<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31, 1998
THE TOWN AND COUNTRY TRUST
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 001-12056 52-6613091
- -------------- ---------------------- ---------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
100 S. Charles Street, Baltimore, MD 21201
- --------------------------------------- --------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (410)539-7600
-----------------
N/A
- ----------------------------------------------------------
(Former name or former address if changed from last report)
<PAGE>
ITEM 5. OTHER EVENTS
Between March 31, 1998 and October 5, 1999, the Registrant acquired
eight additional multi-family apartment communities, comprised of 2,252
apartment units. The aggregate purchase price for the four apartment
communities acquired in 1998 was $68,200,000. The aggregate purchase price
for the four apartment communities acquired in 1999 was $64,300,000. None of
the Registrant nor any of its affiliates, trustees or officers, nor any
associates thereof, has a material relationship with any of the sellers of
these properties.
Financial statements for the acquired properties complying with the
provisions of Rule 3-14 of Regulation S-X under the Securities Act of 1933,
as amended, are set forth in this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
THE FAIRINGTON
On October 14, 1998, the Company acquired The Fairington, a garden-style
apartment community in Charlotte, North Carolina. The community, which
contains 250 units, was purchased for approximately $18,000,000 from Sentinel
Realty Partners II, L.P. The community consists of 21 two- and three-story
buildings and is located in the South Park area, five miles from downtown
Charlotte and 10 miles from Charlotte-Douglas International Airport. Built in
1980 - 1982, The Fairington contains 108 one-bedroom, one-bath apartments,
106 two-bedroom, two-bath apartments, and 36 three-bedroom, three-bath
apartments. Each unit has its own full-size washer/dryer connection, private
entryway and patio or balcony. Select units include wood burning fireplaces,
bay windows and extra storage space. Amenities include two swimming pools,
two tennis courts, clubhouse, a fitness facility and two on-site laundry
facilities.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Charlotte. The community has up-to-date amenity packages. The Company owns
another property in the same area. The Company believes that this proximity
will create management efficiencies.
The Company is not aware of any material factors relating to the
property not set forth in this report that would cause the financial
information contained in this report not to be indicative of future operating
results as related to revenues and certain expense.
2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of The Fairington (the "Property") as described in Note 2 for the
year ended December 31, 1997. This historical statement of revenue and
certain expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of The Fairington for the year ended
December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
September 11, 1998
2
<PAGE>
THE FAIRINGTON
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Six Months
Year ended Ended
December 31, 1997 June 30, 1998
----------------- -------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $2,060,568 $1,048,221
Other income 35,432 18,264
---------- ----------
Total revenue 2,096,000 1,066,485
EXPENSES:
Operating 381,103 203,265
Real estate taxes 138,773 69,252
Marketing and
advertising 13,803 16,663
Repairs and
maintenance 125,607 70,817
General and
administrative 19,494 11,579
---------- ----------
Total expenses 678,780 371,576
Revenue in excess ---------- ----------
of certain
expenses $1,417,220 $ 694,909
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
THE FAIRINGTON
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of The Fairington ("Property") owned by a party
unaffiliated with The Town and Country Trust which subsequently acquired the
Property. The Property is located in Charlotte, North Carolina and consists
of 250 units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not
3
<PAGE>
representative of the actual operations of the Property for the year
presented nor indicative of future operations as certain expenses which are
not included in the historical statement, consisting of management fees,
depreciation and interest, are directly related to the future operations of
the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the management all
adjustments, consisting solely of normal recurring adjustments, necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended June 30, 1998 are not
necessarily indicative of the results to be obtained for a full fiscal year.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WINDERMERE LAKES
On December 10, 1998, the Company acquired Windermere Lakes, a garden-style
apartment community in Orlando, Florida. The community, which contains 276
units, was purchased for approximately $15,200,000 from Sentinel Realty
Partners I, L.P. The community consists of 12 two and three story buildings
and is situated seven miles from downtown Orlando and ten miles from Orlando
International Airport. Built in 1988, Windermere Lakes contains 144
one-bedroom, one-bath apartments, 116 two-bedroom, two-bath apartments, and
16 three-bedroom, two-bath apartments. Each unit has its own full-size
washer/dryer, private entryway and patio or balcony. Select units also
include vaulted ceilings and wood burning fireplaces. Amenities include a
swimming pool, tennis court, clubhouse and fitness facilities.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Orlando. The community is relatively new and has up-to-date amenity
packages. The Company acquired another property in the same area, Twelve
Oaks, which is adjacent to the community. The Company believes that this
proximity will create management efficiencies.
The Company is not aware of any material factors relating to the
property not set forth in this report that would cause the financial
information contained in this report not to be indicative of future operating
results as related to revenues and certain expense.
4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of Windermere Lakes (the "Property") as described in Note 2 for the
year ended December 31, 1997. This historical statement of revenue and
certain expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of Windermere Lakes for the year ended
December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
October 8, 1998
5
<PAGE>
WINDERMERE LAKES
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Nine Months
Year ended Ended
December 31, 1997 September 30, 1998
----------------- ------------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $2,027,319 $1,554,133
Other income 57,955 46,721
---------- ----------
Total revenue 2,085,274 1,600,854
EXPENSES:
Operating 403,829 277,276
Real estate taxes 219,989 177,156
Marketing and
advertising 25,822 16,485
Repairs and
maintenance 87,367 71,103
General and
administrative 25,338 20,702
---------- ----------
Total expenses 762,345 562,722
Revenue in excess ---------- ----------
of certain
expenses $1,322,929 $1,038,132
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
WINDERMERE LAKES
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of Windermere Lakes ("Property") owned by a party
unaffiliated with The Town and Country Trust which subsequently acquired the
Property. The Property is located in Orlando, Florida and consists of 276
units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of
6
<PAGE>
future operations as certain expenses which are not included in the
historical statement, consisting of management fees, depreciation and
interest, are directly related to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the management all
adjustments, consisting solely of normal recurring adjustments, necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended September 30, 1998 are not
necessarily indicative of the results to be obtained for a full fiscal year.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TWELVE OAKS
On December 10, 1998, the Company acquired Twelve Oaks, a garden-style
apartment community in Orlando, Florida. The community, which contains 284
units, was purchased for approximately $16,500,000 from Sentinel Real Estate
Fund. The community consists of 12 two and three story buildings and is
situated seven miles from downtown Orlando and ten miles from Orlando
International Airport. Built in 1992, Twelve Oaks contains 180 one-bedroom,
one-bath apartments, 88 two-bedroom, two-bath apartments, and 16
three-bedroom, two-bath apartments. Each unit has its own full-size
washer/dryer, private entryway and patio or balcony. Select units also
include vaulted ceilings and wood burning fireplaces. Amenities include a
swimming pool, tennis court and a clubhouse. The acquisition was funded
through the use of the Company's revolving loan facilities and the assumption
of existing mortgage debt.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Orlando. The community is relatively new and has up-to-date amenity packages.
The Company acquired another property in the same area, Windermere Lakes,
which is adjacent to the community. The Company believes that this proximity
will create management efficiencies.
The Company is not aware of any material factors relating to the property not
set forth in this report that would cause the financial information contained
in this report not to be indicative of future operating results as related to
revenues and certain expense.
7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of Twelve Oaks (the "Property") as described in Note 2 for the year
ended December 31, 1997. This historical statement of revenue and certain
expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of Twelve Oaks for the year ended
December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
October 8, 1998
8
<PAGE>
TWELVE OAKS
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Nine Months
Year ended Ended
December 31, 1997 September 30, 1998
----------------- ------------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $2,068,934 $1,596,896
Other income 57,053 53,070
---------- ----------
Total revenue 2,125,987 1,649,966
EXPENSES:
Operating 397,128 296,616
Real estate taxes 235,261 195,372
Marketing and
advertising 26,408 20,954
Repairs and
maintenance 64,937 44,074
General and
administrative 26,233 20,379
---------- ----------
Total expenses 749,967 577,395
---------- ----------
Revenue in excess
of certain
expenses $1,376,020 $1,072,571
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
TWELVE OAKS
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of Twelve Oaks ("Property") owned by a party
unaffiliated with The Town and Country Trust which subsequently acquired the
Property. The Property is located in Orlando, Florida and consists of 286
units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of future operations as
certain expenses which are not included in the historical statement,
9
<PAGE>
consisting of management fees, depreciation, and interest, are directly
related to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the management all
adjustments, consisting solely of normal recurring adjustments, necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended September 30, 1998 are not
necessarily indicative of the results to be obtained for a full fiscal year.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COLONIAL GRAND AT KIRKMAN
On March 31, 1999, the Company acquired Colonial Grand at Kirkman, a
garden-style apartment community in Orlando, Florida. The community, which
contains 370 units, was purchased for approximately $25,000,000 from Colonial
Realty, L.P. The community consists of 14 two-and three-story buildings and
is located two miles west of Interstate 4 in the Metro West section of
Orlando, five miles southwest of the downtown Orlando business district and
within one mile of Universal Studios. Built in 1992, Kirkman contains 156
one-bedroom, one-bath apartments, 106 two-bedroom, one-bath apartments, 54
two-bedroom, two-bath apartments and 54 three-bedroom, two-bath apartments.
Each unit has its own full-size washer and dryer connection, optional
attached garage, private entryway and a patio or balcony. Amenities include
lighted tennis courts, air-conditioned racquetball court, sand and water
volleyball, fitness center, lagoon- style swimming pool, two heated lap pools
and a heated spa.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Orlando. The community is relatively new and has up-to-date amenity
packages. The Company owns other properties in the same area. The Company
believes that this proximity will create management efficiencies.
The Company is not aware of any material factors relating to the
property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results as
related to revenues and certain expense.
10
<PAGE>
Report of Independent Auditors
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of Colonial Grand at Kirkman (the "Property") as described in Note 2
for the year ended December 31, 1998. This historical statement of revenue
and certain expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of Colonial Grand at Kirkman for the
year ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
February 12, 1999
11
<PAGE>
COLONIAL GRAND AT KIRKMAN
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Year ended
December 31, 1998
-----------------
<S> <C>
REVENUE:
Rental $3,072,724
Other income 290,676
------------
Total revenue 3,363,400
EXPENSES:
Operating 382,608
Real estate taxes 396,506
Marketing and
advertising 63,623
Repairs and
maintenance 226,214
General and
administrative 103,289
-----------
Total expenses 1,172,240
-----------
Revenue in excess
of certain
expenses $2,191,160
===========
</TABLE>
SEE ACCOMPANYING NOTES.
COLONIAL GRAND AT KIRKMAN
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of Colonial Grand at Kirkman ("Property") owned by a
party unaffiliated with The Town and Country Trust which subsequently
acquired the Property. The Property is located in Orlando, Florida and
consists of 370 units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of
12
<PAGE>
future operations as certain expenses which are not included in the
historical statement, consisting of management fees, depreciation and
interest, are directly related to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
NOTE 3 RELATED PARTIES
The Property utilizes a related party as an insurance agent to place
insurance with an independent insurance company.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HERON'S RUN
On October 5, 1999, the Company acquired Heron's Run, a garden-style
apartment community in Sarasota, Florida. The community, which contains 274
units, was purchased for approximately $15,000,000 from Summit Properties
Partnership, L.P. The community consists of 9 three-story buildings and is
located 1 1/4 miles west of I-75. Built in 1990, Heron's Run contains 148
one-bedroom, one-bath apartments, 30 two-bedroom, one-bath apartments and 96
two-bedroom, two- bath apartments. Each unit has a full-sized stack
washer/dryer or hookup, high ceilings, and a large patio or balcony.
Amenities include a swimming pool, clubhouse, fitness facilities, and a car
wash area.
The proceeds of the sale of a community in Harrisburg, Pennsylvania were used
to acquire Heron's Run in a transaction that was treated as a tax-free
exchange. Heron's Run has been added to the collateral pool provided to
Fannie Mae in connection with the Company's $375 million credit facility.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Sarasota. The community is relatively new and has up-to-date amenity
packages. The Company also acquired other properties in the area, including
McIntosh, which is less than one mile away. The Company believes that this
proximity will create management efficiencies.
The Company is not aware of any material factors relating to the property not
set forth in this report that would cause the financial information contained
in this report not to be indicative of future operating results as related to
revenues and certain expense.
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of Heron's Run (the "Property") as described in Note 2 for the year
ended December 31, 1998. This historical statement of revenue and certain
expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of Heron's Run for the year ended
December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
August 26, 1999
14
<PAGE>
HERON'S RUN
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Six Months
Year ended Ended
December 31, 1998 June 30, 1999
----------------- -------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $2,093,298 $1,076,456
Other income 205,223 125,287
------------- -----------
Total revenue 2,298,521 1,201,743
EXPENSES:
Operating 480,494 255,745
Real estate taxes 234,905 117,968
Marketing and
advertising 35,299 16,892
Repairs and
maintenance 140,134 55,777
General and
administrative 48,585 23,439
------------- -----------
Total expenses 939,417 469,821
------------- -----------
Revenue in excess
of certain
expenses $1,359,104 $ 731,922
============= ===========
</TABLE>
SEE ACCOMPANYING NOTES.
HERON'S RUN
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of Heron's Run ("Property") owned by a party
unaffiliated with The Town and Country Trust which subsequently acquired the
Property. The Property is located in Sarasota, Florida and consists of 274
units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of
15
<PAGE>
future operations as certain expenses which are not included in the
historical statement, consisting of management fees, depreciation and
interest, are directly related to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended June 30, 1999 are not
necessarily indicative of the results to be obtained for a full fiscal year.
NOTE 3 RELATED PARTIES
Management and leasing activities for the Property are performed by
a related party to the owner.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MCINTOSH
On October 5, 1999, the Company acquired McIntosh, a garden-style
apartment community in Sarasota, Florida. The community, which contains 212
units, was purchased for approximately $10,900,000 from Summit Properties
Partnership, L.P. The community consists of 19 two- and three-story buildings
and is located 1 1/2 miles from I-75. Built in 1990, McIntosh contains 118
one-bedroom, one-bath apartments, 26 two-bedroom, one-bath apartments and 68
two-bedroom, two-bath apartments. Each unit has a washer/dryer or hookup and
a spa-style tub, high ceilings, and a large patio or balcony. Select units
have bay windows. Amenities include a swimming pool, clubhouse, fitness
facilities, and a car wash area. The community also includes 48 rentable
garages.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Sarasota. The community is relatively new and has up-to-date amenity
packages. The Company also acquired other properties in the same area,
including Heron's Run, which is less than one mile away. The Company believes
that this proximity will create management efficiencies.
The Company is not aware of any material factors relating to the property not
set forth in this report that would cause the financial information contained
in this report not to be indicative of future operating results as related to
revenue and certain expense.
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of McIntosh (the "Property") as described in Note 2 for the year
ended December 31, 1998. This historical statement of revenue and certain
expenses is the responsibility of the Property's management. Our
responsibility is to express an opinion on the historical statement of
revenue and certain expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of McIntosh for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
August 26, 1999
17
<PAGE>
MCINTOSH
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Six Months
Year ended Ended
December 31, 1998 June 30, 1999
----------------- -------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $1,579,599 $ 791,753
Other income 142,782 86,819
---------- ----------
Total revenue 1,722,381 878,572
EXPENSES:
Operating 431,949 224,703
Real estate taxes 193,102 97,282
Marketing and
advertising 28,706 14,259
Repairs and
maintenance 124,440 41,482
General and
administrative 35,866 18,652
---------- ----------
Total expenses 814,063 396,378
---------- ----------
Revenue in excess
of certain
expenses $ 908,318 $ 482,194
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
MCINTOSH
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of McIntosh ("Property") owned by a party
unaffiliated with The Town and Country Trust who subsequently acquired the
Property. The Property is located in Sarasota, Florida and consists of 212
units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of future operations as
certain expenses which are not included in the historical statement,
consisting of management fees, depreciation and interest, are directly
related to the future operations of the Property.
18
<PAGE>
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended June 30, 1999 are not
necessarily indicative of the results to be obtained for a full fiscal year.
NOTE 3 RELATED PARTIES
Management and leasing activities for the Property are performed by
a related party to the owner.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PERICO
On October 5, 1999, the Company acquired Perico, a garden-style apartment
community in Bradenton, Florida. The community, which contains 256 units, was
purchased for approximately $13,400,000 from Summit Properties Partnership,
L.P. The community consists of 12 three-story buildings and is located 1 1/2
miles from the Gulf of Mexico. Built in 1989, Perico contains 117
one-bedroom, one-bath apartments, 46 two-bedroom, one-bath apartments and 93
two-bedroom, two-bath apartments. Each unit has a spa-style tub, high
ceilings, and a patio or balcony. Select units include a washer/dryer hookup.
Amenities include a swimming pool, clubhouse, fitness facilities, and a car
wash area. The community also includes 50 rentable garages.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY
The factors considered by the Company to be relevant in evaluating the
property for acquisition by the Company included the following:
The Company believes that the community is located in a very desirable part
of Bradenton. The community is relatively new and has up-to-date amenity
packages. The Company also acquired other properties in the
Sarasota-Bradenton area. The Company believes that this proximity
will create management efficiencies.
The Company is not aware of any material factors relating to the
property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results as
related to revenues and certain expense.
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To Board of Trustees
The Town and Country Trust
We have audited the accompanying historical statement of revenue and certain
expenses of Perico (the "Property") as described in Note 2 for the year ended
December 31, 1998. This historical statement of revenue and certain expenses
is the responsibility of the Property's management. Our responsibility is to
express an opinion on the historical statement of revenue and certain
expenses 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 historical statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the historical statement of revenue and certain expenses. An audit also
includes assessing the basis of accounting used and the significant estimates
made by management, as well as evaluating the overall presentation of the
historical statement of revenue and certain expenses. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission as described in Note 2, and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement of revenue and certain expenses
referred to above presents fairly, in all material respects, the revenue and
certain expenses described in Note 2 of Perico for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
August 26, 1999
20
<PAGE>
PERICO
HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
Six Months
Year ended Ended
December 31, 1998 June 30, 1999
----------------- -------------
Unaudited
<S> <C> <C>
REVENUE:
Rental $1,823,799 $ 959,363
Other income 130,105 114,046
------------ -----------
Total revenue 1,953,904 1,073,409
EXPENSES:
Operating 419,777 211,053
Real estate taxes 187,186 93,806
Marketing and
advertising 29,394 11,827
Repairs and
maintenance 132,954 58,334
General and
administrative 40,567 16,914
------------ -----------
Total expenses 809,878 391,934
------------ -----------
Revenue in excess
of certain
expenses $1,144,026 $ 681,475
============ ==========
</TABLE>
SEE ACCOMPANYING NOTES.
PERICO
NOTES TO THE HISTORICAL STATEMENT OF REVENUE AND CERTAIN EXPENSES
NOTE 1 BUSINESS
The accompanying historical statement of revenue and certain expenses
includes the operations of Perico ("Property") owned by a party unaffiliated
with The Town and Country Trust which subsequently acquired the Property. The
Property is located in Bradenton, Florida and consists of 256 units.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying historical statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission. The accompanying historical statement of
revenue and certain expenses is not representative of the actual operations
of the Property for the year presented nor indicative of future operations as
certain expenses which are not included in the historical statement,
21
<PAGE>
consisting of management fees, depreciation and interest, are directly
related to the future operations of the Property.
REVENUE RECOGNITION
Rental revenue is recognized as income in the period earned. Leases are
generally for one year or less.
USE OF ESTIMATES
The preparation of the historical statement of revenue and certain expenses
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of revenue and certain expenses during the reporting periods. Actual results
may differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited historical statement of revenue and certain
expenses has been prepared pursuant to the rules and regulation of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments necessary for
the fair presentation of the accompanying unaudited historical statement of
revenue and certain expenses for the interim period have been made. The
results of operations for the interim period ended June 30, 1999 are not
necessarily indicative of the results to be obtained for a full fiscal year.
NOTE 3 RELATED PARTIES
Management and leasing activities for the Property are performed by a related
party to the owner.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1998 (UNAUDITED)
The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1998, is presented as if the 8 property acquisitions made
during 1998 and 1999 had occurred on January 1, 1998. The Unaudited Pro Forma
Financial Statement also assumes the October 5, 1999 sale of Union Deposit in
Harrisburg, Pennsylvania, which occurred immediately prior to the period
presented. The proceeds from the sale of Union Deposit were used to acquire
Heron's Run in Sarasota, Florida, in a like-kind exchange transaction.
Therefore, the results of operations of Union Deposit have been removed from
the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 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 year ended December 31,
1998 if the acquisitions had occurred at the beginning of the year, nor does
it purport to be indicative of the results of operations in future periods.
The Unaudited Pro Forma Consolidated 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>
12/31/98 1/1/98 TO 1/1/1998 TO 1/1/98 TO 1/1/98 TO
HISTORICAL 3/30/98 10/13/98 12/9/98 12/9/98
STATEMENT FOREST RIDGE THE FAIRINGTON WINDERMERE LAKES TWELVE OAKS
OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Rental 98,262,000 575,000 1,656,000 1,960,000 2,014,000
Other Income 628,000 16,000 29,000 59,000 67,000
----------------------------------------------------------------------------------
Total Revenue 98,890,000 591,000 1,685,000 2,019,000 2,081,000
EXPENSES:
Operating 21,795,000 114,000 321,000 350,000 374,000
Real Estate Taxes 7,106,000 39,000 109,000 223,000 246,000
Depreciation 25,564,000
Marketing and advertising 3,903,000 6,000 26,000 21,000 26,000
Repairs and maintenance 7,143,000 35,000 112,000 90,000 56,000
General and administrative 3,233,000 8,000 18,000 26,000 26,000
----------------------------------------------------------------------------------
Total Expenses 68,744,000 202,000 586,000 710,000 728,000
Interest expense 22,529,000
Interest expense related to the
amortization of deferred financing costs 374,000 - - - -
----------------------------------------------------------------------------------
91,647,000 202,000 586,000 710,000 728,000
Income before minority interest 7,243,000 389,000 1,099,000 1,309,000 1,353,000
----------------------------------------------------------------------------------
<CAPTION>
1/1/98 TO
12/31/98 1/1/98 TO 1/1/98 TO 1/1/98 TO 1/1/98 TO
COLONIAL GRAND 12/31/98 12/31/98 12/31/98 12/31/98
AT KIRKMAN HERON'S RUN MCINTOSH PERICO UNION DEPOSIT
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Rental 3,073,000 2,093,000 1,580,000 1,824,000 (2,518,000)
Other Income 291,000 205,000 143,000 130,000 (140,000)
---------------------------------------------------------------------------------
Total Revenue 3,364,000 2,298,000 1,723,000 1,954,000 (2,658,000)
EXPENSES:
Operating 383,000 480,000 432,000 420,000 (756,000)
Real Estate Taxes 397,000 235,000 193,000 187,000 (174,000)
Depreciation - - - - -
Marketing and advertising 64,000 35,000 29,000 29,000 (245,000)
Repairs and maintenance 226,000 140,000 124,000 133,000 (210,000)
General and administrative 103,000 49,000 36,000 41,000 -
---------------------------------------------------------------------------------
Total Expenses 1,173,000 939,000 814,000 810,000 (1,385,000)
Interest expense
Interest expense related to the
amortization of deferred financing costs - 9,000 - - (9,000)
---------------------------------------------------------------------------------
1,173,000 948,000 814,000 810,000 (1,394,000)
Income before minority interest 2,191,000 1,350,000 909,000 1,144,000 (1,264,000)
---------------------------------------------------------------------------------
<CAPTION>
12/31/98
1998 BALANCE
PRO FORMA TOTAL AFTER
ADJUSTMENTS ADJUSTMENT ADJUSTMENTS
------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Rental - 12,257,000 110,519,000
Other Income - 800,000 1,428,000
------------------------------------------------
Total Revenue 13,057,000 111,947,000
EXPENSES:
Operating - 2,118,000 23,913,000
Real Estate Taxes - 1,455,000 8,561,000
Depreciation (a) 2,384,000 2,384,000 27,948,000
Marketing and advertising - (9,000) 3,894,000
Repairs and maintenance - 706,000 7,849,000
General and administrative - 307,000 3,540,000
------------------------------------------------
Total Expenses 2,384,000 6,961,000 75,705,000
Interest expense (b) 6,581,000 6,581,000 29,110,000
Interest expense related to the
amortization of deferred financing costs - 374,000
------------------------------------------------
8,965,000 13,542,000 105,189,000
Income before minority interest (8,965,000) (485,000) 6,758,000
------------------------------------------------
</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 34.9 years.
(b) Represents the interest expense for the 8 properties purchased using the
line of credit for the period in which the properties were not owned for the
twelve month period ended December 31, 1998. Interest was computed based on
the interest rates under the Company's line of credit in effect at the time
of the respective acquisition. Heron's Run was acquired in a like-kind
exchange transaction and, accordingly, no additional debt was incurred.
22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 (UNAUDITED)
The Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1999, is presented as if the 4 property
acquisitions made during 1999 had occurred on January 1, 1999. The Unaudited
Pro Forma Financial Statement also assumes the October 5, 1999 sale of Union
Deposit in Harrisburg, Pennsylvania, which occurred immediately prior to the
period presented. The proceeds from the sale of Union Deposit were used to
acquire Heron's Run in Sarasota, Florida, in a like-kind exchange
transaction. Therefore, the results of operations of Union Deposit have been
removed from the Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1999. The Unaudited Pro Forma Consolidated
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 nine months ended
September 30, 1999 if the acquisitions had occurred at the beginning of the
year, nor does it purport to be indicative of the results of operations in
future periods. The Unaudited Pro Forma Consolidated 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>
1/1/99 TO
9/30/99 3/30/99 1/1/99 TO 1/1/99 TO 1/1/99 TO
HISTORICAL COLONIAL GRAND 10/4/99 10/4/99 10/4/99
STATEMENT AT KIRKMAN HERON'S RUN MCINTOSH PERICO
OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Rental 83,194,000 758,000 1,624,000 1,194,000 1,447,000
Other Income 313,000 72,000 189,000 131,000 172,000
----------------------------------------------------------------------------------
Total Revenue 83,507,000 830,000 1,813,000 1,325,000 1,619,000
EXPENSES:
Operating 18,303,000 94,000 386,000 339,000 318,000
Real Estate Taxes 6,091,000 98,000 178,000 147,000 141,000
Depreciation 19,304,000 -
Marketing and advertising 3,166,000 16,000 25,000 22,000 18,000
Repairs and maintenance 6,304,000 56,000 84,000 63,000 88,000
General and administrative 2,493,000 25,000 35,000 28,000 26,000
----------------------------------------------------------------------------------
Total Expenses 55,661,000 289,000 708,000 599,000 591,000
Interest expense 20,377,000
Interest expense related to the
amortization of deferred financing costs 358,000 - 7,000 - -
----------------------------------------------------------------------------------
76,396,000 289,000 715,000 599,000 591,000
Income before minority interest 7,111,000 541,000 1,098,000 726,000 1,028,000
----------------------------------------------------------------------------------
<CAPTION>
1/1/99 TO
9/30/99 9/30/99
UNION DEPOSIT 1999 BALANCE
PRO FORMA PRO FORMA TOTAL AFTER
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
Rental (1,860,000) 3,163,000 86,357,000
Other Income (99,000) 465,000 778,000
------------------------------------------------------------------------
Total Revenue (1,959,000) 3,628,000 87,135,000
EXPENSES:
Operating (624,000) 513,000 18,816,000
Real Estate Taxes (132,000) 432,000 6,523,000
Depreciation - (a) 610,000 610,000 19,914,000
Marketing and advertising (123,000) (42,000) 3,124,000
Repairs and maintenance (172,000) 119,000 6,423,000
General and administrative - 114,000 2,607,000
------------------------------------------------------------------------
Total Expenses (1,051,000) 610,000 1,746,000 57,407,000
Interest expense (b) 1,761,000 1,761,000 22,138,000
Interest expense related to the
amortization of deferred financing costs (7,000) - 358,000
------------------------------------------------------------------------
(1,058,000) 2,371,000 3,507,000 79,903,000
Income before minority interest (901,000) (2,371,000) 121,000 7,232,000
------------------------------------------------------------------------
</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 34.9 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
twelve month period ended December 31, 1998. Interest was computed based on
the interest rates under the Company's line of credit in effect at the time
of the respective acquisition. Heron's Run was acquired in a like-kind
exchange transaction and, accordingly, no additional debt was incurred.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 (UNAUDITED)
The Unaudited Pro Forma Consolidated Balance Sheet is presented as if the
Company had owned the properties included in the table below as of
September 30, 1999. The Unaudited Pro Forma Financial Statement also assumes
the October 5, 1999 sale of Union Deposit, in Harrisburg, Pennsylvania, which
occurred immediately prior to the period presented. The proceeds from the
sale of Union Deposit were used to acquire Heron's Run in Sarasota, Florida
in a like-kind exchange transaction. Therefore, the financial position at
Union Deposit has been removed from the Pro Forma Consolidated Balance Sheet
as of September 30, 1999.
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 September 30,
1999 if the acquisitions had occurred at September 30, 1999, nor does it
purport to present the future financial position of the Company. The
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>
9/30/99
HISTORICAL
BALANCE
Assets Sheet Heron's Run McIntosh Perico
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Assets:
Land 94,717,000 2,700,000 1,962,000 2,412,000
Building & Improvements 604,205,000 12,300,000 8,938,000 10,988,000
Other 4,613,000 - - -
--------------------------------------------------------------------------
703,535,000 15,000,000 10,900,000 13,400,000
Less accumulated depreciation (267,581,000) - - -
--------------------------------------------------------------------------
435,954,000 15,000,000 10,900,000 13,400,000
Cash and cash equivalent 1,670,000 1,000
Restricted cash 1,685,000 -
Receivable 1,797,000 17,000
Prepaid expenses and other assets 6,719,000 122,000
Deferred financing costs 3,867,000 76,000
--------------------------------------------------------------------------
TOTAL ASSETS 451,692,000 15,216,000 10,900,000 13,400,000
==========================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Mortgage Payable 418,192,000 7,748,000 10,900,000 13,400,000
Accrued Interest 2,071,000 45,000
Accounts payable and other liabilities 7,107,000 2,583,000
Security deposits 2,487,000 51,000
Minority interest 2,935,000 -
--------------------------------------------------------------------------
Total Liabilities 432,792,000 10,427,000 10,900,000 13,400,000
SHAREHOLDER'S EQUITY
Common shares 158,000
Additional paid-in capital 319,411,000 -
Accumulated deficit (298,681,000) 4,789,000
Unearned compensation - restricted (1,988,000)
--------------------------------------------------------------------------
18,900,000 4,789,000 - -
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 451,692,000 15,216,000 10,900,000 13,400,000
==========================================================================
<CAPTION>
TOTAL 9/30/99
UNION ALL AFTER
ASSETS DEPOSIT ADJUSTMENTS ADJUSTMENTS
- -------------------------------------- ----------------------------------------------
<S> <C> <C> <C>
Real Estate Assets:
Land (2,181,000) 4,893,000 99,610,000
Building & Improvements (13,967,000) 18,259,000 622,464,000
Other (40,000) (40,000) 4,573,000
----------------------------------------------
(16,188,000) 23,112,000 726,647,000
Less accumulated depreciation 9,056,000 9,056,000 (258,525,000)
----------------------------------------------
(7,132,000) 32,168,000 468,122,000
-
Cash and cash equivalent (1,000) - 1,670,000
Restricted cash - - 1,685,000
Receivable (17,000) - 1,797,000
Prepaid expenses and other assets (122,000) - 6,719,000
Deferred financing costs (76,000) - 3,867,000
----------------------------------------------
TOTAL ASSETS (7,348,000) 32,168,000 483,860,000
==============================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Mortgage Payable (7,748,000) 24,300,000 442,492,000
Accrued Interest (45,000) - 2,071,000
Accounts payable and other liabilities (2,583,000) - 7,107,000
Security deposits (51,000) - 2,487,000
Minority interest - - 2,935,000
----------------------------------------------
Total Liabilities (10,427,000) 24,300,000 457,092,000
SHAREHOLDER'S EQUITY
Common shares 158,000
Additional paid-in capital 319,411,000
Accumulated deficit 3,079,000 7,868,000 (290,813,000)
Unearned compensation - restricted - - (1,988,000)
----------------------------------------------
3,079,000 7,868,000 26,768,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (7,348,000) 32,168,000 483,860,000
==============================================
</TABLE>
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 29, 1999 THE TOWN AND COUNTRY TRUST
By:/s/ Jennifer C. Munch
----------------------------------
Name: Jennifer C. Munch
Title: Vice President and Treasurer;
Principal Accounting Officer
24
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Exhibit Index
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Exhibit 23 Consent of Ernst & Young LLP
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33- 82932) pertaining to The Town and Country Trust Amended and
Restated 1993 Long Term Incentive Plan and (Form S-8 No. 333-53669) pertaining
to The Town and Country Trust 1997 Long Term Incentive Plan of our reports dated
September 11, 1998, October, 8, 1998, October 8, 1998, February 12, 1999, August
26, 1999, August 26, 1999, and August 26, 1999, with respect to the historical
statements of revenue and certain expenses of The Fairington, Windermere Lakes,
Twelve Oaks, Colonial Grand at Kirkman, Heron's Run, McIntosh, and Perico,
respectively, included in the Current Report on Form 8-K filed
December 29, 1999.
/s/ Ernst & Young LLP
Baltimore, Maryland
December 29, 1999
