UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 16, 1998
ASSET INVESTORS CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 1-9360 84-1038736
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
3410 South Galena Street, Suite 210 80231
Denver, Colorado (Zip Code)
(Address of principal executive offices)
(303) 614-9400
(Registrant's telephone number, including area code)
N/A
(Former name or former address,
if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 16, 1998, Asset Investors Corporation (the "Company") acquired three
contiguous manufactured home communities located in Orlando, Florida from
Gulfstream Harbor, Inc. and Gulfstream Harbor II, Inc. These communities consist
of 920 developed homesites with the expansion capacity for an additional 227
homesites. The developed homesites are 100% occupied.
The consideration for the communities was determined through arms-length
negotiations with the sellers. Total consideration for the three parks was
$32,500,000 which was advanced under a short-term note from Salomon Brothers
Realty Corp. The Company intends to replace the short-term note with permanent
financing in the third quarter of 1998.
The Company generally intends to continue to utilize the assets acquired in the
transaction as rental properties which is the same manner as they were employed
prior to the acquisition. Due to the Company's intent to acquire additional
manufactured home communities, the Company's future dividends and the taxable
portion thereof cannot be estimated at this time.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this Report, the Company's Annual Report to Stockholders and other
Company filings (collectively "SEC Filings") under the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended (as well as
information communicated orally or in writing between the dates of such SEC
Filings) contains or may contain information that is forward looking, including,
without limitation, statements regarding projections of the Company's future
financial performance, cash flow, dividends and anticipated returns on real
estate investments. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include: general economic and business
conditions; interest rate changes; financing and refinancing risks; risks
inherent in owning real estate or debt secured by real estate; future
development rate of homesites; competition; the availability of real estate
assets at prices which meet the Company's investment criteria; the Company's
ability to reduce expense levels, implement rent increases, use leverage and
other risks set forth in the Company's Securities and Exchange Commission
filings. Readers should carefully review the Company's financial statements and
the notes thereto, as well as the risk factors described in the SEC Filings.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Statement of Excess of Revenues Over Specific Operating Expenses of the
Gulfstream Harbor Manufactured Home Communities for the Year Ended
December 31, 1997 (audited) and the Period from January 1, 1998 to
March 31, 1998 (unaudited).
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet of Asset Investors
Corporation and Subsidiaries as of March 31, 1998.
Pro Forma Condensed Consolidated Statement of Income of Asset Investors
Corporation and Subsidiaries for the Three Months Ended March 31, 1998.
Pro Forma Condensed Consolidated Statement of Income of Asset Investors
Corporation and Subsidiaries for the Year Ended December 31, 1997.
(c) Exhibits
Exhibit No. Description
2.7 Agreement of Sale dated as of May 13, 1998, between
HFIC, INC. and Gulfstream Harbor, Inc. and Gulfstream
Harbor II Inc. (incorporated herein by reference to
Exhibit 2.7 to the Registrant's Current Report on
Form 8-K dated July 16, 1998, Commission File No.
1-22262, filed on July 30, 1998).
2.7(a) Assignment of Agreement of Sale dated as of July 15,
1998, between HFIC, INC. and AIOP Gulfstream Harbor,
LLC., AIOP Gulfstream Outlot I, L.L.C., AIOP
Gulfstream Outlot II, L.L.C. and AIOP Gulfstream
Outlot III, L.L.C. (incorporated herein by reference
to Exhibit 2.7(a) to the Registrant's Current Report
on Form 8-K dated July 16, 1998, Commission File No.
1-22262, filed on July 30, 1998).
10.7 Loan Agreement dated as of July 16, 1998, by and
among AIOP Brentwood West, L.L.C.; AIOP Lost Dutchman
Notes, L.L.C.; AIOP Mullica, L.L.C.; AIOP Gulfstream
Harbor, L.L.C.; AIOP Gulfstream Outlot I, L.L.C.;
AIOP Gulfstream Outlot II, L.L.C.; AIOP Gulfstream
Outlot III, L.L.C.; and AIOP Serendipity, L.L.C., and
Salomon Brothers Realty Corp. and LaSalle National
Bank (incorporated herein by reference to Exhibit
10.7 to the Registrant's Current Report on Form 8-K
dated July 16, 1998, Commission File No. 1-22262,
filed on July 30, 1998).
10.7(a) Promissory Note dated as of July 16, 1998, between
AIOP Lost Dutchman Notes, L.L.C.; AIOP Brentwood
West, L.L.C.; AIOP Mullica, L.L.C.; AIOP Gulfstream
Harbor, L.L.C.; AIOP Gulfstream Outlot I, L.L.C.;
AIOP Gulfstream Outlot II, L.L.C.; AIOP Gulfstream
Outlot III, L.L.C.; and AIOP Serendipity, L.L.C., and
Salomon Brothers Realty Corp. (incorporated herein by
reference to Exhibit 10.7(a) to the Registrant's
Current Report on Form 8-K dated July 16, 1998,
Commission File No. 1-22262, filed on July 30, 1998).
<PAGE>
10.7(b) Pledge Agreement and Limited Recourse Guaranty dated
as of July 16, 1998 by and among the Registrant,
Asset Investors Operating Partnership, L.P. and
Salomon Brothers Realty Corp. (incorporated herein by
reference to Exhibit 10.7(b) to the Registrant's
Current Report on Form 8-K dated July 16, 1998,
Commission File No. 1-22262, filed on July 30, 1998).
23 Consent of Independent Auditors - Ernst & Young LLP
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 hereunto duly authorized.
ASSET INVESTORS CORPORATION
/s/David M. Becker
Date: September 28, 1998 -------------------------------
By: David M. Becker
Chief Financial Officer
<PAGE>
Statement of Excess of Revenues Over Specific Operating
Expenses
Gulfstream Harbor Manufactured Home Communities
Year ended December 31, 1997
<PAGE>
Gulfstream Harbor Manufactured Home Communities
Statement of Excess of Revenues
Over Specific Operating Expenses
Year ended December 31, 1997
Contents
Report of Independent Auditors.................................................1
Statement of Excess of Revenues Over Specific Operating
Expenses.....................................................................2
Notes to Statement of Excess of Revenues Over Specific
Operating Expenses...........................................................3
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Asset Investors Corporation
We have audited the accompanying statement of excess of revenues over specific
operating expenses of Gulfstream Harbor Manufactured Home Communities (Note 1)
for the year ended December 31, 1997. This statement is the responsibility of
the management of the communities. Our responsibility is to express an opinion
on this 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 statement of excess of revenues over specific
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As described in Note 1, the statement of excess of revenues over specific
operating expenses excludes certain expenses that would not be comparable to the
operations of the community after acquisition by Asset Investors Corporation.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and is not
intended to be a complete presentation of the community's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the excess of revenues over specific operating expenses (exclusive of
expenses described in Note 1) of Gulfstream Harbor Manufactured Home Communities
for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
September 25, 1998 ERNST & YOUNG LLP
1
<PAGE>
Gulfstream Harbor Manufactured Home Communities
Statement of Excess of Revenues
Over Specific Operating Expenses
<TABLE>
<CAPTION>
Period from
Year ended December January 1, 1998 to
31, 1997 March 31, 1998
----------------------------------------
(Unaudited)
Revenues
<S> <C> <C>
Rental $ 3,146,784 $ 858,676
Specific operating expenses
Property operations and maintenance 640,042 144,239
Real estate taxes 306,040 76,510
----------------------------------------
946,082 220,749
----------------------------------------
Excess of revenues over specific operating expenses $ 2,200,702 $ 637,927
========================================
</TABLE>
2
See accompanying notes.
<PAGE>
Gulfstream Harbor Manufactured Home Communities
Notes to Statement of Excess of Revenues
Over Specific Operating Expenses
1. Organization and Significant Accounting Policies
Description of Properties
The Gulfstream Manufactured Home Communities includes three manufactured home
communities (the Communities) owned and operated by Gulfstream Harbor, Inc. and
Gulfstream Harbor II, Inc. located in Orlando, Florida. The Communities, which
are contiguous and under common management and control contain 920 developed
homesites. In July 1998, the Communities were sold to Asset Investors Operating
Partnership L.P.
Basis of Accounting
The accompanying statement of excess of revenues over specific operating
expenses is presented on the accrual basis. This statement has been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties. Accordingly, the statement
excludes certain historical expenses not comparable to the operations of the
property after acquisition, such as professional fees, management fees,
depreciation, amortization and interest.
Revenue Recognition
Rental income attributable to manufactured home lots is recorded when due from
residents.
Use of Estimates
The preparation of the statement of excess of revenues over specific operating
expenses in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the statement and accompanying notes. Actual results could differ from those
estimates.
3
<PAGE>
Item 7(b).
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(In thousands)
(Unaudited)
As Previously Pro Forma Pro Forma
Reported Adjustments Results
------------------------------------------------
ASSETS
<S> <C> <C> <C>
Real estate, net $ 45,434 $ 55,120 (a) $ 100,554
Investments in participating mortgages 15,930 -- 15,930
Real estate joint ventures 9,690 -- 9,690
Cash and cash equivalents 19,417 (16,748) (b) 2,669
Investment in CAX 21,133 -- 21,133
Other assets, net 9,751 628 (c) 10,379
---------- -------- ----------
Total Assets $ 121,355 $ 39,000 $ 160,355
========== ======== ==========
LIABILITIES
Secured notes payable $ 10,567 $ -- $ 10,567
Short-term financing -- 39,000 (d) 39,000
Accounts payable and accrued liabilities 2,051 -- 2,051
---------- -------- ----------
12,618 39,000 51,618
---------- -------- ----------
MINORITY INTEREST IN OPERATING PARTNERSHIP 24,724 -- 24,724
STOCKHOLDERS' EQUITY
Common Stock 51 -- 51
Additional paid-in capital 231,237 -- 231,237
Dividends in excess of accumulated earnings (147,275) -- (147,275)
---------- -------- ----------
84,013 -- 84,013
---------- -------- ----------
Total Liabilities and Stockholders' Equity $ 121,355 $ 39,000 $ 160,355
========== ======== ==========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(In thousands, except per share data)
(Unaudited)
As Previously Pro Forma Pro Forma
RENTAL PROPERTY OPERATIONS Reported Adjustments Results
-------------------------------------------------
<S> <C> <C> <C>
Rental and other property revenues $ 1,744 $ 1,531 (e) $ 3,275
Interest on participating mortgages 393 -- 393
Equity in earnings of real estate joint ventures 311 -- 311
Property operating expenses (759) (457) (e) (1,216)
Owned property management expenses (34) (2) (e) (36)
--------- --------- ---------
Income from property operations before depreciation 1,655 1,072 2,727
Depreciation (393) (528) (i) (921)
--------- --------- ---------
Income from rental property operations 1,262 544 1,806
--------- --------- ---------
SERVICE OPERATIONS
Property management fees and other income 77 (23) (f) 54
Property management costs and other expenses (24) 2 (f) (22)
Amortization of management contracts (827) -- (827)
--------- --------- ---------
Loss from service operations (774) (21) (795)
--------- --------- ---------
OTHER ACTIVITIES
Non-agency MBS bonds revenues 50 -- 50
Equity in earnings of CAX 268 -- 268
--------- --------- ---------
Income from other activities 318 -- 318
--------- --------- ---------
General and administrative expenses (322) -- (322)
Interest and other income 333 (233) (h) 100
Interest expense (208) (675) (j) (883)
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 609 (385) 224
Minority interest in Operating Partnership (127) 75 (k) (52)
--------- --------- ---------
NET INCOME $ 482 $ (310) $ 172
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.09 $ (0.06) $ 0.03
========= ========= =========
DILUTED EARNINGS PER SHARE $ 0.09 $ (0.06) $ 0.03
========= ========= =========
Weighted-Average Common Shares Outstanding 5,109 5,109 5,109
Weighted-Average Common Shares And Common Share
Equivalents Outstanding 5,143 5,143 5,143
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share data)
(Unaudited)
As Previously Pro Forma Pro Forma
RENTAL PROPERTY OPERATIONS Reported Adjustments Results
-------------------------------------------------------
<S> <C> <C> <C>
Rental and other property revenues $ 3,104 $ 5,869 (e) $ 8,973
Equity in earnings of real estate joint ventures 466 -- 466
Property operating expenses (1,311) (1,892) (e) (3,203)
Owned property management expenses (87) (13) (e) (100)
--------- --------- ---------
Income from property operations before depreciation 2,172 3,964 6,136
Depreciation (693) (2,170) (i) (2,863)
--------- --------- ---------
Income from rental property operations 1,479 1,794 3,273
--------- --------- ---------
SERVICE OPERATIONS
Property management fees and other income 128 (93) (f) 35
Property management costs and other expenses (59) 9 (f) (50)
Amortization of management contracts (744) (137) (g) (881)
--------- --------- ---------
Loss from service operations (675) (221) (896)
--------- --------- ---------
OTHER ACTIVITIES
Non-agency MBS bonds revenues 2,966 -- 2,966
Equity in earnings of CAX 3,663 -- 3,663
Management fees to former manager (570) -- (570)
--------- --------- ---------
Income from other activities 6,059 -- 6,059
--------- --------- ---------
General and administrative expenses (1,042) -- (1,042)
Interest and other income 1,808 (984) (h) 824
Interest expense (368) (2,703) (j) (3,071)
Costs incurred to acquire management contract (6,553) -- (6,553)
--------- --------- ---------
INCOME (LOSS) BEFORE GAIN ON RESTRUCTURING OF BONDS AND
MINORITY INTEREST 708 (2,114) (1,406)
Gain on restructuring of bonds 6,484 -- 6,484
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 7,192 (2,114) 5,078
Minority interest in Operating Partnership 62 3 (k) 65
--------- --------- ---------
NET INCOME $ 7,254 $ (2,111) $ 5,143
========= ========= =========
BASIC EARNINGS PER SHARE $ 1.44 $ (0.42) $ 1.02
========= ========= =========
DILUTED EARNINGS PER SHARE $ 1.43 $ (0.41) $ 1.02
========= ========= =========
Weighted-Average Common Shares Outstanding 5,022 5,022 5,022
Weighted-Average Common Shares And Common Share
Equivalents Outstanding 5,061 5,061 5,061
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
ASSET INVESTORS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
The pro forma condensed consolidated balance sheet of the Company as of
March 31, 1998, is presented as if the May 29, 1998 June 2, 1998 and July 16,
1998 acquisitions of manufactured home communities had occurred on March 31,
1998. The pro forma condensed consolidated statements of income are presented
assuming all 1998 acquisitions of manufactured home communities had been
completed: (i) on January 1, 1998 for the statement of income for the three
months ended March 31, 1998; and (ii) on January 1, 1997 for the statement of
income for the year ended December 31, 1997. In management's opinion, all
adjustments necessary to reflect the acquisitions have been made. The unaudited
pro forma condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998, and the Current Reports on Form 8-K dated February 27,
1998 and May 29, 1998.
The unaudited pro forma condensed consolidated financial statements are
not necessarily indicative of what the actual financial position or results of
operations would have been assuming the transactions had been completed as of
the dates indicated, nor does it purport to represent the future financial
position or results of operations of the Company.
(a) Reflects the purchase of manufactured housing communities as follows:
Serendipity Mobile Home Park on May 29, 1998 for $8,672,000; Brentwood West
Mobile Home Park on June 2, 1998 for $13,948,000; and Gulfstream Harbor
Communities on July 16, 1998 for $32,500,000.
(b) The difference between the acquisition price of the manufactured home
communities and the proceeds from the financing less debt issue costs was
paid with existing cash balances.
(c) Reflects costs associated with obtaining financing.
(d) Reflects the $39,000,000 of short-term financing obtained by the Company on
July 16, 1998 which was used to acquire manufactured home communities,
cover debt issuance costs and repay $7,000,000 of short-term financing
obtained by the Company on June 2, 1998.
(e) Reflects adjustment for the rental income and property expenses of
communities acquired during 1998.
(f) Eliminates income from and expenses related to management of Salem Farm and
Mullica Woods for the prior owners and reflects expenses related to the
management of Serendipity, Brentwood West, and Gulfstream Harbor
communities.
(g) Amortizes the remaining cost of Salem Farm and Mullica Woods management
contracts acquired in 1997.
(h) Eliminates the short-term investment income at 5% per annum on the cash
used to acquire the interests in manufactured housing communities.
(i) Reflects depreciation and amortization of acquired assets on the
straight-line basis over the estimated useful lives of the assets. The
estimated useful lives are 25 years for land improvements and buildings.
<PAGE>
(j) Reflects interest expense on $39,000,000 of financing at an effective
interest rate of 6.93%.
(k) Adjusts minority interest in net income allocated to the limited partners
in Asset Investors Operating Partnership, L.P. based upon OP Units issued
and adjusted income before minority interest.
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-42605) of Asset Investors Corporation of our report dated September
25, 1998, with respect to the Statement of Excess of Revenues over Specific
Operating Expenses of the Gulfstream Harbor Manufactured Home Communities for
the year ended December 31, 1997, which are included in the Current Report (Form
8-K/A) dated September 28, 1998.
ERNST & YOUNG LLP
Denver, Colorado
September 28, 1998
