY ACQUISITIONS IN 1996
On December 11, 1996, the Company purchased real estate located
in Houston, Texas for $849,462. The property is a tract of
undeveloped land on which the tenant, Bank United, intends to
construct a branch bank. The lease agreement is for fifteen
years, however the tenant has the option to renew the lease for
one additional term of five years. The lease has provisions for
an escalation in the rent after the fifth and tenth years of the
lease. The Company recorded $5,119 of rental income from Bank
United for 1996.
On December 11, 1996, the Company entered into an agreement with
SCC Baton Rouge JFF, Ltd. for the purchase of a property to be
constructed in Baton Rouge, Louisiana. The property will be
acquired subject to a lease with Just For Feet, Inc. The
purchase price for the property will total approximately
$2,670,000 and will be paid with funds raised from the Company's
stock offering (See Note 1) and through a joint venture with a
related party.
On September 23, 1996, the Company purchased a 51% interest in
real estate located in The Woodlands, Texas through a joint
venture with a related party for the purchase price of $270,300.
The property is a tract of undeveloped land on which the tenant,
Bank United, will construct a branch bank. The lease agreement
extends for fifteen years, however the tenant has the option to
renew the lease for one additional term of five years. The lease
has provisions for an escalation in the rent after the fifth and
tenth years of the lease. The Company recorded $16,111 of rental
income from Bank United for 1996.
On September 11, 1996, the Company acquired a 51.9% interest in
a newly constructed property on lease to Just For Feet, Inc.
through a joint venture with two related parties for the purchase
price of $1,918,189. The lease agreement extends for twenty
years, however the tenant has the option to renew the lease for
two additional terms of five years each. The lease has
provisions for an escalation in the rent after the fifth, tenth,
and fifteenth years of the lease. The Company recorded $123,244
of income from Just For Feet for 1996.
As no buildings had previously been constructed on any of the
properties acquired by the Company during 1996, the rental income
received by the Company from these properties represents the
initial results of operations. Consequently, no pro-forma
information is presented.
F-14
AMERICAN ASSET ADVISERS TRUST, INC.
SCHEDULE III - CONSOLIDATED REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1996
LIFE ON WHICH
DEPRECIATION
COST AT IN LATEST
PROPERTY ENCUM- IMPROVE- LOSE OF YEAR ACCUMULATED DATE OF DATE INCOME STMT.
DESCRIPTION BRANCES BUILDING LAND MENTS BUILDING LAND DEPRECIATION CONSTR. ACQUIRED IS COMPUTED
PROPERTIES INVESTED IN
UNDER OPERATING LEASES
Radio Shack
Retail Store, Texas $0 $788,330 $337,856 $0 $788,330 $337,856 $51,324 N/A 06-15-94 39 Years
Church's Chicken
Restaurant, Georgia $0 $0 $251,071 $0 $0 $251,071 N/A N/A 07-22-94 N/A
Blockbuster Music
Store, Missouri $0 $490,747 $1,145,410 $0 $490,747 $1,145,410 $62,388 N/A 11-14-94 39 Years
OneCare Health
Industries, Inc., Texas $0 $1,246,560 $534,240 $0 $1,246,560 $534,240 $39,954 N/A 09-26-95 39 Years
Blockbuster Music
Store, Kansas $0 $1,255,774 $538,189 $0 $1,255,774 $538,189 $41,590 N/A 09-12-95 39 Years
Just For Feet
Store, Arizona $0 $0 $1,100,910 $0 $0 $1,100,910 N/A N/A 09-11-96 N/A
Bank United,
Woodlands, Texas $0 $0 $531,693 $0 $0 $531,693 N/A N/A 09-23-96 N/A
Bank United,
Houston, Texas $0 $0 $849,874 $0 $0 $849,874 N/A N/A 12-11-96 N/A
Total $0 $3,781,411 $5,289,243 $0 $3,781,411 $5,289,243 $195,256
PROPERTY INVESTED IN UNDER
DIRECT FINANCING LEASE
Church's Chicken
Restaurant, Georgia $0 $585,833 $0 $0 $585,833 $0 (2) N/A 07-22-94 N/A
Just For Feet
Store, Arizona $0 $2,571,259 $0 $0 $2,571,259 $0 (2) N/A 09-11-96 N/A
Total $0 $3,157,092 $0 $0 $3,157,092 $0 (2)
DIRECT
OPERATING FINANCING
(1)Balance at LEASES LEASE
December 31, 1995 $6,588,177 $585,833
Additions during 1996:
Acquisitions through
foreclosure $0 $0
Other acquisitions $2,482,477 $2,571,259
Improvements $0 $0
Deductions during 1996:
Cost of real estate sold $0 $0
Other $0 $0
Balance at
December 31, 1996 $9,070,654 $3,157,092
(2) The portion of the lease relating to the building of this property has
been recorded as a direct financing lease for financial reporting
purposes. Consequently, depreciation is not applicable.
(3) The aggregate cost of all properties for Federal Income Tax purposes is
$12,227,746 at December 31, 1996.
F-15
Exhibit 3 (iv)
AMENDED AND RESTATED BYLAWS
OF
AMERICAN ASSET ADVISERS TRUST, INC.
ARTICLE I
Offices
Section 1.01 Principal Office. The Company's principal office in the
State of Maryland shall be in the City of Baltimore, State of Maryland.
Section 1.02 Principal Executive Office. Unless otherwise determined
from time to time by the Board of Directors, the principal executive office
of the Company shall be in the City of Houston, State of Texas.
Section 1.03 Other Offices. The Company may also have offices at such
other places both in and out of the State of Maryland as the Board of
Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
Meetings of Stockholders
Section 2.01 Place of Meetings. Meetings of the stockholders shall be
held at the office of the Company in the City of Houston and State of Texas,
or at any other place within the United States as shall be designated from
time to time by the Board of Directors and stated in the notice of meeting
or in a duly executed waiver of notice hereof.
Section 2.02 Annual Meetings. Annual meetings of Stockholders shall
be held on such date and time as shall be fixed by the Board of Directors
and stated in the notice of meeting, but in no event less than thirty (30)
days nor more than sixty-one (61) days following the distribution of the
Annual Report to the Stockholders of the Company pursuant to Section 7.03
hereof, at which the Stockholders shall elect a Board of Directors and may
transact any business within the powers of the Company. Any business of the
Company may be transacted at the annual meeting without being specially
designated in the notice, except such business as is specifically required
by law to be stated in the notice.
Section 2.03 Special Meetings. At any time in the interval between
annual meetings, special meetings of the Stockholders, unless otherwise
provided by law or by the Charter, may be called by a majority of the Board
of Directors, a majority of the Independent Directors (as defined in Section
3.01 hereof), or the President or upon the written request of the holders of
shares representing not less than ten percent (10%) of the outstanding shares
entitled to vote at the meeting. Such written request shall be given in
person or by mail and state the purpose or purposes of the proposed meeting,
and the matters proposed to be acted upon at such meeting. No special
meeting need be called upon the request of the holders of less than a
majority of all votes entitled to be cast at such meeting to consider any
matter which is substantially the same as a matter voted upon at any special
meeting of the Stockholders held during the preceding twelve (12) months.
Business transacted at any special meeting of Stockholders shall be limited
to the purposes stated in the notice.
Section 2.04 Notice of Meetings. Not less than ten (10) nor more than
ninety (90) days before the date of every meeting of Stockholders, the
Secretary shall give to each Stockholder entitled to vote at such meeting,
and to each Stockholder not entitled to vote who is entitled by law to
notice, written or printed notice stating the time and place of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, either by mail or by delivering it to him personally or by
leaving it at his residence or usual place of business. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, addressed to the Stockholder at his post office address as
it appears on the records of the Company.
In the case of a special meeting of Stockholders convened at the request
of Stockholders, as provided for in Section 2.03 above, the notice herein
provided for shall be given by the Secretary, in the manner herein provided,
within ten (10) days after receipt of such request of Stockholders. Such a
special meeting shall be held not less than fifteen (15) nor more than sixty
(60) days after receipt of the request of Stockholders. Such meeting shall
be held at the place and time specified in the request or, if none is
specified, at a place and time reasonably believed by the Directors to be
convenient to a majority of the Stockholders.
Section 2.05 Quorum. At any meeting of Stockholders, the presence in
person or by proxy of Stockholders entitled to cast a majority of the votes
shall constitute a quorum; but this Section shall not affect any requirement
of law or under the Company's Charter for the vote necessary for the adoption
of any measure. If, however, such quorum shall not be present or represented
at any meeting of the Stockholders, a majority of the Stockholders entitled
to vote thereat, present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented
any business may be transacted which might have been transacted at the meeting
as originally notified.
Section 2.06 Voting. A majority of the votes cast at a meeting of
Stockholders, duly called and in which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly
come before the meeting, unless more than a majority of the votes cast
is required by law or by the Company's Charter or by these By-Laws. Except
in the election of Directors, which shall be by written ballot, or unless
required by statute or by these Bylaws or demanded by Stockholders present in
person or represented by proxy entitled to cast twenty-five percent (25%) of
the votes entitled to be cast at a meeting, any vote of Stockholders need not be
by written ballot. On a vote by written ballot, each ballot shall be signed
by the Stockholder or his proxy and shall state the number of shares voted.
Unless any statute or the Company's Charter provide otherwise, each
outstanding share of stock having voting power shall be entitled to one vote
on each matter submitted to a vote at a meeting of Stockholders and will be
fully paid and non-assessable by the Company when the share is issued and
paid for. A Stockholder may vote only the shares owned by him as shown on
the record of Stockholders of the Company as of the record date determined
pursuant to Section 6.05 hereof or pursuant to applicable law. All persons
who were holders of record of shares at such time, and no others, shall be
entitled to vote at such meeting and any adjournment thereof. A Stockholder
may vote the shares owned of record by him either in person or by proxy executed
in writing by the Stockholder or by his duly authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months from its date, unless otherwise
provided in the proxy. At all meetings of Stockholders, unless the voting is
conducted by inspectors, all questions relating to the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided by the Chairman of the meeting.
A majority of the then outstanding shares may, without the necessity for
concurrence by the Directors, vote to:
(a) amend the Bylaws;
(b) terminate the Company;
(c) remove the Directors.
With respect to shares owned by the Advisor, the Directors, or any
Affiliates, neither the Advisor, nor the Directors, nor any Affiliate may
vote or consent on matters submitted to the Stockholders regarding the
removal of the Advisor, Directors, or any Affiliate or any transaction between
the Company and any of them. In determining the requisite percentage in
interest of Shares necessary to approve a matter on which the Advisor,
Director and any Affiliate may not vote or consent, any Shares owned by any
of them shall not be included.
Section 2.07 Organization and Order of Business. At each meeting of the
Stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as
Chairman of the meeting. The Secretary, or in his absence or inability to act,
any person appointed by the Chairman of the meeting, shall act as Secretary of
the meeting and keep the minutes thereof. The order of business at all
meetings of the Stockholders shall be as determined by the Chairman of the
meeting.
Section 2.08 Inspectors. The Board of Directors may, in advance of any
meeting of Stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the Chairman of the meeting may, and
at the request of any Stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election of a vote with fairness to all Stockholders. On
request of the Chairman of the meeting, any Stockholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any
fact found by them. No Director or candidate for the office of Director
shall act as inspector of an election of Directors. Inspectors need not be
Stockholders.
Section 2.09 Action Without Meeting. Except as otherwise provided by
statute or the Charter, any action required or permitted to be taken at any
meeting of Stockholders may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth such action, is
signed by all the Stockholders entitled to notice of a meeting of Stockholders
but not to vote thereat have waived in writing any rights which they may have
to dissent from such action, and such consent and waiver are filed with the
records of Stockholders' meetings.
ARTICLE III
Directors
Section 3.01 Number, Election and Term. The number of Directors of the
Company shall be three (3). By vote of a majority of the entire Board of
Directors, the number of Directors fixed by the Company's Charter or by these
Bylaws may from time to time be increased or decreased, but may not at any time
exceed nine (9) nor be less than three (3); provided, however, that the tenure
of office of a Director shall not be affected by any decrease or increase in
the number of Directors so made by the Board. At all times that the Company
intends to be qualified as a real estate investment trust under the Internal
Revenue Code, a majority of the Board of Directors shall be Independent
Directors (as hereinafter defined). Each Director shall have had at least
three (3) years of relevant experience demonstrating the knowledge and
expedience required to acquire and manage the Company's properties. At least
one (1) of the Independent Directors shall have three (3) years actual direct
experience in acquiring or managing properties similar to those acquired
by the Company for his own account or as an agent. For purposes of these
Bylaws, "Independent Director" shall mean a Director of the Company who is not
employed by, or receiving any compensation (other than Director's fees and
reimbursed expenses) from or otherwise affiliated with, the Company and any
affiliate, and who is not affiliated, directly or indirectly, with any
person(s) or entity, if any, responsible for directing and performing the
day-to-day business affairs of the Company (the "Advisor"), whether by
ownership of, ownership interest in, employment by, any material business or
professional relationship with, or by serving as an officer or Director
of, such Advisor or an affiliated business entity of such Advisor. A Director
shall not be considered independent who serves as a Director of more than three
(3) real estate investment trusts organized by the Company or its affiliates or
has been associated with the Company or its Advisor or Affiliates directly or
indirectly, within the previous two (2) years. Until the first annual meeting
of Stockholders or until successors are duly elected and qualified, the Board
shall consist of the persons named as such in the Company's Charter. At the
first annual meeting of Stockholders and at each annual meeting thereafter, the
Stockholders shall elect Directors to hold office until the next annual meeting
or until their successors are elected and qualify. Directors may be re-elected
by the Stockholders. Directors need not be Stockholders in the Company.
Stockholders wanting to nominate a person for election as a Director shall
deliver written notice of such nomination at least ninety (90) days prior to
an annual meeting of Stockholders and within seven (7) days following the date
on which notice of a special meeting of Stockholders to elect Directors is first
given to Stockholders.
Section 3.02 Powers. The business and affairs of the Company shall be
managed in accordance with the Charter and these Bylaws under the direction of
its Board of Directors and where applicable, the Independent Directors, which
may exercise all of the powers of the Company, except such as are by law or
by the Company's Charter or by these Bylaws conferred upon or reserved to the
Stockholders. At, or before, the first meeting of Directors, the Bylaws of the
Company shall be reviewed and ratified by a majority of the Directors and
Independent Directors.
Section 3.03 Vacancies. Any vacancy occurring in the Board of Directors
for any cause other than by reason of an increase in the number of Directors,
may subject to the provisions of Section 3.08, be filled by a majority of the
remaining members of the Board of Directors, although such majority is less
than a quorum; provided, however, that if the Company has sought to qualify as
a real estate investment trust and in accordance with Section 3.01, a majority
of the Board of Directors are required to be Independent Directors, then
Independent Directors shall nominate replacements for vacancies among the
Independent Directors. Any vacancy occurring by reason of the removal of a
Director by the Stockholders may be filled by a vote of the holders of a
majority of the shares entitled to vote for the election of Directors. Any
vacancy occurring by reason of an increase in the number of Directors may be
filled by action of a majority of the entire Board of Directors. If the
Stockholders of any class or series are entitled separately to elect one or
more Directors, a majority of the remaining Directors elected by that class or
series or the sole remaining Director elected by that class or series may fill
any vacancy among the number of Directors elected by that class or series. A
Director elected by the Board of Directors to fill a vacancy shall be elected
to hold office until the next annual meeting of Stockholders or until his
successor is elected and qualifies.
Section 3.04 Resignations. Any Director or member of a committee may
resign at any time. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time is specified, at the time
of the receipt by the Chairman of the Board, the President or the Secretary.
The acceptance of a resignation shall not be necessary to make it effective.
Section 3.05 Fiduciary Duty of the Directors. The Directors shall be
charged with a fiduciary duty to the Company and Stockholders and shall also
have a fiduciary duty to the Stockholders to supervise the relationship of
the Company with the Advisor. The Directors shall devote such time to the
affairs of the Company as they, within their sole discretion, exercised in
good faith, determine to be necessary for the benefit of the Company and the
Stockholders of the Company.
Section 3.06 The Board of Directors may appoint from among its members
an Executive Committee, an Audit Committee and other committees comprised of one
(1) or more Directors. In the case of any committee comprised of less than three
(3) individuals, such individuals must all be Independent Directors (as defined
in Section 3.01). In the case of any committee comprised of three or more
individuals, a majority of the members of any committees so appointed shall be
Independent Directors. The Board of Directors may delegate to any committee of
the powers of the Board of Directors except the power to declare dividends or
distributions on stock, recommend to the Stockholders any action which requires
Stockholder approval, amend the By-Laws, approve any merger or share exchange or
issue stock. However, if the Board of Directors is given general authorization
for the issuance of stock, a committee of the Board, in accordance with the
general formula or method specified by the Board of Directors by resolution or
by adoption of stock option plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued. Notice of committee meetings shall be given in the same manner as
notice for special meetings of Board of Directors.
For any committee comprised of less than three (3) individuals, all of the
members of any such committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business
at such meeting, and the unanimous act of those present shall be the act of such
committee. For any committee comprised of three or more individuals, one-third
(1/3), but not less than two (2), of the members of any committee shall be
present in person at any meeting of such committee in order to constitute a
quorum for the transaction of business at such meeting, and the act of a
majority of those present shall be the act of such committee. The Board of
Directors may designate a Chairman of any committee and such Chairman, or, in
the case of a committee with two or more members, any two (2) members of any
such committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any
such committee, the members thereof present at any meeting any not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another Director to act at the meeting in the place of such absent or
disqualified member; provided, however, that in the event of the