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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
December 22, 1994
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Date of Report (Date of Earliest Event Reported)
CONTINENTAL MORTGAGE AND EQUITY TRUST
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(Exact Name of Registrant as Specified in its Charter)
Califoria 0-10503 94-2738844
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(State of Incorporation) (Commission (IRS Employer
File No.) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, TX 75231
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 692-4700
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Form 8-K/A amends a Form 8-K Current Report dated December 22, 1994 and
filed January 10, 1995 by Continental Mortgage and Equity Trust (the "Trust")
and provides required financial statements that were not available at the date
of the original filing.
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December
31, 1993 and the nine months ended September 30, 1994. A pro forma balance
sheet as of September 30, 1994 is also presented.
A summary of the pro forma transactions follows:
In December 1994, the Trust purchased The Pines Apartments, a 242 unit
apartment complex in Gainesville, Florida for $6.2 million, exclusive of
commissions and closing costs. The Trust paid $750,000 in cash, assumed an
existing first mortgage of $2.7 million, and the seller provided additional
mortgage financing of $2.7 million. The first mortgage bears interest at a rate
of 9.6% per annum, requires monthly payments of principal and interest of
$27,000 and matures in July 2011. The second mortgage bears interest at a rate
of 9.5% per annum, requires monthly payments of interest only through September
1995 and monthly payments of principal and interest of $23,000 thereafter, and
matures in December 1997. The $6.2 million purchase price of The Pines
Apartments is approximately 3.9% of the Trust's consolidated assets at December
31, 1993. Although not a significant acquisition in itself, when aggregated
with the other acquisitions completed by the Trust prior to December 1994, as
described below, such acquisitions constitute a significant acquisition.
In addition to The Pines Apartments acquisition discussed above, the Trust
purchased six other apartment complexes and one commercial property in 1994.
The properties, located in California, Texas and Florida, were purchased for a
total of $26.5 million in separate transactions from unaffiliated sellers, and
represent approximately 16.5% of the Trust's consolidated assets at December
31, 1993. The Trust paid a total of $7.8 million in cash and financed the
remainder of the purchase prices. The mortgages bear interest at rates ranging
from 5.9% to 9.5% and mature from 1998 to 2004.
The Trust has previously provided audited statements of operations for two of
the acquisitions above, the Parkwood Knoll Apartments in San Bernardino,
California which the Trust acquired in August 1994 and the McLeod Commerce
Center in Orlando, Florida which the Trust acquired in September 1994. Such
acquisitions approximated 6.0% of the Trust's consolidated assets at December
31, 1993. The remaining acquisitions, for which the Trust has not provided
audited statements of operations, do not in the aggregate constitute a
significant subsidiary.
The Trust also recorded the insubstance foreclosure of two apartment complexes
in 1994. The properties had a combined estimated fair value (minus estimated
costs of sale) of $11.4 million on the date of foreclosure.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
In addition, the Trust has also sold four properties in 1994, all of which were
held for sale. In connection with the sales, the Trust received cash totaling
$2.0 million and provided an additional $365,000 in purchase money financing.
The pro forma statements of operations present the Trust's operations as if the
transactions described above had occurred at the beginning of each of the
periods presented.
(b) Financial statements of property acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- -----------
<S> <C>
99.0 The Pines Apartments Audited Statement of Operations for the year ended December 31, 1993.
</TABLE>
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
THE PINES
ACTUAL APARTMENTS(1) PRO FORMA
-------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Assets
Notes and interest receivable
Performing............................................... $ 19,956 $ -- $ 19,956
Nonperforming, nonaccruing............................... 3,791 -- 3,791
-------- ------- ---------
23,747 -- 23,747
Real estate held for sale, net of accumulated
depreciation............................................. 24,773 -- 24,773
Less -- allowance for estimated losses..................... (8,088) -- (8,088)
-------- ------- ---------
40,432 -- 40,432
Real estate held for investment, net of accumulated
depreciation............................................. 119,902 6,742 126,644
Investments in marketable equity securities of affiliates,
at market................................................ 4,001 -- 4,001
Investments in partnerships................................ 12,632 -- 12,632
Cash and cash equivalents.................................. 1,726 (1,342) 384
Other assets............................................... 5,511 -- 5,511
-------- ------- ---------
$184,204 $ 5,400 $ 189,604
======== ======= =========
Liabilities and Shareholders' Equity
Liabilities
Notes and interest payable................................. $100,298 $ 5,400 $ 105,698
Other liabilities.......................................... 4,741 -- 4,741
-------- ------- ---------
105,039 5,400 110,439
Commitments and contingencies
Shareholders' equity
Shares of Beneficial Interest, no par value; authorized
shares, unlimited; issued and outstanding, 2,918,152
shares................................................... 8,766 -- 8,766
Paid-in capital............................................ 260,060 -- 260,060
Accumulated distributions in excess of accumulated
earnings................................................. (191,938) -- (191,938)
Net unrealizable gains on marketable equity securities..... 2,277 -- 2,277
-------- ------- ---------
79,165 -- 79,165
-------- ------- ---------
$184,204 $ 5,400 $ 189,604
======== ======= =========
</TABLE>
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(1) Assumes acquisition of The Pines Apartments by the Trust on January 1, 1994.
The effects of all other 1994 property purchases, foreclosures and sales
are included in the September 30, 1994 actual balances.
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
THE PINES OTHER PROPERTY INSUBSTANCE PROPERTY
ACTUAL APARTMENTS(1) ACQUISITIONS(1) FORECLOSURES(2) SALES(3) PRO FORMA
--------- ------------- --------------- --------------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Income
Rentals.......................... $ 19,265 $ 995 $ 2,160 $ 2,229 $ (244) $ 24,405
Interest......................... 2,173 -- -- (453) 13 1,733
Equity in (loss) of
partnerships.................. (406) -- -- -- -- (406)
--------- ----- ------- ------- ------- ---------
21,032 995 2,160 1,776 (231) 25,732
Expenses
Property operations.............. 12,211 502 1,197 1,304 (242) 14,972
Interest......................... 5,534 387 622 73 -- 6,616
Depreciation..................... 2,298 101 194 162 (20) 2,735
Advisory fee to affiliate........ 976 -- -- -- -- 976
General and administrative....... 921 -- -- -- -- 921
Provision for losses............. 200 -- -- -- -- 200
--------- ----- ------- ------- ------- ---------
22,140 990 2,013 1,539 (262) 26,420
Income (loss) before gain on sale
of real estate................... (1,108) 5 147 237 31 (688)
Gain on sale of real estate........ 577 -- -- -- -- 577
--------- ----- ------- ------- ------ ---------
Net income (loss).................. $ (531) $ 5 $ 147 $ 237 $ 31 $ (111)
========= ===== ======= ======= ====== =========
Earnings per share
(Loss) before gain on sale of
real estate................... $ (.38) $ (.24)
Gain on sale of real estate...... .20 $ (.20)
--------- ---------
Net (loss)......................... $ (.18) $ (.04)
========= =========
Shares of beneficial interest
outstanding...................... 2,920,376 2,920,376
========= =========
</TABLE>
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(1) Assumes acquisition by the Trust on January 1, 1994.
(2) Assumes property obtained on January 1, 1994.
(3) Assumes sale by the Trust on January 1, 1994.
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
THE PINES OTHER PROPERTY INSUBSTANCE PROPERTY
ACTUAL APARTMENTS(1) ACQUISITIONS(1) FORECLOSURES(2) SALES(3) PRO FORMA
--------- ------------- --------------- --------------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Income
Rentals.......................... $ 20,996 $1,327 $ 5,545 $ 2,972 $ (657) $ 30,183
Interest......................... 3,292 -- -- (821) 27 2,498
Other............................ (578) -- -- -- -- (578)
--------- ------ ------- ------- ------- ---------
23,710 1,327 5,545 2,151 (630) 32,103
Expenses
Property operations.............. 12,791 669 3,021 1,739 (672) 17,548
Interest......................... 5,531 516 1,373 100 -- 7,520
Depreciation..................... 2,431 135 489 216 (62) 3,209
Advisory fee to affiliate........ 1,160 -- -- -- -- 1,160
General and administrative....... 1,326 -- -- -- -- 1,326
Provision for losses............. 221 -- -- -- -- 221
--------- ------ ------- ------- ------- ---------
23,460 1,320 4,883 2,055 (734) 30,984
Income (loss) before gain on sale
of real estate................... 250 7 662 96 104 1,119
Gain on sale of real estate........ 365 -- -- -- -- 365
--------- ------ ------- ------- ------- ---------
Net income (loss).................. $ 615 $ 7 $ 662 $ 96 $ 104 $ 1,484
========= ====== ======= ======= ====== =========
Earnings per share
Income before gain on sale of
real estate................... $ .08 $ .37
Gain on sale of real estate...... .12 .12
--------- ---------
Net (loss)......................... $ .20 $ .49
========= =========
Shares of beneficial interest
outstanding...................... 3,014,256 3,014,256
========= =========
</TABLE>
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(1) Assumes acquisition by the Trust on January 1, 1993.
(2) Assumes property obtained on January 1, 1993.
(3) Assumes sales by the Trust on January 1, 1993.
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SIGNATURE
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 hereto duly authorized.
CONTINENTAL MORTGAGE AND
EQUITY TRUST
Date: February 10, 1995 By: /s/ Thomas A. Holland
----------------- -------------------------
Thomas A. Holland
Senior Vice President and
Chief Accounting Officer
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CONTINENTAL MORTGAGE AND EQUITY TRUST
EXHIBIT TO ITS
CURRENT REPORT ON FORM 8-K/A
Dated December 22, 1994
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- - ------- ----------- ------
<S> <C> <C>
99.0 The Pines Apartments Audited Statement of 9
Operations for the year ended December 31, 1993.
</TABLE>
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EXHIBIT 99.0
THE PINES
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1993
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[FARMER, FUQUA, HUNT & ROBERT, LLC LETTERHEAD]
Independent Auditors' Report
To the Board of Trustees
Continental Mortgage and Equity Trust
We have audited the accompanying statement of revenues and direct operating
expenses of The Pines (a real estate project) for the year ended December 31,
1993. This statement of revenues and direct operating expenses is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this statement of revenues and direct operating expenses 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 of revenues and direct
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of revenues and direct
operating expenses presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement is prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K of Continental Mortgage & Equity Trust) and, as described
in Note 1, is not intended to be a complete presentation of the results of
operations.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues and
direct operating expenses of The Pines for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & ROBERT, LLC
Dallas, Texas
February 6, 1995
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THE PINES
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
REVENUES:
Rental revenues $1,278,965
Other 48,021
----------
Total Revenue 1,326,986
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OPERATING EXPENSES:
Repairs & maintenance 58,028
Services 64,629
Administration 15,895
Marketing 25,416
Payroll & benefits 159,792
Utilities 113,973
Property taxes 128,910
Insurance 42,927
Management Fees 59,486
----------
Total Operating Expenses 669,056
----------
NET OPERATING INCOME $ 657,930
==========
</TABLE>
The accompanying notes are an integral part of this statement.
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THE PINES
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1993
NOTE 1: ORGANIZATION
The Pines is a 242 unit apartment complex located in Gainesville,
Florida. During 1993, the property was owned by Midland-Missouri Real
Estate Holdings Trust, a Missouri corporation.
The accompanying financial statement does not include provision for
depreciation and amortization, interest expense or income taxes.
Accordingly, this statement is not intended to be a complete
presentation of the results of operations.
NOTE 2: OTHER INCOME
Other income consists of the following:
<TABLE>
<S> <C>
Forfeited security deposits $ 2,560
Pet fees 3,670
Late fees 15,840
Application fee income 6,385
Vending income 12,942
Miscellaneous income 6,624
-------
Total Other Income $48,021
=======
</TABLE>
NOTE 3: MANAGEMENT FEES
The property has a management agreement with Dominion Management
Corporation which calls for a fee equal to 4% of gross monthly
receipts, as defined.
NOTE 4: SUBSEQUENT EVENT
On December 22, 1994, the property was sold to Continental Mortgage
and Equity Trust, a California business trust.
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