<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): August 13, 1996
CHARLES E. SMITH RESIDENTIAL REALITY L.P.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 1934 ACT FILE NUMBER: 0-25968
Delaware 54-1681657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2345 CRYSTAL DRIVE
CRYSTAL CITY, VA 22202
(Address of principal (Zip Code)
executive offices)
Registration's telephone number including area code: (703) 920-8500
<PAGE>
Item 5. Other Events
- ------- ------------
On July 30, 1996, Charles E. Smith Residential Realty L.P. (the "Operating
Partnership") announced that it had purchased Van Ness in Northwest Washington
D.C. and 1841 Columbia in Northwest Washington, D.C. A copy of the related
press release is attached as Exhibit 99.1.
On March 18, 1996, the Operating Partnership announced that it had purchased
Charter Oak in Reston, Virginia and Governor Spotswood in Alexandria, Virginia.
A copy of the related press release is attached as Exhibit 99.2.
Item 7. Financial Statements and Exhibits
- ------- ---------------------------------
(A) Financial Statements of businesses acquired:
Van Ness - beginning at pages F-10 and F-14.
Charter Oak - beginning at pages F-12 and F-26.
(B) Pro Forma financial information follows beginning at page F-4.
(C) Exhibits
99.1 Press Release dated July 30, 1996 of the Company
99.2 Press Release dated March 18, 1996 of the Company
99.3 Consent of Independant Public Accountants dated August 13, 1996
1
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
Pro Forma (unaudited) Consolidated
Balance Sheet as of March 31, 1996 F-4
Pro Forma (unaudited) Consolidated
Condensed Statement of Operations for
the three months ended March 31, 1996 F-5
Pro Forma (unaudited) Consolidated
Condensed Statement of Operations for
the twelve months ended December 31,
1995 F-6
Notes and Management's Assumptions to
Unaudited Pro Forma Consolidated
Condensed Financial Information F-7
ACQUISITION PROPERTIES
Statement of Revenues and Certain
Expenses of Van Ness for the three
months ended March 31, 1996 (unaudited) F-10
Statement of Revenues and Certain
Expenses of Charter Oak for the three
months ended March 31 1996 (unaudited) F-12
JMB/Van Ness Associates, LTD. -
Financial Statements for the years
ended December 31, 1995 and 1994
together with report from Independent
Auditors. F-14
Charter Oak Venture - Statement of
revenues and certain expenses for the
year ended December 31, 1995 together
with report from Independent Auditors. F-26
</TABLE>
F-1
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
------------------------------------------------------
Charles E. Smith Residential Realty L.P. (the "Operating Partnership") was
organized in Maryland in June 1993. The Operating Partnership had no operations
prior to the completion of the business combination which occurred on June 30,
1994. The Charles E. Smith Residential Realty, Inc. (the "Company") was formed
in June, 1993 with the intent of qualifying as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. In connection
with the business combination, the Company, on June 30, 1994, raised equity
through an initial public offering and a private placement (the "Offerings"),
and issued debt in a series of concurrent private financing transactions. The
proceeds were used to acquire the 1.0% sole general partnership and a 41.7%
limited partnership interest in the Operating Partnership. The Operating
Partnership is the successor entity to CES Group (the "Predecessor").
Simultaneous with the offerings, the entities that owned the properties and the
related service businesses included in the CES Group transferred the properties,
the management, development, leasing, interior construction and renovation,
engineering and technical services, and financing services business segments of
the Predecessor to the Operating Partnership (or corporations in which the
Operating Partnership owns substantially all of the equity) and received in
exchange, directly or indirectly, units of limited partnership in the Operating
Partnership. Assets and liabilities related to interests contributed by the
Predecessor Partners have been recorded at their predecessor cost. The Company,
through the Operating Partnership and its subsidiaries, is engaged in the
ownership, operating, management, leasing, acquisition and development of real
estate properties, primarily residential multifamily properties.
The Company, through the Operating Partnership, acquired the following
Properties since January 1, 1996.
Van Ness South Apartments ("Van Ness"). On July 30, 1996, the Operating
-------------------------
Partnership acquired this 625 apartment unit property located in Northwest
Washington, D.C. for $41,750,000. The cash acquistion was funded with
proceeds from the Company's line of credit.
1841 Columbia Road Apartments ("1841 Columbia"). On August 2, 1996, the
-----------------------------
Operating Partnership acquired this 8-story, 115 apartment unit property
located in Northwest Washington, D.C. in exchange for 79,600 partnership
units of the Operating Partnership, which were valued at $1,890,500,
together with the assumption of $3,260,000 of existing mortgage debt. The
mortgage debt is due on August 1, 1999 and bears interest at 9% per year.
The total value of the acquisition was approximately $5,150,500.
Charter Oak Apartments ("Charter Oak") On March 15, 1996, the Operating
----------------------
Partnership acquired this 262 apartment unit complex located in Reston,
Virginia, for 22,059 partnership units of the Operating Partnership, which
were valued at $551,475, together with a cash payment of $13,700,000. The
cash
F-2
<PAGE>
acquistion was funded with proceeds from the Company's line of credit.
The total value of the acquisition was approximately $14,250,000.
Governor Spotswood Apartments ("Governor Spotswood"). On March 14, 1996,
-----------------------------
the Operating Partnership acquired this 47 apartment unit property located
in Alexandria, Virginia for $2,830,000. The cash acquisition was funded
with proceeds from the Company's line of credit.
The following sets forth the Pro Forma (unaudited) Consolidated Balance Sheet as
of March 31, 1996, the Pro Forma (unaudited) Consolidated Condensed Statement of
Operations for the three months ended March 31, 1996, and the Pro Forma
(unaudited) Consolidated Condensed Statement of Operations for the twelve months
ended December 31, 1995 of Charles E. Smith Residential Realty, L.P. (the
"Operating Partnership").
The unaudited pro forma consolidated condensed financial information is based on
the financial statements of the Operating Partnership and reflects the real
estate acquisitions by the Operating Partnership which have occurred in 1996.
The unaudited pro forma information should be read in conjunction with the 1995
historical financial statements and notes related thereto appearing in the
Operating Partnership's Form 10-K.
The unaudited Pro Forma Balance Sheet as of March 31, 1996 is presented as if
the purchase of Van Ness and 1841 Columbia had occurred on March 31, 1996.
The unaudited Pro Forma Consolidated Condensed Statement of Operations for the
twelve months ended December 31, 1995 and for the three months ended March 31,
1996, are presented as if the purchases of the four separate multifamily
properties aggregating 1,049 apartment units had occurred on January 1, 1995 and
January 1, 1996, respectively.
The pro forma financial information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the transactions
had been consummated at the beginning of the periods presented, nor does it
purport to represent the future financial position and results of operations for
future periods. In management's opinion, all adjustments necessary to reflect
the effects of these transactions have been made.
F-3
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996
(Unaudited, Dollars in Thousands)
<TABLE>
<CAPTION> Pro Forma Adjustments
The Operating -------------------------------
Partnership Van Ness 1841 Columbia Pro Forma
(Historical) (a) (b) Consolidated
-------------- --------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Rental property, at predecessor cost,
net of accumulated depreciation $273,243 $ - $ - $ 273,243
Rental property, acquired and developed,
net of accumulated depreciation 155,395 42,600 5,171 203,166
Rental property under development - - - -
Cash and cash equivalents 2,005 - - 2,005
Tenants' security deposits 3,618 - - 3,618
Escrow funds 7,035 - - 7,035
Investments in and due from Property Service
Businesses 11,030 - - 11,030
Deferred charges, net of accumulated amortization,
and other 18,852 - - 18,852
Other assets 10,317 - - 10,317
-------- ---------- ----------- ----------
$481,495 $ 42,600 $ 5,171 $ 529,266
======== ========== =========== ==========
LIABILITIES AND EQUITY
Liabilities
Mortgages payable $413,799 $ - $ 3,280 $ 417,079
Line of credit and construction loan payable 87,136 42,600 0 129,736
Accounts payable and accrued expenses 11,711 0 0 11,711
Tenants' security deposits 3,618 0 0 3,618
Due to related parties 227 0 0 227
-------- ---------- ----------- ----------
516,491 42,600 3,280 562,371
-------- ---------- ----------- ----------
Commitments and Contingencies
Equity (34,996) 0 1,891 (33,105)
-------- ---------- ----------- ----------
(34,996) 0 1,891 (33,105)
-------- ---------- ----------- ----------
$481,495 $ 42,600 $5,171 $ 529,266
======== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------------------------
The Operating 1841 Charter Governor Other
Partnership Van Ness Columbia Oak Spotswood Adjustments Pro Forma
(Historical) (a) (b) (c) (d) and Eliminations Consolidated
------------- -------- -------- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTIES
Revenues $ 39,541 $1,794 $ 277 $ 498 $110 $ - $ 42,220
Operating Expenses 19,114 927 181 351 43 (75) (e) 20,541
Depreciation 4,392 - - - - 285 (f) 4,677
------------ ------ ------- ------ --------- -------- ----------
Operating profit -
Rental properties 16,035 867 96 147 67 (210) 17,002
PROPERTY SERVICE BUSINESSES
Equity in income of
Property Service Businesses 1,548 - - - - 1,548
General & Administrative expenses (745) - - - - (745)
Interest income 269 - - - - 269
Interest expense (10,411) - - - - (1,152) (g) (11,563)
------------ ------ ------- ------ --------- -------- ----------
Net income of the Operating
Partnership 6,696 867 96 147 67 (1,362) 6,511
Net income per unit $0.31 $0.30
============ ==========
Weighted Average
Units Outstanding 21,860,226 21,939,826
============ ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE
TWELVE MONTHS ENDED DECEMBER 31, 1995
(Unaudited, Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------------------------------
The Operating 1841 Charter Governor Other
Partnership Van Ness Columbia Oak Spotswood Adjustments Pro Forma
(Historical) (a) (b) (c) (d) and Eliminations Consolidated
------------- -------- -------- ---------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTIES
Revenues $ 144,909 $7,043 $1,142 $2,587 $441 $ - $ 156,122
Operating Expenses 65,627 3,620 543 1,282 174 (300) (e) 70,946
Depreciation 16,258 - - - - 1,139 (f) 17,397
------------ ------ ------- ------ --------- -------- ----------
Operating profit -
Rental properties 63,024 3,423 599 1,305 267 (839) 67,779
PROPERTY SERVICE BUSINESSES
Equity in income of
Property Service Businesses 6,868 - - - - 6,868
General & Administrative expenses (2,842) - - - - (2,842)
Interest income 1,424 - - - - 1,424
Interest expense (37,421) - - - - (5,060) (g) (42,481)
------------ ------ ------- ------ --------- -------- ----------
Net income of the Operating
Partnership 31,053 3,423 599 1,305 267 (5,899) 30,748
Net income per unit $1.44 $1.42
============ ==========
Weighted Average
Units Outstanding 21,602,995 21,704,654
============ ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
---------------------
The unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996 and Pro
Forma Consolidated Condensed Statements of Operations for the twelve months
ended December 31, 1995 and the three months ended March 31, 1996 are based on
the historical financial statements of the Operating Partnership and reflect all
real estate acquisitions by the Operating Partnership which have occurred in
1996.
The unaudited Pro Forma Consolidated Condensed Statement of Operations for the
twelve months ended December 31, 1995 and for the three months ended March 31,
1996 are presented as if the following multifamily properties had been purchased
on January 1, 1995 and January 1, 1996, respectively: Van Ness, 1841 Columbia,
Charter Oak and Governor Spotswood. The unaudited Pro Forma Balance Sheet as of
March 31, 1996 is presented as if Van Ness and 1841 Columbia had been purchased
as of March 31, 1996. The unaudited pro forma financial information should be
read in conjunction with the historical financial statements and notes related
thereto of the Operating Partnership appearing in the Operating Partnership's
1995 Form 10-K.
Preparation of the pro forma financial information was based on assumptions
considered appropriate by the Operating Partnership's management. The pro forma
financial information is unaudited and is not necessarily indicative of the
results which actually would have occurred if the transactions had been
consummated at the beginning of the periods presented, nor does it purport to
represent the future financial position and results of operations for future
periods of the Operating Partnership.
2. Adjustments to Pro Forma Consolidated Balance Sheet
---------------------------------------------------
a. This adjustment records the acquisition of Van Ness and the related debt
as if it had been purchased on March 31, 1996.
b. This adjustment records the acquisition of 1841 Columbia and the related
debt and issuance of partnership units as if it had been purchased on
March 31, 1996.
3. Adjustments to Pro Forma Consolidated Condensed Statement of Operations for
---------------------------------------------------------------------------
the three months ended March 31, 1996.
--------------------------------------
a. This adjustment represents unaudited revenues and certain expenses of
Van Ness for the three months ended March 31, 1996.
F-7
<PAGE>
b. This adjustment represents unaudited revenues and certain expenses of
1841 Columbia for the three months ended March 31, 1996.
c. This adjustment represents unaudited revenues and certain expenses of
Charter Oak for the period from January 1, 1996 through March 14, 1996.
The results of operations for Charter Oak from March 15, 1996 through
March 31, 1996 are included in the Operating Partnership's historical
amounts.
d. This adjustment represents unaudited revenues and certain expenses of
Governor Spotswood for the period from January 1, 1996 through March 13,
1996. The results of operations for Governor Spotswood from March 14,
1996 through March 31, 1996 are included in the Operating Partnership's
historical amounts.
e. This adjustment represents the incremental decrease in third party
management fee expense as a result of the Operating Partnership assuming
management of the acquisitions.
f. This adjustment represents the depreciation expense related to the
acquired properties as follows:
<TABLE>
<CAPTION>
<S> <C>
Van Ness $192
1841 Columbia 15
Charter Oak 65
Governor Spotswood 13
----
$285
====
</TABLE>
g. This adjustment represents the interest expense related to acquired
properties which were either financed with the line of credit or with
the assumption of the existing mortgage, or both:
<TABLE>
<CAPTION>
<S> <C>
Van Ness $ 764
1841 Columbia 74
Charter Oak 262
Governor Spotswood 52
------
$1,152
======
</TABLE>
4. Adjustments to Pro Forma Consolidated Condensed Statement of Operations for
---------------------------------------------------------------------------
the twelve months ended December 31, 1995.
------------------------------------------
a. This adjustment represents unaudited revenues and certain expenses of
Van Ness for the twelve months ended December 31, 1995.
b. This adjustment represents unaudited revenues and certain expenses of
1841 Columbia for the twelve months ended December 31, 1995.
c. This adjustment represents audited revenues and certain expenses of
Charter Oak for the twelve months ended December 31, 1995.
F-8
<PAGE>
d. This adjustment represents audited revenues and certain expenses of
Governor Spotswood for the twelve months ended December 31, 1995.
e. This adjustment represents the incremental decrease in third party
management fee expense as a result of the Operating Partnership assuming
management of the acquisitions.
f. This adjustment represents the depreciation expense related to the
acquired properties as follows:
<TABLE>
<CAPTION>
<S> <C>
Van Ness $ 769
1841 Columbia 58
Charter Oak 259
Governor Spotswood 53
------
$1,139
======
</TABLE>
g. This adjustment represents the interest expense related to the acquired
properties which were either financed with the line of credit or with
the assumption of existing mortgages, or both.
<TABLE>
<S> <C>
Van Ness $3,481
1841 Columbia 295
Charter Oak 1,047
Governor Spotswood 237
------
$5,060
======
</TABLE>
F-9
<PAGE>
VAN NESS
--------
STATEMENT OF REVENUES AND CERTAIN EXPENSES
------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
-----------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Gross Potential Rent Revenue $1,672,282
Other 121,221
----------
Total revenues 1,793,503
----------
CERTAIN EXPENSES:
Payroll 170,956
Management Fees 90,378
Real Estate Taxes 151,542
Other 52,987
Repairs and Maintenance 221,027
Utilities 224,353
Administrative 16,168
----------
Total certain expenses 927,411
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 866,092
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-10
<PAGE>
VAN NESS
--------
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
---------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
1. ORGANIZATION:
-------------
The accompanying statement of revenues and certain expenses relates to the
operations of Van Ness South Apartments (the "Property") which is a
residential apartment complex of 625 units located in Northwest Washington,
D.C. The Property was previously owned by JMB Realty. The Property was
acquired by Charles E. Smith Residential Realty L.P. (the "Operating
Partnership") on July 30, 1996.
The accompanying statements have been prepared for the purpose of complying
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
and thus, exclude certain expenses, such as interest expense, depreciation
and amortization, professional fees and other costs not directly or
indirectly related to the future operations of the Property, that may not be
comparable to the expenses expected to be incurred by the Partnership in the
proposed future operations of the Property. Management is not aware of any
material factors relating to the Property which would cause the reported
financial information not to be indicative of future operating results.
F-11
<PAGE>
CHARTER OAK
-----------
STATEMENT OF REVENUES AND CERTAIN EXPENSES
------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
-----------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Gross Potential Rent Revenue $494,131
Other 3,709
--------
Total revenues 497,840
--------
CERTAIN EXPENSES:
Payroll 81,570
Management Fees 30,341
Real Estate Taxes 32,772
Other 30,900
Repairs and Maintenance 62,770
Utilities 81,772
Administrative 31,033
--------
Total certain expenses 351,158
--------
REVENUES IN EXCESS OF CERTAIN EXPENSES $146,682
========
</TABLE>
The accompanying notes are an integral part of this statement.
F-12
<PAGE>
CHARTER OAK
-----------
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
---------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-----------------------------------------
1. ORGANIZATION:
-------------
The accompanying statement of revenues and certain expenses relates to the
operations of Charter Oak Apartments (the "Property") which is a residential
apartment complex of 262 units located in Reston, Virginia. The Property was
previously owned by the R&B Realty Group. The Property was acquired by
Charles E. Smith Residential Realty L.P. (the "Operating Partnership") on
March 15, 1996.
The accompanying statements have been prepared for the purpose of complying
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
and thus, exclude certain expenses, such as interest expense, depreciation
and amortization, professional fees and other costs not directly or
indirectly related to the future operations of the Property, that may not be
comparable to the expenses expected to be incurred by the Partnership in the
proposed future operations of the Property. Management is not aware of any
material factors relating to the Property which would cause the reported
financial information not to be indicative of future operating results.
F-13
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE]
REPORT OF INDEPENDENT AUDITORS
To the Partners of
JMB/Van Ness Associates, Ltd.:
We have audited the consolidated balance sheet of JMB/Van Ness Associates,
Ltd. and Consolidated Venture as of December 31, 1995, and the related
consolidated statements of operations, partners' capital accounts (deficits)
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of JMB/Van Ness Associates, Ltd. and Consolidated
Venture for the year ended December 31, 1994, were audited by other auditors
whose report dated April 20, 1995, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of JMB/Van Ness Associates, Ltd. and Consolidated Venture as of
December 31, 1995, and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Chicago, Illinois
April 11, 1996
F-14
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(AN ILLINOIS LIMITED PARTNERSHIP)
and Consolidated Venture
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Assets
------
Investment property, at cost, net of accumulated
depreciation (notes 2 and 3) $18,833,952 19,782,675
Cash and cash equivalents (note 2) 2,187,084 589,562
Short-term investments -- 1,064,103
Rents and other receivables 69,015 77,893
Deferred loan fees, net of amortization -- 75,338
Escrow deposits and other assets 546,806 439,596
----------- ----------
$21,636,857 22,029,167
----------- ----------
Liabilities and Partners' Deficit
---------------------------------
Mortgage loan payable (note 5) $21,599,597 21,750,158
Accounts payable (note 6) 162,362 76,445
Accrued mortgage interest 179,997 181,251
Accrued real estate taxes 159,119 --
Tenants' security deposits 215,056 219,160
----------- ----------
Total liabilities 22,316,131 22,227,014
----------- ----------
Partners' deficit (679,274) (197,847)
----------- ----------
$21,636,857 22,029,167
----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Consolidated Statements of Operations
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Income:
Rental income $6,912,264 6,783,174
Interest and other 131,231 84,961
---------- ---------
7,043,495 6,868,135
---------- ---------
Expenses:
Mortgage interest 2,170,195 2,188,005
Depreciation 1,160,097 1,169,660
Amortization of deferred loan fees 80,337 75,337
Property and partnership management fees
(note 6) 349,227 345,133
Repairs and maintenance 631,278 660,328
Utilities 670,648 727,560
Real estate taxes 781,705 581,371
Other property operating 1,150,616 1,108,784
Professional fees 36.319 58,025
---------- ---------
7,030,422 6,914,203
---------- ---------
Net income (loss) $ 13,073 (46,068)
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Consolidated Statements of Partners' Capital Accounts (Deficits)
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Limited Partners
Initial Special -----------------------------
General Limited Limited Per Unit
Total Partners Partner Partner Amount (215 Units)
----------- ------------ ------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Partners' capital
(deficits),
December
31, 1993 $ 342,721 (1,676,200) (37) 500 2,018,458 9,388
Distributions (494,500) -- -- -- (494,500) (2,300)
Net loss (46,068) (2,303) -- -- (43,765) (204)
--------- ----------- ------- ------ --------- ------
Partners' capital
(deficits),
December
31, 1994........... (197,847) (1,678,503) (37) 500 1,480,193 6,884
Distributions...... (494,500) -- -- -- (494,500) (2,300)
Net income......... 13,073 3,791 -- -- 9,282 43
--------- ----------- ------- ------ --------- ------
Partners' capital
(deficits),
December
31, 1995........... $ (679,274) (1,674,712) (37) 500 994,975 4,627
========== ========== ======= ====== ========= ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Consolidated Statement of Cash Flows
Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 13,073 (46,068)
Items not requiring (providing) cash:
Depreciation 1,160,097 1,169,660
Amortization of deferred expenses 80,337 75,337
Changes in:
Rents and other receivables 8,878 (22,946)
Escrow deposits and other assets (107,210) (128,418)
Accounts payable 85,917 (54,733)
Accrued mortgage interest (1,254) (1,136)
Accrued real estate taxes 159,119 --
Tenants' security deposits (4,104) 3,351
----------- ---------
Net cash provided by operating
activities 1,394,853 995,047
----------- ---------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term
investments 1,064,103 (325,338)
Additions to investment property (211,374) (113,622)
Payment of deferred fees (4,999) --
----------- ---------
Net cash provided by (used in)
investing activities 847,730 (438,960)
----------- ---------
Cash flows from financing activities:
Principal payments on long-term debt (150,561) (136,290)
Distributions to Limited Partners (494,500) (494,500)
----------- ---------
Cash used in financing activities (645,061) (630,790)
----------- ---------
Net increase (decrease) in cash and cash equivalents 1,597,522 (74,703)
Cash and cash equivalents at beginning of year 589,562 664,265
----------- ---------
Cash and cash equivalents at end of year $ 2,187,084 589,562
=========== =========
Supplemental disclosure of cash flow information:
Cash paid for mortgage interest $ 2,171,449 2,189,141
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
Note 1-- Organization. Operations and Basis of Accounting:
- ----------------------------------------------------------
JMB/Van Ness Associates, Ltd. (the "Partnership") was organized as an
Illinois limited partnership on October 29, 1984 with initial capital
of $1,100, of which $1,000 was contributed by its General Partners,
and $100 was contributed by its Initial Limited Partner. In addition,
the General Partners had contributed an additional $9,000 prior to the
admission of additional Limited Partners. Hutton Real Estate Services
I, Inc. (an affiliate of one of the selling agents of the
Partnership's limited partnership interests (see below)) was admitted
as a Special Limited Partner with a capital contribution of $500. The
General Partners are also required to make additional capital
contributions only under certain limited circumstances upon
dissolution and termination of the Partnership.
Pursuant to a private offering, limited partnership interests of the
Partnership were issued to subscribers in consideration of capital
contributed aggregating $13,033,300 representing 215 units of limited
partnership interest at a price of $60,620 per unit plus interest on
certain promissory notes to be issued in favor of the Partnership.
Certain affiliates of the General Partner purchased 11.5 units of the
limited partnership interests at a price of $55,770 per unit (which
represents a discount equal to the $4,850 selling commission which
otherwise would be payable to the selling agents).
JMB/Van Ness Limited Partnership (the "Venture") was organized on November
1, 1984, as a limited partnership (under the Uniform Limited
Partnership Act of the District of Columbia), for the purpose of
acquiring and operating the Van Ness South Apartments, with an initial
contribution of $9,000,000, of which $8,460,000 was contributed by its
General Partner (the Partnership) and $540,000 by its Limited Partner,
(an entity previously unaffiliated with the Partnership or its General
Partners). Business activities consist of apartment rentals to
tenants in Washington, D.C., and the ultimate sale or disposition of
such real estate. The partnership agreement generally provides for all
profits, losses and distributions to be allocated 94% to the
Partnership and 6% to the Venture's Limited Partner. Under certain
circumstances, either pursuant to the venture agreement or due to the
Partnership's obligations as the Venture's general partner, the
Partnership may be required to make additional cash contributions to
the venture.
There are certain risks associated with the Partnership's investments made
through the joint venture including the possibility that the
Partnership's joint venture partner might become unable or unwilling
to fulfill its financial or other obligations, or that such joint
venture partner may have economic or business interests or goals that
are inconsistent with those of the Partnership.
F-19
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Continued)
Note 1-- Organization. Operations and Basis of Accounting, Continued:
- ---------------------------------------------------------------------
The accompanying consolidated financial statements include the accounts of
the Partnership and its 94% controlling interest in the Venture (as
described above). The effect of all transactions between the
Partnership and the Venture have been eliminated.
The Partnership records are maintained on the accrual basis of accounting
as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP"),
which differs from the basis utilized for income tax reporting
purposes, primarily with respect to depreciation lives and methods.
The preparation of financial statements in accordance with GAAP requires
the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Note 2-- Summary of Significant Accounting Policies:
- ----------------------------------------------------
Depreciation of real property is computed using the straight-line method
over the estimated useful life of the asset.
Depreciation of operating equipment is computed using various statutory
methods which approximate the estimated useful lives of these assets.
Deferred loan fees are amortized over the term of the mortgage note.
The Partnership has determined that all leases related to the property are
properly classified as operating leases.
Maintenance and repair expenses are charged to operations as incurred.
Significant betterments and improvements are capitalized and
depreciated over their estimated useful lives.
Statement of Financial Accounting Standards No.95 requires the Partnership
to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and
accumulated according to the classifications specified in the
pronouncement.
F-20
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Continued)
Note 2-- Summary of Significant Accounting Policies, Continued:
- ---------------------------------------------------------------
The Partnership records amounts held in U.S. Government obligations at
cost, which approximates market. For the purposes of these statements,
the Partnership's policy is to consider all such amounts held with
original maturities of three months or less ($1,186,652 and $74,363 at
December 31, 1995 and 1994, respectively) as cash equivalents with any
remaining amounts (generally with original maturities of one year or
less) reflected as short-term investments.
No provision for State and federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.
Statement of Financial Accounting Standards No.107 ("SFAS 107"),
"Disclosures about Fair Value of Financial Instruments," requires all
entities to disclose the SFAS 107 value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined
in the Statement as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The Partnership believes the carrying
amount of its financial instruments (excluding long-term debt)
approximates SFAS 107 value due to the relatively short maturity of
these instruments. The debt secured by the Van Ness Apartment building
is believed to have a SFAS 107 value which approximates the carrying
amount based upon recent modifications of the terms of the existing
loan. The Partnership has no other significant financial instruments.
Certain amounts reported in the 1994 financial statements have been
reclassified to conform with the 1995 presentation.
Note 3-- Investment Property:
- -----------------------------
On November 1, 1984, the Venture acquired from an unaffiliated entity an
11-story apartment complex in Washington, D.C. (containing 625
apartment units), which was constructed in 1970. The property is
subject to a mortgage obligation (note 5). The cost of the property
and accumulated depreciation at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Land ......................... $ 3,508,933 3,508,933
Building and improvements .... 26,384,797 26,197,295
Operating equipment........... 1,647,845 1,623,973
----------- ----------
31,541,575 31,330,201
Less accumulated depreciation 12,707,623 11,547,526
----------- ----------
$18,833,952 19,782,675
=========== ==========
</TABLE>
F-21
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Continued)
Note 3-- Investment Property, Continued:
- ----------------------------------------
Multi-family rental property constructed before 1976 in Washington, D.C.
is subject to rent control whereby base rents were established and
may only be increased by prescribed annual adjustments. Furthermore,
the District of Columbia also regulates the sale of rental property,
including the conversion of the property to condominium or cooperative
ownership.
Note 4-- Partnership Agreement:
- -------------------------------
The partnership agreement (as last amended) provides for:
(a) Operating net profits are to be allocated 71% to the Limited
Partners and 29% to the General Partners and operating net
losses are to be allocated 95% to the Limited Partners and 5%
to the General Partners. Notwithstanding the foregoing, any
interest income (exclusive of stated interest) imputed to the
Partnership from a Limited Partner's capital contribution
obligations (see below) shall be allocated to such Limited
Partner. In addition, any profit or loss directly
attributable to an additional capital contribution by a
General Partner shall be allocated to such General Partner.
(b) Profit from the sale of the property is to be allocated (i)
to the General Partners, the greater of an amount equal to
(a) 1% of net profit or (b) the amount distributable to the
General Partners (in excess of their aggregate net positive
capital account balances, if any) together with additional
net profits from the sale in order to reduce deficits (if
any) in the General Partners' capital accounts to a level
consistent with the gain realized or anticipated to be
realized from the sale, (ii) to the Special Limited Partner,
an amount equal to the amount distributable as sales proceeds
to the Special Limited Partner (in excess of its aggregate
net positive capital account balance, if any), and (iii) the
remainder of the profit allocated to the Limited Partners.
(c) Loss from the sale of the property is to be allocated 99% to
the Limited Partners and 1% to the General Partners.
F-22
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Continued)
Note 4-- Partnership Agreement, Continued:
- ------------------------------------------
(d) "Distributable cash" from operations, as defined, is to be
distributed 90% to the Limited Partners and 10% to the
General Partners, provided however that payment to the
General Partners shall be subordinated to the prior receipt
by the Limited Partners of distributions in varying amounts
from $138,247 for 1985 to $753,864 for 1992 and for each
calendar year thereafter, such amounts to be adjusted for
prior distributions of sale or refinancing proceeds to the
Limited Partners.
(e) Net sale or refinancing proceeds of the Partnership property
are to be distributed (i) 99% to the Limited Partners and 1%
to the General Partners until the Limited Partners have
received amounts equal to their aggregate capital
contributions and an amount equal to 10% per annum of the
Limited Partners' "average adjusted capital investment" (as
defined) for each year, reduced by sale or refinancing
proceeds previously distributed, (ii) to the General
Partners, an amount equal to 3% of the selling price of the
Partnership or Venture property subject to certain
limitations, (iii) to the Special Limited Partner, an amount
equal to its capital contribution, (iv) to the General
Partners, the amount equal to their capital contributions,
and (v) the remainder to be distributed 70% to the Limited
Partners, 29% to the general partners and 1% to the Special
Limited Partner, provided however, that the latter
distribution to the Special Limited Partner together with any
amounts paid to its affiliates in connection with the
offering of the limited partnership interests may not exceed
15% of the aggregate cash capital contributions received from
the Limited Partners.
Note 5-- Mortgage Loan Payable:
- -------------------------------
The mortgage obligation is evidenced by a promissory note accruing
interest at 10% per annum which matured on January 1, 1996, and
provided for monthly installments of principal and interest (in the
amount of $193,233), with the outstanding principal balance and all
accrued and unpaid interest payable on January 1, 1996. On January
19, 1996, the Venture obtained an extension of the maturity date of
the loan for a period of twelve months to January 1, 1997. The terms
of the loan extension require monthly principal and interest payments
of $193,233 commencing on January 1, 1996 with a final installment of
the outstanding principal balance and all accrued and unpaid interest
due on January 1, 1997.
F-23
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Continued)
Note 5-- Mortgage Loan Payable, Continued:
- ------------------------------------------
Prepayment of the loan was not permitted prior to December 1994 and no
partial prepayment was permitted at any time. Prepayment of the loan
subsequent to December 1994 was subject to a prepayment fee (as
defined). Prepayment in full is permitted at anytime during the loan
extension period without a prepayment fee.
The obligation is secured by a deed of trust and security agreement
covering the apartment complex.
The aggregate of the principal portion of mortgage note payable maturing
during each of the next two calendar years is as follows:
<TABLE>
<CAPTION>
Year Amount
---- -----------
<S> <C>
1996 $ 166,327
1997 21,433,270
-----------
$21,599,597
-----------
</TABLE>
The mortgage obligation secured by the apartment complex is scheduled to
mature January 1, 1997. In January 1996, the Venture extended the
maturity date of the loan as discussed above. There can be no
assurance that the Venture will be able to refinance the loan when it
matures.
Note 6-- Related Party Transactions:
- ------------------------------------
In 1994, the Venture entered into an agreement with an affiliate of the
Partnership's General Partners for management and operation of the
property. The agreement provided for payment of management fees of 5%
of gross receipts from property operations. In December 1994, the
affiliated property manager assigned the management contract to an
unaffiliated third party on the same terms that existed prior to the
sale. Property management fees of $314,894 were paid to the
affiliated property manager in 1994 pursuant to this agreement.
One of the General Partners charges a monthly fee of $500 per month for
managing the affairs of the Partnership. As of December 31, 1995,
$4,500 was due for unpaid fees which were paid in April 1996.
Insurance commissions of $58,631 were paid to an affiliate of one of the
General Partners in 1995.
F-24
<PAGE>
JMB/VAN NESS ASSOCIATES, LTD.
(An Illinois Limited Partnership)
and Consolidated Venture
Notes to Consolidated Financial Statements (Concluded)
Note 6-- Related Party Transactions, Continued:
- -----------------------------------------------
Effective October 1, 1995, one of the General Partners of the Partnership
engaged independent third parties to perform certain administrative
services for the partnership which were previously performed by, and
partially reimbursed to, affiliates of the General Partners. Use of
such third parties is not expected to have a material effect on the
operations of the Partnership.
Note 7-- Subsequent Event:
- --------------------------
In January, 1996, the Venture entered into a contract for sale
("Contract") to sell the Van Ness apartment building to an
unaffiliated buyer. The agreement is subject to certain conditions
including the tenants' right of first opportunity to purchase the
Property on essentially the same terms as the Contract within a
specified period of time under District of Columbia law. Accordingly,
the Partnership has notified the property's tenants of the Contract
and its terms. There is no assurance that a sale pursuant to the
Contract or to the property's tenants will be consummated. After the
consummation of the sale on the proposed terms, the Partnership would
then proceed to terminate its affairs.
F-25
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Charles E. Smith Residential Realty, Inc.
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Charter Oak
Apartments for the year ended December 31, 1995. This financial statement is
the responsibility of Charter Oak Apartments' management. Our responsibility is
to express an opinion on this statement of revenues 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 statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. 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 of revenues and certain expenses. We
believe our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of Charles E. Smith
Residential Realty, Inc. Material amounts, described in Note 1 to the statement
of revenues and certain expenses, that would not be comparable to those
resulting from the proposed future operation of Charter Oak Apartments are
excluded and the statement is not intended to be a complete presentation of the
revenues and expenses of this property.
In our opinion, such statement of revenues and certain expenses presents fairly,
in all material respects, the revenues and certain expenses, as defined above,
of Charter Oak Apartments for the year ended December 31, 1995 in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
February 23, 1996
F-26
<PAGE>
CHARTER OAK APARTMENTS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES:
Rental income $2,560,208
Other income (Note 1) 26,353
----------
Total revenues 2,586,561
----------
CERTAIN EXPENSES:
Property management fees and salaries (Note 2) 410,065
Maintenance and repairs 179,183
Property taxes 162,088
Advertising (Note 2) 36,021
Insurance (Note 2) 27,452
Utilities 355,665
General and administrative (Note 2) 111,752
----------
Total expenses 1,282,226
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $1,304,335
==========
</TABLE>
F-27
<PAGE>
CHARTER OAK APARTMENTS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying statement of revenues and certain expenses relate to the
operations of Charter Oak Apartments (the "Property"), which consists of
261 units located in Reston, Virginia. The Property was previously owned by
Charter Oak Venture, a Virginia general partnership (the "Partnership")
between Conneticut General Life Insurance Company on behalf of its Closed
End Real Estate Fund I and R&B Executive Investments - Charter Oak
Associates, whose general partners are executives of R&B Realty Group
("R&B"). Subsequent to December 31, 1995, the Property was acquired by
Charles E. Smith Residential Realty, Inc. (the "Company").
Operating revenues and operating expenses are presented on the accrual
basis of accounting. The accompanying statements of revenues and certain
expenses are not representative of the actual operations for the periods
presented, as certain revenues and expenses that may not be comparable to
the revenues and expenses expected to be incurred by the Company in the
proposed future operation of the Property have been excluded. Expenses
excluded consist of interest, depreciation, professional fees and other
costs not directly related to the future operations of the Property.
2. RELATED PARTY TRANSACTIONS
Expenses of the Property include a management fee to R&B Apartment
Management Company, an affiliate of R&B, and salaries to certain of its
employees who perform various management functions at the apartment
complex. Amounts paid or accrued to R&B Apartment Management Company are as
follows:
Managements fees $103,449
Salaries 306,616
Certain expenses are allocated to the Property by affiliates of R&B. These
costs include advertising, insurance, data processing and office supplies.
Allocated expenses were $57,907.
* * * * * *
F-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
By: Charles E. Smith Residential Realty
Inc., its General Partner
Date: August 13, 1996 By: /s/ Anthony J. LoPinto
---------------------------------
Anthony J. LoPinto
Executive Vice President, Chief
Financial Officer and Treasurer of
Charles E. Smith Residential Realty,
Inc. (on behalf of the Registrant and
as Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99.1 Press Release dated July 30, 1996 of the Company E-1
99.2 Press Release dated March 18, 1996 of the Company E-3
99.3 Consent of Independent Public Accountants E-5
</TABLE>
<PAGE>
NEWS RELEASE LOGO OF
CHARLES E. SMITH
CHARLES E. SMITH RESIDENTIAL REALTY, INC. RESIDENTIAL REALTY, INC.
APPEARS HERE
FOR IMMEDIATE RELEASE Contact: Anthony J. LoPinto
- ---------------------
July 30, 1996 (703) 769-1000
SMITH RESIDENTIAL ACQUIRES TWO MORE APARTMENT PROPERTIES;
PORTFOLIO GROWTH SURPASSES 3,000-UNIT MARK
ARLINGTON, VA - Charles E. Smith Residential Realty, Inc. (NYSE: SRW), the
largest publicly traded real estate investment trust (REIT) focused on the
Washington, D.C.-area apartment market, announced today that it acquired a 625-
unit luxury high-rise building and expects to settle shortly on a 115-unit
building, both of which are located in Northwest Washington. With these
purchases, Smith Residential will have added 3,365 apartment units since going
public in 1994 - increasing its original portfolio by 28 percent - through a
combination of acquisitions and development. Including these latest
acquisitions, Smith will own 15,200 apartments and manage a total of 2l,564
units.
"Growing the company through prudent acquisitions and development has been
and continues to be a chief corporate goal," said Ernest A. Gerardi, Jr.,
President of Smith Residential. "With these latest purchases - which bring to
$176 million the total we've invested in acquiring apartment properties - we are
fulfilling our long-term investment strategy."
Gerardi added: "Given our sizable portfolio in Northwest D.C., which is one
of the region's leading submarkets, there's a natural synergy between these new
acquisitions and our nearby high-rise properties in terms of management and
marketing efficiencies."
- continued -
E-1
<PAGE>
Smith REIT News Release/July 30, 1996 / Page 2
Specifically, today Smith acquired Van Ness South, a luxury 11-story, twin
tower high-rise constructed in 1970. Drawing on its bank line of credit, Smith
acquired the property for $41.75 million ($66,800 per apartment).
Located on Van Ness Street, NW, a half-block east of Connecticut Avenue and
the Van Ness Metrorail station, this apartment community includes three levels
of below-grade parking, a large outdoor swimming pool, and 24-hour front-desk
service.
Smith Residential also said today that the company is under contract to
acquire 1841 Columbia Road, NW, an eight-story high-rise built in 1923, for
$5.25 million. The property includes approximately 16,000 square feet of street-
level retail space; among the tenants is a NationsBank branch office. In
exchange for the property, Smith Residential will issue equity in the company's
operating partnership and assume $3.3 million of mortgage debt.
Located four blocks off of Connecticut Avenue, NW, and near the Woodley
Park Metrorail station, 1841 Columbia is in D.C.'s Adams Morgan section.
***
Charles E. Smith Residential Realty, Inc. is a self-managed real estate
investment trust that owns, operates, acquires and develops multifamily
residential and retail properties, as well as provides related real estate
services to other property owners, in the greater Washington, D.C region. The
total market capitalization of the company is approximately $1 billion. Smith
Residential continues to seek apartment acquisition and development
opportunities.
E-2
<PAGE>
NEWS RELEASE LOGO OF
CHARLES E. SMITH
CHARLES E. SMITH RESIDENTIAL REALTY, INC. RESIDENTIAL REALTY, INC.
APPEARS HERE
FOR IMMEDIATE RELEASE CONTACT: ANTHONY J. LOPINTO
EXECT. V.P./CFO
DATE: 18 MARCH, 1996 (703) 769-1000
SMITH REIT CONTINUES STRONG GROWTH -- ADDS TWO PROPERTIES
RESTON AND ALEXANDRIA APARTMENTS MOST RECENT PURCHASES
Arlington, Va -- Charles E. Smith Residential Realty, Inc. (NYSE:SRW), a Real
Estate Investment Trust, announced today that it has acquired two more apartment
properties in northern Virginia totaling 309 units. These properties bring the
company's total acquisitions to nine properties, with over 2,300 units acquired
since its initial public offering in mid-1994. The latest acquisitions include
Charter Oak Apartments, a 262-unit garden-style community in Reston, and
Governor Spotswood, a 47-unit community in Old Town Alexandria. These
acquisitions continue Smith's aggressive growth strategy of adding well-located,
high-quality apartment properties to its portfolio.
Ernest A. Gerardi, Jr., President of the Smith REIT, stated that, "The
acquisition of Charter Oak represents Smith's initial entry into the strong
Reston submarket -- where there is an ongoing demand for quality apartments --
and increases our presence along the fast-growing Dulles Corridor. We are also
continuing to build our presence in Old Town Alexandria, and our purchase of
Governor Spotswood serves as an extension to The Boulevard of Old Town, which we
purchased in 1995."
Charter Oak is located within walking distance of Reston Town Center, and is
just one block from Sallie Mae's new 400,000 square foot headquarters, which
opened last month and will accommodate 1,300 employees. It is adjacent to the
golf course at Hidden Creek Country Club, affording many residents attractive
fairway views. Over the past two years, more than 80% of the
E-3
<PAGE>
Page - 2
units have been renovated by the prior owner, and Smith plans to complete this
renovation program. The community was built in 1970, and has a current occupancy
of 95%. Charter Oak's on-site amenities include a large swimming pool and tot
lots for children. Residents enjoy easy access to Reston's many amenities
including tennis courts and a network of bike paths.
Charter Oak was acquired from a joint venture composed of a major life insurance
company and a California-based apartment operator for approximately $14,250,000
or $54,389 per apartment unit. A portion of the transaction included an exchange
of limited partnership units in the Operating Partnership of the Smith REIT.
Governor Spotswood apartments were purchased in a cash transaction from a local
property owner for $2,830,000 or $60,213 per apartment unit. According to Mr.
Gerardi, "This acquisition enables our company to further enhance operating
efficiencies among our Old Town Alexandria properties by combining management
with The Boulevard of Old Town, located one block away."
Built in 1941, Governor Spotswood has been completely renovated by the prior
owner. The property is currently 100% occupied. It is adjacent to specialty
boutique retailers including Sutton Place Gourmet, Williams Sonoma, Talbot's and
Laura Ashley.
Charles E. Smith Residential Realty, Inc. is an equity REIT that owns, develops,
acquires and operates multifamily rental communities, and also provides related
real estate services to other property owners in the greater Washington, D.C.
metropolitan area. Including the latest acquisitions, the company's own
portfolio currently consists of 40 multifamily apartment properties containing a
total of 14,460 units. The Smith REIT continues to seek additional multifamily
property acquisitions and development sites.
# # #
E-4
<PAGE>
Consent of Independent Auditors
We consent to the use of our report dated April 11, 1996, with respect to the
consolidated financial statements of JMB/Van Ness Associates, Ltd., for the year
ended December 31, 1995, included in the Current Report on Form 8-K for Charles
E. Smith Residential Realty L.P. dated August 13, 1996, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
August 13, 1996
