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 Original Report: July 2, 1998
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 1-12875 54-1589139
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K/A
Index
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(The Gables Apartments)
Historical Statement of Income
and Direct Operating Expenses
(The Gables Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(The Gables Apartments)
b. Pro Forma Balance Sheet as of June 30, 1998 (unaudited)
Pro Forma Statement of Operations
for the six months ended June 30, 1998
(unaudited)
Pro Forma Statement of Operations
for the year ended December 31, 1997
(unaudited)
c. Exhibit
23.1 Consent of Independent Auditors
(The Gables Apartments)
<PAGE>
The Company hereby amends Items 7.a, 7.b and 7.c, of its Current
Report on Form 8-K dated July 2, 1998 as follows:
<PAGE>
ITEM 7.a.
<PAGE>
[L.P. MARTIN & COMPANY LETTERHEAD]
PHONE (804) 346-2626
FAX: (804) 346-9311
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property The Gables Apartments located in Glen Allen, Virginia for the
twelve month period ended May 31, 1998. This statement is the responsibility of
the management of The Gables Apartments. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in a filing by Cornerstone Realty Income Trust, Inc.) and excludes material
expenses, described in Note 2 to the statement, that would not be comparable to
those resulting from the proposed future operations of the property.
In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of The Gables Apartments (as
defined above) for the twelve month period ended May 31, 1998, in conformity
with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
August 6, 1998
<PAGE>
THE GABLES APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1998
INCOME
Rental and Other Income $1,505,529
----------
DIRECT OPERATING EXPENSES
Administrative and Other 144,832
Insurance 21,687
Repairs and Maintenance 207,941
Taxes, Property 77,075
Utilities 90,002
--------
TOTAL DIRECT OPERATING EXPENSES 541,537
--------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 963,992
=========
See accompanying notes to the financial statement.
<PAGE>
THE GABLES APARTMENTS
NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED MAY 31, 1998
NOTE 1 - ORGANIZATION
The Gables Apartments is a 224 unit garden style apartment complex located on
15.37 acres in Glen Allen, Virginia. The assets comprising the property were
owned by Richmond Gables Associates, an entity unaffiliated with Cornerstone
Realty Income Trust, Inc., during the financial statement period. Cornerstone
Realty Income Trust, Inc. purchased the property on June 30, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, management fees, and
entity expenses.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
<PAGE>
ITEM 7.b.
<PAGE>
Pro Forma Consolidated Balance Sheet as of June 30, 1998 (unaudited)
The Unaudited Pro Forma Consolidated Balance Sheet is presented as if the
Company had owned the property included in the table below as of June 30, 1998,
using the Company's line of credit.
The Unaudited Pro Forma Consolidated Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual financial
position of the Company would have been at June 30, 1998, nor does it
purport to represent the future financial position of the Company. This
Unaudited Pro Forma Consolidated Balance Sheet should be read in conjunction
with, and is qualified in its entirety by, the Company's respective historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
Historical The Gables
Balance Pro Forma Total
Sheet Adjustments Pro Forma
---------------------------------------------
Date of acquisition 7/2/98
<S> <C>
ASSETS
Investment in rental property
Land 82,938,664 2,185,000 85,123,664
Building and improvements 442,482,870 9,315,000 451,797,870
Furniture and fixtures 9,896,228 - 9,896,228
---------------------------------------------
535,317,762 11,500,000 546,817,762
Less accumulated depreciation (37,176,705) - (37,176,705)
---------------------------------------------
498,141,057 11,500,000 509,641,057
Cash and cash equivalents 4,218,878 - 4,218,878
Prepaid expenses 506,155 - 506,155
Other assets 8,816,564 - 8,816,564
---------------------------------------------
13,541,597 - 13,541,597
---------------------------------------------
511,682,654 11,500,000 523,182,654
=============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable 162,447,999 11,500,000 173,947,999
Accounts payable 1,997,273 - 1,997,273
Accrued expenses 3,297,074 - 3,297,074
Rents received in advance 189,798 - 189,798
Tenant security deposits 1,843,827 - 1,843,827
---------------------------------------------
169,775,971 11,500,000 181,275,971
Shareholders' equity
Common stock 383,128,652 - 383,128,652
Deferred compensation (51,978) - (51,978)
Distributions greater than net income (41,169,991) - (41,169,991)
--------------------------------------------
341,906,683 - 341,906,683
---------------------------------------------
511,682,654 11,500,000 523,182,654
=============================================
</TABLE>
<PAGE>
Pro Forma Consolidated Statement of Operations for the six months ended June 30,
1998 (unaudited)
The Unaudited Pro Forma Consolidated Statement of Operations for the six month
period ended June 30, 1998 is presented as if the 5 Property acquisitions made
during 1998 had occurred on January 1, 1998. The Unaudited Pro Forma Statement
of Operations assumes the Company qualifying as a REIT, distributing at least
95% of its taxable income, and, therefore, incurred no federal income tax
liability for the period presented. In the opinion of management, all
adjustments necessary to reflect the effects of these transactions have been
made.
The Unaudited Pro Forma Consolidated Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the period ended June 30, 1998 if the
acquisitions had occurred at the beginning of the period presented, nor does it
purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the Company's respective historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
Stone Pinnacle Hampton
Historical Point Ridge Pointe
Statement of Pro Forma Pro Forma Pro Forma
Operations Adjustments Adjustments Adjustments
-------------------------------------------------------
Date of Acquisitions - 1/15/98 3/31/98 3/31/98
<S> <C>
Rental and other income $43,684,375 $ 56,094 $214,941 $495,061
Rental expenses:
Propety and maintenance 11,475,532 15,821 73,178 157,479
Taxes and insurance 3,204,993 4,154 15,411 54,874
Property management 1,055,380 - - -
General and administrative 923,337 - - -
Amortization and other depreciation 30,284 - - -
Depreciation of rental property 9,690,075 - - -
Other 768,656 - - -
-------------------------------------------------------
27,148,257 19,975 88,589 212,353
Income before interest income (expense) 16,536,118 36,119 126,352 282,708
Interest income 221,199 - - -
Interest expense (6,008,338) - - -
-------------------------------------------------------
Net Income $10,748,979 $36,119 $126,352 $282,708
==============
Net income per common share - Basic $0.30
======
Wgt. avg. number of shares outstanding 36,301,575
===========
</TABLE>
<TABLE>
<CAPTION>
The Timbers The Gables 1998
Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Pro Forma
----------------------------------------- --------------
Date of Acquisitions 6/4/98 7/2/98 -
<S> <C>
Rental and other income $ 494,369 $ 752,765 - $45,697,605
Rental expenses:
Propety and maintenance 169,870 221,388 - 12,113,268
Taxes and insurance 31,692 49,381 - 3,360,505
Property management - - - 1,055,380
General and administrative - - - 923,337
Amortization and other
depreciation - - - 30,284
Depreciation of rental property - - 410,292 (A) 10,100,367
Other - - - 768,656
----------------------------------------- --------------
201,562 270,769 410,292 28,351,797
Income before interest income (expense) 292,807 481,996 (410,292) 17,345,808
Interest income - - - 221,199
Interest expense - - (812,167)(B) (6,820,505)
----------------------------------------- --------------
Net Income $292,807 $481,996 ($1,222,459) $10,746,502
==============
Net income per common share - Basic $0.29
=====
Wgt. avg. number of shares outstanding 309,917 (C) 36,611,492
========== =============
</TABLE>
(A) Represents the depreciation expense of the properties acquired based on the
purchase price,excluding amounts allocated to land, for the period of time not
owned by the Company. The weighted average life of the property depreciated was
27.5 years.
(B) Represents the interest expense for the 4 properties purchased using the
line of credit for the period in which the properties were not owned for the six
month period ended June 30, 1998, interest was computed based on interest rates
under the Company's line of credit in effect at the time of the respective
acquisition.
(C) Repesents additional common shares used to purchase Timbers based upon the
purchase price of $8,100,000 and common shares issued in May 1997 with net
proceeds per share of $10.89 to the Company.
<PAGE>
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited)
The Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997 is presented as if 11 of the 13 Property acquisitions during
1997 and the 5 Property acquisitions during 1998 had occurred on January 1,
1997. The Unaudited Pro Forma Statement of Operations assumes the Company
qualifying as a REIT, distributing at least 95% of its taxable income, and,
therefore, incurred no federal income tax liability for the period presented. In
the opinion of management, all adjustments necessary to reflect the effects of
these transactions have been made.
The Unaudited Pro Forma Consolidated Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of the Company would have been for the year ended December 31, 1997 if
the acquisitions had occurred at the beginning of the period presented, nor does
it purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the Company's respective historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
Historical
Statement of 1997 Pro Forma
Operations Acquisitions Adjustments
--------------------------------------------------------------
Date of Acquisitions - -
<S> <C>
Revenues from rental properties $71,970,624 $8,176,747 -
Rental expenses:
Property and maintenance 19,494,692 2,524,622 -
Taxes and insurance 6,075,991 608,815 -
Property management 1,769,272 - -
General and administrative 1,351,667 - -
Amortization and other depreciation 56,075 - -
Depreciation of rental property 15,163,593 - $ 1,514,811 (A)
Other 1,200,669 - -
Management contract termination 402,907 - -
--------------------------------------------------------------
45,514,866 3,133,437 1,514,811
Income before interest income (expense) 26,455,758 5,043,310 (1,514,811)
Interest income 331,114 - -
Interest expense (7,561,319) - (2,411,653) (B)
--------------------------------------------------------------
Net Income $19,225,553 $5,043,310 ($3,926,464)
=====================
Net income per common share - Basic $0.59
======
Wgt. avg. number of shares outstanding 32,617,823 2,041,544 (C)
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Pinnacle
Pro Forma Stone Point Ridge
Before 1998 Pro Forma Pro Forma
Acquisitions Adjustments Adjustments
--------------------------------------------------------------
Date of Acquisitions 1/15/98 3/31/98
<S> <C>
Revenues from rental properties $80,147,371 $ 1,346,251 $859,763
Rental expenses:
Property and maintenance 22,019,314 379,698 292,713
Taxes and insurance 6,684,806 99,704 61,642
Property management 1,769,272 - -
General and administrative 1,351,667 - -
Amortization and other depreciation 56,075 - -
Depreciation of rental property 16,678,404 - -
Other 1,200,669
Management contract termination 402,907 - -
--------------------------------------------------------------
50,163,114 479,402 354,355
Income before interest income (expense) 29,984,257 866,849 505,408
Interest income 331,114 - -
Interest expense (9,972,972) - -
--------------------------------------------------------------
Net Income $20,342,399 $866,849 $505,408
Net income per common share - Basic $0.59
=====
Wgt. avg. number of shares outstanding 34,659,367
==========
</TABLE>
<TABLE>
<CAPTION>
Hampton
Point The Timbers Gables
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
---------------------------------------------------------------
Date of Acquisitions 3/31/98 6/4/98 7/2/98
<S> <C>
Revenues from rental properties $1,980,245 $ 1,186,485 $ 1,505,529
Rental expenses:
Property and maintenance 629,914 407,687 442,775
Taxes and insurance 219,495 76,060 98,762
Property management - - -
General and administrative - - -
Amortization and other depreciation - - -
Depreciation of rental property - - -
Other - - -
Management contract termination - - -
---------------------------------------------------------------
849,409 483,747 541,537
Income before interest income (expense) 1,130,836 702,738 963,992
Interest income - - -
Interest expense - - -
---------------------------------------------------------------
Net Income $1,130,836 $702,738 $963,992
Net income per common share - Basic
Wgt. avg. number of shares outstanding
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Total
Adjustments Pro Forma
---------------------- ---------------------
Date of Acquisitions -
<S> <C>
Revenues from rental properties - $87,025,644
Rental expenses:
Property and maintenance - 24,172,101
Taxes and insurance - 7,240,469
Property management - 1,769,272
General and administrative - 1,351,667
Amortization and other depreciation - 56,075
Depreciation of rental property $ 1,411,872 (A) 18,090,276
Other - 1,200,669
Management contract termination - 402,907
---------------------- ---------------------
1,411,872 54,283,436
Income before interest income (expense) (1,411,872) 32,742,208
Interest income - 331,114
Interest expense (2,992,993) (B) (12,965,965)
---------------------- ---------------------
Net Income ($4,404,865) $20,107,357
=====================
Net income per common share - Basic $0.57
=====
Wgt. avg. number of shares outstanding 743,802 (C) 35,403,169
====================== ==========
</TABLE>
(A) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, for the period of time not
owned by the Company. The weighted average life of the property depreciated was
27.5 years.
(B) Represents the interest expense for the properties purchased with the
Company's unsecured line of credit or other unsecured financing. Total purchase
price of $63,851,388 for 1997 acquisitions (8 properties) and total purchase
price of $47,256,150 for 1998 acquisitions (4 properties) for the period in
which properties were not owned for the year ended December 31, 1997. Interest
was computed based on interest rates under the Company's line of credit in
effect at the time of the respective acquisition.
(C) Represents additional common shares used to purchase Ashley Run, Carlyle,
Charleston Place and a portion of Dunwoody based upon purchase prices of
$18,000,000 $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
Dunwoody was $15,200,000), respectively and common shares issued in April, 1997
with net proceeds of $9.5875 per share to the Company and purchase of Timbers
unsing the proceeds of a public offering issuing shares with net proceeds of
$10.89 per share.
<PAGE>
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited)
The following schedule provides detail of 1997 acquisitions by property included
in the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997.
<TABLE>
<CAPTION>
Paces Paces Ashley
Westchase Arbor Forest Run
Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
Date of Acquisition 1/15/97 3/1/97 3/1/97 4/30/97
<S> <C>
Property operations
Revenues from rental properties $166,656 $128,993 $154,702 $916,820
Rental expenses:
Property management 54,436 35,902 37,110 246,537
Taxes and insurance 16,024 8,094 9,108 69,240
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
---------------------------------------------------------------------
70,460 43,996 46,218 315,777
Income before interest income (expense) 96,196 84,997 108,484 601,043
Interest income - - - -
Interest expense - - - -
---------------------------------------------------------------------
Net Income $96,196 $84,997 $108,484 $601,043
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
Carlyle Charleston Dunwoody Clarion
Club Place Springs Crossing
Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
Date of Acquisition 4/30/97 5/13/97 7/25/97 9/30/97
<S> <C>
Property operations
Revenues from rental properties $637,842 $536,210 $1,437,230 $1,141,473
Rental expenses:
Property management 205,723 169,807 451,935 442,582
Taxes and insurance 46,970 34,987 144,766 59,664
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
-------------------------------------------------------------------
252,693 204,794 596,701 502,246
Income before interest income (expense) 385,149 331,416 840,529 639,227
Interest income - - - -
Interest expense - - - -
-------------------------------------------------------------------
Net Income $385,149 $331,416 $840,529 $639,227
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Remington Stone
St. Regis Place Brooke 1997
Pro Forma Pro Forma Pro Forma Acquisition
Adjustments Adjustments Adjustments Adjustments
----------- ----------- ----------- -----------
Date of Acquisition 10/31/97 10/31/97 10/31/97
<S> <C>
Property operations
Revenues from rental properties $1,100,453 $918,833 $1,037,535 $8,176,747
Rental expenses: -
Property management 294,153 262,938 323,499 2,524,622
Taxes and insurance 64,195 60,505 95,262 608,815
General and administrative - - - -
Amortization - - - -
Depreciation of rental property - - - -
Other - - - -
-------------------------------------------------------------------
358,348 323,443 418,761 3,133,437
Income before interest income (expense) 742,105 595,390 618,774 5,043,310
Interest income - - - -
Interest expense - - - -
-------------------------------------------------------------------
Net Income $742,105 $595,390 $618,774 $5,043,310
===================================================================
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 8-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
CORNERSTONE REALTY INCOME TRUST, INC.
Date: September 14, 1998 By:/s/ Stanley J. Olander, Jr.
---------------------------------------
Stanley J. Olander, Jr.
Chief Financial Officer
of Cornerstone Realty Income
Trust, Inc.
<PAGE>
ITEM 7.c.
<PAGE>
EXHIBIT INDEX
Cornerstone Realty Income Trust, Inc.
Form 8-K/A to Form 8-K dated July 2, 1998
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
(The Gables Apartments)
[L.P. MARTIN & COMPANY LETTERHEAD]
PHONE (804) 346-2626
FAX: (804) 346-9311
Consent of Independent Auditors'
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We consent to the use of our report dated August 6, 1998 with
respect to the statement of income and direct operating expenses
exclusive of items not comparable to the proposed future
operations of the property The Gables Apartments for the twelve
month period ended May 31, 1998, for inclusion in a filing by
Cornerstone Realty Income Trust, Inc. on Form 8-K and for
incorporation by reference into the following registration
statements of Cornerstone Realty Income Trust, Inc.
Registration Statement Number Description
333-24871 Form S-8, pertaining to the Company's
1992 Non-Employee Directors Stock Option
Plan, Special Non-Employee Directors
Stock Option Plan, and Non-Employee
Directors Fees Plan
333-24875 Form S-8, pertaining to the Company's
1992 Incentive Plan
333-34441 Form S-3, Shelf Registration Statement,
pertaining to the registration of $200
million of Common Stock, Preferred Stock
and Debt Securities
333-19187 Form S-3, pertaining to the Company's
Dividend Reinvestment and Share Purchase
Plan
/s/ L.P. Martin & Co., P.C.
Richmond, Virginia
August 13, 1998
