SUPPLEMENT NO. 1 DATED FEBRUARY 10, 1997
TO PROSPECTUS DATED NOVEMBER 19, 1996
APPLE RESIDENTIAL INCOME TRUST, INC.
The following information supplements the Prospectus of Apple Residential
Income Trust, Inc. dated November 19, 1996 and is part of such Prospectus.
Prospective investors should carefully review both the Prospectus and this
Supplement.
STATUS OF THE OFFERING.
As of January 31, 1997, the Company had closed the sale to investors of
$1,666,666.67 Shares at $9 per Share, and 1,691,137.73 Shares at $10 per Share,
representing aggregate gross proceeds to the Company of $31,911,377.
AUTHORIZATION FOR ADDITIONAL SHARE ISSUANCE.
On February 10, 1997, in response to a request from Cornerstone Realty Income
Trust, Inc. ("Cornerstone"), the Company's Board of Directors authorized the
grant to Cornerstone of a continuing right to purchase such number of Shares of
the Company as would, following any such purchase, be up to but not in excess of
9.8% of the total number of Shares of the Company then outstanding. This right
will continue for so long as the Company's Initial Offering continues, and the
purchase price for such Shares under such right would be the current public
offering price less the Selling Commissions and Marketing Expense Allowance
payable with respect thereto. Shares sold to Cornerstone pursuant to this right
would be in addition to, and not part of, the offering made by the Prospectus.
The Company elected to grant to Cornerstone this ongoing right because it
determined that the issuance of Shares in this manner would represent an
appropriate and financially prudent method of raising additional equity for the
Company. Glade M. Knight, who is a Director and the Chairman and President of
the Company, also serves as a Director, and the Chairman and Chief Executive
Officer of Cornerstone. To the extent that Cornerstone exercises its right to
acquire up to 9.8% of the outstanding Shares of the Company, Cornerstone may
become one of the largest, or perhaps the largest, shareholder of the Company,
with commensurate voting power.
PROPERTY ACQUISITIONS.
On January 28, 1997, the Company acquired the Brookfield Apartments in
Dallas, Texas, on January 30, 1997, the Company acquired the Eagle Crest I & II
Apartments in Irving, Texas, and on January 31, 1997, the Company acquired the
Tahoe Apartments in Arlington, Texas. Additional information on these properties
is provided below.
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BROOKFIELD APARTMENTS
DALLAS, TEXAS
On January 28, 1997, effective January 1, 1997, the Company purchased the
Brookfield Apartments, a 232-unit apartment complex having an address of 4060
Preferred Place, Dallas, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,458,485, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.
LOCATION. The following information is based in part upon information
provided by the Dallas Chamber of Commerce.
The Property is located in south Dallas, within the Dallas/Fort Worth
Consolidated Metropolitan Statistical area, or as it is called locally, "The
Metroplex." The Dallas/Fort Worth Metroplex is in the north-central part of
Texas and is composed of nine counties. The 1996 population of The Metroplex was
approximately 4,400,000. Dallas is the second largest city in the state, behind
Houston.
The economy of the Dallas/Fort Worth area is complex and diversified. Key
economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J. C.
Penney, NationsBank and Vought Aircraft Company.
The Metroplex is also an established transportation center for the nation.
The Dallas/Fort Worth International Airport occupies approximately 17,800 acres
of land between the two cities. It is the largest commercial airport in the
United States in terms of land area, and is the fourth busiest airport in the
world, with 1,700 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The Property is located in a well-established area of Dallas near the Red
Bird Mall. The area is characterized by various retail centers, restaurants and
businesses. Downtown Dallas is an approximately 15-minute drive from the
Property. The Property is an approximately 25-minute drive from Dallas/Fort
Worth International Airport.
DESCRIPTION OF THE PROPERTY. The Property consists of 232 garden-style
apartments located in 15 two- and three-story buildings on approximately seven
acres of land. The Property was completed in 1984.
The Company believes that the Property has generally been well maintained and
is generally in good condition. However, the Company has budgeted approximately
$232,000 of the proceeds of its offering of Shares for repairs and improvements,
including clubhouse renovation, painting, wood replacement, and parking lot
repair.
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The Property offers seven different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ----------------------------------------- ------------- ---------
39 One bedroom, one bath 578 $380
9 One bedroom, one bath (view) 578 390
36 One bedroom, one bath w/sunroom 658 405
12 One bedroom, one bath w/sunroom (view) 658 415
24 One bedroom, one bath w/WD connections 669 430
One bedroom, one bath w/WD connections,
48 FP, bookshelves 661 440
Two bedrooms, two baths w/WD connections,
64 FP, bookshelves 913 565
The apartments provide a combined total of approximately 165,000 square feet
of net rentable area.
Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example, a two-bedroom, two-bath apartment rented for $520 in 1992, $520 in
1993, $530 in 1994, $545 in 1995, and $565 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.11, $7.11, $7.24, $7.45 and $7.72, respectively.
The buildings are wood frame construction with a combination of brick veneer
and masonite hardboard exteriors on reinforced concrete slab foundations. Roofs
are sloped fiberglass shingles on plywood.
The Property has an outdoor swimming pool with a large deck, a hot tub, a
controlled access entrance and exit gate, and covered parking for approximately
232 vehicles. The Property also includes a clubhouse with a leasing office.
There is also uncovered paved parking for residents.
Apartment units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment unit has a television hook-up,
mini-blinds, drapes on sliding glass doors and individually controlled heating
and air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer
with ice maker, electric range and oven, dishwasher and garbage disposal. Also,
as indicated in the table above, some units have a woodburning fireplace, a
utility area with washer/dryer connections, bookshelves, ceiling fans or a
sunroom. The owner of the Property pays for cold water, sewer service, gas usage
for hot water and trash removal. Tenants pay for their electricity service,
which includes cooking, lighting, heating and air-conditioning.
There are at least 10 apartment properties which compete with the Property.
All offer similar amenities and generally have rents that are higher when
compared with those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 90%.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 92% in 1992, 93% in 1993, 93% in 1994, 94% in
1995 and 97% in 1996. On January 1, 1997, the Property was 98% occupied. The
residents are a mix of blue-collar and white-collar workers, students and
retired persons.
The following table sets forth the 1996 real estate tax information on the
Property:
ASSESSED
JURISDICTION VALUE RATE TAX
---------------- ------------ ---------- -------------
County of Dallas................... $5,038,370 $0.46255 $ 23,304.98
City of Dallas..................... 5,038,370 2.13063 107,349.02
-------------
Total............................. $130,654.00
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The basis of the depreciable residential real property portion of the
Property (currently estimated at about $3,980,880) will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will be continue
to be adequately covered by property and liability insurance.
ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $109,170. Apple
Residential Management Group, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.
EAGLE CREST I & II APARTMENTS
IRVING, TEXAS
On January 30, 1997, effective January 1, 1997, the Company purchased the
Eagle Crest I & II Apartments, a 484-unit apartment complex having an address of
4013 West Northgate, Irving, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $15,650,000, which the Company paid entirely
in cash using proceeds from the sale of the Shares. Title to the Property was
conveyed to the Company by limited warranty deed.
LOCATION. See above under "Brookfield Apartments" for a description of the
greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Irving, Texas.
Irving is approximately eight miles west of the Dallas central business
district and approximately 25 miles east of downtown Fort Worth. Irving is a
relatively young city with a majority of its development occurring during the
latter half of this century. The location of Irving between Dallas and Fort
Worth, and near Dallas/Fort Worth International Airport, has enabled it to
garner a large portion of the area's recent commercial and industrial
development.
Irving is the site of Las Colinas, one of the nation's largest master-planned
real estate developments. The development occupies approximately 12,500 acres
and includes residential developments, office space, research, distribution and
light industrial facilities, four golf courses, the Las Colinas Sports Club and
an equestrian center.
Las Colinas is targeted to large employers and is the home of numerous
regional and national businesses. The Irving employment sector is primarily
white-collar. Significant employers in Las Colinas include Exxon, GTE, Aetna,
Abbott Laboratories, Boeing, US Sprint, Computer Associates, Allstate Insurance,
Zale Jewelers and the Federal Home Loan Bank Board. In addition, Columbia/HCA
Health Care Corporation recently signed an agreement to buy approximately 28
acres in the development. The plans for the land include a community hospital
with medical office complex and a full-service acute-care facility.
Irving has a well-defined highway system. The city is connected to Dallas by
State Highway 114 on the northeast, State Highway 183 in its central portion and
Interstate 30 on the south.
The Property is located off of Belt Line Road in Irving. The immediate
neighborhood includes other multi-family communities, and residential,
commercial and retail development. The Property is conveniently located near
restaurants, businesses, schools, and churches, and is readily accessible from
Highways 161 and 183. The Property is an approximately 5-minute drive from
Dallas/Fort Worth International Airport.
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DESCRIPTION OF THE PROPERTY. The Property consists of 484 apartment units in
31 two- and three-story buildings on approximately 18 acres of land. There are
296 apartment units in Phase I, which was built in 1983, and 188 apartment units
in Phase II, which was built in 1985.
The Company believes that the Property has generally been well maintained and
is generally in good condition. However, the Company has budgeted approximately
$968,000 for repairs and improvements, including clubhouse renovations,
structural repair of shrink/swell soil conditions, painting, and wood
replacement.
The Property offers a wide range of units types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ------------------------------------- ------------- -----------
116 One bedroom, one bath 698 $480-$490
120 One bedroom, one bath 796 515-525
4 One bedroom, one bath, sunroom, bar 798 540-560
48 One bedroom, one bath 896 580-590
24 Two bedrooms, one bath 912 580-590
63 Two bedrooms, two baths 1023 645-665
80 Two bedrooms, two baths 1089 675-695
1 Two bedrooms, two baths, sunroom 1123 705
4 Two bedrooms, two baths, sunroom, bar 1189 735
21 Two bedrooms, two baths 1124 715-725
3 Two bedrooms, two baths, sunroom 1224 785
The apartments provide a combined total of approximately 429,000 square feet
of net rentable area.
Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example, a one-bedroom, one-bath apartment rented for $445 in 1992, $445 in
1993, $445 in 1994, $469 in 1995, and $485 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.17, $7.17, $7.17, $7.56 and $7.81, respectively.
The buildings are wood frame construction with a combination of brick veneer
and masonite hardboard siding on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.
The Property has three outdoor swimming pools, two jacuzzis, three laundry
facilities, a fitness building, gas grills and ice machines. The Property also
has a clubhouse with a leasing office. There is ample paved parking for
residents.
Each apartment unit has wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, double stainless
steel sink, a dishwasher and garbage disposal. All apartment units include
washer/dryer connections for full-sized appliances. Some apartment units feature
additional amenities, such as linen closets, a fireplace with mantle, ceiling
fans, a pantry closet, a dry bar, an entertainment center, vaulted ceilings, a
sunroom and greenhouse windows. The owner of the Property pays for cold water,
gas for hot water, sewer service, and trash removal. The tenants pay for their
electricity usage, which includes cooking, lighting, heating and
air-conditioning.
There are at least four apartment properties which compete with the Property.
All offer similar amenities and generally have rents that are comparable to
those of the Property. Based on a recent telephone survey, the Advisor estimates
that occupancy in nearby competing properties now averages approximately 95%.
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According to information provided by the seller, physical occupancy at the
Property averaged approximately 95% in 1992, 94% in 1993, 95% in 1994, 95% in
1995 and 97% in 1996. On January 1, 1997, the Property was 95% occupied. The
tenants are a mix of white-collar and blue-collar workers.
The following tables set forth the 1996 real estate tax information on the
Property:
PHASE I
ASSESSED
JURISDICTION VALUE RATE TAX
---------------------- ------------ ---------- --------------
County of Dallas.................... $7,900,000 $0.46255 $ 36,541.45
City of Irving...................... 7,900,000 0.50860 40,179.40
Irving School District.............. 7,900,000 1.66340 131,408.60
--------------
Total.............................. $208,129.45
PHASE II
ASSESSED
JURISDICTION VALUE RATE TAX
---------------------- ------------ ---------- -------------
County of Dallas..................... $5,119,340 $0.46255 $ 23,679.51
City of Irving....................... 5,119,340 0.50860 26,036.96
Irving School District............... 5,119,340 1.66340 85,155.10
-------------
Total............................... $134,871.57
Grand Total......................... $343,001.02
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $10,487,730) will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will be continue
to be adequately covered by property and liability insurance.
ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $313,000. Apple
Residential Management Group, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.
TAHOE APARTMENTS
ARLINGTON, TEXAS
On January 31, 1997, effective January 1, 1997, the Company purchased the
Tahoe Apartments, a 240-unit apartment complex having an address of 2308 Fair
Oaks Drive, Arlington, Texas (the "Property").
The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,625,000, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.
Location. See above under "Brookfield Apartments" for a description of the
greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Arlington, Texas.
The Property is located in the city of Arlington, which is located between
Dallas and Fort Worth. Arlington is approximately 13 miles east of the Fort
Worth Central Business district and approximately 20 miles west of the Dallas
Central Business District.
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Owing in large part to its location between Dallas and Fort Worth, Arlington
has become a focus of business development in the area. Major employers include
General Motors, National Semiconductor, Johnson & Johnson, Doskocil
Manufacturing Company and Arlington Memorial Hospital. The area is also the site
of several large warehousing and distribution companies whose primary market is
the Metroplex.
The University of Texas at Arlington has an enrollment of approximately
23,000 students. Arlington also serves as a major medical center for its own
population and for residents of outlying communities as well. Arlington Memorial
Hospital has a staff of approximately 1,680 and HCA South Arlington Medical
Center has approximately 640 employees, making both of them among the largest
employers in the city.
The immediate area surrounding the Property consists of other multifamily
housing, residential, commercial and retail development. The Property is
conveniently located near restaurants, businesses, schools and churches, and is
readily accessible from Interstate 20 and Interstate 30.
Description of the Property. The Property consists of 240 garden-style
apartment units in 18 two- and three-story buildings on approximately 9.8 acres
of land. The Property was built in 1979.
The Company believes that the Property has generally been well maintained and
is generally in good condition. However, the Company has budgeted approximately
$316,000 for repairs and improvements including exterior painting and exterior
siding replacement.
The Property offers five different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ----------------------- ------------- ---------
64 One bedroom, one bath 480 $370
64 One bedroom, one bath 575 404
48 One bedroom, one bath 634 430
32 Two bedrooms, two baths 941 584
32 Two bedrooms, two baths 1,027 619
The apartments provide a combined total of approximately 161,000 square feet
of net rentable area.
Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
one bedroom, one bath apartment rented for $320 in 1992, $345 in 1993, $365 in
1994, $394 in 1995, and $404 in 1996. The average effective annual rental per
square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was $6.41,
$6.91, $7.31, $7.89, and $8.09, respectively.
The buildings are wood frame construction with a combination of brick veneer
and masonite hardboard exteriors on reinforced concrete slab foundations. Roofs
are sloped fiberglass shingles over plywood.
The Property has an outdoor swimming pool, a hot tub, two laundry facilities,
a fitness center, a sand volleyball court and covered parking for approximately
32 vehicles. The Property also has a clubhouse with a leasing office. There is
also uncovered paved parking for residents.
Each apartment unit has wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds, vertical blinds and an individually controlled heating and
air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer with
icemaker, electric range and oven, dishwasher, microwave and garbage disposal.
Some units have a woodburning fireplace and washer/dryer connections. The owner
of the Property pays for cold water, sewer service, natural gas for hot water
and trash removal. Tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.
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There are at least four apartment properties which compete with the Property.
All offer similar amenities and generally have rents that are higher when
compared with those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 95%.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 94% in 1992, 93% in 1993, 95% in 1994, 89% in
1995 and 94% in 1996. On January 1, 1997, the Property was 88% occupied. The
tenants are a mix of white-collar and blue-collar workers.
The following table sets forth the 1996 real estate tax information on the
Property:
ASSESSED
JURISDICTION VALUE RATE TAX
----------------- ------------ ---------- -----------
County of Tarrant.................. $4,500,000 $1.90619 $ 85,778.37
City of Arlington.................. 4,500,000 0.64000 28,800.00
-----------
Total ............................ $114,578.37
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,075,000) will be depreciated over a
27.5 years on a straight-line basis. The basis of the personal property portion
will be depreciated in accordance with the modified accelerated cost recovery
system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.
The Advisor and the Company believe that the Property is and will continue to
be adequately covered by property and liability insurance.
Acquisition and Management Services and Fees. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $112,500. Apple
Residential Management Group, Inc. will serve as property manager for the
Property and for its service will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.
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