<PAGE> 1
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
July 9, 1996
------------------------------------------------
Date of Report (Date of Earliest Event Reported)
CONTINENTAL MORTGAGE AND EQUITY TRUST
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California 0-10503 94-2738844
- --------------------------------------------------------------------------------
(State of Incorporation) (Commission (IRS Employer
File No.) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, TX 75231
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 692-4700
--------------
Not Applicable
-----------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
1
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 6, 1996, Continental Mortgage and Equity Trust (the "Trust") purchased
the Hampton Office Building in Dallas, Texas for $7.7 million (3.5% of the
Trust's assets at December 31, 1995). The seller of the property was Legacy
Capital Company. The property was constructed in 1987 and consists of 108,900
square feet. The building was 95% occupied at the date of acquisition. The
Trust paid $1.4 million in cash and obtained mortgage financing for the
remaining $6.3 million of the purchase price.
On April 16, 1996, the Trust purchased the Amoco Building in New Orleans,
Louisiana for $5.9 million in cash (2.7% of the Trust's assets at December 31,
1995). The seller of the property was 1340 Poydras New Orleans, Ltd. The
property was constructed in 1977 and consists of 378,244 square feet. The
building was 28% occupied at the date of acquisition.
On April 29, 1996, the Trust purchased the Central Freight Storage Warehouse in
Dallas, Texas for $2.2 million in cash (1.0% of the Trust's assets at December
31, 1995). The seller of the property was Vintage 1985 Associates. The
property was constructed in 1966 and consists of 216,035 square feet. The
building was 100% occupied at the date of acquisition.
On June 28, 1996, the Trust purchased the Grove Park Apartments in Plano, Texas
for $4.4 million (2.0% of the Trust's assets at December 31, 1995). The seller
of the property was Grove Park Joint Venture, a Texas joint venture. The
property was constructed in 1979 and consists of 188 units that were 95%
occupied at the date of acquisition. The Trust paid $1.2 million in cash and
assumed the first lien mortgage secured by the apartment complex of $3.2
million.
On July 9, 1996, the Trust purchased the Promenade Shopping Center in Highlands
Ranch, Colorado for $8.1 million (3.7% of the Trust's assets at December 31,
1995). The seller of the property was the Halpin Partnership. The property
was constructed in 1985 and consists of 133,558 square feet. The shopping
center was 79% occupied at the date of acquisition. The Trust paid $2.3
million in cash and obtained new mortgage financing for the remaining $6.3
million of the purchase price.
On July 23, 1996, the Trust purchased The Park at Colonnade in San Antonio,
Texas for $4.2 million (1.9% of the Trust's assets at December 31, 1995). The
seller of the property was the United States Department of Housing and Urban
Development. The property was constructed in 1975 and consists of 211 units.
The property was 93% occupied at the date of acquisition. The Trust paid
$700,000 in cash and obtained new mortgage financing for the remaining $3.5
million of the purchase price.
On July 31, 1996, the Trust purchased the 3400 Carlisle Building in Dallas,
Texas for $5.3 million (2.4% of the Trust's assets at December 31, 1995). The
seller of the property was Dallas Metro Real Estate Fund I, a California
limited partnership. The property was constructed in 1985 and consists of
76,727 square feet. The building was 95% occupied
2
<PAGE> 3
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS (Continued)
at the date of the acquisition. The Trust paid $800,000 in cash and obtained
first mortgage financing for the remaining $4.5 million of the purchase price.
The combined $35.0 million purchase prices exceeds 10% of the Trust's assets at
December 31, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December
31, 1995 and the six months ended June 30, 1996. A pro forma balance sheet as
of June 30, 1996 is also presented.
A summary of the pro forma transactions follows:
In March 1996, the Trust purchased Hampton Office Building, a 108,900 square
foot office building in Dallas, Texas for $7.7 million, exclusive of
commissions and closing costs. The Trust paid $1.4 million in cash and
obtained mortgage financing in the amount of $6.3 million. The mortgage bears
interest at a rate of 8.01% per annum, requires monthly payments of principal
and interest of $42,053 for the first two years, increasing to $50,028 in the
third year and matures in March 2001.
In April 1996, the Trust purchased the Amoco Building, a 378,244 square foot
office building in New Orleans, Louisiana for $5.9 million in cash, exclusive
of commissions and closing costs.
In April 1996, the Trust purchased the Central Storage Warehouse, a 216,035
square foot warehouse in Dallas, Texas for $2.2 million in cash, exclusive of
commissions and closing costs.
In June 1996, the Trust purchased the Grove Park Apartments, a 188 unit
apartment complex in Plano, Texas for $4.4 million, exclusive of commissions
and closing costs. The Trust paid $1.2 million in cash and assumed the first
lien mortgage secured by the apartment complex of $3.2 million. The mortgage
bears interest at a rate of 8.9% per annum, requires monthly payments of
principal and interest of $26,315 and matures in March 1998.
In July 1996, the Trust purchased the Promenade Shopping Center, a 133,558
square foot shopping center in Highlands Ranch, Colorado for $8.1 million,
exclusive of commissions and closing costs. The Trust paid $3.2 million in
cash and obtained new mortgage financing for the remaining $6.3 million of the
purchase price. The first lien mortgage bears interest at 9.0% per annum,
requires monthly payments of principal and interest of $50,385 and matures July
1, 1999. The second lien mortgage bears interest at 9.0% per annum and matures
June 30, 1997 at which time all principal and interest is due.
Also in July 1996, the Trust purchased The Park at Colonnade, a 211 unit
apartment complex in San Antonio, Texas for $4.2 million, exclusive of
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
commissions and closing costs. The Trust paid $700,000 in cash and obtained
new mortgage financing for the remaining $3.5 million of the purchase price.
The mortgage bears interest at 10.0% per annum through July 1997, increasing to
10.5% through maturity, requires monthly payments of interest only and matures
January 1998.
On July 31, 1996, the Trust purchased the 3400 Carlisle Building in Dallas,
Texas for $5.3 million exclusive of commissions and closing costs. The Trust
paid $800,000 in cash and obtained new mortgage financing for the remaining
$4.5 million of the purchase price. The mortgage bears interest at 8.93% per
annum, requires monthly payments of principal and interest of $33,488 through
July 31, 1998, increasing to $38,457 through maturity and matures March 31,
2001.
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 properties acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------
<S> <C>
99.0 Hampton Court Office Building Audited Statement of Revenues and
Direct Operating Expenses for the year ended December 31, 1995.
99.1 Amoco Building Audited Statement of Revenues and Direct
Operating Expenses for the year ended December 31, 1995.
99.2 Grove Park Apartments Audited Statement of Revenues and Direct
Operating Expenses for the year ended December 31, 1995.
99.3 3400 Carlisle Building Audited Statement of Revenues and Direct
Operating Expenses for the year ended December 31, 1995.
</TABLE>
[THIS SPACE INTENTIONALLY LEFT BLANK.]
4
<PAGE> 5
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
Other
3400 Property
Actual Carlisle(1) Acquisitions(1) Pro forma
---------- ----------- --------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Assets
------
Notes and interest receivable
Performing . . . . . . . . . . . . . . . . . . . . . . . . $ 6,520 $ - $ - $ 6,520
Nonperforming, nonaccruing . . . . . . . . . . . . . . . . 2,287 - - 2,287
---------- -------- -------- ---------
8,807 - - 8,807
Less - allowance for estimated losses . . . . . . . . . . . . (1,081) - - (1,081)
---------- -------- -------- ---------
7,726 - - 7,726
Foreclosed real estate held for sale, net of accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . 10,616 - - 10,616
Less - allowance for estimated losses . . . . . . . . . . . . (5,047) - - (5,047)
---------- -------- -------- ---------
5,569 - - 5,569
Real estate held for investment, net of accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . 175,859 5,300 12,300 193,459
Investments in marketable equity securities of affiliates,
at market . . . . . . . . . . . . . . . . . . . . . . . . 5,926 - - 5,926
Investments in partnerships . . . . . . . . . . . . . . . . . 2,146 - - 2,146
Cash and cash equivalents . . . . . . . . . . . . . . . . . . 14,870 (800) (3,000) 7,670
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 9,728 - - 9,728
---------- -------- -------- ---------
$ 221,824 $ 4,500 $ 9,300 $ 235,624
========== ======== ======== =========
</TABLE>
5
<PAGE> 6
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
Other
3400 Property
Actual Carlisle(1) Acquisitions(1) Pro forma
---------- ----------- ---------------- ---------
Liabilities and Shareholders' Equity (dollars in thousands)
<S> <C> <C> <C> <C>
Liabilities
Notes and interest payable . . . . . . . . . . . . . . . . . $ 135,205 $ 4,500 $ 9,300 $ 149,005
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 6,451 - - 6,451
---------- -------- -------- ---------
141,656 4,500 9,300 155,456
Commitments and contingencies
Shareholders' equity
Shares of Beneficial Interest, no par value; authorized
shares, unlimited; issued and outstanding, 4,193,914
shares . . . . . . . . . . . . . . . . . . . . . . . . . . 8,402 - - 8,402
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 258,641 - - 258,641
Accumulated distributions in excess of accumulated
earnings . . . . . . . . . . . . . . . . . . . . . . . . . (191,077) - - (191,077)
Net unrealizable gains on marketable equity securities . . . 4,202 - - 4,202
---------- -------- -------- ---------
80,168 - - 80,168
---------- -------- -------- ---------
$ 221,824 $ 4,500 $ 9,300 $ 235,624
========== ======== ======== =========
</TABLE>
- ---------------
(1) Assumes acquisitions completed by the Trust subsequent to June 30, 1996 to
be on January 1, 1996. The balance sheet effect of all other 1996 property
purchases are included in the June 30, 1996 actual balances presented.
6
<PAGE> 7
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Other
Hampton Amoco Grove Park 3400 Property
Actual Court(1) Building(1) Apartments(1) Carlisle(1) Acquisitions(1) Pro forma
--------- -------- ----------- ------------- ----------- -------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rentals . . . . . . . . . . $ 21,770 $ 218 $ 253 $ 485 $ 351 $ 1,312 $ 24,389
Interest. . . . . . . . . . 553 - - - - - 553
--------- -------- -------- ---------- ---------- ---------- ---------
22,323 218 253 485 351 1,312 24,942
Expenses
Property operations . . . . 12,903 118 242 224 158 620 14,265
Equity in losses of
partnerships . . . . . . . 194 - - - - - 194
Interest. . . . . . . . . . 6,063 84 - 143 201 459 6,950
Depreciation. . . . . . . . 2,294 26 30 44 53 145 2,592
Advisory fee to
affiliate. . . . . . . . . 851 - - - - - 851
General and
administrative . . . . . . 939 - - - - - 939
--------- -------- -------- ---------- ---------- ---------- ---------
23,244 228 272 411 412 1,224 25,791
--------- -------- -------- ---------- ---------- ---------- ---------
Income (loss) before
gain on sale of real
estate . . . . . . . . . . . (921) (10) (19) 74 (61) 88 (843)
Gain on sale of real
estate . . . . . . . . . . . 6,169 - - - - - 6,169
Extraordinary gain. . . . . . . 663 - - - - - 663
--------- -------- -------- ---------- ---------- ---------- ---------
Net income (loss) . . . . . . . $ 5,911 $ (10) $ (19) $ 74 $ (61) $ 88 $ 5,983
========= ======== ======== ========== ========== ========== =========
Earnings per share
Net income before
extraordinary gain. . . . $ 1.37 $ 1.38
Extraordinary gain . . . . . .02 .02
--------- ---------
Net income . . . . . . . . . $ 1.39 $ 1.40
========= =========
Shares of beneficial
interest outstanding . . . . 4,273,916 4,273,916
========= =========
</TABLE>
- ---------------
(1) Assumes acquisition by the Trust on January 1, 1996. Pro forma amounts for
Hampton Court, Amoco Building and Grove Park are from January 1, through the
date of acquisition only, results subsequent to the date of acquisition are
included in the "Actual" column.
7
<PAGE> 8
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Other
Hampton Amoco Grove Park 3400 Property
Actual Court(1) Building(1) Apartments(1) Carlisle(1) Acquisitions(1) Pro forma
--------- -------- ----------- ------------- ----------- -------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rentals . . . . . . . . . . $ 37,586 $ 1,308 $ 1,010 $ 970 $ 701 $ 2,625 $ 44,200
Interest. . . . . . . . . . 723 - - - - - 723
Equity in income
of partnerships . . . . . 230 - - - - - 230
--------- -------- -------- ---------- ---------- ---------- ---------
38,539 1,308 1,010 970 701 2,625 45,153
Expenses
Property operations . . . . 22,682 707 967 447 316 1,240 26,359
Interest. . . . . . . . . . 10,009 505 - 285 402 917 12,118
Depreciation. . . . . . . . 4,279 154 118 88 106 290 5,035
Advisory fee to
affiliate. . . . . . . . . 1,264 - - - - - 1,264
General and
administrative . . . . . . 1,207 - - - - - 1,207
Provision for losses. . . . 541 - - - - - 541
--------- -------- -------- ---------- ---------- ---------- ---------
39,982 1,366 1,085 820 824 2,447 46,524
--------- -------- -------- ---------- ---------- ---------- ---------
Net income (loss) . . . . . . . $ (1,443) $ (58) $ (75) $ 150 $ (123) $ 178 $ (1,371)
========= ======== ======== ========== ========== ========== =========
Earnings per share
Net loss. . . . . . . . . . $ (.33) $ (.31)
========= =========
Shares of beneficial
interest outstanding. . . . 4,377,165 4,377,916
========= =========
</TABLE>
- ---------------
(1) Assumes acquisition by the Trust on January 1, 1995.
8
<PAGE> 9
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: September 9, 1996 By: /s/ Thomas A. Holland
------------------------ ------------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
9
<PAGE> 10
CONTINENTAL MORTGAGE AND EQUITY TRUST
EXHIBIT TO ITS
CURRENT REPORT ON FORM 8-K
Dated July 9, 1996
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------ ---------------------------------------- ------
<S> <C> <C>
99.0 Hampton Court Office Building Audited State- 11
ment of Revenues and Direct Operating
Expenses for the year ended December 31,
1995.
99.1 Amoco Building Audited Statement of Revenues 15
and Direct Operating Expenses for the year
ended December 31, 1995.
99.2 Grove Park Apartments Audited Statement of 19
Revenues and Direct Operating Expenses for
the year ended December 31, 1995.
99.3 3400 Carlisle Building Audited Statement of 23
Revenues and Direct Operating Expenses for
the year ended December 31, 1995.
</TABLE>
10
<PAGE> 1
EXHIBIT 99.0
HAMPTON COURT
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
11
<PAGE> 2
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 Hampton Court for the ended December 31, 1995. This statement of
revenues and direct operating expenses is the responsibility of the Property'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 and 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 Hampton Court for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
September 5, 1996
12
<PAGE> 3
HAMPTON COURT
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES
Net rental revenues $1,193,897
Other revenues 114,600
----------
Total revenues 1,308,497
OPERATING EXPENSES
Repairs and maintenance 257,810
Utilities 236,010
Property taxes 107,749
Salaries and benefits 89,652
Insurance 15,473
----------
Total direct operating expenses 706,694
----------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 601,803
==========
</TABLE>
The accompanying notes are an integral part of this statement.
13
<PAGE> 4
HAMPTON COURT
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Hampton Court is a 108,889 square foot office building, located in
Dallas, Texas. During 1995, the property was owned by Itochu
International.
The accompanying financial statement does not include a provision
for depreciation and amortization, bad debt expense, interest
expense or income taxes. Accordingly, this statement is not
intended to be a complete presentation of the results of
operations.
NOTE 2: ACCOUNTING 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Utility reimbursement $ 44,882
Lease termination fees 38,873
Tenant escalations 27,606
Miscellaneous 3,239
-------------
$ 114,600
=============
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Continental Mortgage and Equity Trust, a
California business trust, on March 6, 1996.
14
<PAGE> 1
EXHIBIT 99.1
THE AMOCO BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
15
<PAGE> 2
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 Amoco Building for the year ended December 31, 1995. This
statement of revenues and direct operating expenses is the responsibility of
the Property'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 and 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 Amoco Building for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
May 23, 1996
16
<PAGE> 3
THE AMOCO BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES
Rental revenues $ 988,581
Tenant air conditioning charges 21,425
-------------
Total revenues 1,010,006
OPERATING EXPENSES
Utilities 330,868
Contract services 190,450
Salaries and benefits 135,059
Property taxes 108,847
Cleaning 85,012
Insurance 74,500
Supplies 20,199
Mechanical repairs 17,602
Professional services 2,334
Repairs and maintenance 1,913
-------------
Total direct operating expenses 966,784
-------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 43,222
=============
</TABLE>
The accompanying notes are an integral part of this statement.
17
<PAGE> 4
THE AMOCO BUILDING
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Amoco Building is an office building with 378,244 square feet,
located in New Orleans, Louisiana. During 1995, the property was
owned by 1340 Poydras New Orleans Ltd. Partnership.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: SUBSEQUENT EVENT
The property was sold to Continental Mortgages and Equity Trust, a
California business trust, on April 15, 1996.
18
<PAGE> 1
EXHIBIT 99.2
GROVE PARK APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
19
<PAGE> 2
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 Grove Park Apartments for the year ended December 31, 1995. This
statement of revenues and direct operating expenses is the responsibility of
the Property'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 and 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 Grove Park Apartments for the year ended December
31, 1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
July 9, 1996
20
<PAGE> 3
GROVE PARK APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES
Net rental revenues $ 932,766
Other revenues 37,615
-------------
Total revenues 970,381
OPERATING EXPENSES
Salaries and benefits 144,572
Property taxes 105,299
Utilities 90,814
Repairs and maintenance 81,474
Insurance 24,745
-------------
Total direct operating expenses 446,904
-------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 523,477
=============
</TABLE>
The accompanying notes are an integral part of this statement.
21
<PAGE> 4
GROVE PARK APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Grove Park Apartments is a 188-unit apartment complex, located in
Plano, Texas. During 1995, the property was owned by Southwest
Properties Group, Inc.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Security deposits forfeited $ 11,419
Late fees 7,471
Interest income 6,894
Laundry revenue 4,410
Miscellaneous 4,321
Application fees 3,100
-------------
$ 37,615
=============
</TABLE>
NOTE 3: SUBSEQUENT EVENT
The property was sold to Continental Mortgages and Equity Trust, a
California business trust, on June 28, 1996.
22
<PAGE> 1
EXHIBIT 99.3
3400 CARLISLE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
23
<PAGE> 2
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 3400 Carlisle for the year ended December 31, 1995. This statement
of revenues and direct operating expenses is the responsibility of the
Property'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 and 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 3400 Carlisle for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
July 24, 1996
24
<PAGE> 3
3400 CARLISLE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES
Net rental revenues $ 690,262
Other revenues 10,973
-------------
Total revenues 701,235
OPERATING EXPENSES
Repairs and maintenance 124,001
Utilities 95,437
Property taxes 67,174
Salaries and benefits 17,146
Insurance 12,022
-------------
Total direct operating expenses 315,780
-------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 385,455
=============
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE> 4
3400 CARLISLE
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
3400 Carlisle is a 74,000 square foot office building located in
Dallas, Texas. During 1995, the property was owned by Dallas Metro
Real Estate Fund I.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: ACCOUNTING 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 assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Utility reimbursement $ 6,417
Lease termination fees 4,556
-------------
$ 10,973
=============
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property is to be sold to Continental Mortgage and Equity Trust, a
California business trust, on July 30, 1996.
26
