SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment #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): July 27, 1998
BODDIE-NOELL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-9496 56-1574675
(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)
3850 One First Union Center, Charlotte, NC 28202
(Address or principal executive offices, Zip Code)
Registrant's telephone number 704/944-0100
Total number of pages: 65
1
<PAGE>
Item 2. Acquisition or Disposition of Assets
OAK HOLLOW APARTMENTS, CARY, NORTH CAROLINA
Effective July 27, 1998, Boddie-Noell Properties, Inc. (the "Company")
acquired Oak Hollow Apartments, including the property and its operating assets
and liabilities, for an estimated total acquisition cost of approximately $12.3
million, as follows:
- We made cash payments totaling approximately $2.3 million to former
limited partners of Oak Hollow Apartments Limited Partnership.
- We issued 106,124 partnership units in Boddie-Noell Properties Limited
Partnership (the "Operating Partnership"), with an imputed value of
approximately $1.5 million, to former limited partners of Oak Hollow
Apartments Limited Partnership.
- We contributed approximately $533,000 to Oak Hollow Apartments Limited
Partnership for payments associated with its liquidation.
- We assumed first and second deed of trust loan obligations totaling
approximately $7.8 million. In addition, we assumed approximately
$70,000 of current liabilities in excess of current assets acquired.
- We incurred other direct costs of the acquisition estimated at
approximately $91,000.
On August 27, 1998, we applied $8.4 million proceeds from a fixed rate
loan by AMRESCO Capital, LP, to retire the assumed loan obligations and fund the
payments associated with the liquidation of Oak Hollow Apartments Limited
Partnership. A deed of trust and assignment of rents of Oak Hollow Apartments
secure the new loan. The note payable provides for interest at 6.65% payable in
monthly installments of $46,000 and matures in 2008. The balance of funds
required for the acquisition came from draws on our revolving line of
credit.
Oak Hollow is located in Cary, North Carolina and contains 220 one- and
two-bedroom apartments.
WOODS EDGE APARTMENTS, DURHAM, NORTH CAROLINA
Effective June 1, 1998, we acquired Woods Edge Apartments. We acquired
the property and its operating assets and liabilities for an estimated total
acquisition cost of approximately $14.1 million, as follows:
- We made cash payments totaling approximately $2.3 million to former
limited partners of Woods Edge Apartments Limited Partnership of
Durham.
- We issued 186,282 partnership units in the Operating Partnership, with
an imputed value of approximately $2.7 million, to former limited
partners of Woods Edge Apartments Limited Partnership of Durham.
- We assumed a long-term debt obligation to AMRESCO Capital, LP,
totaling $9.75 million. A deed of trust and assignment of rents of
Woods Edge
2
<PAGE>
Apartments secure the loan. The note payable provides for
interest at 6.95% payable in monthly installments of $56,000 and
matures in 2007.
- We acquired approximately $822,000 current assets in excess of current
liabilities assumed. Current assets acquired included approximately
$585,000 cash.
- We incurred other direct costs of the acquisition estimated at
approximately $123,000.
We financed the acquisition with draws on our revolving line of
credit.
Woods Edge is located in Durham, North Carolina and contains 264 one- and
two-bedroom apartment units.
We are a self-administered and self-managed real estate investment trust
that owns and operates apartment communities in North Carolina and Virginia.
With the acquisitions of Woods Edge Apartments and Oak Hollow Apartments, we
currently own and operate 11 apartment communities containing 2,692 units, and
have the right to acquire three additional apartment communities containing 476
units. We also own 47 restaurant properties, which we lease to a third party
under a master lease on a triple-net basis. In addition, we manage five other
apartment communities through an unconsolidated subsidiary. Our executive
offices are located at 3850 One First Union Center, Charlotte, North Carolina
28202-6032, telephone 704/944-0100.
The Company is structured as an UPREIT, or umbrella partnership real
estate investment trust. We are the sole general partner and own a controlling
interest in the Operating Partnership, through which we conduct all of our
operations.
BNP Management, Inc., our unconsolidated subsidiary third-party
management company, previously managed both of the properties acquired.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
Page 7 Woods Edge Apartments Statement of Revenues and
Certain Operating Expenses for the five months ended
May 31, 1998 (unaudited)
Page 8 Oak Hollow Apartments Statement of Revenues and
Certain Operating Expenses for the six months ended
June 30, 1998 (unaudited)
Pages 9-16 Woods Edge Apartments Limited Partnership Audited
Financial Statements as of and for the year ended
December 31, 1997
3
<PAGE>
Pages 17-29 Woods Edge Apartments Limited Partnership
Audited Financial Statements as of and for the year
ended December 31, 1996
Pages 30-43 Woods Edge Apartments Limited Partnership
Audited Financial Statements as of and for the year
ended December 31, 1995
Pages 44-51 Oak Hollow Apartments Limited Partnership
Audited Financial Statements as of and for the years
ended December 31, 1997, and December 31, 1996
Pages 52-59 Oak Hollow Apartments Limited Partnership
Audited Financial Statements as of and for the years
ended December 31, 1995, and December 31, 1994
(b) Pro Forma Financial Information.
Pages 60-61 Boddie-Noell Properties, Inc. Unaudited Pro Forma
Condensed Consolidated Balance Sheet as of
June 30, 1998
Pages 62-65 Boddie-Noell Properties, Inc. Unaudited Pro Forma
Condensed Statements of Operations for the six months
ended June 30, 1998, and for the year ended
December 31, 1997
The unaudited pro forma condensed consolidated balance sheet as of June
30, 1998, is presented as if the acquisition of Oak Hollow Apartments had
occurred on June 30, 1998. We acquired Woods Edge Apartments effective June 1,
1998, and that acquisition is reflected in our historical balance sheet as of
June 30, 1998.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 1997, and for the six months ended June 30,
1998, are presented as if the acquisitions of Woods Edge Apartments and Oak
Hollow Apartments had occurred on January 1 of each period presented.
You should read these unaudited statements in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 1997, and our Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998. We believe the pro
forma condensed consolidated financial information provides all adjustments
necessary to reflect the effects of these acquisitions.
No one has audited these pro forma condensed consolidated financial
statements. These pro forma statements may not represent what our financial
position would have been if we had really acquired Oak Hollow Apartments on June
30, 1998. These pro forma statements may not represent how we would have
performed if we had acquired Woods Edge Apartments and Oak Hollow Apartments at
the beginning of the periods presented. In addition, these pro forma statements
do not purport to project our financial position or results of operations at any
future date or for any future period.
4
<PAGE>
(c) Exhibits.
None.
5
<PAGE>
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 hereunto duly authorized.
Boddie-Noell Properties, Inc.
(Registrant)
September 21, 1998 by: /s/ Pamela B. Novak
Pamela B. Novak
Vice President, Controller and
Chief Accounting Officer
6
<PAGE>
Woods Edge Apartments
Statement of Revenues and Certain Operating Expenses
For the Five Months Ended May 31, 1998
(Unaudited)
Apartment rental income $944,701
Interest income 26,394
-----------------
971,095
Property operations expense 251,258
Property taxes and insurance 87,600
Allocated accounting salaries and supplies 12,377
-----------------
351,235
-----------------
Revenues in excess of certain operating expenses $619,860
=================
Notes:
1. Basis of Presentation
The accompanying Statement of Revenue and Certain Operating Expenses includes
the accounts of Woods Edge Apartments, which was owned by Woods Edge Apartments
Limited Partnership of Durham (the "Partnership"). This statement includes only
those accounts that are directly related to the apartment community's operation.
BNP Management, Inc., the apartment community's management agent, allocated
certain costs, including property accounting office salaries, office supplies
and long-distance telephone costs, to the apartment community.
This financial statement does not include all of the Partnership's accounts. We
have excluded interest, depreciation and amortization, management fees, and
general and administrative expenses of the Partnership which are not directly
related to the apartment community's operation.
2. Significant Accounting Policies
We expense advertising costs as incurred. Advertising expense included in
apartment operations expense was $8,700.
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from these estimates.
3. Leases
We lease our residential apartments under operating leases with monthly payments
due in advance. Terms of the apartment leases are generally one year or less,
with none longer than two years. We record rental and other revenues as they are
earned.
7
<PAGE>
Oak Hollow Apartments
Statement of Revenues and Certain Operating Expenses
For the Six Months Ended June 30, 1998
(Unaudited)
Apartment rental income $924,787
Interest income 12,045
-----------------
936,832
Property operations expense 267,217
Property taxes and insurance 63,965
Allocated accounting salaries and supplies 12,094
-----------------
343,276
-----------------
Revenues in excess of certain operating expenses $593,556
=================
Notes:
1. Basis of Presentation
The accompanying Statement of Revenue and Certain Operating Expenses includes
the accounts of Oak Hollow Apartments, which was owned by Oak Hollow Apartments
Limited Partnership (the "Partnership"). This statement includes only those
accounts that are directly related to the apartment community's operation.
BNP Management, Inc., the apartment community's management agent, allocated
certain costs, including property accounting office salaries, office supplies
and long-distance telephone costs, to the apartment community.
This financial statement does not include all of the accounts of the
Partnership. We have excluded interest, depreciation and amortization,
management fees, and general and administrative expenses of the Partnership
which are not directly related to the apartment community's operation.
2. Significant Accounting Policies
We expense advertising costs as incurred. Advertising expense included in
apartment operations expense was $9,700.
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from these estimates.
3. Leases
We lease our residential apartments under operating leases with monthly payments
due in advance. Terms of the apartment leases are generally one year or less,
with none longer than two years. We record rental and other revenues as they are
earned.
8
<PAGE>
Report of Independent Auditors
To the Partners of
Wood's Edge Apartments Limited Partnership
We have audited the accompanying balance sheet of Wood's Edge Apartments Limited
Partnership as of December 31, 1997 and the related statements of operations,
partners' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the general partner. 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.
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 the
general partner, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of Wood's Edge Apartments
Limited Partnership as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
February 4, 1998
9
<PAGE>
Wood's Edge Apartments Limited Partnership
Balance Sheet
December 31, 1997
Assets
Rental Properties:
Land $ 907,474
Buildings and improvements 9,433,407
Personal property 1,910,686
Less - accumulated depreciation (5,416,280)
--------------------
6,835,287
Cash and cash equivalents 617,167
Restricted cash - tenant security deposits 26,476
Prepaids and other assets 134,676
Deferred costs, net of amortization of $1,878 223,509
Repair escrow 259,644
--------------------
Total assets $ 8,096,759
====================
Liabilities and partners' deficit
Mortgage loan payable $ 9,750,000
Trade accounts payable and accrued expense 75,880
Prepaid rents and tenant security deposits 30,529
--------------------
Total liabilities 9,856,409
Partners' deficit:
Limited partners (1,687,995)
General partner (71,655)
--------------------
Total partners' deficit (1,759,650)
--------------------
Total liabilities and partners' deficit $ 8,096,759
====================
See accompanying notes.
10
<PAGE>
Wood's Edge Apartments Limited Partnership
Statement of Operations
Year ended December 31, 1997
Revenues
Rental revenue $ 2,219,492
Interest 13,266
----------------
2,232,758
Expenses
Property operations 528,739
General and administrative 39,369
Property taxes and insurance 236,314
Management fees 133,134
Depreciation 403,409
Amortization 12,515
Interest 782,805
----------------
2,136,285
----------------
Income before extraordinary item 96,473
Extraordinary item - loss on early
extinguishment of debt (343,349)
----------------
Net loss $ (246,876)
================
Net loss allocated to limited partners (99%) $ (244,407)
================
Net loss allocated to general partner (1%) $ (2,469)
================
See accompanying notes.
11
<PAGE>
Wood's Edge Apartments Limited Partnership
Statement of Partners' Deficit
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------- General
Class A Class B Class C Partner Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ (46,957) $ (756,374) $ (262,077) $ (65,366) $(1,130,774)
Distributions (160,904) (131,868) (85,408) (3,820) (382,000)
Net loss (103,988) (85,222) (55,197) (2,469) (246,876)
------------------------------------------------------------------------------
Balance at December 31, 1997 $ (311,849) $ (973,464) $ (402,682) $ (71,655) $(1,759,650)
==============================================================================
</TABLE>
See accompanying notes.
12
<PAGE>
Wood's Edge Apartments Limited Partnership
Statement of Cash Flows
Year ended December 31, 1997
Operating activities
Net loss $ (246,876)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 415,924
Loss on early extinguishment of debt 343,349
Changes in operating assets and liabilities:
Prepaid rents and tenant security deposits (1,812)
Prepaids and other assets 33,121
Trade accounts payable and accrued expenses (9,499)
---------------
Net cash provided by operating activities 534,207
Investing activities
Additions to rental property (289,392)
Deposit to repair escrow (259,644)
Releases from replacement reserve escrow, net 99,074
---------------
Net cash used in investing activities (449,962)
Financing activities
Proceeds from notes payable 9,750,000
Payment of deferred loan costs (225,387)
Repayment of long-term debt (8,944,763)
Distributions to partners (382,000)
---------------
Net cash provided by financing activities 197,850
---------------
Net increase in cash and cash equivalents 282,095
Cash and cash equivalents at beginning of year 335,072
---------------
Cash and cash equivalents at end of year $ 617,167
===============
See accompanying notes.
13
<PAGE>
Wood's Edge Apartments Limited Partnership
Notes to Financial Statements
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Wood's Edge Apartments Limited Partnership (the Partnership) is a North Carolina
limited partnership formed to acquire, hold, operate and manage a residential
apartment community in Durham, North Carolina.
Under the terms of the partnership, net income or loss and cash distributions
from operations are to be allocated 99 percent to the limited partners and 1
percent to the general partner. Upon the sale or refinance of the partnership
property, the partnership agreement specifies certain allocations of net
proceeds and taxable gain or loss from the transaction.
Rental Revenue
The apartments are generally leased for terms of one year or less. Revenue from
apartment rentals and service income are recognized as they accrue. Advance
receipts of rental revenue are deferred and classified as liabilities until
earned.
Rental Properties
All property is stated at cost. Buildings are depreciated on a straight-line
basis over the estimated useful life of 30 years. Capitalized building
improvements and personal property are depreciated using accelerated methods
over 15 years and 7 years, respectively. Repairs and maintenance costs are
expensed as incurred.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Deferred Costs
Financing costs have been capitalized and are amortized over the term of the
related mortgage.
14
<PAGE>
Wood's Edge Apartments Limited Partnership
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Income Taxes
Under current income tax laws, income or loss of the Partnership is included in
the income tax returns of the partners. Accordingly, no provision has been made
for federal or state income taxes in the accompanying financial statements. The
tax returns of the Partnership are subject to examination by federal and state
taxing authorities. If such examinations occur and result in changes with
respect to the partnership qualification or in changes to partnership income or
loss, the tax liability of the partners would be changed accordingly.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Depreciation amounts included in these financial statements reflect management's
estimate of the life and related depreciation rates for rental properties.
Actual results could differ from these estimates.
2. Notes Payable
In November 1997 the Partnership applied proceeds of a $9,750,000 note payable
to a financial institution to retire the existing note payable. The $9,750,000
note payable provides for interest at 6.95% payable in monthly installments of
$56,469, with principal payable in full November 2007. The note payable is
secured by a deed of trust on the Partnership's apartment property. The previous
loan provided for interest at 8.75%.
In conjunction with this refinancing, the Partnership wrote-off unamortized loan
costs totaling $343,300, which is reflected as an extraordinary item in the
financial statements.
Interest payments related to deed of trust loans totaled $791,600 in 1997.
15
<PAGE>
Wood's Edge Apartments Limited Partnership
Notes to Financial Statements (continued)
3. Transactions with Affiliates
The general partner in the Partnership is Boddie Investment Company ("BIC"). BNP
Management, Inc. serves as management agent of the rental property and
Partnership matters. Certain officers of BIC are also officers of BNP
Management, Inc.
The Partnership is charged a property management fee of 5 percent of gross
collections, as defined, and a partnership administration fee of 1 percent of
gross collections, as defined. In addition, the management agent allocates
certain costs, including property accounting office salaries, office supplies
and long-distance telephone costs, to the Partnership totaling $28,700 in 1997.
Operating expenses paid on behalf of the Partnership are reimbursed on a
monthly basis.
In conjunction with refinancing of its deed of trust note payable, the
Partnership paid a loan fee of $97,500 to Boddie-Noell Properties, Inc. Certain
officers and directors of BIC and BNP Management, Inc. are also officers and
directors of Boddie-Noell Properties, Inc.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Woods Edge Apartments Limited Partnership
We have audited the accompanying balance sheet of Woods Edge Apartments
Limited Partnership as of December 31, 1996, and the related statements of
profit and loss, partners' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the partnership'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 the 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 Woods Edge
Apartments Limited Partnership, as of December 31, 1996, and the results of its
operations, the changes in partners' deficit and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Charlotte, North Carolina
January 29, 1997
17
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
BALANCE SHEET
December 31, 1996
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS
1110 Petty cash $ 1,000
1120 Cash in bank 3,241
1121 Cash - partnership 120,143
1130 Tenant accounts receivable 1,807
1132 Accounts receivable - other 10,054
1170 Investments (short-term) 211,688
1240 Prepaid property insurance 13,308
1250 Prepaid mortgage insurance 26,066
---------------
Total current assets 387,307
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 35,548
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 29,839
1320 Reserve for replacements 184,797 214,636
--------------
RENTAL PROPERTY
1410 Land 907,474
1420 Buildings and improvements 9,251,196
1430 Building equipment - fixed 1,803,505
--------------
11,962,175
Less accumulated depreciation 5,012,871 6,949,304
--------------
OTHER ASSETS
1901 Mortgage costs, less accumulated
amortization of $52,178 353,986
---------------
$ 7,940,781
===============
</TABLE>
18
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
BALANCE SHEET - CONTINUED
December 31, 1996
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES
2110 Accounts payable $ 20,157
2130 Accrued interest payable - mortgage 65,222
2210 Rent deferred credits 7,913
2320 Mortgage payable - current maturities 60,867
--------------
Total current liabilities 154,159
DEPOSITS LIABILITIES
2191 Tenant security deposits (contra) 33,500
LONG-TERM LIABILITIES
2320 Mortgage payable, net of current maturities 8,883,896
3130 PARTNERS' DEFICIT (1,130,774)
--------------
$ 7,940,781
==============
</TABLE>
19
<PAGE>
Woods Edge Apartments Limited Partnership
STATEMENT OF PROFIT AND LOSS
December 31, 1996
<TABLE>
<S> <C>
Apartments or member carrying charges $ 2,295,477
-----------------
Total rent revenue potential at 100% occupancy 2,295,477
-----------------
Apartments (112,757)
Miscellaneous (specify) (98,498)
-----------------
Total vacancies (211,255)
-----------------
Net rental revenue rent revenue less vacancies 2,084,222
-----------------
Elderly and congregate services income - 5300
Total service income (Schedule attached)
Interest income - project operations 10,519
Income from investments - reserve for replacement 13,637
-----------------
Total financial revenue 24,156
-----------------
Laundry and vending 15,888
NSF and late charges 4,161
Damages and cleaning fees 4,433
Forfeited tenant security deposits 11,693
Other revenue (Specify) 61,564
-----------------
Total other revenue 97,739
-----------------
Total revenue 2,206,117
-----------------
Advertising 26,954
Other renting expenses 2,805
Office salaries 84,237
Office supplies 14,632
Management fee 108,759
Legal expenses (project) 53
Auditing expenses (project) 8,755
Telephone and answering services 5,941
Bad debts (2,706)
Miscellaneous administrative expenses (specify) 6,573
-----------------
Total administrative expenses 256,003
-----------------
</TABLE>
20
<PAGE>
Woods Edge Apartments Limited Partnership
STATEMENT OF PROFIT AND LOSS - CONTINUED
December 31, 1996
<TABLE>
<S> <C>
Electricity $ 23,294
Water 54,228
Gas 417
-----------------
Total utilities expense 77,939
-----------------
Janitor and cleaning supplies 593
Janitor and cleaning contract 44,084
Exterminating payroll/contract 4,684
Garbage and trash removal 17,485
Ground supplies 15,924
Grounds contract 38,485
Repairs payroll 50,214
Repairs material 63,428
Heating/cooling repairs and maintenance 3,223
Swimming pool maintenance/contract 1,742
Other 4,340
Miscellaneous operating and maintenance expenses 15,784
-----------------
Total operating and maintenance expenses 259,986
-----------------
Real estate taxes 176,449
Payroll taxes (FICA) 9,133
Miscellaneous taxes, licenses and permits 1,490
Property and liability insurance (hazard) 15,216
Fidelity bond insurance 195
Workmen's compensation 3,847
Health insurance & other employee benefits 6,275
Other insurance specify 890
-----------------
Total tax and insurance 213,495
-----------------
Interest on mortgage payable 784,939
Mortgage insurance premium/service charge 44,851
-----------------
Total financial expenses 829,790
-----------------
Total cost of operations before depreciation 1,637,213
-----------------
Profit before depreciation 568,904
Depreciation (total) - 6600 & amortization 391,656
-----------------
Operating profit 177,248
Other expenses (entity) Note F 19,262
-----------------
Total corporate expenses 19,262
-----------------
Net profit $ 157,986
=================
</TABLE>
21
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSIRP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1996
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------------------------------------
General partner Class A Class B Class C Total
------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Partners' deficit, beginning $ (63,296) $ 40,243 $ (684,912) $ (215,795) $ (923,760)
Distributions (3,650) (153,744) (125,999) (81,607) (365,000)
Net profit 1,580 66,544 54,537 35,325 157,986
------------------ -------------- --------------- --------------- ---------------
Partners' deficit, ending $ (65,366) $ (46,957) $ (756,374) $ (262,077) $ (1,130,774)
================== ============== =============== =============== ===============
</TABLE>
22
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF CASH FLOWS
Year ended December 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities
Rental income received $ 2,077,431
Interest received 27,202
Other income received 97,739
Administrative expenses paid (67,215)
Management fees paid (117,454)
Utilities paid (70,091)
Salaries and wages paid (134,451)
Operating and maintenance paid (224,427)
Real estate taxes paid (176,449)
Payroll taxes paid (9,133)
Property insurance paid (15,969)
Other taxes and insurance paid (12,697)
Interest paid on mortgage (785,346)
Mortgage insurance premium paid (44,686)
Increase in mortgage escrow deposits (645)
Mortgagor entity expenses paid (27,282)
Net tenant security deposits paid (695)
--------------
Net cash provided by operating activities 515,832
--------------
Cash flows from investing activities
Deposits to reserve for replacements (56,068)
Withdrawals from reserve for replacements 97,904
Withdrawals from miscellaneous reserve 75,045
Investment in rental property (169,070)
Decrease in short-term investments 24,564
--------------
Net cash used in investing activities (27,625)
--------------
Cash flows from financing activities
Mortgage principal payments (55,785)
Distributions to partners (365,000)
--------------
Net cash used in financing activities (420,785)
--------------
NET INCREASE IN CASH 67,422
Cash, beginning 56,962
--------------
Cash, ending $ 124,384
==============
</TABLE>
23
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1996
<TABLE>
<S> <C>
Reconciliation of net profit to net cash provided by operating activities
Net profit $ 157,986
Adjustments to reconcile net profit to net cash
provided by operating activities
Depreciation 380,052
Amortization 11,604
Mortgagor entity expense 22,308
Mortgagor entity expenses paid (27,282)
Changes in asset and liability accounts
(Increase) decrease in assets
Tenant accounts receivable (1,784)
Accounts receivable - other (10,054)
Prepaid expenses (588)
Tenant security deposits - net (695)
Mortgage escrow deposits (645)
Increase (decrease) in liabilities
Accounts payable 1,745
Accrued interest payable (407)
Management fees payable (8,695)
Rent deferred credits (7,713)
-------------
Net cash provided by operating activities $ 515,832
=============
</TABLE>
24
<PAGE>
Woods Edge Apartments Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The partnership was formed as a limited partnership under the laws of the
State of North Carolina on June 6, 1985, for the purpose of constructing and
operating a rental housing project. The project has a mortgage issued on
June 16, 1992, which is insured under Section 207 and pursuant to Section
223(f) of the National Housing Act. The project consists of 264 units
located in Durham, North Carolina and is currently operating under the name
of Woods Edge Apartments. Cash distributions are limited by agreements
between the partnership and HUD to the extent of surplus cash as defined by
HUD.
Summary of significant accounting policies follows.
Use of 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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Recorded depreciation amounts reflect management's
estimate of useful lives of rental property assets and related depreciation
rates. Actual results could differ from those estimates.
Rental Income
Revenue from apartment rentals and service income are recognized as they
accrue. Advance receipts of rental income are deferred and classified as
liabilities until earned. All leases between the partnership and tenants of
the property are operating leases.
Rental Property
Rental property is carried at cost. Buildings are depreciated on a
straight-line basis over their estimated useful life of up to 30 years.
Improvements and furnishings and appliances are depreciated using
accelerated methods over lives of 15 years and 7 years.
Amortization
Mortgage costs are amortized over the term of the mortgage loan using the
straight-line method.
25
<PAGE>
Woods Edge Apartments Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Income Taxes
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
NOTE B - MORTGAGE PAYABLE
The mortgage note is insured by HUD and collateralized by a deed of trust on
the rental property. The note bears interest at the rate of 8.75 percent.
Principal and interest are payable by the partnership in monthly
installments of $70,094 through July 1, 2027.
Under agreements with HUD the partnership is required to make monthly escrow
deposits for taxes, insurance and replacement of project assets, and is
subject to restrictions as to operating policies, rental charges, operating
expenditures and distributions to partners.
The liability of the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
The aggregate principal payments for each of the next five years are as
follows:
December 31, 1997 $ 60,867
1998 66,412
1999 72,462
2000 79,062
2001 86,265
Thereafter 8,579,695
26
<PAGE>
Woods Edge Apartments Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE C - RELATED PARTY TRANSACTIONS
The general partner in the partnership is Boddie Investment Company ("BIC").
BNP Management, Inc. serves as management agent of the rental property and
partnership administration. Certain officers of BIC are also officers of BNP
Management, Inc.
Management Agent Transactions
The partnership is charged a property management fee of five percent of
gross collections, as defined. These fees totaled $108,759 during the year
ended December 31, 1996. In addition, the management agent allocated certain
costs including property accounting office salaries, office supplies, and
long-distance telephone costs to the properties it managed based on relative
number of rental units. Allocated costs charged to the partnership during
the year ended December 31, 1996 totaled $19,472 for office salaries, $7,714
for office supplies, and $806 for long distance telephone costs. Operating
expenses paid on behalf of the partnership are reimbursed monthly.
NOTE D - OTHER REVENUE
Other revenue for 1996 includes the following:
Application fees $ 4,500
Administrative fees 17,870
Pet fees and Rent 19,810
Other tenant charges 14,863
Miscellaneous income 4,521
------------
$ 61,564
============
27
<PAGE>
Woods Edge Apartments Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
<TABLE>
<S> <C>
NOTE E - MISCELLANEOUS VACANCIES
Miscellaneous vacancies for 1996 were as follows:
Model unit $ 9,325
Discounts and concessions 83,950
Employee discounts 5,223
--------------
$ 98,498
==============
NOTE F - MORTGAGOR ENTITY EXPENSE
Net mortgagor entity expense in 1996 is as follows:
Interest earned on partnership cash $ (3,046)
Partnership administrative fees 22,308
--------------
$ 19,262
==============
NOTE G - PAYMENTS OUT OF SURPLUS CASH
During 1996, the partnership paid the following out of surplus cash:
Due to BNP Management, Inc. partnership management fee $ 27,282
Transfer to partnership cash account 117,097
Distributions to owners 365,000
--------------
$ 509,379
==============
Surplus cash: December 31, 1995 $ 182,302
==============
Surplus cash: June 30, 1996 $ 327,408
==============
</TABLE>
28
<PAGE>
Woods Edge Apartments Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE H - SHORT TERM INVESTMENTS
The partnership has investments of $211,688 in certificates of deposit at
December 31, 1996. The investments are carried at cost, which approximates
fair value. The investments are available to fund project operations.
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Woods Edge Apartments Limited Partnership
We have audited the accompanying balance sheet of Woods Edge Apartments
Limited Partnership as of December 31, 1995, and the related statements of
profit and loss, partners' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the partnership'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 the 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 Woods Edge
Apartments Limited Partnership, as of December 31, 1995, and the results of its
operations, the changes in partners' deficit and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Charlotte, North Carolina
January 26, 1996
30
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
BALANCE SHEET
December 31, 1995
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS
1110 Petty cash $ 1,000
1120 Cash in bank 55,962
1130 Tenant accounts receivable 23
1170 Investments (short-term) 236,252
1240 Prepaid property insurance 12,555
1250 Prepaid mortgage insurance 26,231
-------------
Total current assets 332,023
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 43,928
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 29,194
1320 Reserve for replacements 226,633
1350 Miscellaneous escrows 75,045 330,872
------------
RENTAL PROPERTY
1410 Land 907,474
1420 Buildings and improvements 9,202,809
11430 Building equipment - fixed 1,686,725
------------
11,797,008
Less accumulated depreciation 4,632,819 7,164,189
------------
OTHER ASSETS
1901 Mortgage costs, less accumulated
amortization of $40,574 365,590
-------------
$ 8,236,602
=============
</TABLE>
31
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
BALANCE SHEET - CONTINUED
December 31, 1995
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<S> <C>
CURRENT LIABILITIES
2110 Accounts payable $ 22,315
2130 Accrued interest payable - mortgage 65,629
2190 Management fees payable 8,695
2193 Partnership administrative fee 4,974
2210 Rent deferred credits 15,626
2320 Mortgage payable - current maturities 55,785
------------
Total current liabilities 173,024
DEPOSITS LIABILITIES
2191 Tenant security deposits (contra) 42,575
LONG-TERM LIABILITIES
2320 Mortgage payable, net of current maturities 8,944,763
3130 PARTNERS' DEFICIT (923,760)
------------
$8,236,602
============
</TABLE>
32
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
STATEMENT OF PROFIT AND LOSS
December 31, 1995
<TABLE>
<S> <C>
Apartments or member carrying charges $ 2,216,552
-----------------
Total rent revenue potential at 100% occupancy 2,216,552
-----------------
Apartments (84,859)
Miscellaneous (specify) (109,026)
-----------------
Total vacancies (193,885)
-----------------
Net rental revenue rent revenue less vacancies 2,022,667
-----------------
Elderly and congregate services income - 5300
Total service income (Schedule attached)
Interest income - project operations 11,387
Income from investments - reserve for replacement 4,022
-----------------
Total financial revenue 15,409
-----------------
Laundry and vending 17,244
NSF and late charges 6,347
Damages and cleaning fees 3,275
Forfeited tenant security deposits 13,153
Other revenue (Specify) 57,815
-----------------
Total other revenue 97,834
-----------------
Total revenue 2,135,910
-----------------
Advertising 19,911
Office salaries 71,698
Office supplies 16,639
Management fee 105,494
Legal expenses (project) 80
Auditing expenses (project) 8,849
Telephone and answering services 5,959
Bad debts 6,879
Miscellaneous administrative expenses (specify) 7,479
-----------------
Total administrative expenses 242,988
-----------------
</TABLE>
33
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
STATEMENT OF PROFIT AND LOSS - CONTINUED
December 31, 1995
<TABLE>
<S> <C>
Electricity $ 23,224
Water 46,965
Gas 1,698
-----------------
Total utilities expense 71,887
-----------------
Janitor and cleaning supplies 959
Janitor and cleaning contract 51,837
Exterminating payroll/contract 2,345
Garbage and trash removal 12,774
Security payroll/contract 368
Ground supplies 10,533
Grounds contract 32,484
Repairs payroll 57,641
Repairs material 49,714
Elevator maintenance/contract 2,480
Heating/cooling repairs and maintenance 37
Swimming pool maintenance/contract 4,467
Other 4,017
Miscellaneous operating and maintenance expenses 6,702
-----------------
Total operating and maintenance expenses 236,358
-----------------
Real estate taxes 174,767
Payroll taxes (FICA) 8,861
Property and liability insurance (hazard) 13,898
Fidelity bond insurance 278
Workmen's compensation 5,522
Health insurance & other employee benefits 3,697
Other insurance specify 1,236
-----------------
Total tax and insurance 208,259
-----------------
Interest on mortgage payable 789,630
Mortgage insurance premium/service charge 45,119
Miscellaneous financial expenses 1,094
-----------------
Total financial expenses 835,843
-----------------
Total cost of operations before depreciation 1,595,335
-----------------
Profit before depreciation 540,575
Depreciation (total) - 6600 & amortization 372,620
-----------------
Operating profit 167,955
Other expenses (entity) Note F 20,565
-----------------
Total corporate expenses 20,565
-----------------
Net profit $ 147,390
=================
</TABLE>
34
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1995
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------------------------------------
General partner Class A Class B Class C Total
--------------- ----------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Partners' deficit, beginning $ (60,705) $ 149,377 $ (595,470) $ (157,859) $ (664,657)
Distributions 1,474 62,081 50,879 32,956 147,390
Net profit (4,065) (171,215) (140,321) (90,892) (406,493)
--------------- ----------------- --------------- --------------- ----------------
Partners' deficit, ending $ (63,296) $ 40,243 $ (684,912) $ (215,795) $ (923,760)
=============== ================= =============== =============== ================
Profit and loss percentage 1.00% 42.12% 34.52% 22.36% 100.00%
=============== ================= =============== =============== ================
</TABLE>
35
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF CASH FLOWS
Year ended December 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities
Rental income received $ 2,012,047
Interest received 15,409
Other income received 97,834
Administrative expenses paid (58,799)
Management fees paid (106,970)
Utilities paid (73,336)
Salaries and wages paid (129,339)
Operating and maintenance paid (176,646)
Real estate taxes paid (174,767)
Payroll taxes paid (8,861)
Property insurance paid (15,065)
Other taxes and insurance paid (10,733)
Interest paid on mortgage (790,003)
Mortgage insurance premium paid (44,968)
Miscellaneous financial premium paid (1,094)
Decrease in mortgage escrow deposits 9,791
Mortgagor entity expenses paid (25,989)
Net tenant security deposits received 128
--------------
Net cash provided by operating activities 518,639
--------------
Cash flows from investing activities
Deposits to reserve for replacements (46,354)
Withdrawals from reserve for replacements 73,087
Investment in rental property (149,706)
Increase in short-term investments (136,714)
--------------
Net cash used in investing activities (259,687)
--------------
Cash flows from financing activities
Mortgage principal payments (51,128)
Distributions to partners (406,493)
--------------
Net cash used in financing activities (457,621)
--------------
NET INCREASE IN CASH (198,669)
Cash, beginning 255,631
--------------
Cash, ending $ 56,962
==============
</TABLE>
36
<PAGE>
WOODS EDGE APARTMENTS LIMITED PARTNERSHIP
HUD Project No.: 053-11030 REF/CON
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1995
<TABLE>
<S> <C>
Reconciliation of net profit to net cash provided by operating activities
Net profit $ 147,390
Adjustments to reconcile net profit to net cash
provided by operating activities
Depreciation 361,015
Amortization 11,605
Mortgagor entity expense 20,565
Mortgagor entity expenses paid (25,989)
Changes in asset and liability accounts
(Increase) decrease in assets
Tenant accounts receivable 168
Prepaid expenses (1,016)
Tenant security deposits - net 128
Mortgage escrow deposits 9,791
Increase (decrease) in liabilities
Accounts payable 740
Accrued interest payable (373)
Management fees payable (1,476)
Rent deferred credits (3,909)
-----------
Net cash provided by operating activities $ 518,639
===========
</TABLE>
37
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The partnership was formed as a limited partnership under the laws of the
State of North Carolina on June 6, 1985, for the purpose of constructing and
operating a rental housing project. The project has a mortgage issued on
June 16, 1992, which is insured under Section 207 and pursuant to Section
223(f) of the National Housing Act. The project consists of 264 units
located in Durham, North Carolina and is currently operating under the name
of Woods Edge Apartments. Cash distributions are limited by agreements
between the partnership and HUD to the extent of surplus cash as defined by
HUD.
Summary of significant accounting policies follows.
Use of 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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Rental income
Revenue from apartment rentals and service income are recognized as they
accrue. Advance receipts of rental income are deferred and classified as
liabilities until earned. All leases between the partnership and tenants of
the property are operating leases.
38
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Rental property
Rental property is carried at cost. Buildings are depreciated on a
straight-line basis over their estimated useful life of up to 30 years.
Improvements and furnishings and appliances are depreciated using
accelerated methods over lives of 15 years and 7 years.
Amortization
Mortgage costs are amortized over the term of the mortgage loan using the
straight-line method.
Income taxes
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
Changes in Accounting Policy
In 1994 the partnership expensed its carpet, vinyl, and wallpaper. During
1995, the partnership changed the capitalization policy, for carpet, vinyl
and, wallpaper acquired during and subsequent to 1995. The partnership
believes the new policy allocates the cost of the new assets more
effectively over their economic useful life. The effect of this change was
to increase net income for 1995 by $87,047.
39
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE B - MORTGAGE PAYABLE
The mortgage note is insured by HUD and collateralized by a deed of trust on
the rental property. The note bears interest at the rate of 8.75 percent.
Principal and interest are payable by the partnership in monthly
installments of $70,094 through August 1, 2027.
Under agreements with HUD the partnership is required to make monthly escrow
deposits for taxes, insurance and replacement of project assets, and is
subject to restrictions as to operating policies, rental charges, operating
expenditures and distributions to partners.
The liability of the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
The aggregate principal payments for each of the next five years are as
follows:
December 31, 1996 $ 55,785
1997 60,867
1998 66,412
1999 72,462
2000 79,062
Thereafter 8,665,960
Based on the interest rate of 7.75 percent, which approximates loans with
similar maturities currently available to the partnership, the estimated fair
value of the mortgage payable is $9,690,000 at December 31, 1995.
40
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE C - RELATED PARTY TRANSACTIONS
In October 1994 BT Venture Corporation, the former management agent, was
acquired by and merged into Boddie-Noell Properties, Inc. ("BNP"), a
publicly held real estate investment trust. Prior to its merger with BNP,
BTVC assigned all amounts receivable from the partnership to Boddie
Investment Company ("BIC"), the General Partner as of September 30, 1994.
BNP became the management agent effective October 1, 1994. Effective October
1, 1995, BNP transferred property management responsibility and rights to
its subsidiary, BNP Management, Inc.
Management Agent Transactions
Boddie-Noell Properties, Inc. (BNP), a real estate investment trust, was the
management agent through September 30, 1995. BNP transferred rights as the
management agent to its affiliate, BNP Management, Inc. Certain officers and
directors of Boddie Investment Company (BIC), the general partner of the
partnership, are also officers and directors of BNP. The partnership is
charged a property management fee of 5.00 percent of gross collections, as
defined. These fees totaled $105,494 during the year ended December 31,
1995. In addition, the management agents allocated certain costs including
property accounting office salaries, office supplies, and long-distance
telephone costs to the properties it managed based on relative number of
rental units. Allocated costs charged to the partnership during the year
ended December 31, 1995 totaled $16,640 for office salaries, $8,322 for
office supplies, and $787 for long distance telephone costs. Operating
expenses paid on behalf of the partnership are reimbursed monthly.
41
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE C - RELATED PARTY TRANSACTIONS (Continued)
At December 31, 1995, amounts due to BNP Management, Inc. are summarized
as follows
Management $ 8,695
Overpayment of reimbursement
for operating expenses (118)
---------
$ 8,577
=========
NOTE D - OTHER REVENUE
Other revenue for 1995 includes the following:
Application fees $ 6,148
Administrative fees 26,695
Pet fees and Rent 12,624
Other tenant charges 11,853
Miscellaneous Income 495
---------
$ 57,815
=========
NOTE E - MISCELLANEOUS VACANCIES
Miscellaneous vacancies for 1995 were as follows:
Administrative apartments $ 6,182
Discounts and concessions 99,192
Employee discounts 3,652
---------
$109,026
=========
42
<PAGE>
Woods Edge Apartments Limited Partnership
HUD Project No.:053-11030 REF/CON
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE F - MORTGAGOR ENTITY EXPENSE
Total mortgagor entity expense in 1995 is as follows:
Partnership administrative fees $ 20,565
=========
NOTE G - PAYMENTS OUT OF SURPLUS CASH
During 1995, the partnership paid the following
out of surplus cash:
Due to BNP partnership management fee $ 5,320
Mortgagor entity expense 15,591
Due to BIC partnership management fee 5,078
Distributions to owners 406,493
---------
$432,482
=========
Surplus cash:
December 31, 1994 $248,077
=========
June 30, 1995 $209,335
=========
NOTE H - SHORT TERM INVESTMENTS
The partnership has investments of $236,252 in certificates of deposit at
December 31, 1995. The investments are carried at cost, which approximates
fair value. The investments are available to fund project operations.
43
<PAGE>
Report of Independent Auditors
The Partners of Oak Hollow Apartments, Limited Partnership
We have audited the accompanying balance sheets of Oak Hollow Apartments,
Limited Partnership as of December 31, 1997 and 1996 and the related statements
of income, partners' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the general partner. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the
general partner, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 Oak Hollow Apartments, Limited
Partnership as of December 31, 1997 and 1996 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
February 6, 1998
44
<PAGE>
Oak Hollow Apartments, Limited Partnership
Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
-------------------------------------------
<S> <C> <C>
Assets
Rental Properties:
Land $ 758,247 $ 758,247
Buildings and improvements 8,317,706 8,211,495
Personal property 1,549,461 1,498,649
Less accumulated depreciation (4,626,493) (4,279,983)
-------------------------------------------
5,998,921 6,188,408
Cash and cash equivalents 528,443 207,813
Restricted cash - tenant security deposits 20,605 26,743
Prepaids and other assets 1,687 27,838
Deferred costs, net of amortization of $85,846 in 1997 and $58,726 in
1996 185,405 212,525
-------------------------------------------
Total assets $ 6,735,061 $ 6,663,327
===========================================
Liabilities and partners' deficit
Mortgage loan payable $ 6,578,918 $ 6,677,031
Trade accounts payable and accrued expenses 54,982 51,240
Prepaid rents and tenant security deposits 30,741 35,199
Advances, fees and accrued interest due to affiliates 1,119,128 1,021,562
-------------------------------------------
Total liabilities 7,783,769 7,785,032
Partners' deficit:
Limited partners (990,215) (1,062,482)
General partner (58,493) (59,223)
-------------------------------------------
Total partners' deficit (1,048,708) (1,121,705)
-------------------------------------------
Total liabilities and partners' deficit $ 6,735,061 $ 6,663,327
===========================================
</TABLE>
See accompanying notes.
45
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
------------------------------------------
<S> <C> <C>
Revenues
Rental revenue $ 1,814,886 $ 1,757,864
Interest 17,328 33,189
------------------------------------------
1,832,214 1,791,053
Expenses
Property operations 464,662 449,621
General and administrative 33,784 32,321
Property taxes and insurance 117,945 116,285
Management fees 108,541 104,758
Depreciation 346,510 335,484
Amortization 27,120 27,125
Interest 660,655 684,187
------------------------------------------
1,759,217 1,749,781
------------------------------------------
Net income $ 72,997 $ 41,272
==========================================
Net income allocated to limited partners (99%) $ 72,267 $ 40,859
==========================================
Net income allocated to general partner (1%) $ 730 $ 413
==========================================
</TABLE>
See accompanying notes.
46
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Partners' Deficit
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-----------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1995 $ (1,103,341) $ (59,636) $ (1,162,977)
Net income 40,859 413 41,272
-----------------------------------------------------------
Balance at December 31, 1996 (1,062,482) (59,223) (1,121,705)
Net income 72,267 730 72,997
-----------------------------------------------------------
Balance at December 31, 1997 $ (990,215) $ (58,493) $ (1,048,708)
===========================================================
</TABLE>
See accompanying notes.
47
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1997 1996
------------------------------------------
<S> <C> <C>
Operating activities
Net income $ 72,997 $ 41,272
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 373,630 362,609
Changes in operating assets and liabilities:
Prepaid rents and tenant security deposits 1,680 (10,825)
Prepaids and other assets 26,151 (5,133)
Trade accounts payable and accrued expenses 3,742 (28,994)
Accrued interest due to affiliates 97,566 (141,698)
------------------------------------------
Net cash provided by operating activities 575,766 217,231
Investing activities
Additions to rental properties (157,023) (287,613)
Release of replacement reserve - 144,250
------------------------------------------
Net cash used in investing activities (157,023) (143,363)
Financing activities
Payment of long-term debt (98,113) (90,145)
Repayment of amounts due to affiliates - (169,129)
------------------------------------------
Cash used in financing activities (98,113) (259,274)
------------------------------------------
Increase (decrease) in cash and cash equivalents 320,630 (185,406)
Cash and cash equivalents at beginning of year 207,813 393,219
------------------------------------------
Cash and cash equivalents at end of year $ 528,443 $ 207,813
==========================================
</TABLE>
See accompanying notes.
48
<PAGE>
Oak Hollow Apartments, Limited Partnership
Notes to Financial Statements
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Oak Hollow Apartments, Limited Partnership (the Partnership) is a North Carolina
limited partnership formed to acquire hold, operate and manage a residential
apartment community in Cary, North Carolina.
Under the terms of the partnership agreement, net income (loss) and cash
distributions from operations are to be allocated 99 percent to the limited
partners and 1 percent to the general partner until the limited partners receive
distributions equal to an 8 percent annual return of their invested capital (as
defined). Thereafter, net income (loss) and cash distributions will be allocated
75 percent to the limited partners and 25 percent to the general partner. Upon
the sale or refinance of the partnership property, the partnership agreement
specifies certain allocations of net proceeds and taxable gain or loss from the
transaction.
Rental Revenue
The apartments are generally leased for terms of one year or less. Revenue from
apartment rentals and service income are recognized as they accrue. Advance
receipts of rental revenue are deferred and classified as liabilities until
earned.
Rental Properties
All property is stated at cost. Buildings are depreciated on a straight-line
basis over the estimated useful life of 30 years. Capitalized building
improvements and personal property are depreciated using accelerated methods
over 15 years and 7 years, respectively. Repairs and maintenance costs are
expensed as incurred.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Deferred Costs
Financing costs have been capitalized and are amortized over the term of the
related mortgage.
49
<PAGE>
Oak Hollow Apartments, Limited Partnership
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Income Taxes
Under current income tax laws, income or loss of the Partnership is included in
the income tax returns of the partners. Accordingly, no provision has been made
for federal or state income taxes in the accompanying financial statements. The
tax returns of the Partnership are subject to examination by federal and state
taxing authorities. If such examinations occur and result in changes with
respect to the partnership qualification or in changes to partnership income or
loss, the tax liability of the partners would be changed accordingly.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Depreciation amounts included in these financial statements reflect management's
estimate of the life and related depreciation rates for rental properties.
Actual results could differ from these estimates.
2. Mortgage Note Payable
The mortgage loan is a nonrecourse mortgage note payable to an insurance company
secured by a deed of trust on Oak Hollow Apartments. The note bears interest at
the rate of 8.5 percent subject to adjustment in December 1999. Principal and
interest are payable in monthly installments of $55,158, based on a 25-year
amortization schedule and subject to adjustment in 1999, with a balloon payment
of the remaining outstanding balance due in December 2004.
Scheduled principal payments on the mortgage loan at December 31, 1997, are as
follows:
1998 $ 106,785
1999 116,224
2000 126,497
2001 137,678
2002 149,848
Thereafter 5,941,886
-----------------
$ 6,578,918
=================
Interest payments related to the mortgage note payable totaled approximately
$563,800 in 1997 and $571,800 in
1996.
50
<PAGE>
Oak Hollow Apartments, Limited Partnership
Notes to Financial Statements (continued)
3. Transactions with Affiliates
The general partner in the Partnership is Boddie Investment Company ("BIC"). BNP
Management, Inc. serves as management agent of the rental property and
Partnership matters. Certain officers of BIC are also officers of BNP
Management, Inc.
In previous years, the general partner and its predecessors made advances to the
Partnership. Under the terms of the partnership agreement, interest accrues on
such outstanding balances at the prime rate plus 2 percent. Interest charges
related to such advances totaled approximately $97,600 in 1997 and $113,100 in
1996. The interest rate in effect at December 31, 1997 and 1996 was 10.50
percent and 10.25 percent, respectively.
In 1996 the Partnership repaid advances totaling approximately $169,100 and made
interest payments totaling approximately $254,800 to BIC.
The Partnership is charged a property management fee and a partnership
administration fee of 5 percent and 1 percent of gross collections, as defined,
respectively. In addition, the management agent allocates certain costs,
including property accounting office salaries, office supplies and long-distance
telephone costs, to the Partnership totaling $23,900 in 1997 and $23,300 in
1996. Operating expenses paid on behalf of the Partnership are reimbursed on a
monthly basis.
51
<PAGE>
Report of Independent Public Accountants
To the Partners of Oak Hollow Apartments, Limited Partnership:
We have audited the accompanying balance sheets of Oak Hollow Apartments,
Limited Partnership (a North Carolina limited partnership) as of December 31,
1995 and 1994, and the related statements of operations, changes in partners'
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the managing general partner. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 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 the
managing general partner, as well as evaluating the overall financial statement
presentation. We believe that our audits provide 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 Oak Hollow Apartments, Limited
Partnership as of December 31, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Charlotte, North Carolina,
January 26, 1996.
52
<PAGE>
Oak Hollow Apartments, Limited Partnership
Balance Sheets -- December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------------ ------------
<S> <C> <C>
Rental properties:
Land $ 758,247 $ 758,247
Buildings and improvements 8,008,967 7,954,760
Personal property 1,413,564 1,302,899
Less - Accumulated depreciation (3,944,499) (3,628,454)
------------ ------------
6,236,279 6,387,452
Cash and cash equivalents 393,219 279,083
Restricted cash - Tenant security deposits held in trust 27,813 28,857
Prepaids and other assets 22,705 12,669
Replacement reserve escrow 144,250 144,250
Deferred costs, net of amortization of $31,601 in 1995 and $4,506 in 1994 239,650 265,862
------------ ------------
$7,063,916 $7,118,173
============ ============
Liabilities and Partners' Deficit
Mortgage loan payable $6,767,176 $6,850,000
Trade accounts payable 32,300 39,048
Prepaid rents 20,619 20,355
Tenant security deposits 26,475 27,875
Accrued interest payable 47,934 48,521
Advances, fees and accrued interest due to affiliates 1,332,389 1,324,771
------------ ------------
8,226,893 8,310,570
------------ ------------
Partners' deficit:
Limited partners (1,103,341) (1,132,467)
General partner (59,636) (59,930)
------------ ------------
(1,162,977) (1,192,397)
------------ ------------
$7,063,916 $7,118,173
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
53
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Operations
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Rental revenue $ 1,747,058 $ 1,698,547
Interest 8,801 968
------------ ------------
1,755,859 1,699,515
------------ ------------
Expenses:
Property operations 434,707 485,484
General and administrative 30,280 28,461
Property taxes and insurance 115,397 121,059
Property management fees 87,397 85,212
Partnership administration fee 17,414 17,043
Depreciation 316,045 299,833
Amortization 27,095 7,508
Interest 698,104 793,393
------------ ------------
1,726,439 1,837,993
------------ ------------
Net income (loss) $ 29,420 $ (138,478)
============ ============
Net income (loss) allocated to limited partners (99%) $ 29,126 $ (137,094)
============ ============
Net income (loss) allocated to general partner (1%) $ 294 $ (1,384)
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
54
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Changes in Partners' Deficit
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------- ------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1993 $ (994,789) $(58,546) $(1,053,335)
Distributions on behalf of limited partners (584) 0 (584)
Net loss (137,094) (1,384) (138,478)
Balance, December 31, 1994 (1,132,467) (59,930) (1,192,397)
Net income 29,126 294 29,420
Balance, December 31, 1995 ============== ============= ===============
$ (1,103,341) $(59,636) $(1,162,977)
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
55
<PAGE>
Oak Hollow Apartments, Limited Partnership
Statements of Cash Flows
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 29,420 $ (138,478)
Adjustments to reconcile net income (loss) to cash provided by operating
activities-
Depreciation and amortization 343,140 307,341
Changes in operating assets and liabilities:
Tenant security deposits (356) 956
Prepaid rents 264 7,811
Prepaids and other assets (10,036) 52,179
Trade accounts payable and accrued expenses (7,335) 6,959
Fees payable to affiliates 0 12,516
Accrued interest due to affiliates 7,618 106,719
------------- -------------
Cash provided by operating activities 362,715 356,003
------------- -------------
Cash flows from investing activities:
Additions to rental properties (164,872) (43,744)
Deposits to replacement reserve 0 (144,250)
------------- -------------
Cash used in investing activities (164,872) (187,994)
------------- -------------
Cash flows from financing activities:
Distributions on behalf of limited partners 0 (584)
Net proceeds of mortgage refinancing 0 1,214,713
Repayment of note payable and accrued interest to affiliate 0 (763,952)
Payment of loan costs (883) (270,368)
Repayment of mortgage loan principal (82,824) (70,882)
Advances from affiliates 0 205,500
Repayment of amounts due to affiliates 0 (221,408)
------------- -------------
Cash (used in) provided by financing activities (83,707) 93,019
------------- -------------
Increase in cash and cash equivalents 114,136 261,028
Cash and cash equivalents, beginning of year 279,083 18,055
------------- -------------
Cash and cash equivalents, end of year $ 393,219 $ 279,083
============= =============
Supplemental disclosure of cash flow information - Cash payments for interest $ 691,073 $ 693,223
============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
56
<PAGE>
Oak Hollow Apartments, Limited Partnership
Notes to Financial Statements
December 31, 1995 and 1994
1. Organization and Summary of Significant Accounting Policies:
Oak Hollow Apartments, Limited Partnership (the Partnership) is a North Carolina
limited partnership formed to acquire, hold, operate and manage a residential
apartment community in Cary, North Carolina.
Under the terms of the partnership agreement, net income (loss) and cash
distributions from operations are to be allocated 99% to the limited partners
and 1% to the general partner until the limited partners receive distributions
equal to an 8% annual return on their invested capital (as defined). Thereafter,
net income (loss) and cash distributions will be allocated 75% to the limited
partners and 25% to the general partner. Upon the sale or refinance of the
partnership property, the partnership agreement specifies certain allocations of
net proceeds and taxable gain or loss from the transaction.
Rental Revenue
The apartments are leased for terms of one year or less. Revenue from apartment
rentals and service income are recognized as they accrue. Advance receipts of
rental revenue are deferred and classified as liabilities until earned.
Rental Properties
All property is stated at cost. Buildings are depreciated on a straight-line
basis over the estimated useful life of 30 years. Capitalized building
improvements and personal property are depreciated using an accelerated method
over 15 years and 7 years, respectively. Repairs and maintenance costs are
expensed as incurred. In 1994, the Partnership charged purchases of carpet,
vinyl and wallpaper to property operations. In 1995, the Partnership revised its
policy to capitalize these items and depreciate them over 7 years. Management
believes that the estimated useful life of these assets more accurately reflects
their use and is consistent with current industry practice.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Deferred Costs
Financing costs have been capitalized and are amortized over the term of the
related mortgage.
57
<PAGE>
Income Taxes
Under current income tax laws, income or loss of the Partnership is included in
the income tax returns of the partners. Accordingly, no provision has been made
for federal or state income taxes in the accompanying financial statements. The
tax returns of the Partnership are subject to examination by federal and state
taxing authorities. If such examinations occur and result in changes with
respect to the partnership qualification or in changes to partnership income or
loss, the tax liability of the partners would be changed accordingly.
Reclassifications
Certain amounts have been reclassified on the accompanying financial statements
to conform with 1995 financial statement presentation.
2. Mortgage Note Payable:
The mortgage loan is a nonrecourse mortgage note payable to an insurance company
secured by a deed of trust on Oak Hollow Apartments. The note bears interest at
the rate of 8.5 %, subject to adjustment in December 1999. Principal and
interest are payable in monthly installments of $55,158, based on a 25-year
amortization schedule and subject to adjustment in 1999, with a balloon payment
in December 2004.
In November 1994, the Partnership refinanced its mortgage debt following the
maturity of the previous mortgage note payable. The previous mortgage loan was a
nonrecourse wrap-around mortgage note payable to the prior owner of the rental
property, with interest at the rate of 10.75%.
Scheduled principal payments on the mortgage loan at December 31, 1995, are as
follows:
1996 $ 90,100
1997 98,100
1998 106,800
1999 116,200
2000 126,500
Thereafter 6,229,500
=============
3. Related-party Transactions:
In April 1994, Boddie Investment Company (BIC) purchased and redeemed Tom G.
Thornburg's interests in BT Venture Partners (BTVP, the general partner), BT
Venture Corporation (BTVC, the management agent) and other related entities. Mr.
Thornburg had served as managing general partner of BTVP and as president of
BTVC. In conjunction with this transaction, BIC became the general partner of
the Partnership effective April 14, 1994, and all amounts due to BTVP were
assigned to BIC as of that date.
58
<PAGE>
On October 1, 1994, BTVC was acquired by and merged into Boddie-Noell
Properties, Inc. (BNP), a publicly held real estate investment trust. Certain
officers and directors of BIC, the general partner, are also officers and
directors of BNP. Prior to its merger into BNP, BTVC assigned all amounts
receivable from the Partnership to BIC. BNP assumed BTVC's rights as the
management agent at the merger date. In June 1995, BNP transferred its rights as
the management agent to its subsidiary, BNP Management, Inc.
The Partnership had a $760,000 note payable to BTVP which was repaid in full
from proceeds of the November 1994 refinancing. The note accrued interest at
prime plus .25% and was due on demand. Interest was payable in monthly
installments of approximately $4,000. The Partnership recorded interest expense
related to this note of approximately $42,000 in 1994.
The Partnership is charged a property management fee and a partnership
administration fee of 5% and 1%, respectively, of gross collections, as defined.
In addition, the management agents allocated certain costs, including property
accounting office salaries, office supplies and long-distance telephone costs to
the Partnership totaling $21,500 in 1995 and $18,000 in 1994. Operating expenses
paid on behalf of the Partnership are reimbursed on a monthly basis. During
1994, the Partnership paid BNP loan fees of $68,500 related to the mortgage
refinancing.
In previous years, BTVP and BTVC made advances to the Partnership. Under the
terms of the partnership agreement, interest accrues on such outstanding
balances at the prime rate of a bank plus 2%. During 1994, the Partnership
received and repaid an advance from BIC in the amount of $205,500 and paid BIC
loan fees of $85,600 related to the mortgage refinancing. Interest charges
related to advances from BIC, BTVP and BTVC totaled $119,618 in 1995 and
$106,700 in 1994.
At December 31, 1995, amounts due to BIC, including amounts assigned from BTVP
and BTVC, along with comparative balances at December 31, 1994, are summarized
below. The interest rate in effect at December 31, 1995, was 10.75%.
1995 1994
------------ ------------
Property management and partnership
administration fees $ 86,799 $ 86,799
Advances 1,103,892 1,103,892
Accrued interest 141,698 134,080
------------ ------------
$ 1,332,389 $1,324,771
============ ============
59
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1998
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Oak Hollow
Historical Acquisition Pro Forma
----------------- ----------------- -----------------
(A) (B)
<S> <C> <C> <C>
Assets
Real estate assets, net $169,692 $12,340 $182,032
Cash and cash equivalents 1,723 (44) 1,679
Other current assets 1,907 191 2,098
Investment in and advances to
Management Company 424 - 424
Notes receivable 2,271 - 2,271
Intangible related to acquisition of
management operations, net 2,537 - 2,537
Deferred financing costs, net 829 100 929
----------------- ----------------- -----------------
Total assets $179,382 $12,587 $191,969
================= ================= =================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $100,994 $10,885 $111,879
Accounts payable and other current liabilities 2,046 157 2,203
Consideration due for acquisitions 2,600 - 2,600
----------------- ----------------- -----------------
105,640 11,042 116,682
Minority interest in Operating Partnership 15,090 1,545 16,636
Shareholders' equity 58,652 - 58,652
----------------- ----------------- -----------------
Total liabilities and shareholders' equity $179,382 $12,587 $191,969
================= ================= =================
</TABLE>
See accompanying notes.
60
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
(A) Reflects our historical balance sheet contained in our Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
These balances at June 30, 1998, reflect the acquisition of Woods Edge
Apartments effective June 1, 1998. We estimate the cost of the Woods Edge
acquisition as follows:
<TABLE>
<S> <C>
We issued 186,282 Operating Partnership units at $14.5625 per unit to former
partners in Woods Edge Apartments Limited Partnership of Durham $ 2,713,000
We made cash payments to former partners in Woods Edge Apartments Limited
Partnership of Durham 2,314,000
We assumed a first deed of trust loan 9,750,000
Other costs (estimated) 123,000
-----------------
14,900,000
Less other current assets acquired, including $585,000 cash, in excess of
current liabilities assumed (822,000)
-----------------
$14,078,000
=================
</TABLE>
We assumed a $9.75 million fixed-rate note secured by a deed of trust and
assignment of rents of Woods Edge Apartments. The note payable provides for
interest at 6.95% payable in monthly installments of $56,000 and matures in
2007. The balance of funds required for the acquisition came from draws on our
revolving line of credit.
(B) Reflects the acquisition of Oak Hollow Apartments. We estimate the cost of
the Oak Hollow acquisition as follows:
<TABLE>
<S> <C>
We issued 106,124 Operating Partnership units at $14.5625 per unit to former
partners in Oak Hollow Apartments Limited Partnership $ 1,545,000
We made cash payments to former partners in Oak Hollow Apartments
Limited Partnership 2,323,000
We made a cash contribution to Oak Hollow Apartments Limited Partnership for
liquidating distributions to certain partners 533,000
We made cash payments to retire existing debt 7,778,000
Other costs (estimated) 91,000
-----------------
12,270,000
Current liabilities assumed, in excess of current assets acquired 70,000
-----------------
$12,340,000
=================
</TABLE>
We financed the Oak Hollow acquisition with net proceeds from an $8.4 million
fixed-rate note secured by a deed of trust and assignment of rents of Oak Hollow
Apartments. The note payable provides for interest at 6.65% payable in monthly
installments of $46,000 and matures in 2008. The balance of funds required for
the acquisition came from draws on our revolving line of credit.
61
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Woods Oak
Woods Oak Edge Hollow
Historical Edge Hollow Acquisition Acquisition Pro Forma
------------- ------------ ------------- ------------ ------------- ------------
(D) (E) (E) (G) (G)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Apartment rents $9,399 $945 $925 $ - $ - $11,268
Restaurant rents 2,250 - - - - 2,250
Equity in income of
Management Company 79 - - - - 79
Interest and other 273 26 12 - - 311
------------- ------------ ------------- ------------ ------------- ------------
12,000 971 937 - - 13,908
Expenses
Depreciation 2,021 - - 159 157 2,337
Amortization 259 - - - 5 264
Apartment operations 3,040 351 343 - - 3,734
Administrative 629 - - 47 46 722
Interest 3,496 - - 282 279 4,057
------------- ------------ ------------- ------------ ------------- ------------
9,445 351 343 488 487 11,114
------------- ------------ ------------- ------------ ------------- ------------
Income before
Minority interest 2,556 620 594 (488) (487) 2,794
Minority interest in
Operating Partnership 365 - - 79 57 500
------------- ------------ ------------- ------------ ------------- ------------
Income before
extraordinary item $2,191 $620 $594 $(567) $(544) $ 2,294
============= ============ ============= ============ ============= ============
Per share data:
Income before
extraordinary item -
basic $0.37 $0.39
============= ============
Income before
extraordinary item -
diluted $0.37 $0.39
============= ============
Weighted average
shares outstanding 5,881 5,881
============= ============
</TABLE>
See accompanying notes.
62
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Woods Oak
Woods Oak Edge Hollow
Historical Edge Hollow Acquisition Acquisition Pro Forma
------------- ------------ ------------- ------------ ------------- ------------
(C) (F) (F) (G) (G)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Apartment rents $11,197 $2,219 $1,815 $ - $ - $15,231
Restaurant rents 4,500 - - - - 4,500
Equity in income of
Management Company 210 - - - - 210
Interest and other 345 13 17 - - 376
------------- ------------ ------------- ------------ ------------- ------------
16,252 2,233 1,832 - - 20,317
Expenses
Depreciation 2,686 - - 380 314 3,380
Amortization 580 - - - 10 590
Apartment operations 3,546 765 583 29 24 4,946
Administrative 1,000 - - 110 90 1,200
Interest 6,487 - - 678 558 7,723
------------- ------------ ------------- ------------ ------------- ------------
14,299 765 583 1,197 996 17,839
------------- ------------ ------------- ------------ ------------- ------------
Income before
Minority interest 1,953 1,468 1,250 (1,197) (996) 2,477
Minority interest in
Operating Partnership 39 - - 131 85 255
------------- ------------ ------------- ------------ ------------- ------------
Income before
extraordinary item $ 1,913 $1,468 $1,250 $(1,328) $(1,081) $ 2,222
============= ============ ============= ============ ============= ============
Per share data:
Income before
extraordinary item -
basic $0.60 $0.70
============= ============
Income before
extraordinary item -
diluted $0.59 $0.69
============= ============
Weighted average
shares outstanding 3,180 3,180
============= ============
</TABLE>
63
<PAGE>
See accompanying notes.
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(C) Reflects our historical statement of operations contained in our Annual
Report on Form 10-K for the year ended December 31, 1997.
(D) Reflects our historical statement of operations contained in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998.
(E) Reflects the revenues and certain operating expenses of Woods Edge
Apartments for the five months ended May 31, 1998 (we acquired Woods Edge
effective June 1, 1998), and the revenues and certain operating expenses of Oak
Hollow Apartments for the six months ended June 30, 1998.
(F) Reflects the revenues and certain operating expenses directly related to
Woods Edge and Oak Hollow apartment operations for the year ended December 31,
1997. These amounts were derived from the audited statements of operations of
Woods Edge Apartments Limited Partnership and Oak Hollow Apartments Limited
Partnership, respectively, for the year ended December 31, 1997. We calculated
the amounts for "apartment operations" expense by adding together the amounts
identified as "property operations" and "property taxes and insurance" in those
audited financial statements.
(G) Reflects adjustments to our historical statements of operations and the
revenues and expenses directly related to Woods Edge and Oak Hollow apartment
operations as follows:
<TABLE>
<CAPTION>
For the For the
Six Months Year
Ended Ended
June 30 December 31
1998* 1997
----------------- -----------------
<S> <C> <C>
We calculated depreciation expense for Woods Edge and Oak Hollow
using the straight-line method over the estimated useful lives of
the related assets. These estimated useful lives are 40 years
for buildings, 20 years for land improvements, 10 years for fixtures
and equipment, and 5 years for carpet and vinyl.
- Woods Edge Apartments $159,000 $380,000
- Oak Hollow Apartments 157,000 314,000
----------------- -----------------
$316,000 $694,000
================= =================
We calculated amortization of approximately $100,000 deferred
financing costs related to the financing of the Oak Hollow
acquisition using the straight-line method over 10 years. Costs
related to our assumption of the first deed of trust related to
Woods Edge were insignificant.
- Oak Hollow Apartments $5,000 $10,000
================= =================
We identified the amounts for allocated accounting salaries and
supplies charged to the apartment communities by BNP Management,
Inc. These amounts are included in general and administrative
expense in the audited statements of operations for the year
ended December 31, 1997. (No adjustment is needed for the 1998 pro
forma financial statements, because these amounts are already included
in apartment operations expense in the statements of revenues and
certain operating expenses in the 1998 interim period financial statements.)
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
For the For the
Six Months Year
Ended Ended
June 30 December 31
1998* 1997
----------------- -----------------
<S> <C> <C>
- Woods Edge Apartments $29,000
- Oak Hollow Apartments 24,000
-----------------
$53,000
=================
We calculated the estimated increase in general and administrative
expense for additional management staff and supplies using a rate
of 5% of revenues.
- Woods Edge Apartments $47,000 $110,000
- Oak Hollow Apartments 46,000 90,000
----------------- -----------------
$93,000 $200,000
================= =================
We calculated interest on deed of trust loans related to
the acquisitions.
- Woods Edge Apartments - $9.75 million at 6.95% $282,000 $ 678,000
- Oak Hollow Apartments - $8.385 million at 6.65% 279,000 558,000
----------------- -----------------
$561,000 $1,236,000
================= =================
We calculated the minority interest assuming an approximate
weighted average 10% minority interest in 1997 (compared to
the historical approximate weighted average 2% minority interest)
and an approximate weighted average 17% minority interest
during the six months ended June 30, 1998 (compared to the
historical approximate 14% minority interest).
*We acquired Woods Edge Apartments effective June 1, 1998. Amounts for Woods
Edge represent estimates for the period January 1 through May 31, 1998.
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