<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
December 13, 1996
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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)
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
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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This Form 8-K/A Amendment No. 2 amends the Registrant's current report on Form
8-K/A dated December 13, 1996 as filed with the Securities and Exchange
Commission on February 11, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS - pages 6 through 19.
<PAGE> 3
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Northpoint 2626 Cole Other
Oak Run Office Office Property Property
Actual Apartments(1) Building(1) Building(1) Acquisitions(1) Dispositions(1) Pro forma
------------ ------------- ------------ ------------ --------------- -------------- ------------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rents ................... $ 33,205 $ 662 $ 1,411 $ 1,175 $ 5,770 $ (3,926) $ 38,297
Interest ................ 821 -- -- -- -- -- 821
------------ ------------ ------------ ------------ ------------ ------------ ------------
34,026 662 1,411 1,175 5,770 (3,926) 39,118
Expenses
Property operations ..... 20,091 465 871 550 3,192 (2,560) 22,609
Interest ................ 9,317 174 410 439 1,827 (1,079) 11,088
Depreciation ............ 3,565 59 133 136 644 (461) 4,076
Provision for losses .... (884) -- -- -- -- -- (884)
Advisory fee to
affiliate ............ 1,300 -- -- -- -- -- 1,300
General and
administrative ....... 1,400 -- -- -- -- -- 1,400
------------ ------------ ------------ ------------ ------------ ------------ ------------
34,789 698 1,414 1,125 5,663 (4,100) 39,589
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from
operations .............. (763) (36) (3) 50 107 174 (471)
Equity in income of
partnerships ............ 197 -- -- -- -- -- 197
Gain on sale of real
estate .................. 9,397 -- -- -- -- -- 9,397
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before
extraordinary gain ...... 8,831 (36) (3) 50 107 174 9,123
Extraordinary gain ......... 812 -- -- -- -- -- 812
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) .......... $ 9,643 $ (36) $ (3) $ 50 $ 107 $ 174 $ 9,935
============ ============ ============ ============ ============ ============ ============
Earnings per share
Net income before
extraordinary gain ... $ 2.08 $ 2.15
Extraordinary gain ...... .20 .20
------------ ------------
Net income .............. $ 2.28 $ 2.35
============ ============
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.
6
<PAGE> 4
CONTINENTAL MORTGAGE AND EQUITY TRUST
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Northpoint 2626 Cole Other
Oak Run Office Office Property Property
Actual Apartments(1) Building(1) Building(1) Acquisitions(1) Dispositions(1) Pro forma
------------ ------------- ------------ ------------ --------------- --------------- -----------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rents ................... $ 37,586 $ 882 $ 1,881 $ 1,566 $ 7,694 $ (7,339) $ 42,270
Interest ................ 723 -- -- -- -- -- 723
------------ ------------ ------------ ------------ ------------ ------------ ------------
38,309 882 1,881 1,566 7,694 (7,339) 42,993
Expenses
Property operations ..... 22,682 620 1,161 734 4,255 (4,442) 25,010
Interest ................ 10,009 232 546 584 2,434 (1,990) 11,815
Depreciation ............ 4,279 79 177 182 859 (950) 4,626
Advisory fee to
affiliate ............ 1,264 -- -- -- -- -- 1,264
General and
administrative ....... 1,207 -- -- -- -- -- 1,207
Provision for losses .... 541 -- -- -- -- -- 541
------------ ------------ ------------ ------------ ------------ ------------ ------------
39,982 931 1,884 1,500 7,548 (7,382) 44,463
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from
operations .............. (1,673) (49) (3) 66 146 43 (1,470)
Equity in income of
partnerships ............ 230 -- -- -- -- -- 230
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income (loss) .......... $ (1,443) $ (49) $ (3) $ 66 $ 146 $ 43 $ (1,240)
============ ============ ============ ============ ============ ============ ============
Earnings per share
Net income .............. $ (.33) $ (.28)
============ ============
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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<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
(b) Financial statements of properties acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------------------------------------------------------
<S> <C>
99.0 Oak Run Apartments Audited Statement of Revenues and Direct
Operating Expenses for the year ended December 31, 1995.
99.1 Northpoint Central Office Building Audited Statement of
Revenues and Direct Operating Expenses for the year ended
December 31, 1995.
99.2 2626 Cole Office Building Audited Statement of Revenues and
Direct Operating Expenses for the Year Ended December 31, 1995.
</TABLE>
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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: March 11, 1997 By: /s/ Thomas A. Holland
---------------------- -----------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE> 6
CONTINENTAL MORTGAGE AND EQUITY TRUST
EXHIBIT TO ITS
CURRENT REPORT ON FORM 8-K
Dated December 13, 1996
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ----------------------------------------------- ------
<S> <C> <C>
99.0 Oak Run Apartments Audited Statement of 10
Revenues and Direct Operating Expenses for
the year ended December 31, 1995.
99.1 Northpoint Central Office Building Audited 12
Statement of Revenues and Direct Operating
Expenses for the year ended December 31, 1995.
99.2 2626 Cole Office Building Audited Statement 16
of Revenues and Direct Operating Expenses
for the year ended December 31, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 99.0
[ANDREW V. SCHNURR & CO. LETTERHEAD]
December 11, 1996
Philip Edmundson, Trustee
Capital Advantage Group
510 Bering Drive, Suite 300
Houston, Texas 77057
Dear Mr. Edmundson:
We have audited the accompanying statement of revenues and direct operating
expenses of Oak Run Manor 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 upon 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 included
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 by management, as well as evaluating
the overall statement of revenues and direct operating expenses presentation.
We believe our audit provides a reasonable basis for our opinion.
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 Oak Run Manor for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Respectfully submitted,
/s/ ANDREW V. SCHNURR & CO.
------------------------------
Andrew V. Schnurr & Co.
10
<PAGE> 2
OAK RUN MANOR
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
INCOME
------
Rental Income $879,170.
Interset Income, Late Charges, Etc. 2,758.
---------
TOTAL INCOME 881,928.
------------
DIRECT EXPENSES
---------------
Advertising $18,908.
Office Expenses 14,461.
Management Fees 42,267.
Legal & Accounting 4,645.
Telephone 3,373.
Janitor Payroll 81,571.
Electric 9,189.
Water & Sewer 53,331.
Exterminating 1,018.
Hospitalization 3,828.
Repairs - Materials 170,852.
Decorating Supplies & Contracts 33,916.
Taxes - Real Estate 128,756.
- Payroll 10,181.
Insurance - Hazard 20,602.
Gardening 22,802.
Bank Charges 291.
--------
TOTAL DIRECT EXPENSES 619,991.
--------------------- ---------
NET REVENUE $261,937.
----------- =========
</TABLE>
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<PAGE> 1
EXHIBIT 99.1
NORTHPOINT CENTRAL
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1995
12
<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 Northpoint Central 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 Northpoint Central for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
February 5, 1997
13
<PAGE> 3
NORTHPOINT CENTRAL
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1995
<TABLE>
<S> <C>
REVENUES
Net rental revenues $ 1,751,402
Other revenues 40,413
--------------
Total revenues 1,791,815
OPERATING EXPENSES
Repairs and maintenance 376,315
Utilities 233,611
Property taxes 203,916
Salaries and benefits 119,222
Insurance 27,829
--------------
Total direct operating expenses 960,893
--------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 830,922
==============
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 4
NORTHPOINT CENTRAL
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year ended December 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Northpoint Central is a 176,043 square-foot office building,
located in Houston, Texas. During 1996, the property was
owned by Alpha Northpoint Associates, L.P.
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
<TABLE>
<S> <C>
Other revenues consist of the following:
Rent escalations $ 36,196
Miscellaneous 4,217
-------------
$ 40,413
=============
</TABLE>
NOTE 3: 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 4: SUBSEQUENT EVENT
The property was sold to Continental Mortgage and Equity Trust, a
California business trust, on December 27, 1996.
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<PAGE> 1
EXHIBIT 99.2
2626 COLE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1995
16
<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 2626 Cole 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 2626 Cole for the year ended December 31, 1995,
in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
February 18, 1997
17
<PAGE> 3
2626 COLE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1995
<TABLE>
<S> <C>
REVENUES
Net rental revenues $ 1,452,889
Other revenues 113,410
--------------
Total revenues 1,566,299
OPERATING EXPENSES
Repairs and maintenance 259,264
Utilities 247,564
Property taxes 136,312
Salaries and benefits 73,453
Insurance 17,307
--------------
Total direct operating expenses 733,900
--------------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 832,399
==============
</TABLE>
The accompanying notes are an integral part of this statement.
18
<PAGE> 4
2626 COLE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year ended December 31, 1995
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
2626 Cole is a 119,632 square-foot office building, located in
Dallas, Texas. During 1995, the property was owned by Amerus
Properties, 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
<TABLE>
<S> <C>
Other revenues consist of the following:
Common area maintenance $ 76,021
Miscellaneous 37,389
--------------
$ 113,410
==============
</TABLE>
NOTE 3: 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 4: SUBSEQUENT EVENT
The property was sold to Continental Mortgage and Equity
Trust, a California business trust, on December 31, 1996.
19
