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: February 1, 1999
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
Page No.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Grayson Square Apartments)
Historical Statement of Income
and Direct Operating Expenses
(Grayson Square Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(Grayson Square Apartments)
b. Pro Forma Balance Sheet as of December
31, 1998 (unaudited)
Pro Forma Statement of Operations
for the year ended December 31, 1998
(unaudited)
c. Exhibit
23.1 Consent of Independent Auditors
(Grayson Square Apartments)
-2-
<PAGE>
The Company hereby amends Items 7.a., 7.b., and 7.c. of its Current Report
on Form 8-K dated February 1, 1999 as follows:
-3-
<PAGE>
ITEM 7.a.
-4-
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
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 Grayson Square Apartments located in Grapevine, Texas for the
twelve month period ended December 31, 1998. This statement is the
responsibility of the management of Grayson Square 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 Grayson Square
Apartments (as defined above) for the twelve month period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ L.P. Martin & Co., P.C.
Richmond, Virginia
February 23, 1999
<PAGE>
GRAYSON SQUARE 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 DECEMBER 31, 1998
INCOME
Rental and Other Income $1,514,932
----------
DIRECT OPERATING EXPENSES
Administrative and Other 184,763
Insurance 12,590
Repairs and Maintenance 192,283
Taxes, Property 180,093
Utilities 142,455
----------
TOTAL DIRECT OPERATING EXPENSES 712,184
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 802,748
==========
See accompanying notes to the financial statement.
<PAGE>
GRAYSON SQUARE 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 DECEMBER 31, 1998
NOTE 1 - ORGANIZATION
Grayson Square Apartments is a 200 unit garden style apartment complex located
on approximately 10.789 acres in Grapevine, Texas. The assets comprising the
property were owned by Grapevine I Partners, Limited, an entity unaffiliated
with Apple Residential Income Trust, Inc., during the financial statement
period. Apple REIT VII Limited Partnership, an affiliate of Apple Residential
Income Trust, Inc., purchased the property January 29, 1999.
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 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.
<PAGE>
ITEM 7.b.
-5-
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 (UNAUDITED)
The accompanying Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1998 is presented as if the Company had owned the properties included in the
table below as of December 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 December 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>
Sierra Grayson
Historical Ridge Square
Balance Pro Forma Pro Forma Total
Sheet Adjustments Adjustments Pro Forma
---------------------------------------------------------------------------------
Date of acquisition 1/5/99 2/1/99
<S> <C> <C> <C> <C>
ASSETS
Investment in rental property
Land $ 40,761,281 $ 593,334 $ 751,772 $ 42,106,387
Building and improvements 197,807,725 5,340,006 8,645,372 211,793,103
Furniture and fixtures 3,190,919 - - 3,190,919
---------------------------------------------------------------------------------
241,759,925 5,933,340 9,397,144 257,090,409
Less accumulated depreciation (7,686,479) - - (7,686,479)
---------------------------------------------------------------------------------
234,073,446 5,933,340 9,397,144 249,403,930
Cash and cash equivalents 40,073,198 (5,933,340) (2,404,359) 31,735,499
Prepaid expenses 339,605 - - 339,605
Other assets 7,360,903 - - 7,360,903
---------------------------------------------------------------------------------
47,773,706 (5,933,340) (2,404,359) 39,436,007
---------------------------------------------------------------------------------
Total Assets $ 281,847,152 $ - $ 6,992,785 $ 288,839,937
=================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage notes payable $ 25,165,861 - $ 6,992,785 $ 32,158,646
Accounts payable 1,565,453 - - 1,565,453
Accrued expenses 4,883,852 - - 4,883,852
Rents received in advance 150,351 - - 150,351
Tenant security deposits 882,014 - - 882,014
---------------------------------------------------------------------------------
32,647,531 - 6,992,785 39,640,316
Shareholders' equity
Common stock 251,890,553 - - 251,890,553
Class B convertible stock 20,000 - - 20,000
Distributions greater than net income (2,710,932) - - (2,710,932)
---------------------------------------------------------------------------------
249,199,621 - - 249,199,621
---------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 281,847,152 $ - $ 6,992,785 $ 288,839,937
=================================================================================
</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. or
affiliate allocated between land and building. Adjustments to cash reflect the
use of cash on hand to purchase properties. Adjustments to notes payable reflect
the debt assumed on 1 of the 2 acquisitions.
<PAGE>
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1998 (unaudited) The Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1998 is presented as if the 16 property
acquisitions during 1998 and 2 property acquisitions in 1999 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 year ended December 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>
Historical 1998 Pro Forma
Statement of Acquisitions Pro Forma Before 1999
Operations Adjustments (G) Adjustments Acquisitions
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date of Acquisition -
Rental income $ 30,764,904 $12,107,074 - $ 42,871,978
Rental expenses:
Property and maintenance 8,819,809 4,101,546 - 12,921,355
Taxes and insurance 4,453,177 1,586,415 - 6,039,592
Property management 1,685,713 $ 662,496 (A) 2,348,209
General and administrative 799,732 - 138,849 (B) 938,581
Amortization 38,758 - - 38,758
Depreciation of rental property 5,788,476 - 2,074,177 (C) 7,862,653
----------------------------------------------------------------------------
Total expenses 21,585,665 5,687,961 2,875,522 30,149,148
Income before interest income (expense) 9,179,239 6,419,113 (2,875,522) 12,722,830
Interest income 1,638,544 - (1,221,659)(F) 416,885
Interest expense (737,875) - (912,506)(D) (1,650,381)
-------------------------------------------------- --------------------
Net income $ 10,079,908 $ 6,419,113 $ (5,009,688) $ 11,489,334
Basic and diluted earnings per common share $ 0.51 $ 0.49
============ ============
Wgt. avg. number of common shares outstanding 19,910,408 3,495,101 (E) 23,405,509
=========== ============
</TABLE>
<TABLE>
<CAPTION>
Sierra Grayson
Ridge Square
Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Pro Forma
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date of Acquisition 1/5/99 2/1/99 -
Rental income $1,192,111 $1,514,932 - $ 45,579,021
Rental expenses:
Property and maintenance 534,083 519,501 - 13,974,939
Taxes and insurance 148,050 192,683 - 6,380,325
Property management - - $ 148,252 (A) 2,496,461
General and administrative - - 20,844 (B) 959,425
Amortization - - - 38,758
Depreciation of rental property - - 513,238 (C) 8,375,891
------------------- -----------------------------------------------------
Total expenses 682,133 712,184 682,334 32,225,799
Income before interest income (expense) 509,978 802,748 (682,334) 13,353,222
Interest income - - (416,885) (F) -
Interest expense - - (454,881) (D) (2,105,262)
------------------- ------------------------------- ------------------
Net income $ 509,978 $ 802,748 $(1,554,100) $ 11,247,960
Basic and diluted earnings per common share $ 0.48
===========
Wgt. avg. number of common shares outstanding - (E) 23,405,509
===========
</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 the interest expense for 5 of the 1998 property acquisitions
and 1 of the 1999 property acquisitions for the period in which the
properties were not owned, interest was computed based on market interest
rates of 6.5% on the mortgage debt of $31.2 million that was assumed at
acquisition.
(E) 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 $8.90 per share).
(F) Represents reduction of interest income associated with $37.7 million of
cash used to purchase properties at an interest rate of 5%.
(G) See following table for details.
<PAGE>
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1998 (unaudited)
The following schedule provides detail of 1998 acquisitions by property included
in the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
Copper Summer Park
Main Park Timberglen Crossing Silverbrook I Tree Village
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Date of Acquisition 2/4/98 2/13/98 3/31/98 5/8/98 6/1/98 7/1/98
Rental income $ 122,458 $162,912 $ 228,612 $ 876,661 $ 505,033 $ 641,049
Rental expenses:
Property and maintenance 44,674 39,814 147,405 308,738 202,428 224,466
Taxes and insurance 18,797 21,513 29,927 98,600 63,114 79,850
Property management - - - - - -
General and administrative - - - - - -
Amortization - - - - - -
Depreciation of rental property - - - - - -
-----------------------------------------------------------------------------------
Total expenses 63,471 61,327 177,332 407,338 265,542 304,316
Income before interest income (expense) 58,987 101,585 51,280 469,323 239,491 336,733
Interest income - - - - - -
Interest expense - - - - - -
-----------------------------------------------------------------------------------
Net income $ 58,987 $101,585 $ 51,280 $ 469,323 $ 239,491 $ 336,733
</TABLE>
<TABLE>
<CAPTION>
Cottonwood Pace's Emerald
Crossing Silverbrook II Point Devonshire Newport Oaks
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Date of Acquisition 7/9/98 7/24/98 7/17/98 7/17/98 7/24/98 7/24/98
Rental income $ 565,147 $ 536,970 $1,167,372 $ 534,027 $ 686,911 $ 1,046,462
Rental expenses:
Property and maintenance 216,861 188,406 349,407 156,111 235,111 284,868
Taxes and insurance 74,067 61,559 143,119 75,941 109,875 133,916
Property management - - - - - -
General and administrative - - - - - -
Amortization - - - - - -
Depreciation of rental property - - - - - -
---------------------------------------------------------------------------------------
Total expenses 290,928 249,965 492,526 232,052 344,986 418,784
Income before interest income (expense) 274,219 287,005 674,846 301,975 341,925 627,678
Interest income - - - - - -
Interest expense - - - - - -
---------------------------------------------------------------------------------------
Net income $ 274,219 $ 287,005 $ 674,846 $ 301,975 $ 341,925 $ 627,678
</TABLE>
<TABLE>
<CAPTION>
Estrada Cutter's Burney Courts on
Oaks Point Oaks Pear Ridge
Pro Forma Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Adjustments Pro Forma
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Date of Acquisition 7/27/98 10/29/98 10/28/98 11/17/98 -
Rental income $ 962,727 $1,217,238 $1,309,756 $ 1,543,739 $12,107,074
Rental expenses:
Property and maintenance 281,613 430,131 472,141 519,372 4,101,546
Taxes and insurance 124,830 146,572 180,438 224,297 1,586,415
Property management - - - - -
General and administrative - - - - -
Amortization - - - - -
Depreciation of rental property - - - - -
--------------------------------------------------------------------------------
Total expenses 406,443 576,703 652,579 743,669 5,687,960
Income before interest income (expense) 556,284 640,536 657,177 800,070 6,419,114
Interest income - - - - -
Interest expense - - - - -
--------------------------------------------------------------------------------
Net income $ 556,284 $ 640,536 $ 657,177 $ 800,070 $ 6,419,114
</TABLE>
<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: April 14, 1999 By: /s/ Glade M. Knight
---------------------------
Glade M. Knight
President of
Apple Residential Realty Income Trust, Inc.
<PAGE>
ITEM 7.c.
<PAGE>
EXHIBIT INDEX
Apple Residential Income Trust, Inc.
Form 8-K/A to Form 8-K dated February 1, 1999
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
(Grayson Square Apartments)
Exhibit 23.1
[L.P. MARTIN & COMPANY LETTERHEAD]
Consent of Independent Auditors'
The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated February 23, 1999 with respect
to the statement of income and direct operating expenses exclusive of items not
comparable to the proposed future operations of the property Grayson Square
Apartments for the twelve month period ended December 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.
February 23, 1999
