SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) February 20, 2003
Shelbourne Properties II, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-16341 04-3502382
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(Commission File Number) (I.R.S. Employer Identification No.)
7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114
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(Address of Principal Executive Offices) (Zip Code)
(617) 570-4600
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events
On February 20, 2003, direct and indirect subsidiaries (the "Borrowers") of
each of Shelbourne Properties II, Inc. (the "Company"), Shelbourne Properties I,
Inc. and Shelbourne Properties III, Inc., each a Delaware corporation
(collectively, the "REITs"), entered into a Loan Agreement with Fleet National
Bank, as agent for itself and other lenders (the "Lender") pursuant to which the
Borrowers obtained a $55,000,000 loan (the "Loan"). The REITS believed that by
entering into a single loan transaction instead of three separate loan
transactions they were able to obtain a larger loan at a more favorable interest
rate. The Loan bears interest at the election of the Borrowers at a rate of
either LIBOR plus 275 basis points or Fleet National Bank's prime rate (but not
less than 5%) plus 100 basis points. At present the Borrowers have elected that
the Loan bear interest at LIBOR plus 275 basis points. The Loan matures on
February 19, 2006, subject to two one year extensions. The Loan is prepayable in
whole or in part at anytime without penalty or premium.
The Borrowers are jointly and severally liable for the repayment of the
amounts due under the Loan and the operating partnership and the Company (as
well as the operating partnerships of the other REITs and the other REITs) have
guaranteed the repayment of the Loan. The proceeds of the Loan were used to
satisfy the existing credit facility from Bayerische Hypo- Und Vereinsbank AG,
New York Branch (the "Old Loan") that had a balance due of $37,417,248.86. The
Old Loan was satisfied by delivery of $27,417,248.86 in cash and a $10,000,000
note from 568 Broadway Joint Venture (the "568 Note"), a joint venture of the
REITs, which note was then acquired by Manufacturers Traders and Trust Company.
In connection with the assignment of the 568 Note, the purchase agreement with
respect to the property held by 568 Broadway Joint Venture (the "568 Property")
was amended to provide that the buyer would acquire the property subject to the
Broadway Note and would receive a credit of $10,000,000 at closing. After
satisfying the Old Loan, establishing a capital improvements reserve of
$5,000,000 in the aggregate ($2,657,500 of which is allocable to the Company), a
$10,000,000 reserve ($3,892,500 of which is allocable to the Company) to be
released upon the earlier of the sale of the 568 Property or the satisfaction of
the 568 Note and costs associated with consummating the Loan, the net proceeds
received by the REITs was approximately $11,000,000, which proceeds have been
added to cash reserves and will be used for general purposes or for
distribution.
The Loan is secured by mortgages on certain real properties owned directly
and indirectly by the operating partnerships. The Company's properties located
in Seattle, Washington, San Diego, California, Westerville, Ohio, Grove City,
Ohio, Matthews, North Carolina and Richmond, Virginia (the "Collateral
Properties") secure the Loan. Pursuant to the Loan, the Collateral Properties
may be sold if, among other things, the purchase price provides net proceeds
which are in an amount equal to a minimum release price for such property, which
amount would be applied as a prepayment of the Loan. The Company's other
properties may be sold at any time and, so long as there is no event of default,
none of the net proceeds of the sales of such other properties is required to be
applied towards the Loan. As a result of entering into the Loan, the Company
will be
able to distribute the proceeds of the pending sale of its 568 Broadway property
whereas under the Old Loan, approximately one-half of such proceeds would have
been required to satisfy the Old Loan.
Under the Loan, the REITs are required to maintain a certain debt yield
maintenance ratio and have certain restrictions with respect to engaging in
certain equity financings, business combinations and other transactions that may
result in a "change of control" (as defined under the Loan documents), incurring
additional indebtedness, acquiring additional properties, selling properties and
making certain distributions. In addition, the occurrence of certain events over
which the REITs may have no control and which constitute a "change of control"
will cause a default under the Loan.
Since the Borrowers are jointly and severally liable for the repayment of
the entire principal, interest and other amounts due under the Loan, the
Borrowers, the REITs and their operating partnerships have entered into
Indemnity, Contribution and Subrogation Agreements, the purpose and intent of
which was to place the operating partnerships of the REITs in the same position
(as among each other) as each would have been had the lender made three
separate, smaller loans, one to each of the operating partnership; each of which
loans would have been in a smaller amount than the Loan, would have been the
obligation/liability only of the operating partnership to which it was made and
would have been secured only by such operating partnership's assets.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
10.1 Loan Agreement, dated as of February 19, 2003, among Shelbourne
Properties I L.P., Shelbourne Properties II L.P., Shelbourne
Properties III L.P., Shelbourne Richmond Company LLC, Shelbourne
Matthews Company LLC, Shelbourne Las Vegas Company LLC, Century
Park I Joint Venture, Seattle Landmark Joint Venture,
Tri-Columbus Associates and Fleet National Bank and the other
lending institutions which may become party thereto and Fleet
National Bank, as agent (incorporated by reference to Exhibit
10.1 to the Form 8-K filed by Shelbourne Properties I, Inc. on
February 24, 2003)
10.2 Form of Guaranty, dated as of February 19, 2003, from Shelbourne
Properties II Inc. and Shelbourne Properties II L.P.
(incorporated by reference to Exhibit 10.2 to the Form 8-K filed
by Shelbourne Properties I, Inc. on February 24, 2003)
10.3 Form of Indemnity, Contribution and Subrogation Agreement, dated
as of February 19, 2003, among the REITs and the operating
partnerships (incorporated by reference to Exhibit 10.3 to the
Form 8-K filed by Shelbourne Properties I, Inc. on February 24,
2003)
10.4 Form of Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture Filing with respect to the Collateral
Properties dated as of February 19, 2003 in favor of Fleet
National Bank (incorporated by reference to Exhibit 10.4 to the
Form 8-K filed by Shelbourne Properties I, Inc. on February 24,
2003)
10.5 Cash Management Agreement, dated February 19, 2003, among
Shelbourne Properties I L.P., Shelbourne Properties II L.P.,
Shelbourne Properties III L.P., Fleet National Bank, as agent for
itself and the Lenders, and various subsidiaries of the
Shelbourne OP's listed on Exhibit A thereto (incorporated by
reference to Exhibit 10.5 to the Form 8-K filed by Shelbourne
Properties I, Inc. on February 24, 2003).
99.1 Press Release dated February 20, 2003 (incorporated by reference
to Exhibit 99.1 to the Form 8-K filed by Shelbourne Properties I,
Inc. on February 24, 2003)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized this 20th day of February, 2003.
Shelbourne Properties II, Inc.
By: /s/ Peter Braverman
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Peter Braverman
Executive Vice President
EXHIBIT INDEX
No. Exhibit Page
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10.1 Loan Agreement, dated as of February 19, 2003, (1)
among Shelbourne Properties I L.P., Shelbourne
Properties II L.P., Shelbourne Properties III L.P.,
Shelbourne Richmond Company LLC, Shelbourne
Matthews Company LLC, Shelbourne Las Vegas
Company LLC, Century Park I Joint Venture,
Seattle Landmark Joint Venture, Tri-Columbus
Associates and Fleet National Bank and the
other lending institutions which may become
party thereto and Fleet National Bank, as agent
10.2 Form of Guaranty, dated as of February 19, 2003, (1)
from Shelbourne Properties II Inc. and Shelbourne
Properties II L.P.
10.3 Form of Indemnity, Contribution and Subrogation (1)
Agreement, dated as of February 19, 2003, among
the REITs and the operating partnerships
10.4 Form of Deed of Trust, Assignment of Leases (1)
and Rents, Security Agreement and Fixture Filing
with respect to the Collateral Properties dated as of
February 19, 2003 in favor of Fleet National Bank
10.5 Cash Management Agreement, dated February (1)
19, 2003, among Shelbourne Properties I L.P.,
Shelbourne Properties II L.P., Shelbourne Properties
III L.P., Fleet National Bank, as agent for itself and
the Lenders, and various subsidiaries of the Shelbourne
OP's listed on Exhibit A thereto.
99.1 Press Release dated February 20, 2003. (1)
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(1) Incorporated by reference to Exhibit of like number to the Form 8-K filed by
Shelbourne Properties I, Inc. on February 24, 2003.