CHICAGO, Nov. 20 /PRNewswire/ -- Security Capital Group Incorporated (NYSE: SCZ) announced today that it has sold Homestead Village, its extended-stay lodging company, to an affiliate of Blackstone Real Estate Advisors for a total value of $740 million. The consideration received in the transaction includes $480 million in cash, the assumption of $145 million of liabilities, and the issuance to Security Capital of a five-year $115 million note. The note carries an initial coupon of 12% that increases by 100 basis points annually. Net cash proceeds from the transaction, excluding the five-year note and after transaction costs, are expected to be approximately $462 million.
The sale of Homestead is in keeping with Security Capital's stated intention to exit businesses that do not fit the company's current strategy, said C. Ronald Blankenship, Vice Chairman of Security Capital. This strategy is to focus capital in six private real estate operating divisions that will lead the industry in high sustainable return on equity and earnings growth. Mr. Blankenship noted that proceeds from the sale will further enhance Security Capital's liquidity. This transaction places the company in an even stronger position to execute its strategy, as well as to fund additional share repurchases, he said.
The financial impact of the transaction is detailed in the attached supplemental information.
Salomon Smith Barney served as the financial advisor to Security Capital. Bear, Stearns & Co. Inc. served as the financial advisor to Blackstone and provided the mortgage financing for the transaction.
Security Capital is an international real estate operating company. The company's current strategy is to own all or a high percentage of six real estate businesses that function as private operating divisions and to eliminate the discount to the underlying value of its assets. Security Capital currently has ownership positions in 10 real estate operating businesses with combined assets of $16.8 billion, as well as a capital management division with over $2.8 billion of assets under management. The company plans to reposition or sell its investment in several of these businesses and focus its capital in those that hold one of the top two market positions in their specific niche and are able to create measurable brand value, as well as generate significant income from services and managed capital. The principal offices of Security Capital and its majority-owned affiliates are in Brussels, Chicago, El Paso, Houston, London, Luxembourg, New York and Santa Fe.
Blackstone Real Estate Advisors (BREA) is an affiliate of The Blackstone Group, a private investment bank with offices in New York and London. BREA has raised four funds representing approximately $3.6 billion in total equity. BREA has made more than 100 separate investments in hotels and other commercial properties with a total transaction value exceeding $12 billion. In addition to real estate, The Blackstone Group's core businesses include Mergers and Acquisitions, Restructuring and Reorganization, Private Equity Investing, Private Mezzanine Investing, and Liquid Alternative Asset Management.
This press release contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of the safe-harbor provisions of the U.S. federal securities laws. These statements reflect the current views of Security Capital with respect to future events and are not guarantees of future performance. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors that are beyond Security Capital's ability to control or estimate precisely, such as future market conditions, the behavior of other market participants, the actions of governmental regulators and other risk factors detailed in Security Capital's reports filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Security Capital does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release.
Pro Forma Statements of Earnings Before Depreciation, Amortization and
Deferred Taxes (EBDADT)
(In thousands, except per share amounts)
Three Months Ended September 30, 2001
Sale of Homestead
Actual Village Pro Forma
Income:
Equity in EBDADT
of investees/divisions $127,773 $(22,588)(a) $105,185
Interest and other income 1,504 6,895 (b) 8,399
Total Income 129,277 (15,693) 113,584
Expenses:
Operating expenses 5,476 -- 5,476
Interest expense 18,254 (758)(c) 17,496
Total Expenses 23,730 (758) 22,972
Convertible preferred
share dividends 4,509 -- 4,509
Basic EBDADT before
current income taxes and
special items 101,038 (14,935) 86,103
Current income tax expense 9,912 (282)(d) 9,630
Basic EBDADT before
special items 91,126 (14,653) 76,473
Extraordinary loss on
retirement of debt,
net of tax (756) -- (756)
Basic EBDADT after
special items $90,370 $(14,653) $75,717
Diluted EBDADT per share
before current income
taxes and special items $0.70 $0.60
Current income tax expense 0.07 0.06
Diluted EBDADT per share
before special items 0.63 0.54
Extraordinary loss on
retirement of debt,
net of tax -- (0.01)
Diluted EBDADT per share
after special items $0.63 $0.53
Pro Forma Statements of Earnings Before Depreciation, Amortization and
Deferred Taxes (EBDADT)
(In thousands, except per share amounts)
Nine Months Ended September 30, 2001
Sale of Homestead
Actual Village Pro Forma
Income:
Equity in EBDADT
of investees/divisions $401,820 $(75,348)(a) $326,472
Interest and other income 7,815 19,493 (b) 27,308
Total Income 409,635 (55,855) 353,780
Expenses:
Operating expenses 21,373 -- 21,373
Interest expense 58,895 (5,762)(c) 53,133
Total Expenses 80,268 (5,762) 74,506
Convertible preferred
share dividends 13,526 -- 13,526
Basic EBDADT before current
income taxes and
special items 315,841 (50,093) 265,748
Current income tax expense 33,783 (1,597)(d) 32,186
Basic EBDADT before
special items 282,058 (48,496) 233,562
Extraordinary loss on
retirement of debt,
net of tax (2,701) -- (2,701)
Gain on sale of
Archstone stock,
net of tax 160,087 -- 160,087
Basic EBDADT after
special items $439,444 $(48,496) $390,948
Diluted EBDADT per share
before current income
taxes and special items $2.15 $1.83
Current income tax expense 0.21 0.20
Diluted EBDADT per share
before special items 1.94 1.63
Extraordinary loss on
retirement of debt,
net of tax (0.02) (0.02)
Gain on sale of Archstone
stock, net of tax 1.01 1.01
Diluted EBDADT per share
after special items $2.93 $2.62
Pro Forma Balance Sheet
As of September 30, 2001
(In thousands, except per share amounts)
Sale of Homestead
Actual Village Pro Forma
Assets:
Investees/Divisions:
BelmontCorp $127,623 $-- $127,623
CarrAmerica Realty
Corporation 856,847 -- 856,847
City Center Retail Trust 175,722 -- 175,722
InterPark 294,783 -- 294,783
ProLogis Trust 1,052,855 -- 1,052,855
Regency Centers
Corporation 882,421 -- 882,421
SC-Research & Management 113,852 -- 113,852
SC-European Realty 440,553 -- 440,553
Storage USA, Inc. 465,920 -- 465,920
Former Investee:
Homestead Village
Incorporated 645,644 (645,644)(e) --
Cash & Cash Equivalents 307,353 461,807 (f) 769,160
Other Assets 168,771 165,073 (g) 333,844
Total Assets $5,532,344 $(18,764) $5,513,580
Liabilities and Shareholders' Equity:
Liabilities:
Accounts Payable and
Other Liabilities $117,700 $-- $117,700
Line of Credit -- -- --
Long-term Debt 699,728 -- 699,728
Convertible Subordinated
Debentures 221,268 -- 221,268
Deferred Taxes 290,392 12,800(h) 303,192
Total Liabilities 1,329,088 12,800 1,341,888
Shareholders' Equity:
Series B Preferred Shares 257,642 - 257,642
Common Shareholders'
Equity 3,945,614 (31,564) 3,914,050
Total Shareholders'
Equity 4,203,256 (31,564) 4,171,692
Total Liabilities
and Shareholders'
Equity $5,532,344 $(18,764) $5,513,580
NAV per share before
deferred taxes $28.51 $28.39
NAV per share after
deferred taxes $26.65 $26.45
The accompanying Notes to Pro Forma Financial Information should be read
in conjunction with this statement.
Notes to Pro Forma Financial Information
On November 20, 2001, Security Capital sold its investment in Homestead
Village for a total value of $740 million. The consideration received
includes $480 million in cash, the assumption of $145 million in liabilities,
and the issuance to Security Capital of a five-year $115 million note. Net
cash proceeds, excluding the five-year note and after transaction costs, were
approximately $462 million.
The preceding pro formas are prepared in accordance with rules promulgated
by the Securities and Exchange Commission for transactional pro formas, except
that they reflect EBDADT and interest income on additional cash balances.
Management believes they reflect appropriate adjustments for each period to
show the performance of Security Capital without Homestead Village.
The accompanying pro forma financial information was prepared as if the
sale of Homestead Village had occurred on December 31, 2000 for pro forma
statement of EBDADT purposes and on September 30, 2001 for pro forma balance
sheet purposes. The net cash proceeds are assumed to pay off short-term debt
with remaining cash invested at 3%. Pro forma adjustments are comprised of
the following:
(a) Represents the elimination of equity in EBDADT of Homestead Village.
(b) Represents the interest income on the $115 million note received in
the sale and interest income on the additional invested cash
balances.
(c) Represents the reduction in interest expense on Security Capital's
short-term borrowings.
(d) The decrease in current income tax expense is due to the utilization
of net operating losses made available by the sale of Homestead
partially offset by the tax impact of increased interest income and
reduced interest expense. The elimination of the EBDADT from
Homestead Village did not have a significant impact on tax expense
because Homestead's taxable income is minimal.
(e) Elimination of Security Capital's investment in Homestead.
(f) Represents the net cash proceeds received on sale.
(g) Represents the $115 million of notes received on sale and a current
income tax benefit receivable of approximately $50.1 million.
(h) Represents the elimination of deferred taxes related to Security
Capital's investment in Homestead.
The accompanying pro forma information does not include any purchases of
Security Capital stock. Assuming that the entire net proceeds from the sale
of Homestead Village were used to purchase Security Capital stock at the
November 19, 2001 closing price of $20.10 per share, the adjusted pro forma
per share results would be:
Pro Forma Adjusted Pro Forma
As of and for the three months
ended September 30, 2001:
Diluted EBDADT before special items $0.54 $0.61
Net asset value after deferred taxes $26.45 $27.54
For the nine months ended
September 30, 2001:
Diluted EBDADT before special items $1.63 $1.84
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