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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
November 5, 1996
------------------------------------------------
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)
California 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
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 5, 1996, Continental Mortgage and Equity Trust (the "Trust")
purchased the Glenwood Apartments in Addison, Texas for $4.2 million (1.9% of
the Trust's assets at December 31, 1995). The seller of the property was VRRM,
Inc., a Texas corporation. The property was constructed in 1975 and consists
of 168 units which were 92% occupied at the date of acquisition. The Trust
paid $1.3 million in cash and assumed existing mortgage financing of $2.9
million.
This purchase combined with other property purchases the Trust made in 1996
exceed 10% of the Trust's assets at December 31, 1995.
During 1996, the Trust has sold, or otherwise disposed of, five apartment
complexes and one office building. The Trust has recognized a total gain on
these dispositions of $9.7 million.
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 nine months ended September 30, 1996. A pro forma balance
sheet as of September 30, 1996 is also presented.
A summary of the pro forma transactions follows:
In October 1996, the Trust purchased Glenwood Apartments, a 168 unit apartment
complex in Addison, Texas for $4.2 million, exclusive of commissions and
closing costs. The Trust paid $1.3 million in cash and assumed the first lien
mortgage secured by the apartment complex of $2.9 million. The mortgage bears
interest at 9.25% per annum, requires monthly payments of principal and
interest of $27,476 and matures November 1, 2004.
The $4.2 million purchase price of Glenwood Apartments is approximately 1.9% of
the Trust's assets at December 31, 1995. Although not a significant
acquisition in itself, when aggregated with the other acquisitions completed by
the Trust in 1996 as described below, such acquisitions constitute a
significant acquisition.
In addition to the Glenwood Apartments acquisition discussed above, the Trust
purchased two other apartment complexes, six commercial properties and one
parcel of raw land in 1996. The properties, located in Texas, Louisiana and
Colorado, were purchased for a total of $42.4 million in separate transactions
from unaffiliated sellers and represent approximately 20% of the Trust's assets
at December 31, 1995. The Trust paid a total of $19.9 million in cash and
financed the remainder of the purchase prices. The mortgages bear interest at
rates ranging from 8.01% to 10% and mature from 1997 to 2001.
The Trust has previously filed audited statements of operations on four of
these acquisitions, totaling $23.4 million or 10.7% of the Trust's assets at
December 31, 1995.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
The Trust has not provided audited financial statements of operations on the
remaining five acquisitions totaling $19.0 million or 8.7% of the Trust's
assets at December 31, 1995. None of the acquisitions for which audited
statements of operations have not been provided exceed 5% of the Trust's assets
at December 31, 1995.
In addition to the purchases described above, during 1996 the Trust has sold,
or otherwise disposed of, five apartment complexes and one office building.
The Trust recognized a total gain on these dispositions of $9.7 million.
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.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Glenwood
Actual Apartments(1) Pro forma
------ ---------- ---------
(dollars in thousands)
Assets
------
<S> <C> <C> <C>
Notes and interest receivable
Performing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,119 $ - $ 6,119
Nonperforming, nonaccruing . . . . . . . . . . . . . . . . . . 2,287 - 2,287
------------ -------- ----------
8,406 - 8,406
Less - allowance for estimated losses . . . . . . . . . . . . . . . . (1,188) - (1,188)
------------ -------- -----------
7,218 - 7,218
Foreclosed real estate held for sale, net of accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 10,657 - 10,657
Less - allowance for estimated losses . . . . . . . . . . . . . . . . (4,941) - (4,941)
------------ -------- ----------
5,716 - 5,716
Real estate held for investment, net of accumulated
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 182,724 4,383 187,107
Investments in marketable equity securities of affiliates,
at market . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,676 - 6,676
Investments in partnerships . . . . . . . . . . . . . . . . . . . . . 2,265 - 2,265
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 16,537 (1,497) 15,040
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,254 - 11,254
------------ -------- ----------
$ 232,390 $ 2,886 $ 235,276
============ ======== ==========
</TABLE>
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Glenwood
Actual Apartments(1) Pro forma
------ ---------- ---------
(dollars in thousands)
Liabilities and Shareholders' Equity
- ------------------------------------
<S> <C> <C> <C>
Liabilities
Notes and interest payable . . . . . . . . . . . . . . . . . . . . . $ 142,516 $ 2,886 $ 145,402
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 7,462 - 7,462
---------- ----------- -----------
149,978 2,886 152,864
Commitments and contingencies
Shareholders' equity
Shares of Beneficial Interest, no par value; authorized
shares, unlimited; issued and outstanding, 4,182,030 shares . . 8,379 - 8,379
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,545 - 258,545
Accumulated distributions in excess of accumulated
earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . (189,468) - (189,468)
Net unrealizable gains on marketable equity securities . . . . . . . 4,956 - 4,956
---------- ----------- -----------
82,412 - 82,412
---------- ----------- -----------
$ 232,390 $ 2,886 $ 235,276
========== =========== ===========
</TABLE>
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(1)The balance sheet effect of all other 1996 property purchases and
dispositions are included in the September 30, 1996 actual balances
presented.
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Other
Glenwood Property Property
Actual Apartments(1) Acquisitions(1) Dispositions(1) Pro forma
------ ---------- ------------ ------------ ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income
Rentals . . . . . . . . . . . . . . . . . . . . . . $ 33,205 $ 810 $ 4,960 $ (3,926) $ 35,049
Interest . . . . . . . . . . . . . . . . . . . . . 821 - - - 821
---------- -------- --------- ---------- ----------
34,026 810 4,960 (3,926) 35,870
Expenses
Property operations . . . . . . . . . . . . . . . . 20,091 415 2,777 (2,560) 20,723
Interest . . . . . . . . . . . . . . . . . . . . . 9,317 210 1,617 (1,079) 10,065
Depreciation . . . . . . . . . . . . . . . . . . . 3,565 66 578 (461) 3,748
Provision for losses . . . . . . . . . . . . . . . (884) - - - (884)
Advisory fee to affiliate . . . . . . . . . . . . . 1,300 - - - 1,300
General and administrative . . . . . . . . . . . . 1,400 - - - 1,400
---------- -------- --------- ---------- ----------
34,789 691 4,972 (4,100) 36,352
---------- -------- --------- ---------- ----------
Income (loss) from operations. . . . . . . . . . . . . . (763) 119 (12) 174 (482)
Equity in income of partnerships. . . . . . . . . . . . . 197 - - - 197
Gain on sale of real estate . . . . . . . . . . . . . . . 9,397 - - - 9,397
---------- -------- --------- ---------- ----------
Income (loss) before extraordinary
gain . . . . . . . . . . . . . . . . . . . . . . 8,831 119 (12) 174 9,112
Extraordinary gain . . . . . . . . . . . . . . . . . . . 812 - - - 812
---------- -------- --------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 9,643 $ 119 $ (12) $ 174 $ 9,924
========== ======== ========= ========== ==========
Earnings per share
Net income before extraordinary
gain . . . . . . . . . . . . . . . . . . . . . . $ 2.08 $ 2.14
Extraordinary gain . . . . . . . . . . . . . . . . . . . .20 .20
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 2.28 $ 2.34
========== ==========
Shares of beneficial interest
outstanding. . . . . . . . . . . . . . . . . . . . 4,243,754 4,243,754
========== ==========
</TABLE>
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(1) Assumes acquisition or disposition by the Trust on January 1, 1996. Pro
forma amounts for other property acquisitions are from January 1, through
the date of acquisition only, results subsequent to the date of
acquisition are included in the "Actual" column.
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CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Other
Glenwood Property Property
Actual Apartments(1) Acquisitions(1) Dispositions(1) Pro forma
------ ---------- ------------ ------------ ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Income
Rentals . . . . . . . . . . . . . . . . . . . . . . $ 37,586 $ 1,080 $ 6,614 $ (7,339) $ 37,941
Interest . . . . . . . . . . . . . . . . . . . . . 723 - - - 723
---------- -------- --------- ---------- ----------
38,309 1,080 6,614 (7,339) 38,664
Expenses
Property operations. . . . . . . . . . . . . . . . 22,682 553 3,702 (4,442) 22,495
Interest . . . . . . . . . . . . . . . . . . . . . 10,009 278 2,156 (1,990) 10,453
Depreciation . . . . . . . . . . . . . . . . . . . 4,279 88 771 (950) 4,188
Advisory fee to affiliate. . . . . . . . . . . . . 1,264 - - - 1,264
General and administrative . . . . . . . . . . . . 1,207 - - - 1,207
Provision for losses . . . . . . . . . . . . . . . 541 - - - 541
---------- -------- --------- ---------- ----------
39,982 919 6,629 (7,382) 40,148
---------- -------- --------- ---------- ----------
Income (loss) from operations . . . . . . . . . . . (1,673) 161 (15) 43 (1,484)
Equity in income of partnerships . . . . . . . . . 230 - - - 230
---------- -------- --------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (1,443) $ 161 $ (15) $ 43 $ (1,254)
========== ======== ========= ========== ==========
Earnings per share
Net loss . . . . . . . . . . . . . . . . . . . . . $ (.33) $ (.29)
========== ==========
Shares of beneficial interest
outstanding . . . . . . . . . . . . . . . . . . . . 4,377,165 4,377,165
========== =========
</TABLE>
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(1) Assumes acquisition or disposition by the Trust on January 1, 1995.
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ITEM 7.FINANCIAL STATEMENTS AND EXHIBITS (Continued)
(b) Financial statements of properties acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------------------------------------------------------------------------------------------------------
<S> <C>
99.0 Glenwood Apartments Audited Statement of Revenues and Direct Operating Expenses for the year ended December
31, 1995.
</TABLE>
--------------------------------
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: January 6, 1996 By: /s/ Thomas A. Holland
-------------------------- ----------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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CONTINENTAL MORTGAGE AND EQUITY TRUST
EXHIBIT TO ITS
CURRENT REPORT ON FORM 8-K
Dated November 5, 1996
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ------------------------------------------ ------
<S> <C> <C>
99.0 Glenwood Apartments Audited Statement of 10
Revenues and Direct Operating Expenses for
the year ended December 31, 1995.
</TABLE>
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EXHIBIT 99.0
THE GLENWOOD APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended August 31, 1996
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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 Glenwood Apartments for the year ended August 31, 1996. 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 Glenwood Apartments for the year ended August
31, 1996, in conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
December 30, 1996
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THE GLENWOOD APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended August 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $ 947,995
Other 131,716
--------------
Total revenues 1,079,711
OPERATING EXPENSES
Salaries and benefits 127,902
Property taxes 94,844
Utilities 236,966
Repairs and maintenance 71,742
Insurance 21,592
--------------
Total direct operating expenses 553,046
--------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 526,665
==============
</TABLE>
The accompanying notes are an integral part of this statement.
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THE GLENWOOD APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
August 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Glenwood Apartments is a 168 unit apartment complex,
located in Dallas, Texas. During 1996, the property was owned
by VRRM, 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: 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: SUBSEQUENT EVENT
The property was sold to Continental Mortgage and Equity
Trust, a California business trust, on November 5, 1996.
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