SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 25, 2000
--------------------
Presidential Realty Corporation
- ---------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 1-8594 13-1954619
- ---------------------------- ------------ ------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
180 South Broadway, White Plains, New York 10605
- ------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 948-1300
--------------
No change since last Report
- -------------------------------------------------
(Former name or former address, if changed since
last report)
PRESIDENTIAL REALTY CORPORATION
AMENDMENT NO. 1 TO
CURRENT REPORT
ON FORM 8-K/A
Presidential Realty Corporation hereby amends Item 2 of its Current Reports on
Form 8-K, which were filed on March 27, 2000 and April 10, 2000, as set forth in
the pages attached hereto:
Item 2. Acquisition of Assets.
Financial Statements for Farrington Apartments and Preston Lake Apartments
purchased on March 15, 2000 and March 30, 2000, respectively, and pro forma
financial information are presented in Item 7.
Item 7. Financial Statements and Exhibits.
Financial Statements of the business acquired:
Independent Auditors' Report
Audited Statement of Revenue and Certain Expenses of Farrington Apartments
for the Year Ended December 31, 1999.
Notes to Statement of Revenue and Certain Expenses.
Independent Auditors' Report
Audited Statement of Revenue and Certain Expenses of Preston Lake Apartments
for the Year Ended December 31, 1999.
Notes to Statement of Revenue and Certain Expenses.
Pro Forma Financial Information:
Pro Forma Consolidated Statements of Operations for the Year Ended December 31,
1999 and for the Three Months Ended March 31,2000.
Notes to the Pro Forma Consolidated Statements of Operations
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Presidential Realty Corporation
White Plains, New York
We have audited the accompanying statement of revenue and certain expenses of
the Farrington Apartments ("Farrington"), as described in Note 1, for the year
ended December 31, 1999. This financial statement is the responsibility of
Presidential Realty Corporation's management. Our responsibility is to express
an opinion on this financial 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the filing of Form 8-K/A of Presidential
Realty Corporation) as described in Note 1 and is not intended to be a complete
presentation of Farrington's revenues and expenses.
In our opinion, such financial statement presents fairly, in all material
respects, the revenue and certain expenses of the Farrington Apartments for the
year ended December 31, 1999, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Stamford, Connecticut
April 20, 2000
FARRINGTON APARTMENTS
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
Revenue:
Rental $1,628,212
----------
Total revenue 1,628,212
----------
Certain Expenses:
Operating expenses 552,887
Real estate taxes 118,474
----------
Total certain expenses 671,361
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $956,851
==========
See notes to statement of revenue and certain expenses.
FARRINGTON APARTMENTS
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND BASIS OF PRESENTATION
BUSINESS
The accompanying Statement of Revenue and Certain Expenses includes the
operations (see "Basis of Presentation" below) of Farrington Apartments, a 224
unit garden apartment property, located in Clearwater, Florida. During the year
ended December 31, 1999, Farrington Apartments was owned by Royal River
Partners, L.P., which is not related to Presidential Realty Corporation (the
"Company").
On March 15, 2000, the Company acquired Farrington Apartments. The acquisition
was funded from the proceeds of a new $7,900,000 first mortgage loan on the
property and $2,005,739 of the Company's available cash. The mortgage has an
interest rate of 8.25% per annum, matures on May 1, 2010 and has a balloon
payment of $7,106,299 due at maturity.
BASIS OF PRESENTATION
The accompanying financial statement has been prepared on the accrual basis of
accounting, but is not representative of the actual operations of Farrington
Apartments for the period shown. As required by the Securities and Exchange
Commission Regulation S-X, Rule 3-14, certain expenses have been excluded which
may not be comparable to the proposed future operations of Farrington
Apartments. Expenses excluded relate to property management fees, interest
expense, depreciation and amortization expenses and other expenses not directly
related to the future operations of Farrington Apartments. The Company is not
aware of any material factors relating to Farrington Apartments that would cause
the reported financial information not to be necessarily indicative of future
operating results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Rental income, attributable to residential leases, is recognized as earned over
the lease term. Leases are generally for terms of one year.
MANAGEMENT'S ESTIMATES
The financial statement has been prepared in conformity with generally accepted
accounting principles. In preparing the financial statement, management is
required to make estimates and assumptions that affect the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Presidential Realty Corporation
White Plains, New York
We have audited the accompanying statement of revenue and certain expenses of
the Preston Lake Apartments ("Preston Lake"), as described in Note 1, for the
year ended December 31, 1999. This financial statement is the responsibility of
Presidential Realty Corporation's management. Our responsibility is to express
an opinion on this financial 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the filing of Form 8-K/A of Presidential
Realty Corporation) as described in Note 1 and is not intended to be a complete
presentation of Preston Lake's revenues and expenses.
In our opinion, such financial statement presents fairly, in all material
respects, the revenue and certain expenses of the Preston Lake Apartments for
the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
April 25, 2000
PRESTON LAKE APARTMENTS
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
Revenue:
Rental $2,651,118
----------
Total revenue 2,651,118
----------
Certain Expenses:
Operating expenses 648,261
Real estate taxes 212,628
----------
Total certain expenses 860,889
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $1,790,229
==========
See notes to statement of revenue and certain expenses.
PRESTON LAKE APARTMENTS
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND BASIS OF PRESENTATION
BUSINESS
The accompanying Statement of Revenue and Certain Expenses includes the
operations (see "Basis of Presentation" below) of Preston Lake Apartments, a 320
unit garden apartment property, located in Tucker, Georgia. During the year
ended December 31, 1999, Preston Lake Apartments was owned by EQR Preston Lake
Vistas, Inc., which is not related to Presidential Realty Corporation (the
"Company").
On March 30, 2000, the Company acquired Preston Lake Apartments. The acquisition
was funded from the proceeds of a new $14,000,000 first mortgage loan on the
property, the proceeds from the sale of $1,285,263 of securities available for
sale and $2,727,999 of the Company's available cash. The mortgage has an
interest rate of 8.15% per annum, matures on May 1, 2010 and has a balloon
payment of $12,564,077 due at maturity.
BASIS OF PRESENTATION
The accompanying financial statement has been prepared on the accrual basis of
accounting, but is not representative of the actual operations of Preston Lake
Apartments for the period shown. As required by the Securities and Exchange
Commission Regulation S-X, Rule 3-14, certain expenses have been excluded which
may not be comparable to the proposed future operations of Preston Lake
Apartments. Expenses excluded relate to property management fees, interest
expense, depreciation and amortization expenses and other expenses not directly
related to the future operations of Preston Lake Apartments. The Company is not
aware of any material factors relating to Preston Lake Apartments that would
cause the reported financial information not to be necessarily indicative of
future operating results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Rental income, attributable to residential leases, is recognized as earned over
the lease term. Leases are generally for terms of one year.
MANAGEMENT'S ESTIMATES
The financial statement has been prepared in conformity with generally accepted
accounting principles. In preparing the financial statement, management is
required to make estimates and assumptions that affect the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000
The unaudited Pro Forma Consolidated Statements of Operations of Presidential
Realty Corporation (the "Company") for the year ended December 31, 1999 and for
the three months ended March 31, 2000 are presented as if the acquisitions of
Farrington Apartments and Preston Lake Apartments had occurred on January 1,
1999. The unaudited Pro Forma Consolidated Statements of Operations should be
read in conjunction with the Statements of Revenue and Certain Expenses for the
year ended December 31, 1999 of Farrington Apartments and of Preston Lake
Apartments and notes thereto included elsewhere herein. In the opinion of
Company management, all adjustments necessary to reflect the effects of the
purchase of Farrington Apartments and Preston Lake Apartments have been made.
The unaudited Pro Forma Consolidated Statements of Operations are prepared for
informational purposes only and are not necessarily indicative of the Company's
future results or of actual results that would have been achieved if these
acquisitions had been completed as of the date indicated above.
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<CAPTION>
Pro Forma Adjustments
Presidential --------------------------------- Pro
Realty Farrington Preston Lake Forma
Corporation (a) Apartments Apartments Total
------------------- ---------- ------------ -----------
Income:
<S> <C> <C> <C> <C>
Rental $10,672,236 $1,628,212 (b) $2,651,118 (b) $14,951,566
Interest on mortgages - sold properties 3,074,034 3,074,034
Interest on wrap mortgages 528,173 528,173
Interest on mortgages - related parties 250,491 250,491
Investment income 648,221 648,221
Other 71,127 71,127
--------------- -------------- --------------- ----------------
Total 15,244,282 1,628,212 2,651,118 19,523,612
--------------- -------------- --------------- ----------------
Costs and Expenses:
General and administrative 3,098,272 3,098,272
Interest on note payable and other 236,739 236,739
Interest on wrap mortgage debt 54,586 54,586
Amortization of loan acquisition costs 3,128 3,128
Depreciation on non-rental property 25,497 25,497
Rental property:
Operating expenses 4,684,312 552,887 (b) 648,261 (b)
65,128 (c) 106,045 (c) 6,056,633
Interest on mortgages 2,952,811 658,860 (d) 1,153,353 (d) 4,765,024
Real estate taxes 927,344 118,474 (b) 212,628 (b) 1,258,446
Depreciation on real estate 1,008,051 226,014 (e) 435,815 (e) 1,669,880
Amortization of mortgage costs 273,752 10,633 (f) 14,063 (f) 298,448
Minority interest share of partnership income 601,489 601,489
--------------- -------------- --------------- ----------------
Total 13,865,981 1,631,996 2,570,165 18,068,142
--------------- -------------- --------------- ----------------
Income (loss) before net gain from sales of properties,
notes, and securities 1,378,301 (3,784) 80,953 1,455,470
Net gain from sales of properties, notes and securities 7,703,081 7,703,081
--------------- -------------- --------------- ----------------
Net Income (Loss) $9,081,382 ($3,784) $80,953 $9,158,551
=============== ============== =============== ================
Historical earnings per share (basic and diluted):
Income before net gain from sales of properties,
notes, and securities $0.38
Net gain from sales of properties, notes and securities 2.12
---------------
Net Income $2.50
===============
Pro forma earnings per share (basic and diluted):
Income before net gain from sales of properties,
notes, and securities $0.40
Net gain from sales of properties, notes and securities 2.12
----------------
Net Income $2.52
================
Weighted Average Number of Shares Outstanding 3,629,333
===============
See notes to pro forma consolidated statement of operations.
</TABLE>
<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
<CAPTION>
Pro Forma Adjustments
Presidential -------------------------------- Pro
Realty Farrington Preston Lake Forma
Corporation (a) Apartments Apartments Total
----------------- ---------- ------------ -----------
Income:
<S> <C> <C> <C> <C>
Rental $2,880,532 $314,093 (b) $677,512 (b) $3,872,137
Interest on mortgages - sold properties 744,165 744,165
Interest on mortgages - related parties 45,209 45,209
Investment income 126,753 126,753
Other 20,314 20,314
-------------- -------------- --------------- ----------------
Total 3,816,973 314,093 677,512 4,808,578
-------------- -------------- --------------- ----------------
Costs and Expenses:
General and administrative 721,169 721,169
Depreciation on non-rental property 5,675 5,675
Rental property:
Operating expenses 1,158,270 141,177 (b) 164,582 (b)
12,564 (c) 27,100 (c) 1,503,693
Interest on mortgages 766,049 135,781 (d) 281,914 (d) 1,183,744
Real estate taxes 247,392 23,958 (b) 50,721 (b) 322,071
Depreciation on real estate 270,584 47,086 (e) 108,954 (e) 426,624
Amortization of mortgage costs 20,741 2,152 (f) 3,419 (f) 26,312
Minority interest share of partnership income 168,195 168,195
-------------- -------------- --------------- ----------------
Total 3,358,075 362,718 636,690 4,357,483
-------------- -------------- --------------- ----------------
Income (loss) before net gain from sales of properties,
notes, and securities 458,898 (48,625) 40,822 451,095
Net gain from sales of properties, notes and securities 12,703 12,703
-------------- -------------- --------------- ----------------
Net Income (Loss) $471,601 ($48,625) $40,822 $463,798
============== ============== =============== ================
Historical earnings per share (basic and diluted):
Income before net gain from sales of properties,
notes, and securities $0.13
Net gain from sales of properties, notes and securities 0.00
--------------
Net Income $0.13
==============
Pro forma earnings per share (basic and diluted):
Income before net gain from sales of properties,
notes, and securities $0.13
Net gain from sales of properties, notes and securities 0.00
----------------
Net Income $0.13
================
Weighted Average Number of Shares Outstanding 3,692,081
==============
See notes to pro forma consolidated statement of operations.
</TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
a) Reflects the historical consolidated statements of operations for the
Company for the year ended December 31, 1999 as reported on Form 10-K and
for the three months ended March 31, 2000 as reported on Form 10-Q.
b) Reflects the historical rental income and operating expenses of
Farrington Apartments and Preston Lake Apartments.
c) Reflects an adjustment for property management fees. The property
management fees included in operating expenses are based on a fee of 4% of
rental income, which is the standard rental property management fee paid
for other properties owned by the Company and managed by the unaffiliated
rental property management company.
d) Reflects interest expense on the debt used to fund the acquisitions. The
mortgage interest rates for Farrington Apartments and Preston Lake
Apartments are 8.25% and 8.15%, per annum, respectively. Interest is
calculated on the actual number of days elapsed divided by 360 days, on
principal balances of $7,900,000 for the debt on Farrington Apartments and
$14,000,000 for Preston Lake Apartments.
e) Reflects depreciation on the acquired assets. Depreciation expense on the
buildings is recorded using the straight-line method over 35 years.
Depreciation expense on the equipment is recorded using the straight-line
method over 5 years.
f) Reflects amortization of costs incurred to obtain mortgage financing. The
interest method is used for the amortization of mortgage costs, over the
life of the mortgage debt.
SIGNATURES
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 thereunto duly authorized.
PRESIDENTIAL REALTY CORPORATION
By: Jeffrey F. Joseph
-----------------
Jeffrey F. Joseph
President
Date: May 25, 2000
