<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
November 1, 1994
-----------------------------------------------
Date of Report (Date of Earliest Event Reported)
TRANSCONTINENTAL REALTY INVESTORS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-13291 94-6565852
- - - --------------------------------------------------------------------------------
(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 November 1, 1994, Transcontinental Realty Investors, Inc. ("the Company")
purchased the Summerfield Apartments, a 224 unit apartment complex in Orlando,
Florida for $5.6 million, exclusive of commissions and closing costs. The
Company paid $800,000 in cash and assumed a first mortgage in the amount of
$4.8 million. The mortgage bears interest at a variable rate and requires
monthly payments of principal and interest of $43,240. The mortgage matures in
March 2024. The $5.6 million purchase price of the Summerfield Apartments is
approximately 3.0% of the Company's consolidated assets at December 31, 1993.
Although not a significant acquisition in itself, when aggregated with the
other acquisitions completed by the Company in 1994, as described below, such
acquisitions constitute a significant acquisition.
In addition to the Summerfield Apartments acquisition discussed above, the
Company has purchased three industrial properties and two office buildings in
1994. The three industrial properties and one of the office buildings are
located in Virginia, and the other office building is located in Dallas, Texas.
The properties were purchased for a total of $21.7 million and represent
approximately 9.4% of the Company's consolidated assets at December 31, 1993.
The Company paid a total of $3.7 million in cash and financed the remainder of
the purchase prices. The mortgages secured by the properties bear interest at
rates ranging from 6.0% to 10.0% per annum and mature in 1999 and 2006. Two of
these acquisitions occurred prior to September 30, 1994 and are accordingly
reflected in the September 30, 1994 "actual balance sheet" of the Company, as
presented.
In 1994, the Company has also sold one apartment complex, one office building,
its general partnership interest in two partnerships and its limited partner
interest in one partnership. In connection with the sales, the Company
received cash totaling $1.6 million and provided an additional $100,000 in
purchase money financing. These sales all occurred prior to September 30, 1994
and are accordingly reflected in the Company's "actual balance sheet" as of
September 30, 1994, as presented.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(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. The pro forma
statements of operations present the Company's operations as if the
transactions described above had occurred at the beginning of each of the
periods presented. A pro forma balance sheet as of September 30, 1994 is also
presented. The pro forma balance sheet presents the purchase transactions,
described above, as if they had occurred on September 30, 1994.
2
<PAGE> 3
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Other
Property
Actual Summerfield(1) Acquisitions(2) Proforma
--------------- -------------- --------------- --------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Assets
------
Notes and interest receivable
Performing.................. $ 16,641 $ - $ - $ 16,641
Nonperforming, nonaccruing.. 593 - - 593
--------------- -------------- -------------- --------------
17,234 - - 17,234
Real estate held for sale, net
of depreciation............. 8,137 - - 8,137
Less - allowance for
estimated losses............ (960) - - (960)
--------------- -------------- -------------- --------------
24,411 - - 24,411
Real estate held for invest-
ment, net of accumulated
depreciation................ 183,217 5,582 9,600 198,399
Investment in partnerships.... 11,094 - - 11,094
Cash and cash equivalents..... 4,816 (771) (2,038) 2,007
Other assets.................. 6,194 - (136) 6,058
--------------- -------------- -------------- --------------
$ 229,732 $ 4,811 $ 7,426 $ 241,969
=============== ============== ============== ==============
Liabilities and Stockholders' Equity
- - - ------------------------------------
Liabilities
Notes and interest payable.... $ 124,082 $ 4,811 $ 7,391 $ 136,284
Other liabilities............. 10,813 - 35 10,848
--------------- -------------- -------------- --------------
134,895 4,811 7,426 147,132
Commitments and contingencies
Stockholders' equity
Common stock $.01 par value,
authorized, 10,000,000
shares; issued and out-
standing, 2,674,850 shares.. 27 - - 27
Paid-in capital............... 219,049 - - 219,049
Accumulated distributions in
excess of accumulated
earnings.................... (124,239) - - (124,239)
--------------- -------------- -------------- --------------
94,837 - - 94,837
--------------- -------------- -------------- --------------
$ 229,732 $ 4,811 $ 7,426 $ 241,969
=============== ============== ============== ==============
</TABLE>
__________________________
(1) Assumes the November 1, 1994 acquisition of the property by the Company
occurred on September 30, 1994.
(2) Assumes that the October and November 1994 property acquisitions of the
Company occurred on September 30, 1994.
3
<PAGE> 4
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Other Property and
Property Partnership
Actual Summerfield(1) Acquisitions(1) Sales (2) Pro forma
----------- -------------- -------------- ------------ ---------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C>
Income
Rentals................................ $ 26,376 $ 876 $ 2,778 $ (1,062) $ 28,968
Interest............................... 1,160 - - - 1,160
Equity in (losses) of investees........ (77) - - (6) (83)
----------- ---------- -------- --------- ---------
27,459 876 2,778 (1,068) 30,045
Expenses
Property operations.................... 20,317 440 1,598 (506) 21,849
Interest............................... 7.711 357 1,038 (356) 8,750
Depreciation........................... 4,472 145 334 (175) 4,776
Advisory fee to affiliate.............. 1,280 - - - 1,280
General and administrative............. 1,280 - - - 1,280
----------- ---------- -------- --------- ---------
35,060 942 2,970 (1,037) 37,935
(loss) before gain on sale of
partnership interests, gain on sale of
real estate and extraordinary gain..... (7,601) (66) (192) (31) (7,890)
Gain on sale of partnership interests.... 2,514 - - - 2,514
Gain on sale of real estate.............. 2,513 - - - 2,153
Extraordinary gain....................... 1,189 - - - 1,189
----------- ---------- -------- --------- ---------
Net (loss)............................... $ (1,745) $ (66) $ (192) $ (31) $ (2,034)
=========== ========== ======== ========= =========
Earnings per share
(Loss) before gain on sale of partner-
ship interests, gain on sale of real
estate and extraordinary gain........ $ (2.84) $ (2.95)
Gain on sale of partnership interests.. .94 .94
Gain on sale of real estate............ .80 .80
Extraordinary gain..................... .44 .44
----------- ---------
Net (loss)............................. $ (.66) $ (.77)
=========== =========
Weighted average Common shares used in
computing earnings per share........... 2,674,850 2,674,850
=========== =========
</TABLE>
____________________________
(1) Assumes acquisition by the Company on January 1, 1994.
(2) Assumes sale by the Company on January 1, 1994.
4
<PAGE> 5
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Property
Other and
Summerfield Property Partnership
Actual Acquisition(1) Acquisitions(1) Sales (2) Pro forma
---------- -------------- --------------- ----------- ----------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C>
Income
Rentals.............................. $ 30,373 $ 1,075 $ 2,814 $ (1,911) $ 32,351
Interest............................. 1,869 - - - 1,869
Equity in (losses) of investees...... (262) - - 490 228
--------- --------- ------- ---------- ---------
31,980 1,075 2,814 (1,421) 34,448
Expenses
Property operations.................. 23,659 666 1,847 (1,315) 24,857
Interest............................. 8,662 472 1,354 (596) 9,892
Depreciation......................... 5,435 167 541 (229) 5,914
Advisory fee to affiliate............ 1,548 - - - 1,548
General and administrative........... 1,991 - - - 1,991
Provision for losses................. 873 - - - 873
--------- --------- ------- ---------- ---------
42,168 1,305 3,742 (2,140) 45,075
Income (loss) before gain on sale of
real estate and extraordinary gain... (10,188) (230) (928) 719 (10,627)
Gain on sale of real estate............ 24 - - - 24
Extraordinary gain..................... 1,594 - - - 1,594
--------- --------- ------- ---------- ---------
Net income (loss)...................... $ (8,570) $ (230) $ (928) $ 719 $ (9,009)
========= ========= ======= ========== =========
Earnings per share
Income before gain on sale of real
estate and extraordinary gain...... $ (3.79) $ (3.95)
Gain on sale of real estate.......... .01 .01
Extraordinary gain................... .59 .59
--------- ---------
Net income........................... $(3.19) $ (3.35)
--------- =========
Weighted average shares of Common
shares used in computing earnings
per share............................ 2,688,888 2,688,888
========= =========
</TABLE>
____________________________
(1) Assumes acquisition by the Company on January 1, 1993.
(2) Assumes sale by the Company on January 1, 1993.
5
<PAGE> 6
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Financial statements of property acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- - - ------- ----------------------------------------------------------
<S> <C>
99.0 Audited Financial Statements of Summerfield Apartments
for the year ended December 31, 1993.
</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.
TRANSCONTINENTAL REALTY INVESTORS, INC.
Date: November 14, 1994 By: /s/ Thomas A. Holland
Thomas A. Holland
Senior Vice President and
Chief Accounting Officer
6
<PAGE> 7
TRANSCONTINENTAL REALTY INVESTORS, INC.
EXHIBITS TO
CURRENT REPORT ON FORM 8-K
Dated November 1, 1994
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- - - ------- ----------------------------------------- ------
<S> <C> <C>
99.0 Audited Financial Statements of 8
Summerfield Apartments for the year ended
December 31, 1993.
</TABLE>
7
<PAGE> 1
EXHIBIT 99.0
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
TABLE OF CONTENTS
DECEMBER 31, 1993
INDEPENDENT AUDITOR'S REPORT ........................................... 1
FINANCIAL STATEMENTS:
Balance Sheet, December 31, 1993 ..................................... 2-3
Statement of Profit and Loss (HUD Form No. 92410)
for the year ended December 31, 1993 ............................... 4-5
Statement of Changes in Project Equity for the year
ended December 31, 1993 ............................................ 6
Statement of Cash Flows for the year ended
December 31, 1993 .................................................. 7
Notes to Financial Statements ........................................ 8-10
<PAGE> 2
INDEPENDENT AUDITOR'S REPORT
To the Partners
Griffin Orlando, A Limited Partnership
Minneapolis, Minnesota
We have audited the accompanying balance sheet of SUMMERFIELD APARTMENTS OF
GRIFFIN ORLANDO, A LIMITED PARTNERSHIP (HUD Project Number 067-10561) as of
December 31, 1993, and the related statements of profit and loss, changes in
Project equity and cash flows for the year then ended. These financial
statements are the responsibility of the Project's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SUMMERFIELD APARTMENTS as of
December 31, 1993, and the results of its operations and its changes in Project
equity and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Our audit for the year ended December 31, 1993, was conducted for the purpose
of forming an opinion on the financial statements taken as a whole. The
supporting information included in the report (shown on pages 10 to 13) are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements of SUMMERFIELD APARTMENTS. Such information has
been subjected to the audit procedures applied in the audit of the financial
statements and, in our opinion, is fairly presented in all material respects in
relation to the financial statements taken as a whole.
The accompanying financial statements and supplementary information have been
prepared assuming that the entity will continue as a going concern. Because of
operating losses and negative current ratio, conditions raise substantial doubt
about the ability of SUMMERFIELD APARTMENTS to continue as a going concern.
The financial statements and supplementary information do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ LARSON, ALLEN, WEISHAIR & CO.
LARSON, ALLEN, WEISHAIR & CO.
Saint Paul, Minnesota
February 22, 1994
1
<PAGE> 3
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
BALANCE SHEET
AS OF DECEMBER 31, 1993
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS
1110 Petty cash $ 4,000
1120 Cash in bank 4,931
1130 Tenant accounts receivable 2,851
----------
Total current assets 11,782
----------
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits (contra) 36,377
----------
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits (Schedule II) 35,803
1320 Reserve for replacements (Schedule IV) 89,436
----------
Total deposits 125,239
----------
FIXED ASSETS
1410 Land 420,000
1420 Buildings 6,289,619
1460 Furnishings 502,799
----------
Total fixed assets 7,212,418
Less accumulated depreciation 1,905,922
----------
Net Fixed Assets 5,306,496
----------
Total Assets $5,479,894
==========
</TABLE>
See Accompanying Notes to Financial Statements
-2-
<PAGE> 4
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
BALANCE SHEET
AS OF DECEMBER 31, 1993
LIABILITIES
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
2110 Accounts payable $ 99,683
2120 Accrued wages payable 6,814
2130 Accrued interest payable 43,409
2190 Miscellaneous current liabilities 475
2320 Mortgage payable - current portion 24,814
----------
Total current liabilities 175,195
----------
DEPOSIT AND PREPAYMENT LIABILITIES
2191 Tenant security deposits (contra) 35,108
2210 Prepaid rent 2,824
----------
Total Deposit and Prepayment Liabilities 37,932
----------
LONG-TERM LIABILITIES
2320 Mortgage payable 4,831,282
Less: Current portion 24,814
----------
Total long-term liabilities 4,806,468
----------
Total Liabilities 5,019,595
----------
PROJECT EQUITY
3130 Project equity 460,299
----------
Total Liabilities and Project Equity $5,479,894
==========
</TABLE>
See Accompanying Notes to Financial Statements
-3-
<PAGE> 5
Statement of
Profit and Loss
U.S. Department of Housing
and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052 (Exp. 8/31/93)
<TABLE>
<CAPTION>
For Month: Period Project Number Project Name
Beginning 1-1-93 Ending 12-31-93 067-10561 Summerfield Apartments
- - - --------------------------------- -------------- ----------------------
<S> <C> <C> <C>
Part I Description of Account Acct. No
RENTAL INCOME - 5100
Apartments or member carrying charges (Coops) 5120 $1,271,752
Furniture and equipment 5130 $ 4,327
TOTAL RENT REVENUE Potential at 100% Occupancy $1,276,079
VACANCIES - 5200
Apartments 5220 $ (219,964)
Miscellaneous (specify) rent credit 5290 $ (18,172)
TOTAL VACANCIES $ (238,136)
NET RENTAL REVENUE Rent revenue less vacancies $1,037,943
FINANCIAL REVENUE - 5400
Interest income - project operations 5410 $ 731
Interest income from investment - reserve for replacement 5440 $ 3,151
TOTAL FINANCIAL REVENUE $ 3,882
OTHER REVENUE - 5900
Laundry and vending 5910 $ 28,183
Other revenue (specify) Clubhouse fees 5990 $ 523
& Redecorating
Bad debt recovery 5991 $ 4,494
TOTAL OTHER REVENUE $ 33,200
TOTAL REVENUE $1,075,025
ADMINISTRATIVE EXPENSES - 6200/6300
Advertising 6210 $ 15,051
Other renting expense 6250 $ 1,331
Office salaries 6310 $ 58,205
Office supplies 6311 $ 11,312
Management fee 6320 $ 61,981
Legal Expense 6340 $ 1,881
Auditing expense 6350 $ 2,125
Bookkeeping fees/accounting services 6351 $ 4,194
Telephone and answering service 6360 $ 5,712
Bad debts 6370 $ 19,257
Miscellaneous administrative expenses (specify)
Membership dues 6390 $ 218
TOTAL ADMINISTRATIVE EXPENSES $ 181,267
UTILITIES EXPENSE - 6400
Electricity 6450 $ 36,732
Water 6451 $ 16,168
Gas 6452 $ 3,140
TOTAL UTILITIES EXPENSE $ 56,040
OPERATING AND MAINTENANCE EXPENSES - 6500
Janitor and cleaning payroll 6510 $ 8,122
Janitor and cleaning supplies 6515 $ 11,762
Janitor and cleaning contract 6517 $ 10,080
Exterminating payroll/contract 6519 $ 2,650
Grounds payroll 6535 $ 18,951
Grounds supplies 6536 $ 1,064
Grounds/contract 6537 $ 13,176
Repairs payroll 6540 $ 50,084
Repairs material 6541 $ 78,966
Heating/cooling repairs and maintenance 6546 $ 3,256
Swimming pool maintenance/contract 6547 $ 5,912
Decorating supplies 6561 $ 1,795
Vehicle & maintenance equipment operation & repairs 6570 $ 4,577
Misc. operating & maintenance expenses 6590 $ 2,280
TOTAL OPERATING & MAINTENANCE EXPENSES $ 212,675
</TABLE>
See Accompanying Notes to Financial Statements
-4-
<PAGE> 6
Statement of
Profit and Loss
U.S. Department of Housing
and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052 (Exp. 8/31/93)
<TABLE>
<CAPTION>
For Month: Period Project Number Project Name
Beginning 1-1-93 Ending 12-31-93 067-10561 Summerfield Apartments
- - - --------------------------------- -------------- ----------------------
<S> <C> <C> <C>
Acct. No.
TAXES AND INSURANCE - 6700
Real estate taxes 6710 $ 105,534
Payroll taxes (FICA) 6711 $ 11,779
Miscellaneous taxes, licenses and permits 6719 $ 1,376
Property and liability insurance (hazard) 6720 $ 44,709
Health insurance & other employee benefits 6723 $ 21,576
TOTAL TAXES AND INSURANCE $ 184,974
FINANCIAL EXPENSES - 6800
Interest on mortgage payable 6820 $ 471,864
Mortgage insurance premium/service charge 6850 $ 19,352
Miscellaneous financial expenses 6890 $ 1,494
TOTAL FINANCIAL EXPENSES $ 492,710
TOTAL COST OF OPERATIONS BEFORE DEPRECIATION $1,127,666
Profit (loss) before depreciation $ (52,641)
Depreciation (total) - 6600 (specify) 6600 $ 167,039
Operating profit or (loss) $ (219,680)
NET PROFIT OR (LOSS) $ (219,680)
</TABLE>
<TABLE>
<S> <C> <C>
Part II 1. Total principal payments required under the 3. Replacement of painting reserve releases which
mortgage even if payments under a Workout are included as expense items on this profit
Agreement are less or more than those and loss statement. $44,362
required under the mortgage. $22,407
2. Replacement reserve deposits required by the 4. Project improvement reserve releases under
Regulatory Agreement or amendments thereto, the Flexible Subsidy Program that are included
even if payments may be temporarily suspended as expense items on this profit and loss
or waived. $26,260 statement. $ N/A
</TABLE>
See Accompanying Notes to Financial Statements
-5-
<PAGE> 7
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
STATEMENT OF CHANGES IN PROJECT EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
Project equity, January 1, 1993 $ 529,854
Partnership contribution to Project 150,125
Net loss (219,680)
---------
Project equity, December 31, 1993 $ 460,299
=========
</TABLE>
See Accompanying Notes to Financial Statements
-6-
<PAGE> 8
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from tenants $1,049,325
Cash paid to suppliers and employees (604,409)
Interest received 3,882
Interest paid (473,810)
----------
NET CASH USED BY OPERATING ACTIVITIES (25,012)
----------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchase of property (98,848)
----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Contribution by partnership to Project 150,125
Principal payments of mortgage note payable (22,407)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 127,718
----------
INCREASE IN CASH 3,858
CASH, BEGINNING OF YEAR 5,073
----------
CASH, END OF YEAR $ 8,931
==========
RECONCILIATION OF NET LOSS TO NET CASH USED
BY OPERATING ACTIVITIES:
Net loss $ (219,680)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation 167,039
Decrease (increase) in:
Tenant security deposits 1,769
Mortgage escrow deposits 73,676
Other assets (1,876)
Replacement reserves 14,951
Increase (decrease) in:
Security deposits 3,543
Accounts payable and due to affiliates 49,647
Accrued interest and other expenses (114,081)
----------
NET CASH USED BY OPERATING ACTIVITIES $ (25,012)
==========
</TABLE>
See Accompanying Notes to Financial Statements
-7-
<PAGE> 9
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. Summary of Significant Accounting Policies
Description of Summerfield Apartments - Summerfield Apartments (the
"Project") is a 224 unit apartment complex located in Orlando, Florida
owned and operated by Griffin Orlando, A Limited Partnership (the
"Partnership"). The Partnership contributed $2,554,802 for the purchase
of the Project on March 14, 1984.
Basis of Presentation - The accompanying financial statements and
supplemental schedules are presented in the format prescribed by the
U.S. Department of Housing and Urban Development ("HUD").
Property and Depreciation - Property is stated at cost and is
depreciated using the straight-line method over its estimated useful
life (buildings, 40 years; furnishings and equipment, 5 years). For
tax purposes, the Partnership depreciates the buildings over 15, 18, 19
and 27.5 years using the Accelerated Cost Recovery System and the
Modified Accelerated Cost Recovery System.
Income Taxes - The financial statements of the Project do not include a
provision for income taxes as the income and losses of the Project are
allocated to the individual partners of the Partnership for inclusion
in their tax returns.
Rental Revenues - Rental revenue is recognized in the period earned.
2. Organization
Griffin Orlando, A Limited Partnership was formed by the general
partner, GO Associates, a Minnesota general partnership, to acquire
existing, income-producing real properties for rental purposes. GO
Associates is not required to make any capital contributions to the
Partnership.
The Limited Partnership Agreement and Certificate of Limited
Partnership (Partnership Agreement) contain certain provisions, among
others, described as follows:
-- The management and general responsibility of operating the
Partnership business shall be vested exclusively in the
general partner.
-- Profits, losses and cash flow distributions, other than from
the sale of the Partnership properties, are allocated 95% to
the limited partners and 5% to the general partner.
-- Net proceeds from refinancing or from the sale of property
other than upon liquidation, less any necessary liability
reserves or debt payments, will be distributed in the
following order subject to the general partner receiving at
least 1% of the distributions:
-8-
<PAGE> 10
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
-- First to the limited partners to the extent that prior
distributions are less than the original capital contributions
plus 10% per annum (as defined in the Partnership Agreement);
-- Second, any unpaid real estate commissions due to the general
partner on the resale of the Partnership properties;
-- Third, any remaining balance, 75% to the limited partners and
25% to the general partner.
-- The Partnership will terminate on December 31, 2014 or earlier upon
the sale of substantially all of the properties or the occurrence of
certain other events as stated in the Partnership Agreement.
3. Mortgages
The mortgage note payable bears interest at 10.25% and is payable
through March 2024. The mortgage note is secured by the property.
Approximate annual maturities of the mortgage note through 1998 are
as follows:
<TABLE>
<S> <C>
1994 $ 24,814
1995 $ 27,481
1996 $ 30,434
1997 $ 33,704
1998 $ 37,326
</TABLE>
4. Related Party Transactions
The partners of GO Associates, the general partner of the Partnership,
are also owners, directors, and officers of Griffin Companies, a
Minnesota Corporation. The following is a summary of fees incurred in
1993 relating to Griffin Companies:
<TABLE>
<S> <C>
Management fees $61,981
Major improvement supervisory fees $ 5,976
</TABLE>
-9-
<PAGE> 11
SUMMERFIELD APARTMENTS
PROJECT NO. 067-10561
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
5. Contingencies - Going Concern
As shown in the accompanying form HUD-92410 statement of profit and
loss, the project incurred a net loss of $219,680 during the year
ended December 31, 1993, and as of that date, the project's current
liabilities exceeded its current assets by $163,413. These factors
create an uncertainty about the project's ability to continue as a
going concern. The ability of the project to continue as a going
concern is dependent on improved tenant occupancy and improved
operations of the project. The financial statements do not include
any adjustments that might be necessary if the project is unable to
continue as a going concern.
-10-
