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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): March 3, 1998
FM Properties Inc.
Delaware 0-19989 72-1211572
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
98 San Jacinto Blvd., Suite 220
Austin, Texas 78701
Registrant's telephone number, including area code: (512) 478-5788
Item 5. Other Events.
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The following news release was issued by FM Properties Inc. and
Olympus Real Estate Corporation on March 3, 1998:
AUSTIN and DALLAS, TEXAS, March 3, 1998 -- FM Properties Inc.
(NASDAQ: FMPO) and Olympus Real Estate Corporation (Olympus), an
affiliate of Hicks, Muse, Tate & Furst Incorporated, announced
today that they have signed a letter of intent to form a
strategic alliance to develop certain of FMPO's existing
properties and to pursue new real estate acquisition and
development opportunities throughout the United States. Under
the terms of the letter of intent, Olympus would make a $10
million investment in an FMPO mandatorily redeemable equity
security, provide a $10 million convertible debt financing
facility to FMPO and make available up to $50 million of capital
for direct investment in joint FMPO/Olympus projects. In total,
the transaction would provide FMPO up to $70 million of new
capital for acquisition and development activities. FMPO and
Olympus expect the closing of the transaction to occur within 90
days.
The $10 million mandatorily redeemable equity security would
have a par value of $5.84 per share, the average closing price of
a share of FMPO common stock on the Nasdaq Stock Market during
the 30 trading days ending March 2, 1998. These shares would be
redeemable (i) at the option of the holder at any time after the
third anniversary of the transaction closing date for an amount
per share approximating the economic benefit that would have
accrued had the shares been converted into common stock on a one-
to-one basis and sold (the "common stock equivalent value") or
(ii) at the option of FMPO after the fifth anniversary (and in
any event not later than the sixth anniversary) for the greater
of their common stock equivalent value or their par value per
share, plus accrued and unpaid dividends, if any. FMPO would
have an option to satisfy the redemption with shares of common
stock, subject to certain limitations. The redeemable security
would share any dividends or distributions ratably with the FMPO
common stock, which currently pays no dividend. Olympus would
have the right to designate for nomination 20 percent of FMPO's
board membership
Currently, there are 14.29 million shares of FMPO common
stock outstanding. The closing price of FMPO common stock on
NASDAQ as of March 2, 1998 was $6.625 per share. FMPO would use
the proceeds of the sale of the mandatorily redeemable equity
security to repay debt.
The $10 million convertible debt facility would be available
to FMPO in whole or in part for a period of six years after the
closing date to finance FMPO's equity investment in new
FMPO/Olympus joint venture opportunities in properties not
currently owned by FMPO. The interest rate on the convertible
debt would be 12 percent per year. At Olympus's option, the
interest would be payable quarterly, or accrued and added to
principal. The convertible debt facility would have a six-year
term from the closing date of the transaction. Outstanding
principal under the facility would be convertible at any time into
FMPO common stock at a conversion price of $7.31, which is 125
percent of the average closing price of FMPO common stock on the
Nasdaq Stock Market during the 30 trading days ending March 2,
1998. If not converted into common stock, the convertible debt
would be repaid on the sixth anniversary of the transaction
closing date. If the combination of interest at 12 percent and
the value of the conversion right does not provide Olympus with at
least a 15 percent annual return on the convertible debt, FMPO
would pay Olympus additional interest upon retirement of the
convertible debt in an amount necessary to yield a 15 percent
annual return. The convertible debt would be secured by a pledge
of FMPO's interests in investments in new FMPO/Olympus joint
venture opportunities financed with the proceeds of the
convertible debt and would be non-recourse to FMPO.
For a three-year period after the closing of the
transaction, Olympus would make available up to $50 million for
its share of capital for direct investments in FMPO/Olympus joint
acquisition and development activities. For the three-year
period, FMPO would provide Olympus a right of first refusal to
participate for no less than a 50 percent interest in all new
acquisition and development projects on properties not presently
owned by FMPO, as well as development opportunities on existing
properties in which FMPO seeks third-party equity participation.
William H. Armstrong, FMPO's President and Chief Operating
Officer, said, "While FMPO has been exclusively involved in the
development of large mixed-use communities in Texas, an integral
part of the FMPO/Olympus alliance's strategy will be evaluating
opportunities outside its current areas of operation, including
areas outside Texas. These opportunities are expected to
include real estate development activities that are broader in
scope than those previously undertaken by FMPO. This strategic
alliance is an opportunity for FMPO to become a multi-market land
acquisition and development company and for us to achieve
geographic expansion and product diversity. Olympus' capital and
access to acquisition and development opportunities will enable
us to apply our marketing and development expertise to new
markets."
David B. Deniger, President and Chief Executive Officer of
Olympus, said, "We view FMPO as an excellent platform for our
strategic land development activities. The joint venture with
FMPO exemplifies our basic strategy of applying Olympus' capital
and capital markets expertise to a real estate entrepreneur's
operating expertise in the joint execution of an aggressive
business plan."
The transaction is subject to the completion of due
diligence, negotiation of definitive agreements and approval of
FMPO's Board of Directors.
FMPO, headquartered in Austin, Texas, is engaged in the
development and marketing of real estate in the Austin, Dallas,
Houston and San Antonio, Texas areas.
Olympus Real Estate Corporation, with offices in Dallas and
New York, invests in real estate equities, mortgages and
securities in major markets throughout the United States.
Olympus was formed in May 1994 by Hicks, Muse, Tate & Furst
Incorporated and David B. Deniger. Since its formation Olympus
has completed more than $1 billion in real estate investments,
including numerous commercial, residential, hospitality and golf-
related projects throughout the United States.
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SIGNATURE
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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, thereunto duly
authorized.
FM Properties Inc.
By: /s/ C. Donald Whitmire
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C. Donald Whitmire
Vice President & Controller-
Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: March 11, 1998