ASR INVESTMENTS CORP, 8-K/A, 1997-06-16

ASR INVESTMENTS CORP
8-K/A, 1997-06-16
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K/A

Amendment No. 1 to Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 30, 1997

ASR INVESTMENTS CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)

MARYLAND 1-9646 86-0587826
--------------- --------------------- ---------------------
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)

335 North Wilmot, Suite 250, Tucson, Arizona 85711
--------------------------------------------------
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: (520) 748-2111

Not Applicable
-----------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ASR INVESTMENTS CORPORATION

Amendment No. 1 to Current Report on Form 8-K
Filed on May 15, 1997

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

The Winton Acquisition

Pursuant to the Master Combination and Contribution Agreement dated as
of November 8, 1996 (the "Combination Agreement") and an Addendum to the Master
Combination and Contribution Agreement dated as of April 30, 1997 (the
"Addendum") among ASR Investments Corporation ("ASR" or the "Company"), Don W.
Winton, certain limited partnerships in which Mr. Winton is the general partner
(the "Winton Partnerships"), Winton & Associates, Inc. ("Winton & Associates"),
Heritage Communities L.P. ("Heritage Communities"), Heritage Residential Group,
Inc. ("Heritage Residential"), Heritage SGP Corporation ("Heritage SGP"), Pima
Mortgage Limited Partnership ("Pima Mortgage"), Pima Realty Advisors, Inc.
("Pima Realty"), Jon A. Grove, Joseph C. Chan, and Frank S. Parise, Jr., on
April 30, 1997, Heritage Communities, in which ASR is a general partner,
acquired substantially all of the assets and properties of the Winton
Partnerships consisting primarily of 13 apartment properties located in the
state of Washington and Texas, and one office building located in the state of
Washington (the "Winton Acquisition"). In connection with the Acquisition, ASR
or its subsidiaries (i) assumed or refinanced first mortgage loans totalling
$49,396,000, (ii) issued 683,626 shares of ASR's common stock, par value $.01
per share (the "Common Stock"), (iii) issued limited partnership units in
Heritage LP ("LP Units") that are convertible into an aggregate of 942,184
shares of Common Stock at any time following April 30, 1998, and (iv) paid
$1,250,000 in closing costs to the Winton Partnerships. The following is a
description of each of the properties acquired by the Company in the Winton
Acquisition.

Aspen Court Apartments. The Aspen Court Apartments are located in Arlington,
Texas, a suburb of Dallas, Texas and consist of 140 units built in 1985. The
Aspen Court Apartments were completely repainted in December 1996. As of
September 30, 1996, the Aspen Court Apartments had an average monthly rent of
$543, or $.73 per square foot per month, and an average occupancy rate of 93%.
The deemed value of the property under the Combination Agreement was $4,400,000.
A subsidiary of the Company assumed the existing first mortgage debt of
approximately $2.0 million secured by the property and bearing interest at 7.5%
per annum and maturing in 2008. The property's main competition for tenants
comes primarily from existing multifamily apartment projects in the surrounding
North Arlington area of east Forth Worth. Although several new apartment
communities have been developed in the area surrounding the Aspen Court
Apartments in the last few years, such apartment communities generally contain
larger, more costly, units with additional amenities, and as a result, are not
in direct competition with the Aspen Court Apartments. There are 114 competing
apartment projects in the area consisting of over 19,000 apartment units. The
average occupancy for the area at September 30, 1996 was approximately 94% and
the average monthly rental rate was $528, or $.66 per square foot per month. The
Company plans no immediate major capital expenditures for the Aspen Court
Apartments as a result of the consistent upkeep of the property and the recently
completed repaint of the entire property.
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Highlands of Preston Apartments. The Highlands of Preston Apartments are
located in Plano, Texas, a suburb of Dallas, Texas and consist of 220 units
built in 1985. As of September 30, 1996, the Highlands of Preston Apartments had
an average monthly rent of $610, or $.78 per square foot per month, and an
average occupancy rate of 96%. The deemed value of the property under the
Combination Agreement was $8,800,000. A subsidiary of the Company assumed the
existing first mortgage debt of approximately $4.9 million secured by the
property and bearing interest at 8.00% per annum and maturing in 2000. The
property's primary competition for tenants comes from existing multifamily
apartment projects in the surrounding West Plano area of north Dallas. Numerous
new apartment projects have been developed in the greater West Plano area in
recent years, which may attract tenants temporarily to these new projects as
these projects offer concessions to maximize occupancy rates. However, due to
the typically larger size and more expensive stabilized leasing rates, these new
projects will not act as direct, long-term competition for the Highlands of
Preston Apartments. Additional competition comes from the abundant, but more
expensive, single family home market in this upscale area. There are 58
competing apartment projects in the area consisting of over 13,000 apartment
units. The average occupancy for the area at September 30, 1996 was
approximately 95% and the average monthly rental rate was $700, or $.80 per
square foot per month. The Company plans no immediate major capital expenditures
for the Highlands of Preston Apartments as a result of the consistent upkeep of
the property.

14400 Montfort Townhomes. The Montfort Townhomes are located in Dallas, Texas
and consist of 83 units built in 1986. As of September 30, 1996, the Montfort
Townhomes had an average monthly rent of $982, or $.88 per square foot per
month, and an average occupancy rate of 92%. The deemed value of the property
under the Combination Agreement was $5,650,000. A subsidiary of the Company
assumed the existing first mortgage debt of approximately $4.1 million secured
by the property and bearing interest at a floating rate of 2.25% above the 11th
district cost of funds index, which was approximately 4.8% at September 30,
1996, subject to an interest rate floor and cap of 1.31% and 11.31%,
respectively, per annum and maturing in 2006. The property's primary competition
for tenants comes from new and existing luxury multifamily apartment projects in
the surrounding north Dallas area. There are 111 apartment projects in the area
consisting of over 21,000 apartment units. The average occupancy for the area at
September 30, 1996 was approximately 93% and the average monthly rental rate was
$625, or $.76 per square foot per month. These occupancy and rental statistics
reflect all of the 111 apartment projects in the area, whereas the property
competes only with the newest and highest quality properties, which generally
have higher rental rates and square footage per unit than the averages for all
of the apartment properties in the area reflect. The Company plans no immediate
major capital expenditures, for the Montfort Townhomes as a result of the
consistent upkeep of the property and the recently completed repaint of the
entire property.

Briar Park Apartments. The Briar Park Apartments are located in Houston,
Texas and consist of 80 units built in 1983. A total replacement of the roofs of
the Briar Park Apartments was completed in October 1996. As of September 30,
1996, the Briar Park Apartments had an average monthly rent of $515, or $.56 per
square foot per month, and an average occupancy rate of 89%. The deemed value of
the property under the Combination Agreement was $2,200,000. A subsidiary of the
Company assumed the existing first mortgage debt of approximately $1.4 million
secured by the property and bearing interest at 8.42% per annum and maturing in
2006, with the remainder of the equity paid in shares of the Company's Common
Stock, LP Units, or cash. The property's primary competition for tenants comes
from existing multifamily apartment projects in the surrounding Inwood area of
northwest Houston. There are 27 competing apartment projects in the area with
the majority of projects completed in the early 1980s. There have been no new
projects built since 1984 in the area surrounding the property, although a
number of older projects have been renovated in recent years. The average
occupancy for the area at September 30, 1996 was approximately 92% and the
average montly rental rate was $404, or $.50 per square foot per month. The
Company plans no immediate major capital expenditures for the Briar Park
Apartments as a result of the consistent upkeep of the property and the
aforementioned roof replacement.
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Chelsea Park Apartments. The Chelsea Park Apartments are located in Houston,
Texas and consist of 204 units built in 1983. The Chelsea Park Apartments were
completely repainted in November 1996. As of September 30, 1996, the Chelsea
Park Apartments had an average monthly rent of $518, or $.62 per square foot per
month, and an average occupancy rate of 95%. The deemed value of the property
under the Combination Agreement was $5,600,000. A subsidiary of the Company
secured new financing of the existing first mortgage debt of approximately $2.9
million secured by the property and bearing interest at 8.50% per annum and
maturing in 1999. The property's primary competition for tenants comes from
existing multifamily apartment projects in the surrounding Steeplechase area of
northwest Houston. There are 30 competing apartment projects in the area with
the majority of projects completed in the early 1980s, and several additional
projects built in the last several years. Apartment units built in the area in
the 1990s are generally larger, more expensive and have more amenities than
older units, and as a result, are not in direct competition with Chelsea Park.
The average occupancy for the area at September 30, 1996 was approximately 90%
and the average rental rate was $558, or $.65 per square foot per month. The
Company plans no immediate major capital expenditures for the Chelsea Park
Apartments as a result of the consistent upkeep of the property and the recently
completed repainting of the property.

Marymont Apartments. The Marymont Apartments are located in Tomball, Texas, a
suburb of Houston, Texas and consist of 128 units built in 1983. As of September
30, 1996, the Marymont Apartments had an average monthly rent of $567, or $.65
per square foot per month, and an average occupancy rate of 98%. The deemed
value of the property under the Combination Agreement was $4,350,000. A
subsidiary of the Company assumed the existing first mortgage debt of
approximately $2.5 million secured by the property and bearing interest at 8.50%
per annum and maturing in 2015. The property's primary competition for tenants
comes from existing multifamily apartment projects in the surrounding Tomball
area of northwest Houston. There are 12 competing apartment projects in the area
with the majority of projects completed in the mid-1980s. No new construction
has occurred in the area since 1986. The average occupancy for the area at
September 30, 1996 was approximately 93% and the average monthly rental rate was
$505, or $.60 per square foot per month. The Company plans no immediate major
capital expenditures for the Marymont Apartments as a result of the consistent
upkeep of the property.

Riverway Apartments. The Riverway Apartments are located in Bay City, Texas,
approximately 60 miles southwest of Houston and consist of 152 units built in
1985. As of September 30, 1996, the Riverway Apartments had an average monthly
rent of $359, or $.48 per square foot per month, and an average occupancy rate
of 73%. The deemed value of the property under the Combination Agreement was
$1,900,000. A subsidiary of the Company assumed the existing first mortgage debt
of approximately $1.2 million secured by the property and bearing interest at
8.75% per annum and maturing in 2005. The property's main competition for
tenants comes from several existing multifamily apartment projects in the
surrounding, primarily rural, area. A substantial portion of the tenant
population consists of temporary workers in the nuclear power industry, the
surrounding chemical manufacturing plants and construction jobs. The Company
believes that the project competes for tenants with two other projects of
similar quality in the area. No third-party statistical research relating to the
apartment communities in the area is available, and, as a result, the Company is
relying upon its review of rental rate structures of competing apartment
properties and historical financial and leasing data available for the Riverway
Apartments to evaluate the performance of the property. The Company's own
surveys suggest that the rental rates compete favorably with the few other
projects in which it competes directly, with rental rates of between $275 and
$425, and average occupancy of approximately 85%. The Company plans no immediate
major capital expenditures for the Riverway Apartments as a result of the
consistent upkeep of the property.

Timbercreek Landing Apartments. The Timbercreek Landing Apartments are
located in Houston, Texas and consist of 204 units built in 1984. As of
September 30, 1996, the Timbercreek Landing Apartments had an average monthly
rent of $482, or $.62 per square foot per month, and an average occupancy rate
of 94%. The deemed value of the property under the Combination Agreement was
$5,500,000. A subsidiary of the Company assumed the existing first mortgage debt
of approximately $3.4 million secured by the property and bearing interest at
9.00% per annum and maturing in 2015. The property's primary competition for
tenants comes from existing multifamily apartment communities in the surrounding
Bear Creek area of northwest Houston. There are 32 competing apartment
communities in the area with the majority of projects completed in the early
1980s. Only one new project has been constructed in the area since 1984. The
average occupancy for the area at September 30, 1996 was approximately 92% and
the average monthly rental rate was $494, or $.62 per square foot per month. The
Company plans no immediate major capital expenditures for Timberweek Landing
Apartments as a result of the consistent upkeep of the property.
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Campus Commons North Apartments. The Campus Commons North Apartments are
located in Pullman, Washington and consist of 234 units built in 1985. As of
September 30, 1996, the Campus Commons North Apartments had an average monthly
rent per unit of $754, or $.83 per square foot per month, and an average
occupancy rate of 96%. The units on the property are primarily leased to
students attending Washington State University. The Campus Commons North
Apartments experiences high occupancy for 10 months out of the year and
substantial vacancy during June and July of each year. Average rental rates for
June and July averages approximately $150. The deemed value of the property
under the Combination Agreement was $10,900,000. A subsidiary of the Company
assumed the existing first mortgage debt of approximately $6.7 million secured
by the property and bearing interest at 7.90% per annum and maturing in 2017.
The property's primary competition for tenants comes from existing multifamily
apartment communities in the surrounding area. The project relies on the
consistent or growing enrollment at Washington State University to maintain its
desired occupancy. The property's four- bedroom units compete primarily with two
and three- bedroom units in other apartment communities in the area. No
third-party statistical research relating to the apartment communities in the
area is available, and, as a result, the Company is relying upon its review of
rental rate structures of competing apartment properties and historical
financial and leasing data available for the Campus Commons North Apartments to
evaluate the performance of the property. The Company's own surveys suggest that
the average monthly rental rates compete favorably with other project rates of
between $.60 to $.80 per square foot, and average occupancy of approximately
93%. The Company plans no immediate major capital expenditures for the Campus
Commons North Apartments as a result of the consistent upkeep of the property.

Campus Commons South Apartments. The Campus Commons South Apartments are
located in Pullman, Washington and consist of 100 units built in 1971. As of
September 30, 1996, the Campus Commons South Apartments had an average monthly
rent per unit of $723, or $.68 per square foot per month, and an average
occupancy rate of 94%. The property is located in close proximity to Campus
Commons North and experiences the same rental trends. The deemed value of the
property under the Combination Agreement was $4,100,000. A subsidiary of the
Company assumed the existing first mortgage debt of approximately $2.7 million
secured by the property and bearing interest at 8.75% per annum and maturing in
2006. The property's primary competition for tenants comes from existing
multifamily apartment communities in the surrounding area. The project relies on
the consistent or growing enrollment at Washington State University to maintain
its desired occupancy. The property's two-bedroom, two-bath units compete with
similar large units at comparatively aged projects, and smaller units at newer
projects. No third-party statistical research relating to the apartment
communities in the area is available, and, as a result, the Company is relying
upon its review of rental rate structures of competing apartment properties and
historical financial and leasing data available for the Campus Commons South
Apartments to evaluate the performance of the property. The Company's own
surveys suggest that the average monthly rental rates compete favorably with
other project rates of between $.56 to $.83 per square foot, and average
occupancy of approximately 93%. The Company plans no immediate major capital
expenditures for the Campus Commons South Apartments as a result of the
consistent upkeep of the property.

Pacific South Center Office Building. The Pacific South Center Office
Building is located in Seattle, Washington and consists of 73,232 square feet of
mixed-use office space built in 1975. As of September 30, 1996, the Pacific
South Center Office Building was 100% leased to various tenants. The current
leases under which the property is leased are scheduled to expire during the
period of 1997-2004 with an average lease maturity date of approximately 2002,
and average rental rates per square foot of approximately $10 per annum. Major
tenants include TCI Cable, a sports bar (whose owners have maintained occupancy
in this building site for the past 15 years), and a health club. The deemed
value of the property under the Combination Agreement was $5,400,000. A
subsidiary of the Company assumed the existing first mortgage debt of
approximately $3.2 million secured by the property and bearing interest at
9.125% per annum and maturing in 2006. The office complex competes for tenants
with other similarly sized, mixed-use office complexes in the Seattle-Tacoma
("Sea-Tac") airport area. The Sea-Tac office market is comprised of numerous
high-class office buildings, but few mixed-use office complexes of similar size,
with easy access to major freeways. The Company plans no immediate major capital
expenditures for the Pacific South Center Office Building as a result of the
consistent upkeep of the property.
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Greenwood Creek Apartments. The Greenwood Creek Apartments are located in
Fort Worth, Texas and consist of 328 units built in 1984. Substantial capital
improvements were completed on the property in 1996, including remodeling of the
leasing office, installation of access gates and perimeter fencing, and
repainting of the entire property. As of September 30, 1996, the Greenwood Creek
Apartments had an average monthly rent of $429, or $.60 per square foot per
month, and an average occupancy rate of 92%. The deemed value of the property
under the Combination Agreement was $7,700,000. A subsidiary of the Company
assumed the existing first mortgage debt of approximately $5.0 million secured
by the property and bearing interest at 7.48% per annum and maturing in 2006.
The property's primary competition for tenants comes from existing multifamily
apartment communities in the surrounding area of southwest Fort Worth. There are
64 competing apartment communities in the area consisting of over 11,000
apartment units. The average occupancy for the area at September 30, 1996 was
approximately 95% and the average monthly rental rate was $460, or $.62 per
square foot. The Company plans no immediate major capital expenditures for the
Greenwood Creek Apartments as a result of the substantial capital improvements
recently completed.

Springfield Apartments. The Springfield Apartments are located in Dallas,
Texas and consist of 218 units built in 1986. Substantial capital improvements
were completed on the property in late 1996, including the repair of the parking
lot, the installation of access gates and perimeter fencing, and the repainting
of the entire property. As of September 30, 1996, the Springfield Apartments had
an average monthly rent of $609, or $.72 per square foot per month, and an
average occupancy rate of 89%. The deemed value of the property under the
Combination Agreement was $8,420,000. A subsidiary of the Company assumed the
existing first mortgage debt of approximately $5.5 million secured by the
property and bearing interest at 7.375% per annum and maturing in 2016. The
property's primary competition for tenants comes from new and existing
multifamily apartment communities in the surrounding Carrollton area of north
Dallas. Numerous new apartment communities have been developed in the greater
area in recent years, which may attract tenants temporarily as these projects
offer concessions to maximize occupancy rates. However, due to the typically
larger size and more expensive stabilized leasing rates, these new projects will
not act as direct long-term competition for the project. There are 100 competing
apartment communities in the area consisting of over 17,000 apartment units. The
average occupancy for the area at September 30, 1996 was approximately 94% and
the average monthly rental rate was $611, or $.71 per square foot per month. The
Company plans no immediate major capital expenditures for the Springfield
Apartments as a result of the substantial capital improvements recently
completed.

Country Club Place Apartments. The Country Club Place Apartments are located
in Richmond, Texas, a suburb of Houston, Texas and consist of 169 units built in
1986. Substantial capital improvements were completed on the property in late
1996, including the remodeling of the leasing office, complete roof replacement
for a substantial portion of the property, installation of access gates and
perimeter fencing, and the repainting of the entire property. As of September
30, 1996, the Country Club Place Apartments had an average monthly rent of $530,
or $.65 per square foot per month, and an average occupancy rate of 88%. The
deemed value of the property under the Combination Agreement was $5,350,000. A
subsidiary of the Company assumed the existing first mortgage debt of
approximately $3.5 million secured by the property and bearing interest at 8.00%
per annum and maturing in 2006. The property's primary competition for tenants
comes from existing multifamily apartment communities in the surrounding
Richmond area of southwest Houston, and from affordable single family housing in
the area. There are 18 competing apartment communities in the area with the
majority of projects completed between 1976 and 1984. No new construction has
occurred since development of the property was completed in 1986. The average
occupancy for the area at September 30, 1996 was approximately 87% and the
average monthly rental rate was $431, or $.56 per square foot per month. The
Company plans no immediate major capital expenditures for Country Club Place
Apartments as a result of the substantial capital improvements recently
completed.
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The description contained herein of the Winton Acquisition is qualified
in its entirety by reference to the Combination Agreement, the Addendum, and
ASR's Definitive Proxy Statement filed with the Securities and Exchange
Commission (the "Commission") on March 27, 1997, which were attached to the
Company's Form 8-K filed on May 15, 1997 and are incorporated herein by
reference.

The Management Mergers

The Associates Merger

Pursuant to the Combination Agreement and the Agreement and Plan of
Reorganization dated as of November 8, 1996 (the "Associates Merger Agreement")
among ASR, Heritage Residential, Winton & Associates, and Mr. Winton, on May 1,
1997 Winton & Associates merged with and into Heritage Residential, a wholly
owned subsidiary of ASR (the "Associates Merger"). In connection with the
Associates Merger, the outstanding shares of capital stock of Associates were
converted into 70,284 shares of ASR Common Stock. In addition, Don W. Winton
entered into an employment agreement with ASR pursuant to the Associates Merger
Agreement.

The description contained herein of the Associates Merger is qualified
in its entirety by reference to the Combination Agreement, the Addendum, the
Associates Merger Agreement, and ASR's Definitive Proxy Statement filed with the
Commission on March 27, 1997, which were attached as exhibits to the Company's
Form 8-K filed on May 15, 1997 and are incorporated herein by reference.

The Pima Mergers

Pursuant to the Combination Agreement and the Agreement and Plan of
Reorganization dated as of November 8, 1996 (the "Pima Mortgage/Pima Realty
Merger Agreement") among ASR, Heritage Residential, Pima Realty, Pima Mortgage,
JG Mortgage Advisors, Inc. ("JG Mortgage"), JC Mortgage Advisors, Inc. ("JC
Mortgage"), FP Mortgage Advisors, Inc. ("FP Mortgage"), and Messrs. Grove, Chan,
and Parise, on April 30, 1997 Pima Realty, JG Mortgage, JC Mortgage, and FP
Mortgage merged with and into Heritage Residential (the "Pima Mergers"). In
connection with the Pima Mergers, the outstanding shares of capital stock of
Pima Realty, JG Mortgage, JC Mortgage, and FP Mortgage were converted into an
aggregate of 262,008 shares of ASR Common Stock. In addition, each of Jon A.
Grove, Joseph C. Chan, and Frank S. Parise, Jr. entered into an employment
agreement with ASR pursuant to the Pima Mortgage/Pima Realty Merger Agreement.

The description contained herein of the Pima Mergers is qualified in
its entirety by reference to the Combination Agreement, the Addendum, the Pima
Mortgage/Pima Realty Merger Agreement, and ASR's Definitive Proxy Statement
which were attached as exhibits to the Company's Form 8-K filed on May 15, 1997
and are incorporated herein by reference.
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Other Acquisitions

The Company has also recently consummated the following acquisitions.

Ivystone/Woodsedge Apartments. On March 26, 1997, a subsidiary of the
Company acquired the Ivystone/Woodsedge Apartments. The Ivystone/Woodsedge
Apartments, located in Houston, Texas, consist of 266 units built in 1983. The
project was acquired in March 1997 from a third-party seller. At March 31, 1997,
the Ivystone/Woodsedge Apartments had an average monthly rent of $417, or $.54 a
square foot per month, and an average occupancy rate of 85%. The purchase price
for the property was $4,450,000. The Company obtained a new fixed rate first
mortgage debt of $3,700,000 secured by the property and bearing interest at
8.39% per annum and maturing in 2007. The main competition for tenants comes
from existing multifamily apartment projects in the surrounding FM 1960
West/Champions area of northwest Houston. The Company plans numerous substantive
improvements to the property, which are expected to total approximately
$700,000. Exterior improvements include replacing all of the existing roofs,
complete exterior repaint, parking lot repair, additional landscaping, and
installation of fencing and gates. Interior improvements include carpet and
vinyl replacement in approximately 40% of the units, installation of new
refrigerators in approximately 40% of the units, and installation of washer and
dryers in approximately 15% of the units. There are 115 competing apartment
projects in the area with the majority of projects completed in the late 1970s
to early 1980s, and several additional projects built in the last few years.
Typically units built in the 1990s are larger and more expensive and typically
have more amenities than older units, and therefore are not direct competition
for Ivystone/Woodsedge Apartments. The average occupancy for the area at April
30, 1997 was approximately 93% and the average rental rate was $504 a month or
$.60 a square foot per month.

London Park Apartments. On April 24, 1997, a subsidiary of the Company
acquired the London Park Apartments. The London Park Apartments, located in
Houston, Texas, consist of 257 units built in 1983. The project was acquired in
April 1997 from a third-party seller. At March 31, 1997, the London Park
Apartments had an average monthly rent of $498, or $.61 a square foot per month,
and an average occupancy rate of 93%. The purchase price for the property was
$6,000,000. The Company obtained a new fixed rate first mortgage debt of
$4,400,000, secured by the property, and bearing interest at 8.75% per annum and
maturing in 2007. The property's main competition for tenants comes from
existing multifamily apartment projects in the surrounding FM 1960
West/Champions area of northwest Houston. The Company plans numerous substantive
improvements to the property, which are expected to total approximately
$500,000. Exterior improvements include replacing all of the existing roofs,
siding repair and paint touchup, installation of carports, additional
landscaping, and installation of fencing and repair of existing gates. Interior
improvements include carpet and vinyl replacement in approximately 40% of the
units and replacement of cabinet doors and drawer fronts in approximately 50% of
the units. There are 115 competing apartment projects in the area with the
majority of projects completed in the late 1970s to early 1980s, and several
additional projects built in the last few years. Typically units built in the
1990s are larger and more expensive and typically have more amenities than older
units, and therefore are not direct competition for London Park Apartments. The
average occupancy for the area at April 30, 1997 was approximately 93% and the
average rental rate was $504 a month or $.60 a square foot per month.

La Privada Apartments. On May 1, 1997, a subsidiary of the Company acquired
the remaining 85% interest in the limited liability company that owns the La
Privada Apartments. The La Privada Apartments, located in Scottsdale, Arizona,
consist of 350 units built in 1987. The project was acquired through a joint
venture partnership (in which the Company was the general partner and 15% owner
in the property) in June 1995 from a third-party seller. In May 1997, the
Company purchased the remaining 85% interest in the partnership from its limited
partner for $8,233,000. The Company retained the existing $16,000,000 fixed rate
first mortgage debt secured by the property that bears interest at 7.56% and
matures in 2001. Concurrently, the Company borrowed an additional $3,000,000
through a floating rate obligation secured by the Company's ownership interest
in the property. That loan matures in 1999 and floats at LIBOR plus 3.00%. At
March 31, 1997, the La Privada Apartments had an average monthly rent of $870,
or $.73 a square foot per month, and an average occupancy rate of 95%. The
property's main competition for tenants comes from existing multifamily
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apartment projects in the surrounding north Scottsdale area of greater Phoenix.
The Company plans no major capital improvements due to the completion of
approximately $1,200,000 of improvements completed in 1995 and 1996. There are
41 competing apartment projects in the area with the majority of projects
completed in the mid-1980s to the mid-1990s, and numerous additional projects
built in the last few years. La Privada competes with luxury apartments built in
the 1980s as well as new projects built in the last few years. La Privada
typically has larger units and lower density (i.e. fewer units to the acre) than
its competition. In addition, with its recent improvements the tenant amenities
are more akin to a newer 1990's apartment project than a typical 1980's
constructed project. The avarage occupancy for the area at March 31, 1997 for
stabilized projects was approximately 95% and the average rental rate was $773 a
month, or $.80 a square foot per month.

The Court Apartments. On May 9, 1997, a subsidiary of the Company
acquired The Court Apartments. The Court Apartments, located (in the Seattle
area) in Renton, Washington, consist of 175 units built in 1980. The project was
acquired in May 1997 from a third-party seller. At March 31, 1997, The Court
Apartments had an average monthly rent per unit of $416, or $.71 a square foot
per month, and an average occupancy rate of 93%. The purchase price of the
property was $4,059,000. The Company obtained a new fixed rate first mortgage
debt of $2,900,000, secured by the property, bearing interest at 8.669% per
annum and maturing in 2007. The Company plans numerous substantive improvements
to the property, which are expected to total approximately $400,000. Exterior
improvements include replacing existing roofs, siding repair and exterior paint,
and asphalt repair. Interior improvements include carpet and vinyl replacement
in approximately 60% of the units, replacing approximately 70% of the unit
refrigerators, replacing approximately 30% of the unit dishwashers, installation
of new thermal pane windows and doors, and replacement of cabinet doors and
drawer fronts. The property's main competition for tenants comes from existing
multifamily apartment projects in the surrounding area. There are approximately
50 competing apartment projects in the area with the majority of projects
completed in the late 1970s to early 1980s, and several additional projects
built in the last few years. Typically units built in the 1990s are larger and
more expensive and typically have more amenities than older units, and therefore
are not direct competition for The Court Apartments. The average occupancy for
the area at April 30, 1997 was approximately 97% and the average rental rate was
$604 a month or approximately $.73 a square foot per month.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND
EXHIBITS

(a) FINANCIAL STATEMENTS

(i) Winton Properties
Independent Auditors' Report
Combined Historical Summary of Revenues and Certain Operating
Expenses for the year ended December 31, 1996 and the three
months ended March 31, 1997 (unaudited)
Notes to Combined Historical Summary of Revenues and certain
Operating Expenses

(ii) London Park Apartments
Independent Auditors' Report
Historical Summary of Revenues and Certain Operating Expenses for
the year ended December 31, 1996 and the three months ended
March 31, 1997 (unaudited)
Notes to Historical Summary of Revenues and certain Operating
Expenses
8
<PAGE>
(iii) La Privada Apartments
Independent Auditors' Report
Historical Summary of Revenues and Certain Operating Expenses for
the year ended December 31, 1996 and the three months ended
March 31, 1997 (unaudited)
Notes to Historical Summary of Revenues and certain Operating
Expenses

(iv) Ivystone/Woodsedge Apartments and The Court Apartments

Unaudited Combined Historical Summary of Revenues and Certain
Operating Expenses for the year ended December 31, 1996 and
the three months ended March 31, 1997
Notes to Unaudited Combined Historical Summary of Revenues and
Certain Operating Expenses

(b) PRO FORMA FINANCIAL STATEMENTS

Introduction
Pro forma Financial Information as of March 31, 1997 and for the
year ended December 31, 1996 and the three months ended March
31, 1997
Notes to Unaudited Pro Forma Combined Financial Statements
9
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
ASR Investments Corporation:

We have audited the accompanying combined historical summary of revenues and
certain operating expenses (the "Summary") of the Winton Properties (as
described in Note 2), for the year ended December 31, 1996. The Summary is the
responsiblity of the management of the Winton Properties. Our responsibility is
to express an opinion on the Summary 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 Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Summary. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall Summary presentation. We believe that our audit provides
a reasonable basis for our opinion.

The accompanying Summary was prepared for the purpose of complying with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion
in ASR Investments Corporation's Registration Statement on Form S-3 as described
in Note 1 to the Summary and is not intended to be a complete presentation of
the Winton Properties' revenues and expenses.

In our opinion, such Summary presents fairly, in all material respects, the
combined revenues and certain operating expenses, as defined above, of the
Winton Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.

Deloitte & Touche LLP
Tucson, Arizona
April 25, 1997
10
<PAGE>
WINTON PROPERTIES
COMBINED HISTORICAL SUMMARY OF REVENUES AND
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

Rental income .......................................... $14,348
Other apartment operating income ....................... 254
-------
Total revenue .......................................... 14,602
-------

Certain Operating Expenses
Operating and maintenance expenses ................... 4,891
Real estate taxes and insurance ...................... 1,882
-------
Total certain operating expenses ....................... 6,773
-------
Excess of revenue over certain operating expenses ...... $ 7,829
=======

See accompanying notes to the historical summary of
revenues and certain operating expenses.
11
<PAGE>
WINTON PROPERTIES
COMBINED HISTORICAL SUMMARY OF REVENUES AND
CERTAIN OPERATING EXPENSES
FOR THE QUARTER ENDED MARCH 31, 1997
(IN THOUSANDS)
(UNAUDITED)

Rental income ........................................... $3,719
Other apartment operating income ........................ 64
------
Total revenue ........................................... 3,783
------

Certain Operating Expenses
Operating and maintenance expenses .................... 1,229
Real estate taxes and insurance ....................... 503
------
Total certain operating expenses ........................ 1,732
------
Excess of revenue over certain operating expenses ....... $2,051
======

See accompanying notes to the historical summary of
revenues and certain operating expenses.
12
<PAGE>
WINTON PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARY OF REVENUES
AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996

1. BASIS OF PRESENTATION

The combined historical summary of revenues and certain operating expenses
(the "Summary") has been prepared in accordance with Rule 3-14 of Regulation S-X
of the Securities and Exchange Commission ("Rule 3-14"). The Summary reflects
the historical revenues and certain operating expenses of the thirteen apartment
communities and one commercial property as listed in Note 2 (the "Winton
Properties") for the year ended December 31, 1996. ASR Investments Corporation
("ASR") has entered into agreements to acquire the Winton Properties from
unaffiliated third parties. In accordance with Rule 3-14, the Summary includes
certain operating and maintenance costs, real estate taxes and insurance
expenses, but excludes mortgage interest, depreciation and corporate expenses as
they are dependent upon a particular owner, purchase price or other financial
arrangement. Accordingly, the expenses reflected in the Summary may not be
comparable to the expenses to be incurred by ASR in the operations of the
properties. ASR is not aware of any material factors relating to the Winton
Properties other than those set forth herein that would cause the Summary not to
be indicative of the future operating results of the properties.

The Summary has been prepared on the accrual method of accounting. The
apartment communities have operating leases with terms generally of one year or
less. The commercial property has operating leases with remaining terms of 11
months to 91 months as of March 31, 1997. Rental income is recognized as earned.

2. WINTON PROPERTIES

Below is certain information relating to the Winton Properties:

Apartment Communities

PROPERTY NAME LOCATION NO. OF UNITS
- ------------------------------- ------------------- --------------
Briar Park Apartments ................. Houston, Texas 80
Chelsea Park Apartments ............... Houston, Texas 204
Timbercreek Landings Apartments Houston, Texas 204
14400 Montfort Townhomes ............. Dallas, Texas 83
Springfield Apartments ................ Dallas, Texas 218
Greenwood Creek Apartments. ........... Fort Worth, Texas 328
Aspen Court Apartments ................ Arlington, Texas 140
Country Club Place Apartments ........ Richmond, Texas 169
Highlands of Preston Apartments Plano, Texas 220
Marymont Apartments ................... Tomball, Texas 128
Riverway Apartments ................... Bay City, Texas 152
Campus Commons North Apartments........ Pullman, Washington 234
Campus Commons South Apartments........ Pullman, Washington 100

Commercial Property

PROPERTY NAME LOCATION SQUARE FEET
- ------------------------------------ -------- -----------
Pacific South Center Office Building ........ Seattle, Washington 73,232

3. USE OF ESTIMATES

To the Board of Directors and Stockholders
ASR Investments Corporation:

We have audited the accompanying historical summary of revenues and certain
operating expenses (the "Summary") of London Park Apartments, for the year ended
December 31, 1996. The Summary is the responsiblity of the management of ASR
Investments Corporation. Our responsibility is to express an opinion on the
Summary based on our audit.

In our opinion, such Summary presents fairly, in all material respects, the
revenues and certain operating expenses, as defined above, of London Park
Apartments for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP
Tucson, Arizona
May 29, 1997
14
<PAGE>
LONDON PARK APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)

1996 1997
------ ------
(UNAUDITED)

Rental income .................................... $1,306 $ 347
Other operating income ........................... 22 6
------ ------
Total revenue .................................... 1,328 353
------ ------

Certain Operating Expenses
Operating and maintenance expenses ............. 514 120
Real estate taxes and insurance ................ 282 80
------ ------
Total certain operating expenses ................. 796 200
------ ------
Excess of revenues over certain operating expenses $ 532 $ 153
====== ======

See accompanying notes to the historical summary of
revenues and certain operating expenses.
15
<PAGE>
LONDON PARK APARTMENTS
NOTES TO HISTORICAL SUMMARY OF REVENUES
AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

1. BASIS OF PRESENTATION

London Park Apartments is a 257-unit apartment community located in Houston,
Texas. The historical summary of revenues and certain operating expenses (the
"Summary") of London Park Apartments has been prepared in accordance with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission ("Rule 3-14").
ASR acquired the property in April 1997 from an unrelated party. In accordance
with Rule 3-14, the Summary includes certain operating and maintenance expenses,
real estate taxes and insurance expenses, but excludes property management fee
expense, mortgage interest, depreciation and corporate expenses as they are
dependent upon a particular owner, purchase price or other financial
arrangement. Accordingly, the expenses reflected in the Summary may not be
comparable to the expenses to be incurred by ASR in the operations of the
property. ASR is not aware of any material factors relating to the property
other than those set forth herein that would cause the Summary not to be
indicative of the future operating results of the property.

The Summary has been prepared on the accrual method of accounting. The
property has operating leases with terms generally of one year or less.
Rental income is recognized as earned.

2. USE OF ESTIMATES

To the Board of Directors and Stockholders
ASR Investments Corporation:

We have audited the accompanying historical summary of revenues and certain
operating expenses (the "Summary") of La Privada Apartments, for the year ended
December 31, 1996. The Summary is the responsiblity of the management of ASR
Investments Corporation. Our responsibility is to express an opinion on the
Summary based on our audit.

In our opinion, such Summary presents fairly, in all material respects, the
revenues and certain operating expenses, as defined above, of La Privada
Apartments for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.

Deloitte & Touche LLP
Tucson, Arizona
May 23, 1997
17
<PAGE>
LA PRIVADA APARTMENTS
HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)

1996 1997
------ ------
(UNAUDITED)

Rental income .................................... $3,199 $ 829
Other operating income ........................... 100 23
------ ------
Total revenue .................................... 3,299 852
------ ------

Certain Operating Expenses
Operating and maintenance expenses ............. 897 188
Real estate taxes and insurance ................ 160 55
------ ------
Total certain operating expenses ................. 1,057 243
------ ------
Excess of revenues over certain operating expenses $2,242 $ 609
====== ======

See accompanying notes to the historical summary of
revenues and certain operating expenses.
18
<PAGE>
LA PRIVADA APARTMENTS
NOTES TO HISTORICAL SUMMARY OF REVENUES
AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

1. BASIS OF PRESENTATION

La Privada Apartments is a 350-unit apartment community located in
Scottsdale, Arizona which until May 1997 was owned by a joint venture between
ASR and an unrelated party. The historical summary of revenues and certain
operating expenses (the "Summary") has been prepared in accordance with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission ("Rule 3-14").
On May 1, 1997, ASR acquired the remaining 85% interest in La Privada Apartments
L.L.C. (the "LLC") and thus owns 100% of the community. ASR was the managing
member of the LLC and an affiliate of ASR was the property manager of the
community. In accordance with Rule 3-14, the Summary includes certain operating
and maintenance expenses, real estate taxes and insurance expenses, but excludes
property management fee expense, mortgage interest, depreciation and corporate
expenses as they are dependent upon a particular owner, purchase price or other
financial arrangement. Accordingly, the expenses reflected in the Summary may
not be comparable to the expenses to be incurred by ASR in the operations of the
property. ASR is not aware of any material factors relating to the property
other than those set forth herein that would cause the Summary not to be
indicative of the future operating results of the property.

The Summary has been prepared on the accrual method of accounting. The
property has operating leases with terms generally of one year or less.
Rental income is recognized as earned.

2. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect some of the amounts reported in the financial statements. Actual results
could differ from those estimates.
19
<PAGE>
OTHER ACQUIRED COMMUNITIES
COMBINED HISTORICAL SUMMARY OF REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS)
(UNAUDITED)

1996 1997
------ ------

Rental income .................................... $1,885 $ 468
Other operating income ........................... 55 13
------ ------
Total revenue .................................... 1,940 481
------ ------

Certain Operating Expenses
Operating and maintenance expenses ............. 838 184
Real estate taxes and insurance ................ 234 53
------ ------
Total certain operating expenses ................. 1,072 237
------ ------
Excess of revenues over certain operating expenses $ 868 $ 244
====== ======

See accompanying notes to the historical summary of
revenues and certain operating expenses.
20
<PAGE>
OTHER ACQUISITION COMMUNITIES
NOTES TO COMBINED HISTORICAL SUMMARY OF REVENUES
AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)

1. BASIS OF PRESENTATION

The combined historical summary of revenues and certain operating expenses
(the "Summary") has been prepared in accordance with Rule 3-14 of Regulation S-X
of the Securities and Exchange Commission ("Rule 3-14"). The Summary reflects
the combined historical operating revenues and certain operating expenses of two
apartment communities (the "Other Acquisition Communities"): the Ivystone/
Woodridge Apartments acquired in March 1997, and The Court Apartments acquired
in May 1997. In accordance with Rule 3-14, the Summary includes certain
operating and maintenance expenses, real estate taxes and insurance expenses,
but excludes property management fee expense, mortgage interest, depreciation
and corporate expenses as they are dependent upon a particular owner, purchase
price or other financial arrangement. Accordingly, the expenses reflected in the
Summary may not be comparable to the expenses to be incurred by ASR in the
operations of the properties. ASR is not aware of any material factors relating
to the properties other than those set forth herein that would cause the Summary
not to be indicative of the future operating results of the properties.

The Summary has been prepared on the accrual method of accounting. The
properties have operating leases with terms generally of one year or less.
Rental income is recognized as earned.

2. USE OF ESTIMATES

The following unaudited pro forma combined financial statements give effect
to the following transactions (collectively the "Transactions") that occurred
during the period from April 1, 1997 to May 30, 1997, (i) the acquisition of the
Winton Properties, (ii) the acquisition of Winton & Associates, (iii) the
acquisition of Pima Mortgage Limited Partnership and Pima Realty Advisors, Inc.
(the "Pima Entities"), (iv) the acquisition of London Park Apartments, (v) the
acquisition of the remaining 85% interest in La Privada Apartments L.L.C. and
the related sale of the interests in the other five joint ventures, (vi) the
acquisitions of Ivystone/Woodsedge Apartments and The Court Apartments, and
(vii) the issuance of 187,847 shares of Common Stock for cash in April and May.
The acquisition of the Winton Properties, Winton & Associates and the Pima
Entities are collectively referred to as the "Winton Related Acquisitions" in
this section. The pro forma combined balance sheet as of March 31, 1997 has been
prepared as if the Transactions had occurred on March 31, 1997. The pro forma
combined income statements for the year ended December 31, 1996 and the three
months ended March 31, 1997 have been prepared as if the Transactions had been
consummated as of January 1, 1996. Adjustments necessary to reflect these
assumptions and to restate the historical combined financial statements are
presented in the Pro Forma Adjustments columns and are described in the Notes
thereto.

The historical financial information for the Company is derived from the
audited consolidated financial statements of the Company as of and for the year
ended December 31, 1996 and the unaudited consolidated financial statements as
of and for the three months ended March 31, 1997. The historical financial
information for the properties and entities acquired is derived from unaudited
financial statements of the properties or entities, as adjusted to reflect
certain preacquisition transactions.

The unaudited pro forma combined financial statements are not necessarily
indicative of what the actual financial position would have been at March 31,
1997 or the actual results of operations for the year ended December 31, 1996
and the three months ended March 31, 1997 had the Transactions occurred on the
assumed dates described above, nor does it purport to present the future
financial position or results of operations of the Company.
22
<PAGE>
Unaudited Pro Forma Combined Balance Sheet As of March 31, 1997
(In thousands except for per share data)

<TABLE>
<CAPTION>
Winton
ASR Related Pro Forma Pro Forma
Historical Acquisitions Adjustments Combined
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS

Real Estate Investments ............... $ 31,244 (A)
6,119 (D)
25,502 (E)
Properties, net of depreciation ...... $ 70,624 $ 53,361 4,114 (F) $ 190,964
1,757 (A)
538 (D)
Restricted cash and deferred loan cost 4,231 347 (F) 6,873
Investments in joint ventures ......... 2,788 (2,788)(E) 0
Construction in progress .............. 18,528 18,528
Land held for investment .............. 925 925
Other real estate ..................... 1,617 1,617
--------- -------- --------- ---------
Total real estate investments ....... 98,713 53,361 66,833 218,907
Mortgage assets ....................... 3,270 3,270
(4,507)(A)
(2,257)(D)
(3,171)(E)
Cash .................................. 10,781 127 (1,561)(F) 2,806
3,394 (G)
Goodwill .............................. 1,408 (B) 1,408
Other assets .......................... 1,269 738 2,007
--------- -------- --------- ---------
Total assets ........................ $ 114,033 $ 54,226 $ 60,139 $ 228,398
========= ======== ========= =========

LIABILITIES AND EQUITY
Liabilities ........................... $ 4,400 (D)
19,074 (E)
Real estate loans .................... $ 63,771 $ 49,396 2,900 (F) $ 139,541
Short-term borrowings ................. 500 500

Other liabilities ..................... 4,665 746 5,411
--------- -------- --------- ---------
Total liabilities ................... 68,936 50,142 26,374 145,452
469 (E)
5,250 (C)
(5,250)(C)
1,408 (B)
Stockholders' Equity .................. 45,097 4,084 28,494 (A) 82,946
--------- -------- --------- ---------
Total liabilities and Stockholders'
Equity ............................... $ 114,033 $ 54,226 $ 60,139 $ 228,398
========= ======== ========= =========

Outstanding common shares and LP Units.. 3,234 5,380
Book value per share (L) .............. $ 13.94 $ 15.42

</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.

23
<PAGE>
Unaudited Pro Forma Combined Income Statement For Year Ended December 31, 1996
(In Thousands Except For Per Share Data)
<TABLE>
<CAPTION>
WINTON
ASR RELATED LONDON OTHER PRO FORMA PRO FORMA
HISTORICAL ACQUISITIONS PARK LA PRIVADA ACQUISITIONS ADJUSTMENTS COMBINED
------------ -------------- -------- ------------ -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Operations
Rental income ...............$ 14,581 $14,602 $1,328 $ 3,299 $ 1,940 $ 35,750
Property management fees .... 1,859 ($ 1,103) (H) 756
Commission and other income . 34 34
------------ -------------- -------- ------------ -------------- -------------- -----------
Total real estate income .. 14,581 16,495 1,328 3,299 1,940 (1,103) 36,540
------------ -------------- -------- ------------ -------------- -------------- -----------
Operating and maintenance .. (5,404) (6,371) (514) (897) (838) 1,103 (H) (12,921)
Real estate taxes and (1,451) (1,882) (282) (160) (234) (4,009)
insurance ...................
Interest expense ............. (4,348) (6,408)(N) (10,756)
Depreciation and amortization (2,819) (4,860) (M) (7,679)
------------ -------------- -------- ------------ -------------- -------------- -----------
Real estate operating (14,022) (8,253) (796) (1,057) (1,072) (10,165) (35,365)
expenses ....................
------------ -------------- -------- ------------ -------------- -------------- -----------
Real estate operating income 559 8,242 532 2,242 868 (11,268) 1,175
------------ -------------- -------- ------------ -------------- -------------- -----------
Mortgage Asset Income
Prospective yield income ... 2,630 193 (I) 2,823
Income from redemptions and 9,461 9,461
sales .......................
Interest expense ............. (181) (181)
------------ -------------- -------- ------------ -------------- -------------- -----------
Income from mortgage assets . 11,910 0 0 0 0 193 12,103
------------ -------------- -------- ------------ -------------- -------------- -----------
Other Income and Expenses
Amortization of goodwill ... (70)(K) (70)
Management fees .............. 575 (575) (I) 0
Interest and other income ... (425) 70 (594)(J) (949)
Administrative expenses ..... (3,203) (593) 638 (I) (3,158)
------------ -------------- -------- ------------ -------------- -------------- -----------
Other income and expense .. (3,628) 52 0 0 0 (601) (4,177)
------------ -------------- -------- ------------ -------------- -------------- -----------
Net Income ...................$ 8,841 $ 8,294 $ 532 $ 2,242 $ 868 ($ 11,676) $ 9,101
============ ============== ======== ============ ============== ============== ===========
Net Income per share (L) ....$ 2.80 $ 1.72
Dividends declared per share $ 2.00 $ 2.00
Weighted average common
shares outstanding .......... 3,153 5,299
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
24
<PAGE>
Unaudited Pro Forma Combined Income Statement For Quarter Ended March 31, 1997
(In Thousands Except For Per Share Data)
<TABLE>
<CAPTION>
WINTON
ASR RELATED LONDON OTHER PRO FORMA PRO FORMA
HISTORICAL ACQUISITIONS PARK LA PRIVADA ACQUISITIONS ADJUSTMENTS COMBINED
------------ -------------- -------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Operations
Rental income ...............$ 3,702 $ 3,783 $ 353 $ 852 $ 481 $ 9,171
Property management fees .... 422 ($ 302)(H) 120
Commission and other income . 2 2
------------ -------------- -------- ------------ -------------- ------------- -----------
Total real estate income .. 3,702 4,207 353 852 481 (302) 9,293
------------ -------------- -------- ------------ -------------- ------------- -----------
Operating and maintenance .. (1,343) (1,695) (120) (188) (184) 302 (H) (3,228)
Real estate taxes and (341) (503) (80) (55) (53) (1,032)
insurance ...................
Interest expense ............. (1,123) (1,604) (N) (2,727)
Depreciation and amortization (680) (1,194) (M) (1,874)
------------ -------------- -------- ------------ -------------- ------------- -----------
Real estate operating (3,487) (2,198) (200) (243) (237) (2,496) (8,861)
expenses ....................
------------ -------------- -------- ------------ -------------- ------------- -----------
Real estate operating income 215 2,009 153 609 244 (2,798) 432
------------ -------------- -------- ------------ -------------- ------------- -----------
Mortgage Asset Income
Prospective yield income ... 330 40 (I) 370
Income from redemptions and 5,338 5,338
sales .......................
Interest expense ............. (17) (17)
------------ -------------- -------- ------------ -------------- ------------- -----------
Income from mortgage assets . 5,651 0 0 0 0 40 5,691
------------ -------------- -------- ------------ -------------- ------------- -----------
Other Income and Expenses
Amortization of goodwill ... (18)(K) (18)
Management fees .............. 135 (135)(I) 0
Interest and other income ... 187 12 (142)(J) 57
Administrative expenses ..... (1,107) (49) 60 (I) (1,096)
------------ -------------- -------- ------------ -------------- ------------- -----------
Other income and expenses . (920) 98 0 0 0 (235) (1,057)
------------ -------------- -------- ------------ -------------- ------------- -----------
Net Income ...................$ 4,946 $ 2,107 $ 153 $ 609 $ 244 ($ 2,993) $ 5,066
============ ============== ======== ============ ============== ============= ===========
Net Income per share (L) ....$ 1.52 $ 0.95
Dividends declared per share $ 0.50 $ 0.50
Weighted average common
shares outstanding .......... 3,159 5,305
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
25
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements

Pro Forma Balance Sheet as of March 31, 1997

(A) The acquisition of the Winton Properties is recorded as a purchase in
accordance with generally accepted accounting principles and, accordingly,
the assets and liabilities acquired are presented at the estimated fair
values. The 15 Winton Partnerships contributed the Winton Properties to
Heritage LP in which the Company is the general partner and Heritage LP (i)
assumed or refinanced first mortgage loans totaling approximately
$49,396,000, (ii) paid $1,250,000 in cash to the sellers for transactional
costs, (iii) issued 683,626 shares of Common Stock, and (iv) issued 942,184
LP Units with each LP Unit convertible into one share of Common Stock after
one year. For financial reporting purposes, the Common Stock and LP Units
are recorded at a per share fair value of $20.038, which is the average
closing price of the Common Stock on the Amex for the 10-day period prior to
public announcement of the acquisition on November 19, 1996. The pro forma
adjustments are as follows (in thousands):

DEBIT (CREDIT)
--------------
Purchase price of Winton Properties .............................. $ 83,224
Estimated transaction costs ...................................... 1,500
Less historical carrying value of the Winton Properties
Properties, net of depreciation ................................. (53,361)
Other assets ..................................................... (119)
--------
Increase to real estate ........................................ 31,244
--------
Deposits to loan escrow accounts ................................. 1,286
Loan origination and assumption fees ............................. 471
--------
Increase in restricted cash and deferred loan costs ............ 1,757
--------
Estimated transaction costs ...................................... (1,500)
Cash payment to sellers .......................................... (1,250)
Loan escrow deposits and loan fees ............................... (1,757)
--------
Decrease in cash ............................................... (4,507)
--------
Increase in equity from issuance of Common Stock and LP Units .... (28,494)
--------
$ 0
========

(B) The acquisition of Winton & Associates is accounted for as a purchase in
accordance with generally accepted accounting principles. The Company issued
70,284 shares of Common Stock which are recorded at fair value of $20.038
per share. As it is an acquisition of a business from a third party, the
cost of $1,408,000 is recorded as goodwill and is being amortized to expense
over a 20-year period. The pro forma adjustments are as follows (in
thousands):

Increase in goodwill ........................................... $ 1,408
Increase in equity from issuance of Common Stock ............... (1,408)
-------
$ 0
=======

(C) The purchase price for the Pima Entities of $5,250,000 was negotiated
between the owners of the Pima Entities, who are also executive officers and
directors of the Company, and the Special Committee of the Board of
Directors. The Special Committee obtained an opinion from Oppenheimer &
Company, Inc. as to the fairness, from a financial point of view, of the
consideration paid. The 262,008 shares of Common Stock issued was calculated
based on a per share fair value of $20.038. The cost of the Pima Entities is
assigned to the contracts between the Company and the Pima Entities. As the
contracts are effectively terminated, the cost of $5,250,000 is charged to
contract termination expense

26
<PAGE>
in the second quarter of 1997. Since the cost will not be a recurring expense,
no adjustment is made in the Unaudited Pro Forma Combined Income Statements. The
pro forma adjustments are as follows (in thousands):

Write off of purchase price as a contract termination expense ..... $ 5,250
Increase in equity from issuance of Common Stock .................. (5,250)
-------
$ 0
=======

(D) The Company acquired London Park Apartments in April 1997 for $6,000,000 and
obtained a first mortgage loan of $4,400,000. The pro forma adjustments are
as follows:

Purchase price ................................................... $ 6,000
Estimated transaction costs ...................................... 119
-------
Increase to real estate ........................................ 6,119
-------
Deposits to loan escrow accounts ................................. 488
Loan origination and assumption fees ............................. 50
-------
Increase in restricted cash and deferred loan .................... 538
costs
Purchase price and transaction costs ............................. 6,119
Increase in real estate loans .................................... (4,400)
-------
Decrease in cash .................................($ ........... 2,257)
=======

(E) The Company acquired the remaining 85% interest in La Privada Apartments
L.L.C. (the "LLC") for $8,233,000. Accordingly, the assets and liabilities
of the LLC are included in the pro forma combined financial statements of
the Company. The Company obtained a $3,000,000 loan secured by its interest
in the LLC. The Company also sold its 15% interest in the other five joint
ventures for $2,062,000. Accordingly, the investment is joint ventures is
eliminated. The pro forma adjustments are as follows (in thousands):

DEBIT (CREDIT)
--------------

Purchase price of the 85% equity ................................. $ 8,233
Carrying value of 15% interest in the LLC ........................ 1,195
Mortgage loan of the LLC ......................................... 16,074
--------
Increase to real estate ........................................ 25,502
--------
Carrying value of 15% interest in the LLC ........................ (1,195)
Carrying value of equity in the joint ventures sold .............. (1,593)
--------
Elimination of investment in all joint ventures .................. (2,788)
--------
Purchase price of the 85% equity ................................. (8,233)
Proceeds from sale of interests in other joint ventures .......... 2,062
Increase in real estate loans .................................... 3,000
--------
Decrease in cash ............................................... (3,171)
--------
Increase in real estate loans .................................... (19,074)
--------
Sale price of interests in joint ventures ........................ (2,062)
Less carrying value of equity in the joint ventures sold ......... 1,593
--------
Gain on sale of joint ventures ................................... (469)
--------
Total .......................................................... $ 0
========
27
<PAGE>
(F) The Company acquired The Court Apartments in May 1997 for $4,059,000 and
obtained a mortgage loan for $2,900,000. The pro forma adjustments are as
follows (in thousands):

Purchase price ................................................. $ 4,059
Estimated transaction costs .................................... 55
-------
Increase to real estate ...................................... 4,114
-------
Deposits to loan escrow accounts ............................... 294
Loan origination and assumption fees ........................... 53
-------
Increase in restricted cash and deferred loan ................ 347
costs
Purchase price and transaction costs ........................... 4,114
Increase in real estate loans .................................. (2,900)
-------
Decrease in cash ............................................. ($1,561)
=======

(G) The Company issued 110,500 shares of Common Stock for cash in April 1997 and
77,347 shares of Common Stock in May for cash. The pro forma adjustments are
as follows:

Cash proceeds .............................................. $ 3,394
Increase in stockholders' equity ........................... (3,394)
-------
$ 0
=======

Pro Forma Combined Income Statement Adjustments For the Year Ended December 31,
1996 and the Three Months Ended March 31, 1997.

(H) Winton & Associates provided property management services relating to the
Winton Properties, and Pima Realty provided property management services on
the Company's properties. The adjustments to eliminate the property
management fees previously charged are as follows (in thousands):

1996 1997
------ ------
Pima Realty ................................ $ 472 $ 145
Winton & Associates ........................ 631 157
------ ------
$1,103 $ 302
====== ======
28
<PAGE>
(I) Pima Mortgage provided advisory and bond administration services to the
Company on a fee basis pursuant to a management agreement. The Company has
entered into employment agreements with the three officers of the corporate
partners of Pima Mortgage. The Company expects to eliminate the expenses
incurred by Pima Mortgage (consisting of salaries to the officers of the
corporate partners) offset by costs incurred by the Company under the
employment agreements. The adjustments to reflect elimination of the
advisory and bond administration fees, elimination of the Pima Mortgage
expenses, and the addition of salaries to be paid by the Company are as
follows (in thousands):

1996 1997
----- -----
Elimination of bond administration fees expense .......... $ 193 $ 40
===== =====
Elimination of management fee income
Bond administration fee income .......................... ($193) ($ 40)
Management fee income .................................... (382) (95)
----- -----
Total .................................................. ($575) ($135)
===== =====
Elimination of management fees expense and
addition of salary expense
Elimination of management fee expense ................... $ 382 $ 95
Elimination of Pima Mortgage salary expenses ............. 593 49
Addition of salaries under employment agreements ......... (337) (84)
----- -----
Reduction in operating expenses ........................ $ 638 $ 60
===== =====

(J) To eliminate interest and dividend income on certain assets of the Pima
Entities not acquired by the Company and to reduce the Company's interest
income to reflect cash used in the Transactions (in thousands).

1996 1997
---- ----
Elimination of the Pima Entities' income ............... $ 70 $ 12
Reduction of the Company's interest income ............. 520 130
---- ----
Reduction of other income ............................ $594 $142
==== ====

(K) To amortize the recorded purchase price of Winton & Associates over a
20-year period.

(L) The acquired entities include 15 independent partnerships and Pima Mortgage
for which there are no common partnership interests. As a result, no
historical or pro forma amounts for either book value or net income per
share are calculable for such entities.

(M) Increase in depreciation and amortization charges to reflect depreciation
and amortization based on ASR's acquisition costs calculated utilizing an
estimated life of 27.5 years on the property, seven years on personal
property and improvements, and the remaining life on loan costs and
acquisition costs are allocated 85% to buildings and improvements in
accordance with ASR's estimated allocations:

DEPRECIATION OR
AMORTIZATION
LIFE
----
Acquisition costs allocated to:
Land .......................................................
Buildings .................................................. 27.5
Personal property and improvement .......................... 7
Transaction and loan costs ................................. 7
29
<PAGE>
The resulting pro forma depreciation and amortization expense is (in thousands):

1996 1997
------ ------
Winton Properties ............................ $3,607 $ 875
London Park Apartments ....................... 164 46
La Privada Apartments ........................ 857 208
Other Communities ............................ 232 65
------ ------
Total Pro Forma ............................ $4,860 $1,194
Adjustment
====== ======

(N) The pro forma adjustments to the interest expense reflecting mortgage loans
obtained or assumed are as follows (in thousands):

1996 1997
------ ------
Winton Properties ................................ $4,004 $1,001
London Park Apartments ........................... 375 94
La Privada Apartments ............................ 1,470 368
Other Communities ................................ 559 141
------ ------
Total .......................................... $6,408 $1,604
====== ======

(O) Although the Company believes that funds from operations ("FFO") is a
measure commonly reported and widely used by analysts, investors, and other
interested parties in the REIT industry as a measure of performance of an
equity REIT, all REITs and financial analysts do not calculate FFO in the
same manner and, as a result, FFO as used in this Prospectus may not be
comparable to similarly titled measures as reported by other companies. FFO
is generally defined as net income plus certain non-cash charges (primarily
depreciation and amortization), less gains from sales of assets and after
adjustments for unconsolidated partnerships and joint ventures. As a result,
FFO provides a view of REIT performance without regard to depreciation and
amortization, gains on sales of assets, and corresponding income and
expenses in unconsolidated partnerships and joint ventures. The Company
considers income from redemptions and sales of Mortgage Assets to be similar
in nature to gains from sales of real estate and has thus excluded such
income in determining the Company's FFO, as modified. Other adjustments
consist of depreciation and amortization and amortization of goodwill. FFO,
as modified, should not be considered as an alternative to net income
(determined in accordance with generally accepted accounting principles) as
an indication of the Company's financial performance or to cash flow through
operating activities (determined in accordance with generally accepted
accounting principles) as a measure of liquidity. FFO, as presented, differs
from cash flow through operating activities (determined in accordance with
generally accepted accounting principles) as (i) FFO excludes income from
sales and redemptions of Mortgage Assets that are included in cash flow
through operating activities and (ii) FFO is not adjusted for changes in
accrual as is cash flow through operating activities. FFO is also not
adjusted for cash flow through investing or financing activities (determined
in accordance with generally accepted accounting principles). FFO, as
modified, is calculated as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------------- -----------------------
ASR ASR ASR ASR
HISTORICAL COMBINED HISTORICAL COMBINED
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Net Income ..........................$ 8,841 $ 9,101 $ 4,946 $ 5,066
Depreciation and amortization ...... 2,819 7,679 680 1,874
Adjustment for unconsolidated 297 -- 105 --
joint ventures .....................
Amortization of goodwill ............ 70 18
Income from redemptions and sales of (9,461) (9,461) (5,338) (5,338)
mortgage assets ....................
------------ ---------- ------------ ----------
Funds from operations, as modified .$ 2,496 $ 7,389 $ 393 $ 1,620
============ ========== ============ ==========
</TABLE>
30
<PAGE>
Pursuant to the requirements of the Security Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

ASR INVESTMENTS CORPORATION

By: /s/ Joseph Chan
------------------------------
Name: Joseph Chan
Its: Executive Vice President, Chief Operating Officer,
Secretary and Treasurer

June 16, 1997
31