UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 0-23983
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1816010
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal executive offices) (Zip Code)
(804) 643-1761
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At August 1, 1998, there were outstanding 21,773,998 shares of common stock, no
par value, of the registrant.
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1998 3
and December 31, 1997
Consolidated Statements of Operations - 4
Three months ended June 30, 1998 and June 30, 1997
Six months ended June 30, 1998 and June 30, 1997
Consolidated Statement of Shareholders' Equity- 5
Six months ended June 30, 1998
Consolidated Statements of Cash Flows - 6
Six months ended June 30, 1998
and June 30, 1997
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 12
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings (not applicable).
Item 2. Changes in Securities and Use of Proceeds. 16
Item 3. Defaults Upon Senior Securities (not applicable).
Item 4. Submission of Matters to a Vote of
Security Holders (not applicable).
Item 5. Other Information (not applicable).
Item 6. Exhibits and Reports on Form 8-K.
17
</TABLE>
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------- ----------------
<S> <C>
ASSETS
Investment in Rental Property
Land $25,515,794 $15,396,823
Buildings and property improvements 111,419,576 73,113,886
Furniture and fixtures 1,896,013 1,123,639
----------------- ----------------
138,831,383 89,634,348
Less accumulated depreciation (3,978,003) (1,898,003)
----------------- ----------------
134,853,380 87,736,345
Cash and cash equivalents 45,877,272 24,162,572
Prepaid expenses 99,503 142,581
Other assets 1,128,864 444,022
----------------- ----------------
Total Assets $181,959,019 $112,485,520
================= ================
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Accounts payable 1,235,261 536,324
Accrued expenses 1,710,253 2,143,888
Rents received in advance 42,745 70,051
Tenant security deposits 588,753 394,702
----------------- ----------------
Total Liabilities 3,577,012 3,144,965
Shareholders' equity
Common stock, no par value, authorized 50,000,000
shares; issued and outstanding 20,109,698 shares
and 12,371,829 shares, respectively 178,551,942 109,090,459
Class B convertible stock, no par value, authorized 200,000 shares;
issued and outstanding 200,000 shares 20,000 20,000
Receivable from officer-shareholder - (20,000)
Net income greater than distributions (189,935) 250,096
----------------- ----------------
Total Shareholders' Equity 178,382,007 109,340,555
----------------- ----------------
Total Liabilities and Shareholders' Equity $181,959,019 $112,485,520
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
--------------------------------- -------------------------------
<S> <C>
REVENUE:
Rental income $6,106,378 $2,824,034 $11,035,129 $3,978,434
EXPENSES:
Property and maintenance 1,634,846 808,237 2,871,674 1,100,889
Taxes and insurance 724,401 472,857 1,462,552 578,955
Property management 349,207 135,790 606,245 196,453
General and administrative 194,322 109,314 357,195 182,649
Amortization expense 8,484 8,484 16,968 16,960
Depreciation of rental property 1,190,455 305,652 2,080,000 443,341
--------------------------------- -------------------------------
Total expenses 4,101,715 1,840,334 7,394,634 2,519,247
--------------------------------- -------------------------------
Income before interest income (expense) 2,004,663 983,700 3,640,495 1,459,187
Interest income 485,409 3,606 821,796 88,541
Interest expense (13,330) (156,837) (25,831) (161,004)
--------------------------------- -------------------------------
Net income $2,476,742 $830,469 $4,436,460 $1,386,724
================================= ===============================
Basic and diluted earnings per common share $0.14 $0.15 $0.28 $0.31
================================= ===============================
Distributions per common share $ 0.20 $ 0.20 $ 0.41 $ 0.20
================================= ===============================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Convertible Class B Stock
--------------------- ------------------------ Receivable Net Income Total
Number Number From Officer- Greater Than Shareholders'
of Shares Amount of Shares Amount Shareholder Distributions Equity
------------------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1997 12,371,829 $109,090,459 200,000 $20,000 ($20,000) $ 250,096 $109,340,555
Net proceeds from the sale of shares 7,438,580 66,767,882 - - - - 66,767,882
Net income - - - - - 4,436,460 4,436,460
Cash distributions declared to shareholders
($.41 per share) - - - - - (4,876,491) (4,876,491)
Payment from officer-shareholder - - - - 20,000 - 20,000
Shares issued through Additional Share Option 299,289 2,693,601 - - - - 2,693,601
------------------------------------------------------------------------------------
Balance at June 30, 1998 20,109,698 $178,551,942 200,000 $20,000 - ($189,935) $178,382,007
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
<S><C>
Six Months Ended
June 30, June 30,
1998 1997
----------------------------------------------------
Cash flow from operating activities:
Net income $4,436,460 $1,386,724
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 2,096,968 460,301
Amortization of deferred financing costs 25,831 16,668
Changes in operating assets and liabilities:
Prepaid expenses 43,078 (144,540)
Other assets (727,641) (235,148)
Accounts payable 698,937 276,966
Accrued expenses (633,699) 644,150
Rent received in advance (27,306) 3,772
Tenant security deposits (8,291) 53,311
----------------- ----------------
Net cash provided by operating activities 5,904,337 2,462,204
Cash flow from investing activities:
Acquisitions of rental property, net of liabilities assumed (44,875,121) (66,314,416)
Capital improvements (3,919,508) (1,255,299)
----------------- ----------------
Net cash used in investing activities (48,794,629) (67,569,715)
Cash flow from financing activities:
Proceeds from short-term borrowings - 26,540,000
Repayments of short-term borrowings - (16,540,000)
Payment from officer-shareholder 20,000 -
Net proceeds from issuance of shares 69,461,483 56,720,606
Cash distributions paid to shareholders (4,876,491) (680,482)
----------------- ----------------
Net cash provided by financing activities 64,604,992 66,040,124
Increase in cash and cash equivalents 21,714,700 932,613
Cash and cash equivalents, beginning of year 24,162,572 -
----------------- ----------------
Cash and cash equivalents,
end of period $45,877,272 $932,613
================= ================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
APPLE RESIDENTIAL INCOME TRUST, INC
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1998
(1) General Information and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information required by generally accepted accounting principles. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended
June 30, 1998 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998. These financial
statements should be read in conjunction with the Company's December
31, 1997 Annual Report on Form 10-K.
All earnings per share amounts for all periods have been presented and
where appropriate, restated to conform to the Statement 128
requirements.
Certain previously reported amounts have been reclassified to conform
with the current financial statement presentation.
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's
net income or shareholders' equity. The Company does not currently
have any items of comprehensive income requiring separate reporting
and disclosure.
The Company commenced operations in January 1997.
<PAGE>
(2) Investment in Rental Property
The Company purchased five properties located in the Dallas/ Fort
Worth area of Texas for $43,730,000 during the six months ended June
30, 1998. The following is a summary of rental property acquired
during the six months ended June 30, 1998:
Initial Date of
Description Acquisition Cost Acquisition
----------- ---------------- -----------
Main Park $ 8,000,000 February, 1998
Timberglen 12,000,000 February, 1998
Copper Ridge 4,525,000 March, 1998
Silver Brook 13,505,000 May, 1998
(formerly Bitter Creek)
Summer Tree 5,700,000 June, 1998
(3) Related Parties
Prior to March 1, 1997, the Company had contracted with Apple
Residential Management Group, Inc. (the "Management Company") to
manage the acquired properties, Apple Residential Advisors, Inc. (the
"Advisor") to advise and provide the Company with day to day
management, and Apple Realty Group, Inc. to acquire and dispose of
real estate assets held by the Company. The Company paid the
Management Company a management fee equal to 5% of rental income plus
reimbursement of certain expenses in the amount of $52,375. The
Company paid the Advisor a fee equal to .25% of total contributions
received by the Company in the amount of $14,894. The Company paid
Apple Realty Group, Inc. a fee of 2% of the purchase price of the
acquired properties in the amount of $624,382.
Effective March 1, 1997, with the approval of the Company, Cornerstone
Realty Income Trust Inc. ("Cornerstone"), for which Glade M. Knight
(Chief Executive Officer and Chairman of the Board of the Company)
also serves as Chief Executive Officer and Chairman, entered into
subcontract agreements with the Management Company and Advisor whereby
Cornerstone will provide advisory and property management services to
the Company in exchange for fees and expense reimbursement per the
same terms described above. For the six months ended June 30, 1998,
the Company paid Cornerstone $817,954 under the agreements and
$84,000 for certain reimbursable items.
During 1997, with the consent of the Company, Cornerstone acquired all
the assets of Apple Realty Group, Inc. The sole material asset of the
company was the acquisition/disposition agreement with the Company.
Cornerstone paid $350,000 in cash and issued 150,000 common shares
(valued at $11 per common share for a total of $1,650,000) in exchange
for the assignment of the rights to the acquisition/disposition
agreement. Cornerstone is entitled, under the terms of the
acquisition/disposition agreement, to a real estate commission equal
to 2% of the gross purchase price of the Company's properties plus
reimbursement of certain expenses to the extent proceeds from the
Company's equity offering are used to purchase the property. For the
six months ended June 30, 1998, the Company paid Cornerstone
approximately $874,600 under the agreement and $12,500 for expense
reimbursement.
<PAGE>
During the first quarter of 1997, the Company granted Cornerstone a
continuing right to acquire up to 9.8% of the common shares of the
Company at the market price, net of selling commissions, extending
through the end of the Company's initial public offering of its
shares. In April 1997, Cornerstone purchased 417,778 common shares of
the Company at $9 per share for approximately $3.76 million.
Cornerstone owns approximately 2% of the total common shares of the
Company outstanding as of June 30, 1998. Cornerstone intends to make
periodic evaluations of the advisability of purchasing additional
common shares of the Company and may make such purchases, if such
purchases are deemed by the Cornerstone board of directors to be in
the best interests of Cornerstone and its shareholders.
(4) Earnings Per Common Share
The following table sets forth the computation of basic and diluted
earnings per common share:
<TABLE>
<CAPTION>
<S> <C>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
6/30/98 6/30/98 6/30/97 6/30/97
------------ ---------- ------------ ----------
Numerator:
Net income $2,476,742 $4,436,460 $830,469 $1,386,724
Numerator for basic and
diluted earnings 2,476,742 4,436,460 830,469 1,386,724
Denominator:
Denominator for basic
earnings per share-weighted-
average shares 17,828,897 15,855,507 5,458,096 4,430,927
Effect of dilutive securities:
Stock options - - - -
------------ ---------- --------- ---------
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions 17,828,897 15,855,507 5,458,096 4,430,927
------------ ---------- --------- ---------
Basic and diluted earnings per
common share $ .14 $ 0.28 $ .15 $ 0.31
------------ ---------- --------- ----------
</TABLE>
(5) Subsequent Events
During July 1998, the Company distributed to its shareholders
approximately $3,581,284 (20.5 cents per share) of which approximately
$2,238,677 was reinvested in the purchase of additional shares through
the Additional Share Option. During July 1998, the Company also closed
the sale to investors of 1,440,433 shares at $10 per share
representing net proceeds to the Company after payment of brokerage
fees of $12,963,897.
<PAGE>
During July 1998, the Company purchased the following eight apartment
communities:
<TABLE>
<CAPTION>
<S> <C>
Contractual
Interest
Property Name Units Purchase Price Debt Assumed Maturity Date Rate Location
- ------------- ----- -------------- ------------ ------------ ----------- --------
Park Village 238 $7,000,000 - - - Bedford,TX
Cottonwood 200 5,700,000 - - - Arlington, TX
Crossing
Pace's Point 300 11,405,000 $7,713,617 7-1-2003 8.555% Lewisville, TX
Pepper Square 144 5,205,000 3,643,424 7-1-2006 8.575 North Dallas, TX
Emerald Oaks 250 10,930,000 6,685,706 4-1-2007 6.75 Grapevine, TX
Hayden's Crossing 170 4,705,000 3,072,399 4-1-2004 6.47 Grand Prairie, TX
Newport 200 6,330,000 3,043,873 12-1-2005 6.675 Austin, TX
Estrada Oaks 248 9,350,000 - - - Irving, TX
</TABLE>
Park Village Apartments, Cottonwood Crossing Apartments, and Estrada
Oaks Apartments were purchased with proceeds from the equity offering.
The remaining properties were purchased through a combination of
proceeds from the equity offering and assumption of mortgage loans.
The total of the mortgage loans assumed at acquisition was
$24,159,019.
<PAGE>
(6) Acquisitions (unaudited)
The following unaudited pro forma information for the six months ended
June 30, 1998 and 1997 assumes the property acquisitions made during
the first six months of 1998 and all of 1997 were made by the Company
on January 1 of the respective year and is presented as if (a) the
Company had qualified as a REIT, distributed at least 95% of its
taxable income and, therefore incurred no federal income tax expense
during the period, and (b) the Company had used proceeds from its best
efforts offering to acquire the properties. The pro forma information
does not purport to represent what the Company's results of operations
would actually have been if such transactions, in fact, had occurred
on January 1 of the respective year, nor does it purport to represent
the results of operations for future periods.
Six Months Six Months
Ended Ended
6/30/97 6/30/97
---------- ----------
Rental Income $12,930,805 $12,808,170
Net income $ 4,968,966 $ 3,927,518
Net Income Per Share $ .27 $ .26
The pro forma information reflects adjustments for the actual rental
income and rental expenses of the 5 acquisitions made in 1998 and the
12 acquisitions made in 1997 for the respective periods in 1998 and
1997 prior to their acquisition by the Company. Net income has been
adjusted as follows: (1) property management and advisory expenses
have been adjusted based on the Company's contractual arrangements of
5% of revenues from rental income plus reimbursement of certain
monthly expenses estimated to be $2.50 per unit; (2) advisory expenses
have been adjusted based on the Company's contractual arrangement of
.25% of annual gross proceeds of common stock raised; (3)
depreciation has been adjusted based on the Company's allocation of
purchase price to buildings over an estimated useful life of 27.5
years, and (4) weighted average number of shares has been adjusted
assuming the properties were acquired with the net proceeds from the
Company's "best efforts" offering of $10 per share (net $8.70 per
share).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include, without limitation, statements
concerning anticipated improvements in financial operations from
completed and planned property renovations. Such statements involve
known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of the Company
to be materially different from the results of operations or plans
expressed or implied by such forward-looking statements. Such factors
include, among other things, unanticipated adverse business
developments affecting the Company or the properties, as the case may
be, adverse changes in the real estate markets and general and local
economies and business conditions. Although the Company believes that
the assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate, and
therefore there can be no assurance that such statements included in
this quarterly report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that
the results or conditions described in such statements or the
objectives and plans of the Company will be achieved.
Results of Operations
Income and occupancy
Substantially all of the Company's income is from the rental operation
of apartment communities. The Company's rental income for six months
ended June 30,1998 reflect the operations from the properties acquired
before 1998 and from the 5 properties acquired in 1998 from their
respective acquisition dates. Rental income for the first six months
increased to $11,035,129 in 1998 from $3,978,434 in 1997. For the
second quarter of 1998 rental income increased to $6,106,378 from
$2,824,034 in 1997. The increase in rental income is primarily due to
the 1997 acquisition operations, as well as the incremental effect of
the 1998 acquisition operations.
Rental income is expected to continue to increase from the impact of
planned improvements which are being made in an effort to improve the
properties' marketability, economic occupancies, and rental rates.
Overall economic occupancy for the Company's properties was 92% and
94% at the three months ended and six months ended June 30, 1998 and
1997. Overall, the average rental rates for the portfolio increased 4%
to $514 from $493 per month for the six months ended June 30, 1998 and
1997, respectively. For the second quarter of 1998 and 1997 average
rental rates increased 14% to $530 to $464 per month, respectively.
The increase is primarily due to rental increases combined with
increases in average rental rates of properties acquired.
<PAGE>
The Company's other source of income is the investment of its cash and
cash reserves. Interest income for the six months ended June 30, 1998
and 1997 was $821,796 and $88,541, respectively. For the second
quarter of 1998 and 1997, interest income was $485,409 and $3,600,
respectively. The increases are due to the Company's investment
balance held in liquid money market investments pending use for
acquisitions. The investment rate was 4.9% at June 30, 1998. It is
anticipated the interest income will decrease with future
acquisitions.
Expenses
Total expenses for the first six months of 1998 increased to
$7,394,634 from $2,519,247 in 1997. For the second quarter of 1998,
total expenses increased to $4,101,715 from $1,840,334 for the same
period in 1997. The increases are due largely to the increase in the
number of apartments. The operating expense ratio (the ratio of rental
expenses, excluding general and administrative, amortization and
depreciation expense, to rental income) was 45% and 47% for the six
months ended June 30, 1998 and 1997, respectively. For the second
quarter of 1998 and 1997, the operating expense ratio was 44% and 50%,
respectively. The decreases are primarily due to a full period of
operation of the 1997 acquisitions and increased efficiencies
associated with economies of scale.
General and administrative expenses totaled 3.2% of total rental
income for the six months ended June 30, 1998 and 4.6% for the same
period in 1997. For the second quarter of 1998 and 1997, general and
administrative expense totaled 3.2% and 3.9%, respectively, of total
income. This percentage is expected to decrease as the Company's asset
base and rental income grow. These expenses represent the
administrative expenses of the Company as distinguished from the
operations of the Company's properties.
Depreciation expense for the six month period ended June 30 has
increased to $2,080,000 in 1998 from $443,341 in 1997. For the second
quarter of 1998 depreciation expense was $1,190,455 in 1998 and
$305,526 for 1997. The increase is directly attributable to the
acquisition of additional apartment communities in 1998 and 1997.
Liquidity and Capital Resources
There was a significant change in the Company's liquidity during the
six months ended June 30, 1998, as the Company continued to acquire
properties. During the six months ended June 30, 1998, the Company
closed the sale to investors of 7,737,869 shares representing gross
proceeds to the Company of $77,378,698 and net proceeds after payment
of brokerage fees and other offering-related costs of $69,461,483.
<PAGE>
Using proceeds from the sale of common shares, the Company acquired
1,400 apartment homes in five residential rental communities during
first six months of 1998. The following is information on these five
acquisitions:
<TABLE>
<CAPTION>
Apartment
Property Name Date Acquired Homes Purchase Price Location
------------- ------------- ----- -------------- --------
<S> <C>
Main Park Apartments February 1998 192 $ 8,000,000 Duncanville, TX
Timberglen Apartments February 1998 304 12,000,000 Dallas, TX
Copper Ridge Apartments March 1998 200 4,525,000 Fort Worth, TX
Bitter Creek Apartments May 1998 472 13,505,000 Grand Prairie, TX
Summer Tree Apartments June 1998 232 5,700,000 Dallas, TX
</TABLE>
Notes payable
During July 1998, the Company purchased five properties through a
combination of using proceeds from the offering and assumption of
mortgage loans. The total of the mortgage loans assumed at acquisition
was approximately $24.1 million (see Note 5 to the consolidated
financial statements).
Cash and cash equivalents
Cash and cash equivalents totaled $45,877,272 at June 30, 1998. During
the first six months of 1998, the Company distributed $4,876,491 to
its shareholders, of which $2,992,890 was reinvested in additional
shares through the Additional Share Option. The reinvested funds
netted the Company $2,693,601 after payment of brokerage fees. During
the six months of 1998, the Company distributed $168,777 to
Cornerstone on shares that had been purchased by Cornerstone.
Capital requirements
The Company has an ongoing capital expenditure commitment to fund its
renovation program for recently acquired properties. In addition, the
Company is always assessing potential acquisitions and intends to
acquire additional properties during 1998. During July 1998, the
Company purchased eight properties for approximately $60.6 million.
The properties were purchased through a combination of using
approximately $36.4 million in proceeds from the offering and
assumption of mortgage loans totaling approximately $24.2 million. As
of August 1, 1998, no material definitive commitments existed for the
purchase of additional properties. The potential sources to fund the
improvements and any additional acquisitions include additional
equity, cash reserves, and debt provided by its line of credit.
The Company capitalized $3.9 million of improvements to its various
properties during the first six months of 1998. It is anticipated that
some $11 million in additional capital improvements will be completed
during the next year on the current portfolio, which are expected to
be funded through cash reserves and dividend reinvestment.
<PAGE>
The Company has short-term cash flow needs in order to conduct the
operation of its properties. The rental income generated from the
properties supplies sufficient cash to provide for the payment of
these operating expenses and distributions.
Capital resources are expected to grow with the future sale of its
shares and the cash flow from operations. Approximately 55% of 1998's
first and second quarter distributions, $2,693,601 (net of brokerage
commissions), were reinvested in additional common shares. In general,
the Company's liquidity and capital resources are expected to be
adequate to meet its cash requirements in 1998.
<PAGE>
Part II, Item 2. Changes in Securities and Use of Proceeds
The following table sets forth information concerning the Company's ongoing
offering of common shares (the "Offering") and the use of proceeds from the
Offering as of June 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Common Shares Registered:
1,666,666.67 Common Shares $ 9 per Common Shares $ 15,000,000
23,500,000.00 Common Shares $ 10 per Common Shares $ 235,000,000
-------------
Totals: 25,166,666.67 Common Shares
-------------
Common Shares Sold:
1,666,666.67 Common Shares $ 9 per Common Share $ 15,000,000
18,025,243.33 Common Shares $10 per Common Share $ 180,252,433
------------- -----------
Totals: 19,691,910.00 Common Shares $ 195,252,433
------------- -----------
Expenses of Issuance and Distribution of Common Shares
1. Underwriting discounts and commissions $ 19,525,243
2. Expenses of underwriters $ -
3. Direct or indirect payments to directors or officers
of the Company or their associates, to ten percent
shareholders, or to affiliates of the Company $ -
4. Fees and expenses of third parties $ 935,248
---------------
Total Expenses of Issuance and Distribution of
Common Shares $ 20,460,491
Net Proceeds to the Company $ 174,791,942
1. Purchase of real estate (including repayment of
indebtedness incurred to purchase real estate) $ 122,866,452
2. Interest on indebtedness $ 484,215
3. Working capital $ 46,701,165
4. Fees to the following (all affiliates of officers of
the Company):
a. Apple Residential Advisors, Inc. $ 14,894
b. Apple Realty Group, Inc. $ 624,382
c. Cornerstone Realty Income Trust, Inc. $ 4,100,834
5. Fees and expenses of third parties: $ -
a. Legal $ -
b. Accounting $ -
6. Other (specify ________________) $ -
-------------
Total of Application of Net Proceeds to the
Company $ 174,791,942
</TABLE>
<PAGE>
Part II, Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-K
The following table lists the reports on Form 8-K filed by the Company
during the quarter ended June 30, 1998, the items reported and the
financial statements included in such filings.
<TABLE>
<CAPTION>
Type and Date of Reports Items Reported Financial Statements Filed
- ------------------------ -------------- --------------------------
<S> <C>
Form 8-K/A (date of Original 7 Historical Statement of Income and
Report: February 4, 1998) Direct Operating Expenses of Main
Park Apartments for the twelve
months ended December 31, 1997
Form 8-K/A (date of Original 7 Historical Statement of Income and
Report: February 13, 1998) Direct Operating Expenses of
Timberglen Apartments for the twelve
months ended December 31, 1997
Form 8-K dated March 2,7 None
31, 1998
Form 8-K/A (date of Originial 7 Historical Statement of Income and
Report: March 31, 1998) Direct Operating Expenses of Copper
Ridge Apartments for the twelve
months ended February 28, 1998
Form 8-K dated May 2,7 None
8, 1998
Form 8-K dated 2,7 None
June 2, 1998
</TABLE>
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 thereunto duly authorized.
Apple Residential Income Trust, Inc.
(Registrant)
DATE: 8-14-98 BY: /s/ Glade M. Knight
- -------------------------------- --------------------------------------
Glade M. Knight
President
BY: /s/ Stanley J. Olander
--------------------------------------
Stanley J. Olander
Treasurer (and as such,
Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 45,877,272
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 138,831,383
<DEPRECIATION> 3,978,003
<TOTAL-ASSETS> 181,959,019
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 178,551,942
<OTHER-SE> 169,935
<TOTAL-LIABILITY-AND-EQUITY> 181,959,019
<SALES> 0
<TOTAL-REVENUES> 11,035,129
<CGS> 0
<TOTAL-COSTS> 7,394,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,831
<INCOME-PRETAX> 4,436,460
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,436,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,436,460
<EPS-PRIMARY> .28
<EPS-DILUTED> .284
<FN>
<F1>Current Assets and Current Liabilities are not separated to conform with
industry standards.
<F2>Income is from rental income. There are no Sales or Cost of Goods Sold.
</FN>
</TABLE>
