SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Original Report: June 24, 1997
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 333-10635 54-1816010
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 8-K/A
Index
Page No.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibit
a. Independent Auditors' Report
(Pace's Cove Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Pace's Cove Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Pace's Cove
Apartments)
b. Pro Forma Statement of Operations for
the Three Months ended
March 31, 1997 (unaudited)
Pro Forma Balance Sheet
as of March 31, 1997 (unaudited)
Pro Forma Statement of Operations
for the Year ended December 31, 1996
(unaudited)
c. Exhibit
23.1 Consent of Independent Auditors
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<PAGE>
The Company hereby amends Items 7.a., 7.b. and 7.c. of its Current
Report on Form 8-K dated June 24, 1997 as follows:
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<PAGE>
ITEM 7.a.
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Pace's Cove Apartments located in Dallas, Texas for
the twelve month period ended May 31, 1997. This statement is the responsibility
of the management of Pace's Cove Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Pace's Cove
Apartments (as defined above) for the twelve month period ended May 31, 1997, in
conformity with generally accepted accounting principles.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 22, 1997
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<PAGE>
PACE'S COVE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1997
INCOME
Rental and Other Income $1,832,695
----------
DIRECT OPERATING EXPENSES
Administrative and Other 237,030
Insurance 42,627
Repairs and Maintenance 273,102
Taxes, Property 213,985
Utilities 118,907
-------
TOTAL DIRECT OPERATING EXPENSES 885,651
-------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 947,044
==========
See accompanying notes to the financial statement.
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<PAGE>
PACE'S COVE APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1997
NOTE 1 - ORGANIZATION
Pace's Cove Apartments is a 328 unit garden style apartment complex
located on 12.97 acres in Dallas, Texas. The assets comprising the property were
owned by Intercapital Portfolio 944 I Limited Partnership, an entity
unaffiliated with Apple Residential Income Trust, Inc. during the financial
statement period. Apple Residential Income Trust, Inc. subsequently purchased
the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization, legal and
professional fees and management fees.
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 revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
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<PAGE>
ITEM 7.b.
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<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
The accompanying Unaudited Pro Forma Statement of Operations for the
three months ended March 31, 1997 is presented as if (a) the Company had
acquired the properties shown below on January 1, 1997; (b) the Company had
qualified as a REIT, distributed at least 95% of its taxable income and,
therefore, incurred no federal income tax liability for the period presented;
and (c) the Company had used proceeds from its best efforts offering to acquire
the properties. In the opinion of management, all adjustments necessary to
reflect the effects of these transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the three months ended March 31, 1997
if the acquisitions and offering had occurred at the beginning of the period
presented, nor does it purport to be indicative of the results of operations in
future periods. The Unaudited Pro Forma Statement of Operations should be read
in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of the Company.
<TABLE>
<CAPTION>
HISTORICAL BROOKFIELD EAGLE CREST TAHOE MILL CROSSING POLO RUN
STATEMENT OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
<S> <C>
Dates of Acquisitions ........... -- 1/31/97 1/31/97 1/31/97 2/28/97 3/31/97
Rental income ................... $1,155,766 $99,879 $ 266,385 $ 100,023 $ 151,389 $ 326,137
Expenses
Utilities ..................... 98,538 7,722 25,425 12,431 24,712 32,231
Repairs and maintenance ....... 59,600 14,519 31,593 29,313 36,083 64,401
Taxes and insurance ........... 106,098 12,720 36,546 12,099 19,230 40,508
Property management fee ....... 60,663 -- -- -- -- --
Advertising ................... 33,475 2,547 4,429 2,475 4,272 6,338
Other operating expenses ...... 92,970 -- -- -- -- --
General and administrative .... 77,502 -- -- -- -- --
Depreciation of real estate ... 137,689 -- -- -- -- --
Amortization .................. 8,476 -- -- -- -- --
Other ......................... 9,434 7,642 13,288 7,424 12,815 19,013
---------- ---------- ---------- ---------- ---------- ----------
684,445 45,150 111,281 63,742 97,112 162,491
Income before interest income ... 471,321 54,729 155,104 36,281 54,277 163,646
Interest income ............... 84,934 -- -- -- -- --
Net income ...................... $556,255 $ 54,729 $ 155,104 $ 36,281 $ 54,277 $ 163,646
========== ========== ========== ========== ========== ==========
Net income per share ............ $ 0.16
----------
Weighted average number of shares
outstanding .................... 3,403,759
=========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
WILDWOOD TOSCANA THE ARBORS PACES 1997
PRO FORMA PRO FORMA PRO FORMA COVE PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
<S> <C>
Dates of Acquisitions ........... 3/31/97 3/31/97 4/25/97 6/30/97 -- --
Rental income ................... $ 202,389 $ 270,812 $ 345,254 $ 458,174 -- $3,376,208
Expenses
Utilities ..................... 19,734 21,222 21,296 29,727 -- 293,038
Repairs and maintenance ....... 30,868 29,279 27,394 68,276 -- 391,326
Taxes and insurance ........... 25,216 35,674 45,547 64,153 -- 397,791
Property management fee ....... -- -- -- -- 99,478 (A) 160,141
Advertising ................... 6,877 8,055 6,977 14,814 -- 90,259
Other operating expenses ...... -- -- -- -- -- 92,970
General and administrative .... -- -- -- -- 23,198 (B) 100,700
Depreciation of real estate ... -- -- -- -- 286,515 (C) 424,204
Amortization .................. -- -- -- -- -- 8,476
Other ......................... 20,632 24,166 20,932 44,443 -- 179,789
---------- ---------- ---------- ---------- -------------- ----------
103,327 118,396 122,146 221,413 409,191 2,138,694
Income before interest income ... 99,062 152,416 223,108 236,761 (409,191) 1,237,514
Interest income ............... -- -- -- -- -- 84,934
---------- ---------- ---------- ---------- -------------- ----------
Net income ...................... $ 99,062 $ 152,416 $ 223,108 $ 236,761 $ (409,191) $1,322,448
========== ========== ========== ========== ============== ==========
Net income per share ............ $ 0.16
==========
Weighted average number of shares
outstanding .................... 4,357,880 (D) 7,751,639
============== ==========
</TABLE>
(A) Represents the property management fees of 5% of rental income and
processing costs equal to $2.50 per apartment per month charged by the
external management company for the period of time not owned by the
company.
(B) Represents the advisory fee of .25% of accumulated capital
contributions under the "best efforts" offering for the period of
time not owned by the company.
(C) Represents the depreciation expense of the properties acquired based on
the purchase price, excluding amounts allocated to land, of the
properties for the period of time not owned by the company. The
weighted average life of the property depreciated was 27.5 years.
(D) Represents additional common shares assuming the properties were
acquired on January 1, 1997 with the "best efforts" offering of $9 per
share for the first $15 million and $10 per share above $15 million.
10
<PAGE>
PRO FORMA BALANCE SHEET AS OF MARCH 31, 1997 (UNAUDITED)
The accompanying Unaudited Pro Forma Balance Sheet as of March 31, 1997
is presented as if the Company had owned the properties included in the table
below as of March 31, 1997. In the opinion of management, all adjustments
necessary to reflect the effects of its ongoing "best efforts" offering have
been made.
The Unaudited Pro Forma Balance Sheet is presented for comparative
purposes only, and is not necessarily indicative of what the actual financial
position of the Company would have been at March 31, 1997, nor does it purport
to represent the future financial position of the Company. This Unaudited Pro
Forma Balance Sheet should be read in conjunction with, and is qualified in its
entirety by, the respective historical financial statements and notes thereto of
the Company. The Pro Forma column assumes the Company used the proceeds from its
"best efforts" offering to acquire certain properties.
<TABLE>
<CAPTION>
HISTORICAL THE ARBORS PACE'S COVE
BALANCE PRO FORMA PRO FORMA TOTAL
SHEET ADJUSTMENTS ADJUSTMENTS PRO FORMA
<S> <C>
ASSETS
Investment in rental property
Land ............................. $ 8,686,051 $ 711,350 $ 1,987,209 $ 11,384,610
Building ......................... 40,821,725 7,192,535 7,475,693 $ 55,489,953
Property improvements ............ 130,343 -- -- 130,343
Furniture and fixtures ........... 80,257 -- -- 80,257
------------ ------------ ------------ ------------
49,718,376 7,903,885 9,462,902 67,085,163
Less accumulated depreciation .... (137,689) -- -- (137,689)
------------ ------------ ------------ ------------
49,580,687 7,903,885 9,462,902 66,947,474
Cash and cash equivalents ........ 1,383,740 -- -- 1,383,740
Prepaid expenses ................. 132,486 -- -- 132,486
Other assets ..................... 738,614 -- -- 738,614
------------ ------------ ------------ ------------
Total Assets ...................... $ 51,835,527 $ 7,903,885 $ 9,462,902 $ 69,202,314
============ ============ ============ ============
LIABILITIES
Notes payable .................... $ 10,000,000 -- -- $ 10,000,000
Accounts payable ................. 508,843 -- -- 508,843
Accrued expenses ................. 643,364 -- -- 643,364
Rents received in advance ........ 19,241 -- -- 19,241
Tenant security deposits ......... 214,087 -- -- 214,087
------------ ------------ ------------ ------------
11,385,535 -- -- 11,385,535
SHAREHOLDERS' EQUITY
Common stock, no par value ....... $ 39,893,737 $ 7,903,885 $ 9,462,902 $ 57,260,524
Class B Convertible Stock, no par
value ........................... 20,000 -- -- 20,000
Receivable from principal share-
holder .......................... (20,000) -- -- (20,000)
Net income ....................... 556,255 -- -- 556,255
------------ ------------ ------------ ------------
40,449,992 7,903,885 9,462,902 57,816,779
------------ ------------ ------------ ------------
Total Liabilities and Shareholders'
Equity ........................... $ 51,835,527 $ 7,903,885 $ 9,462,902 $ 69,202,314
============ ============ ============ ============
</TABLE>
NOTES TO PRO FORMA BALANCE SHEET
Pro Forma adjustments represent the purchase price of the related property,
including the 2% acquisition fee to Cornerstone Realty Income Trust, Inc.
allocated between land and building. Adjustments to common stock reflect the net
proceeds from sales of common stock from the Company's continuous offering.
11
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
The accompanying Unaudited Pro Forma Statement of Operations for the
year ended December 31, 1996 is presented as if (a) the Company had acquired the
properties shown below on January 1, 1996; (b) the Company had qualified as a
REIT, distributed at least 95% of its taxable income and, therefore, incurred no
federal income tax liability for the period presented; and (c) the Company had
used proceeds from its best efforts offering to acquire the properties. The
Company had no operations during the period ending December 31, 1996.
Accordingly, the Company had no revenue or operating profits or loss. In the
opinion of management, all adjustments necessary to reflect the effects of these
transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the year ended December 31, 1996 if
the acquisitions and offering had occurred at the beginning of the period
presented, nor does it purport to be indicative of the results of operations in
future periods. The Unaudited Pro Forma Statement of Operations should be read
in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of the Company.
<TABLE>
<CAPTION>
HISTORICAL BROOKFIELD EAGLE CREST TAHOE MILL CROSSING POLO RUN
STATEMENT PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
<S> <C>
Dates of Acquisitions ........ -- 1/31/97 1/31/97 1/31/97 2/28/97 3/31/97
Rental income -- $1,198,543 $3,196,618 $1,200,270 $ 908,336 $1,304,547
Expenses
Utilities ................... -- 92,664 305,101 149,166 148,270 128,924
Repairs and maintenance ..... -- 174,233 379,120 351,750 216,500 257,602
Taxes and insurance -- 152,636 438,546 145,184 115,377 162,030
Property management fee ..... -- -- -- -- -- --
Advertising ................. -- 30,567 53,153 29,695 25,631 25,350
Other operating expenses .... -- -- -- -- -- --
General and administrative .. -- -- -- -- -- --
-- -- -- -- --
Depreciation of real estate . -- -- -- -- -- --
Amortization ................ -- -- -- -- -- --
Other ....................... -- 91,702 159,460 89,086 76,891 76,050
---------- ---------- ---------- ---------- ----------
-- 541,802 1,335,380 764,881 582,669 649,956
Interest before interest income -- 656,741 1,861,238 435,389 325,667 654,591
Interest income ............. -- -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income -- $656,741 $1,861,238 $ 435,389 $ 325,667 $ 654,591
========== ========== ========== ========== ==========
Net income per share .......... --
Weighted average number of
shares outstanding ........... --
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PACES
WILDWOOD TOSCANA THE ARBORS COVE
PRO FORMA PRO FORMA PRO FORMA ADJUST- PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS MENTS ADJUSTMENTS PROFORMA
<S> <C>
Dates of Acquisitions ........... 3/31/97 3/31/97 4/25/97 6/30/97 -- --
Rental income .................. $ 809,555 $ 1,083,249 $ 1,381,014 $ 1,832,695 -- $12,914,827
Expenses
Utilities .................... 78,937 84,886 85,182 118,907 -- 1,192,037
Repairs and maintenance ...... 123,470 117,117 109,577 273,102 -- 2,002,471
Taxes and insurance .......... 100,862 142,695 182,186 256,812 -- 1,696,128
Property management fee ...... -- -- -- -- 620,527 (A) 620,527
Advertising .................. 27,509 32,221 27,909 59,257 -- 311,292
Other operating expenses ..... -- -- -- -- -- --
General and administrative ... -- -- -- -- 142,211 (B) 452,211
-- -- -- -- 310,000 (D) --
Depreciation of real estate .. -- -- -- -- 1,726,751 (C) 1,726,751
Amortization ................. -- -- -- -- -- --
Other .......................... 82,526 96,663 83,727 177,773 -- 933,878
----------- ----------- ----------- ----------- -------------- -----------
413,304 473,582 488,581 885,651 2,799,489 8,935,295
Interest before interest income 396,251 609,667 892,433 947,044 (2,799,489) 3,979,532
Interest income .............. -- -- -- -- -- --
Net income ............ $ 396,251 $ 609,667 $ 892,433 $ 947,044 $ (2,799,489) $ 3,979,532
=========== =========== =========== =========== ============== ===========
Net income per share ........... $ 0.59
Weighted average number of
shares outstanding ............ 6,705,113 (E) 6,705,113
============== ===========
</TABLE>
(A) Represents the property management fees of 5% of rental income and
processing costs equal to $2.50 per apartment per month charged by the
external management company for the period of time not owned by the
company.
(B) Represents the advisory fee of .25% of accumulated capital
contributions under the "best efforts" offering for the period of time
not owned by the company.
(C) Represents the depreciation expense of the properties acquired based on
the purchase price, excluding amounts allocated to land, of the
properties for the period of time not owned by the company. The
weighted average life of the property depreciated was 27.5 years.
(D) Represents the expenses related to operations as a public REIT, which
consists of directors and officers insurance, investor relations,
corporate accounting, legal fees and director expenses.
(E) Represents additional common shares assuming the properties were
acquired on January 1, 1996 with the "best efforts" offering of $9 per
share for the first $15 million and $10 per share above $15 million.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 8-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
Apple Residential Income Trust, Inc.
Date: August 13, 1997 By: /s/ Glade M. Knight
----------------------------
Glade M. Knight
President of
Apple Residential Income
Trust, Inc.
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K/A for Form 8-K dated June 24, 1997
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
Exhibit 23.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated July 22, 1997 with respect to
the statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Pace's Cove
Apartments for the twelve month period ended May 31, 1997 for inclusion in a
form 8K filing with the Securities and Exchange Commission by Apple Residential
Income Trust, Inc.
Richmond, Virginia /s/ L.P. Martin & Co., P.C.
July 22, 1997
