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: May 8, 1998
APPLE RESIDENTIAL INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23983 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
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Bitter Creek Apartments)
Historical Statement of Income
and Direct Operating Expenses
(Bitter Creek Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(Bitter Creek Apartments)
b. Pro Forma Balance Sheet as of
March 31, 1998 (unaudited)
Pro Forma Statement of Operations
for the period ended March 31, 1998
(unaudited)
Pro Forma Statement of Operations
for the year ended December 31, 1997
(unaudited)
c. Exhibit
23.1 Consent of Independent Auditors
(Bitter Creek Apartments)
<PAGE>
The Company hereby amends Items 7.a., 7.b. and 7.c. of its Current
Report on Form 8-K dated May 8,1998 as follows:
<PAGE>
ITEM 7.a.
<PAGE>
[letterhead]
L.P. MARTIN & COMPANY
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
(804) 346-2626
(804) 346-9311
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 Bitter Creek Apartments located in Grand Prairie,
Texas for the twelve month period ended March 31, 1998. This statement is the
responsibility of the management of Bitter Creek 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 Bitter Creek
Apartments (as defined above) for the twelve month period ended March 31, 1998,
in conformity with generally accepted accounting principles.
Richmond, Virginia /s/L.P. Martin & Co., P.C.
-----------------------
May 14, 1998 L.P. Martin & Co., P.C.
BITTER CREEK 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 MARCH 31, 1998
<TABLE>
<CAPTION>
<S> <C>
INCOME
Rental and Other Income $ 2,629,983
---------
DIRECT OPERATING EXPENSES
Administrative and Other 198,607
Insurance 61,497
Repairs and Maintenance 392,935
Taxes, Property 234,304
Utilities 334,671
-------
TOTAL DIRECT OPERATING EXPENSES 1,222,014
---------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 1,407,969
==========
</TABLE>
See accompanying notes to the financial statement.
<PAGE>
BITTER CREEK 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 MARCH 31, 1998
NOTE 1 - ORGANIZATION
Bitter Creek Apartments is a 472 unit garden style apartment
complex located on approximately 20.7 acres in Grand Prairie,
Texas. The assets comprising the property were owned by Bitter
Creek L. P., an entity unaffiliated with Apple Residential
Income Trust, Inc., during the financial statement period.
Apple Residential Income Trust, Inc. purchased the property in
May, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
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, management fees and
entity expenses.
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.
<PAGE>
ITEM 7.b.
<PAGE>
Pro Forma Consolidated Balance Sheet as of March 31, 1998 (unaudited)
The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1998 is presented as if the Company had owned the properties included in the
table below as of March 31, 1998. In the opinion of management all adjustments
necessary to reflect the effects of the Offering have been made.
The Unaudited Pro Forma Consolidated 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, 1998, nor does it purport
to represent the future financial position of the Company. This Unaudited Pro
Forma Consolidated Balance Sheet should be read in conjunction with, and is
qualified in its entirety by, the Company's respective historical financial
statements and notes thereto.
<TABLE>
<CAPTION>
Bitter
Historical Creek
Balance Pro Forma Total
Sheet Adjustments Pro Forma
----------------------------------------
<S> <C>
Date of acquisition 5/8/98
ASSETS
Investment in rental property
Land $ 19,242,535 $ 3,168,273 $ 22,410,808
Building and improvements 95,914,449 10,606,827 106,521,276
Furniture and fixtures 1,410,819 - 1,410,819
----------------------------------------
116,567,803 13,775,100 130,342,903
Less accumulated depreciation (2,787,548) - (2,787,548)
----------------------------------------
113,780,255 13,775,100 127,555,355
Cash and cash equivalents 36,601,110 (13,775,100) 22,826,010
Prepaid expenses 90,784 - 90,784
Other assets 774,271 - 774,271
----------------------------------------
37,466,165 (13,775,100) 23,691,065
----------------------------------------
Total Assets $ 151,246,420 $ - $ 151,246,420
========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable $ 355,938 - $ 355,938
Accrued expenses 2,143,818 - 2,143,818
Rents received in advance 23,902 - 23,902
Tenant security deposits 492,175 - 492,175
----------------------------------------
3,015,833 - 3,015,833
Shareholders' equity
Common stock 148,058,824 - 148,058,824
Class B convertible stock 20,000 - 20,000
Receivable from officer-shareholder (20,000) - (20,000)
Distributions greater than net inc 171,763 - 171,763
--------------------------------------
148,230,587 - 148,230,587
--------------------------------------
Total Liabilities and Shareholdes 151,246,420 $ - $ 151,246,420
======================================
</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 cash and common stock
reflect the use of net proceeds from sales of common stock from the Company's
continuous offering.
<PAGE>
Pro Forma Consolidated Statement of Operations for the three month period ended
March 31, 1998 (unaudited)
The Unaudited Pro Forma Consolidated Statement of Operations for the three month
period ended March 31, 1998 is presented as if the 4 property acquisitions
during 1998 had occurred on January 1, 1998. The Unaudited Pro Forma
Consolidated Statement of Operations assumes the Company qualifying as a REIT,
distributing at least 95% of its taxable income, and, therefore, incurring no
federal income tax liability for the period presented. In the opinion of
management, all adjustments necessary to reflect the effects of these
transactions have been made.
The Unaudited Pro Forma Consolidated 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 month period ended March
31, 1998 if the acquisitions 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 Consolidated Statement of Operations
should be read in conjunction with, and is qualified in its entirety by, the
Company's respective historical financial statements and notes thereto.
<TABLE>
<CAPTION>
Copper Bitter
Historical Main Park Timberglen Ridge Creek
Statement of Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Operations Adjustments Adjustments Adjustments Adjustments Adjustments
-------------------------------------------------------------------------------------------
<S> <C>
Date of Acquisition - 2/4/98 2/13/98 3/31/98 5/8/98 -
Rental income $4,928,751 $ 122,458 $ 162,912 $ 228,612 $ 657,496 -
Rental expenses:
Property and maintenance 1,236,828 44,674 39,814 147,405 231,553 -
Taxes and insurance 738,151 18,797 21,513 29,927 73,950 -
Property management 257,038 - - - - $ 64,854 (A)
General and administrative 162,873 - - - - 15,744 (B)
Amortization 8,484 - - - - -
Depreciation of rental property 889,545 - - - - 183,921 (C)
--------------------------------------------------------------------------------------
Total expenses 3,292,919 63,471 61,327 177,332 305,503 264,519
Income before interest income (expense) 1,635,832 58,987 101,585 51,280 351,993 (264,519)
Interest income 336,387 - - - - -
Interest expense (12,501) - - - - -
--------------------------------------------------------------------------------------
Net income $1,959,718 $58,987 $101,585 $51,280 $351,993 ($264,519)
Basic and diluted earnings per common
share $0.14
====
Wgt. avg. number of common shares
outstanding 13,882,117 2,895,471 (D)
========== ==========
Total
Pro Forma
-------------
Date of Acquisition -
Rental income $6,100,229
Rental expenses:
Property and maintenance 1,700,274
Taxes and insurance 882,338
Property management 321,892
General and administrative 178,617
Amortization 8,484
Depreciation of rental property 1,073,466
--------------
Total expenses 4,165,071
Income before interest income (expense) 1,935,158
Interest income 336,387
Interest expense (12,501)
---------------
Net income $2,259,044
Basic and diluted earnings per common
share $0.13
====
Wgt. avg. number of common shares
outstanding 16,777,588
==========
</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 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, 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, 1998 with the net proceeds from the "best efforts" offering of
$10 per share (net $8.70 per share).
<PAGE>
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited)
The Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997 is presented as if the 12 property acquisitions during 1997
and the 4 property acquisitions during 1998 had occurred on January 1, 1997. The
Unaudited Pro Forma Consolidated Statement of Operations assumes the Company
qualifying as a REIT, distributing at least 95% of its taxable income, and,
therefore, incurring no federal income tax liability for the period presented.
In the opinion of management, all adjustments necessary to reflect the effects
of these transactions have been made.
The Unaudited Pro Forma Consolidated 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, 1997 if
the acquisitions 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 Consolidated Statement of Operations should be read in
conjunction with, and is qualified in its entirety by, the Company's respective
historical financial statements and notes thereto.
<TABLE>
<CAPTION>
Historical 1997 Pro Forma Main Park Timberglen
Statement of Acquisitions Pro Forma Before 1998 Pro Forma Pro Forma
Operations Adjustments Adjustments Acquisitions Adjustments Adjustments
-----------------------------------------------------------------------------
<S> <C>
Date of Acquisition - - - - 2/4/98 2/13/98
Rental income $12,005,968 $ 5,392,558 - $17,398,526 $ 1,469,496 $ 1,954,938
Rental expenses:
Property and maintenance 3,571,484 1,982,189 - 5,553,673 536,090 477,771
Taxes and insurance 1,765,741 706,939 - 2,472,680 225,564 258,159
Property management 656,267 - $ 295,813 (A) 952,080 - -
General and administrative 351,081 - 67,262 (B) 418,343 - -
Amortization 28,490 - - 28,490 - -
Depreciation of rental property 1,898,003 - 792,074 (C) 2,690,077 - -
---------------------------------------------------------------------------
Total expenses 8,271,066 2,689,128 1,155,149 12,115,343 761,654 735,930
Income before interest income (expense) 3,734,902 2,703,430 (1,155,149) 5,283,183 707,842 1,219,008
Interest income 222,676 - - 222,676 - -
Interest expense (458,384) - - (458,384) - -
------------------------------------ ----------------------------------
Net income $3,499,194 $ 2,703,430 ($1,155,149) $5,047,475 $707,842 $1,219,008
Basic and diluted earnings per common share $0.54 $0.53
====
Wgt. avg. number of common shares outstanding 6,493,114 3,106,405 (D) 9,599,519
============ ============ =========
Copper Bitter
Ridge Creek
Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Pro Forma
---------------------------------------------------
Date of Acquisition 3/31/98 5/8/98 - -
Rental income $ 914,447 $ 2,629,983 - $24,367,390
Rental expenses:
Property and maintenance 589,618 926,213 - 8,083,365
Taxes and insurance 119,708 295,801 - 3,371,912
Property management - - $ 383,483 (A) 1,335,563
General and administrative - - 96,977 (B) 515,320
Amortization - - - 28,490
Depreciation of rental property - - 1,157,036 (C) 3,847,113
-----------------------------------------------------
Total expenses 709,326 1,222,014 1,637,496 17,181,763
Income before interest income (expense) 205,121 1,407,969 (1,637,496) 7,185,627
Interest income - - - 222,676
Interest expense - - - (458,384)
------------------------------------- -----------
Net income $205,121 $1,407,969 ($1,637,496) $6,949,919
Basic and diluted earnings per common share $0.49
====
Wgt. avg. number of common shares outstanding 4,458,690 (D) 14,058,209
=========== ==========
</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 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, 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 net proceeds from the "best efforts" offering of $9
per share (net $7.83 per share) for the first $15 million and $10 per share
(net $8.70 per share) above $15 million.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1997 (UNAUDITED)
The following schedule provides detail of 1997 acquisitions by property included
in the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
Brookfield Eagle Cres Aspen Hills Mill Crossing Polo Run Wildwood Toscana The Arbors
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
--------------------------------------------------------------------------------------------------
<S> <C>
Date of Acquisitions 1/31/97 1/31/97 1/31/97 2/28/97 03/31/97 03/31/97 03/31/97 4/25/97
Rental income $99,879 $266,385 $100,023 $151,389 $326,137 $202,389 $270,812 $460,338
Expenses
Property and maintenance 32,430 74,735 51,643 77,882 121,983 78,111 82,722 102,132
Taxes and insurance 12,720 36,546 12,099 19,230 40,508 25,216 35,674 60,729
Property management - - - - - - - -
General and administrative - - - - - - - -
Depreciation of real estate - - - - - - - -
Amortization - - - - - - - -
----------------------------------------------------------------------------------------------
45,150 111,281 63,742 97,112 162,491 103,327 118,396 162,861
Income before interest income 54,729 155,104 36,281 54,277 163,646 99,062 152,416 297,477
Interest income - - - - - - - -
Interest expense - - - - - - - -
-----------------------------------------------------------------------------------------------
Net income $54,729 $155,104 $36,281 $54,277 $163,646 $99,062 $152,416 $297,477
===============================================================================================
Copper
Paces Cove Chaparosa Riverhill Crossing
Pro Forma Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Adjustments Pro Forma
-----------------------------------------------------------
Date of Acquisitions 6/30/97 8/6/97 8/6/97 11/25/97
Rental income $916,348 $ 801,713 $ 892,295 $ 904,850 $5,392,558
Expenses
Property and maintenance 314,521 286,943 338,906 420,181 1,982,189
Taxes and insurance 128,306 97,242 124,028 114,641 706,939
Property management - - - - 0
General and administrative - - - - 0
Depreciation of real estate - - - - 0
Amortization - - - - 0
-----------------------------------------------------------
442,827 384,185 462,934 534,822 2,689,128
Income before interest income 473,521 417,528 429,361 370,028 2,703,430
Interest income - - - - 0
Interest expense - - - - 0
-------------------------------------------------------------
Net income $473,521 $417,528 $429,361 $370,028 $2,703,430
==============================================================
</TABLE>
<PAGE>
ITEM 7.c.
<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: June 29, 1998 By:/s/ Glade M. Knight
-------------------
Glade M. Knight
President of
Apple Residential Realty Income
Trust, Inc.
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K/A to Form 8-K dated May 8, 1998
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
(Bitter Creek Apartments)
<PAGE>
[letterhead]
L.P. MARTIN & COMPANY
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
(804) 346-2626
(804) 346-9311
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated May 14, 1998 with respect to the
statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Bitter Creek
Apartments for the twelve month period ended March 31, 1998, 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 2, 1998 L.P. Martin & Co., P.C.
