<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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): July 2, 1999
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
(Exact name of registrant as specified in its charter)
Commission File Number: 1934 Act File Number: 0-25968
Delaware 54-1681657
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2345 Crystal Drive 22202
Crystal City, VA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number including area code: (703) 920-8500
<PAGE>
Item 7. Financial Statements and Exhibits
- ------- ---------------------------------
The following pro forma financial information is included as a first amendment
to the Form 8-K dated July 2, 1999 and filed on July 26, 1999 for Charles E.
Smith Residential Realty L.P.
(A) Pro forma financial information beginning at page F-2
(B) Historical financial information (Countryside) beginning at page F-7
(C) Historical financial information (Somerset) beginning at page F-10
(D) Historical financial information (Consulate) beginning at page F-13
(E) Exhibits
99.4 Consent of Independent Public Accountants dated September 14, 1999
99.5 Consent of Independent Public Accountants dated September 14, 1999
99.6 Consent of Independent Auditors dated September 16, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized, on this 16th day of
September 1999.
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
By: Charles E. Smith Residential Realty, Inc.,
its General Partner
By: /s/ W.D. Minami
------------------------------------------
W.D. Minami
Senior Vice President and Chief Financial
Officer of Charles E. Smith Residential
Realty, Inc. (on behalf of the Registrant
and as Principal Financial Officer)
/s/ Steven E. Gulley
------------------------------------------
Steven E. Gulley
Chief Accounting Officer of
Charles E. Smith Residential Realty, Inc.
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
Page
----
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
Pro Forma (Unaudited) Consolidated Balance Sheet
as of June 30, 1999 F-3
Pro Forma (Unaudited) Consolidated Statement of
Operations for the six months ended June 30, 1999 F-4
Pro Forma (Unaudited) Consolidated Statement of
Operations for the year ended December 31, 1998 F-5
Notes and Management's Assumptions to Unaudited Pro Forma
Consolidated Financial Information F-6
ACQUISITION PROPERTIES
Report of Independent Public Accountants - Countryside F-7
Statements of Revenues and Certain Expenses of
Countryside for the six months ended June 30, 1999
(Unaudited) and the year ended December 31, 1998. F-8
Notes to Statements of Revenues and Certain Expenses
of Countryside for the six months ended
June 30, 1999 (Unaudited) and for the year
ended December 31, 1998. F-9
Report of Independent Public Accountants - Somerset F-10
Statements of Revenues and Certain Expenses of
Somerset for the six months ended June 30, 1999
(Unaudited) and for the year ended December 31, 1998. F-11
Notes to Statements of Revenues and Certain Expenses
of Somerset for the six months ended June 30, 1999
(Unaudited) and for the year ended December 31, 1998. F-12
Statement of Revenues and Certain Expenses of
Consulate for the six months ended June 30, 1999
(Unaudited). F-13
Report of Independent Public Accountants-2900
Van Ness Associates [Consulate]. F-15
Financial Statements for 2900 Van Ness Associates
[Consulate] as of December 31, 1998 F-16
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999, and
unaudited Pro Forma Consolidated Statements of Operations for the six months
ended June 30, 1999, and the year ended December 31, 1998, are based on the
historical financial statements of the Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999, is
presented as if the Consulate, Countryside, and Somerset acquisitions had
occurred by June 30, 1999. The unaudited Pro Forma Consolidated Statements of
Operations for the six months ended June 30, 1999, and the year ended December
31, 1998, are presented as if the acquisitions had occurred at the beginning of
each of those periods. The unaudited pro forma information should be read in
conjunction with the historical financial statements and notes related thereto
appearing in the Operating Partnership's Forms 10-Q and 10-K.
Preparation of the unaudited 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 would have occurred if the acquisitions 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 the transaction have been made.
F-2
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS Historical Consulate (A) Countryside (A)
---------- --------- -----------
<S> <C> <C> <C>
Rental property, net $1,015,265 $ 32,700 $ 44,800
Rental property under construction 169,647
Cash and cash equivalents 5,005
Security deposits 2,162
Escrow funds 6,979
Investment in and advances to Property Service Businesses 34,061
Investment in joint ventures 18,799
Deferred charges, net 17,742
Other assets 15,254
--------- ------ ------
Total $1,284,914 $ 32,700 $ 44,800
========= ====== ======
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 710,503 $ 12,800 $ 28,000
Lines of credit 52,000 19,400 9,600
Construction loans 101,003
Accounts payable and accrued expenses 25,797 500 1,200
Deferred Gain 5,091
Security deposits 2,162
--------- ------ ------
Total Liabilities 896,556 32,700 38,800
Other Limited Partners' Interest 445,440 - 6,000
Partners' Equity
General Partner's General and Limited Partnership Interest
Preferred units
Series A Cumulative Convertible Redeemable Preferred Units 71,500
Series C Cumulative Redeemable Preferred Units 50,000
Common units (178,582)
--------- ------ ------
Total Partners' Equity (57,082) - -
--------- ------ ------
Total Liabilities and Partners' Equity $1,284,914 $ 32,700 $ 44,800
========= ====== ======
<CAPTION>
Other
ASSETS Somerset (A) Adjustments Pro-forma
-------- ----------- ---------
<S> <C> <C> <C>
Rental property, net $ 57,600 $ - $1,150,365
Rental property under construction 169,647
Cash and cash equivalents 5,005
Security deposits 2,162
Escrow funds 6,979
Investment in and advances to Property Service Businesses 34,061
Investment in joint ventures 18,799
Deferred charges, net 17,742
Other assets 15,254
------ ------ ---------
Total $ 57,600 $ - $1,420,014
====== ====== =========
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 33,200 $ - $ 784,503
Lines of credit 9,300 90,300
Construction loans 101,003
Accounts payable and accrued expenses 1,200 28,697
Deferred Gain 5,091
Security deposits 2,162
------ ------ ---------
Total Liabilities 43,700 - 1,011,756
Other Limited Partners' Interest 13,900 27 (D) 465,367
Partners' Equity
General Partner's General and Limited Partnership Interest
Preferred units
Series A Cumulative Convertible Redeemable Preferred Units 71,500
Series C Cumulative Redeemable Preferred Units 50,000
Common units (27) (D) (178,609)
------ ------ ---------
Total Partners' Equity - (27) (57,109)
------ ------ ---------
Total Liabilities and Partners' Equity $ 57,600 - 1,420,014
====== ====== =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Other
Historical Consulate Countryside Somerset Adjustments Pro-forma
---------- --------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Properties:
Revenues $ 139,555 $ 1,870 $ 3,989 $ 5,075 $ - $ 150,489
Expenses
Operating Costs (43,430) (504) (1,113) (1,682) 497 (A) (46,232)
Real estate taxes (10,728) (153) (726) (431) (12,038)
Depreciation and amortization (15,941) (1,689) (B) (17,630)
--------- ------- ------- ------- ------- ---------
Total expenses (70,099) (657) (1,839) (2,113) (1,192) (75,900)
--------- ------- ------- ------- ------- ---------
Equity in income of joint ventures 151 151
Equity in income of Property Service Businesses 1,128 1,128
Corporate general and administrative expenses (4,629) (4,629)
Interest income 276 276
Interest expense (26,619) (3,886) (C) (30,505)
--------- ------- ------- ------- ------- ---------
Income before gain on sale
and extraordinary item 39,763 1,213 2,150 2,962 (5,078) 41,010
Gain on sale of property 1,851 1,851
--------- ------- ------- ------- ------- ---------
Income before extraordinary item 41,614 1,213 2,150 2,962 (5,078) 42,861
Extraordinary item - loss on extinguishment of debt (359) (359)
--------- ------- ------- ------- ------- ---------
Net income 41,255 1,213 2,150 2,962 (5,078) 42,502
Less: Income attributable to preferred units (4,755) (4,755)
--------- ---------
Net income attributable to common units $ 36,500 $ 37,747
========= =========
Net income per common unit - basic $ 1.14 $ 1.15
========= =========
Net income per common unit - diluted $ 1.13 (F) $ 1.15
========= =========
Weighted average units outstanding - basic 32,139 32,726
========= =========
Weighted average units outstanding - diluted 32,318 32,905
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Other
Historical Consulate Countryside Somerset Adjustments Pro-forma
---------- --------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rental Properties:
Revenues $ 250,211 $ 3,535 $ 7,166 $ 9,566 $ - $ 270,478
Expenses
Operating costs (84,381) (961) (2,143) (3,357) 971 (A) (89,871)
Real estate taxes (17,254) (203) (1,332) (899) (19,688)
Depreciation and amortization (28,958) (3,378) (B) (32,336)
--------- ------- ------- ------- -------- ---------
Total expenses (130,593) (1,164) (3,475) (4,256) (2,407) (141,895)
--------- ------- ------- ------- -------- ---------
Equity in income of Property Service Businesses 8,433 8,433
Corporate general and administrative expenses (8,947) (8,947)
Interest income 1,257 24 78 94 1,453
Interest expense (47,334) (7,827) (C) (55,161)
--------- ------- ------- ------- -------- ---------
Income before gain on sale, loss on unused treasury
lock, and extraordinary item 73,027 2,395 3,769 5,404 (10,234) 74,361
Gain on sale of property 18,150 18,150
Loss on unused treasury lock (4,923) (4,923)
--------- ------- ------- ------- -------- ---------
Income before extraordinary item 86,254 2,395 3,769 5,404 (10,234) 87,588
Extraordinary item - loss on extinguishment of debt (16,384) (16,384)
--------- ------- ------- ------- -------- ---------
Net income 69,870 2,395 3,769 5,404 (10,234) 71,204
Less: Income attributable to preferred units (10,722) (10,722)
--------- ---------
Net income attributable to common units $ 59,148 $ 60,482
========= =========
Net income per common unit - basic $ 1.96 $ 1.97
========= =========
Net income per common unit - diluted $ 1.95 (E) $ 1.96
========= =========
Weighted average units outstanding - basic 30,184 30,771
========= =========
Weighted average units outstanding - diluted 30,349 30,936
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 and
unaudited Pro Forma Consolidated Statements of Operations for the six
months ended June 30, 1999 and the year ended December 31, 1998 are based
on the historical financial statements of the Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 is
presented as if the Consulate, Countryside, and Somerset acquisitions had
occurred by June 30, 1999. The unaudited Pro Forma Consolidated Statements
of Operations for the six months ended ended June 30, 1999 and the year
ended December 31, 1998 are presented as if the acquisition had occurred
at the beginning of each of those periods. The unaudited pro forma
information should be read in conjunction with the historical financial
statements and notes related thereto appearing in the Operating
Partnership's Forms 10-Q and 10-K.
2. Adjustments to Pro Forma Consolidated Balance Sheet
(A) Acquisition of Consulate, Countryside, and Somerset
Consulate Countryside Somerset
--------------------------------
Purchase price of rental property $32,200 $43,600 $56,400
Initial capital improvements 500 1,200 1,200
--------------------------------
Cost basis of rental property $32,700 $44,800 $57,600
================================
Proceeds from line of credit $19,400 $9,600 $9,300
Assumption of mortgage loans 12,800 28,000 33,200
Other 500 1,200 1,200
Value of Units of the Operating
Partnership issued - 6,000 13,900
--------------------------------
$32,700 $44,800 $57,600
================================
3. Adjustments to Pro Forma Consolidated Statements of Operations
(A) Operating expenses have been adjusted to eliminate management
fees since the Operating Partnership's affiliate manages owned
properties.
(B) Depreciation and amortization has been adjusted based on the
allocated purchase price of the assets acquired and an estimated
useful life of 40 years, as if the purchase occurred on January
1, 1999 for the six months ended June 30, 1999 and January 1,
1998 for the year ended December 31, 1998.
(C) Represents interest expense for draws on the line of credit
(assuming a weighted average interest rate of 6.92% and 6.97%
for the six months ended June 30, 1999 and the year ended
December 31, 1998, respectively) and interest expense for the
assumed mortgage loan related to the acquisition.
(D) To adjust the redemption value of Other Limited Partners'
Interest for the issuance of Operating Partnership Units.
(E) Diluted earnings per common unit reflects the change in
ownership interest after inclusion of common stock equivalents.
F-6
<PAGE>
[KLAYMAN & KORMAN, LLC LETTERHEAD APPEARS HERE]
Report of Independent Public Accountants
To Charles E. Smith Residential Realty, Inc.
We have audited the accompanying statement of revenues and certain expenses of
Countryside Residential Partners, Ltd. (the "Property") for the year ended
December 31, 1998. This statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a text basis, evidence supporting
the amounts and disclosures in the financial statement. 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.
The accompanying statement of revenue and certain expenses was prepared for the
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. as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of this property.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses of Countryside Residential Partners,
Ltd. for the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Klayman & Korman LLC
Chicago, Illinois
February 1, 1999
F-7
<PAGE>
Countryside Residential Partners, Ltd.
Statements Of Revenues And Certain Expenses
For The Six Months Ended June 30, 1999 (Unaudited)
And The Year Ended December 31, 1998
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
---------------- -----------------
Revenues:
Residential rental income $ 3,810,146 $ 6,774,340
Other income 178,572 469,441
------------- ----------------
Total Revenues 3,988,718 7,243,781
------------- ----------------
Certain Expenses:
Administrative 180,323 277,062
Insurance 52,000 103,659
Management fees 138,976 297,388
Operating and maintenance 257,801 494,066
Payroll and related costs 347,593 675,817
Real estate taxes 725,576 1,332,399
Utilities 136,178 294,350
------------- ----------------
Total Certain Expenses 1,838,447 3,474,741
------------- ----------------
Revenues in Excess of Certain Expenses $ 2,150,271 $ 3,769,040
============= ================
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
Countryside Residential Partners, Ltd.
Notes to Statements of Revenues and Certain Expenses
For The Six Months Ended June 30, 1999 (Unaudited) And For
The Year Ended December 31, 1998
Organization
- ------------
The accompanying statements of revenues and certain expenses relate to the
operations of Countryside Apartments (the "Property") which is a residential
apartment building consisting of 720 units located in the Chicago suburbs. The
property was acquired by Charles E. Smith Residential Realty, Inc. (the
"Company") on July 1, 1999.
Method of Accounting
- --------------------
The accompanying statements were prepared on the accrual basis of accounting.
Rental income is recognized when due from tenants.
Presentation
- ------------
The accompanying statements of revenues and certain expenses do not include all
of the expenses of the Property. Expenses not included are interest expense,
depreciation, and nonoperating expenses.
Interim Financial Information
- -----------------------------
The interim statements of revenues and certain expenses are unaudited but
reflect all adjustments which are, in the opinion of management, necessary for a
fair presentation of the interim periods presented. The adjustments consist of
normal recurring accruals.
The statements of revenues and certain expenses for interim periods will not
necessarily be indicative of the operating results of the year.
F-9
<PAGE>
[LETTERHEAD OF KLAYMAN & KORMAN, LLC APPEARS HERE]
Report of Independent Public Accountants
To Charles E. Smith Residential Realty, Inc.
We have audited the accompanying statement of revenues and certain expenses of
Somerset Limited Partnership (the "Property") for the year ended December 31,
1998. This statement is the responsibility of the Property's management. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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.
The accompanying statement of revenues and certain expenses was prepared for the
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. as described in Note 1 and is not intended to be a
complete presentation of the revenues and expenses of this property.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses of Somerset Limited Partnership for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ Klayman & Korman LLC
Klayman & Korman LLC
Chicago, Illinois
February 3, 1999
F-10
<PAGE>
Somerset Limited Partnership
Statement of Revenues and Certain Expenses
For The Six Months Ended June 30, 1999 (Unaudited)
And The Year Ended December 31, 1998
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
---------------- -----------------
<S> <C> <C>
Revenues:
Residential rental income 4,892,103 9,137,819
Other income 182,737 522,217
---------------- -----------------
Total Revenues 5,074,840 9,660,036
---------------- -----------------
Certain Expenses:
Administrative 269,469 483,642
Insurance 67,000 133,279
Management fees 228,434 476,051
Operating and maintenance 405,794 821,617
Payroll and related costs 436,491 843,091
Real estate taxes 431,158 898,846
Utilities 274,045 599,092
---------------- -----------------
Total Certain Expenses 2,112,391 4,255,618
---------------- -----------------
Revenues in Excess of Certain Expenses $ 2,962,449 $ 5,404,418
================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-11
<PAGE>
Somerset Limited Partnership
Notes to Statements of Revenues and Certain Expenses
For The Six Months Ended June 30, 1999 (Unaudited) And For
The Year Ended December 31, 1998
Organization
- ------------
The accompanying statements of revenues and certain expenses relate to the
operations of Somerset Apartments (the "Property") which is a residential
apartment building consisting of 1,158 units located in the Chicago suburbs. The
property was acquired by Charles E. Smith Residential Realty, Inc. (the
"Company") on July 1, 1999.
Method of Accounting
- --------------------
The accompanying statements were prepared on the accrual basis of accounting.
Rental income is recognized when due from tenants.
Presentation
- ------------
The accompanying statements of revenues and certain expenses do not include all
of the expenses of the Property. Expenses not included are interest expense,
depreciation, and nonoperating expenses.
Interim Financial Information
- -----------------------------
The interim statements of revenues and certain expenses are unaudited but
reflect all adjustments which are, in the opinion of management, necessary to a
fair presentation of the interim periods presented. The adjustments consist of
normal recurring accruals.
The statements of revenues and certain expenses for interim periods will not
necessarily be indicative of the operating results of the year.
F-12
<PAGE>
The Consulate
Statement of Revenues and Certain Expenses
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Revenues:
Residential rental income $ 1,755,690
Other income 114,718
-----------
Total Revenues 1,870,408
-----------
Certain Expenses:
Administrative 46,849
Insurance 13,806
Management fees 129,956
Operating and maintenance 141,127
Payroll and related costs 97,118
Real estate taxes 152,502
Utilities 76,012
-----------
Total Certain Expenses 657,370
-----------
Revenues in Excess of Certain Expenses $ 1,213,038
===========
</TABLE>
F-13
<PAGE>
The Consulate
Notes to Statements of Revenues and Certain Expenses
For the Six Months Ended June 30, 1999 (Unaudited)
1. Basis of Presentation
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of The Consulate (the "Property") which is a residential apartment
building containing 269 residential units in Washington, D.C. The Property was
acquired by Charles E. Smith Residential Realty, Inc. (the "Company") on July
15, 1999.
Significant Accounting Policies
-------------------------------
The accompanying statements were prepared on the accrual basis of accounting.
Rental income is recognized when due from tenants.
Interim Financial Information
-----------------------------
The interim statement of revenues and certain expenses is unaudited but
reflects all adjustments which are, in the opinion of management, necessary
to a fair presentation of the interim period presented. The adjustments
consist of normal recurring accruals.
The statements of revenues and certain expenses for interim periods will not
necessarily be indicative of the operating results of the fiscal year.
F-14
<PAGE>
Report of Independent Auditors
To the Partners
2900 Van Ness Associates
We have audited the accompanying balance sheet of 2900 Van Ness Associates, a
limited partnership, as of December 31, 1998, and the related statements of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 2900 Van Ness Associates at
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
May 25, 1999
F-15
<PAGE>
2900 Van Ness Associates
Balance Sheet
December 31, 1998
ASSETS
Real estate
Land $ 2,009,850
Buildings and improvements 20,000,543
Furniture, fixtures and equipment 1,007,436
-------------
23,017,829
Less accumulated depreciation 4,951,172
-------------
18,066,657
Cash and cash equivalents 987,365
Receivables from tenants, net of allowance 17,486
Tenant security deposits 80,531
Escrow deposits 156,346
Prepaid expenses 2,715
Deferred costs, net 156,153
-------------
Total assets $ 19,467,253
=============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage note payable $ 12,892,665
Tenant security deposits 70,649
Accounts payable and accrued expenses 68,340
Accounts payable - affiliates 6,082
Accrued real estate taxes 57,528
Unearned rent 67,282
Other liabilities 40,700
-------------
13,203,246
Partners' capital 6,264,007
-------------
Total liabilities and partners' capital $ 19,467,253
=============
See accompanying notes.
F-16
<PAGE>
2900 Van Ness Associates
Statement of Operations
Year ended December 31, 1998
REVENUES
Rental income $ 3,435,824
Interest income 24,016
Other income 98,702
------------
3,558,542
EXPENSES
Payroll and related expenses 278,802
Utilities 83,639
Repairs and maintenance 162,946
Advertising 52,826
Real estate and personal property taxes 202,550
Insurance 43,287
General and administrative 131,392
Management fee 208,303
Interest 1,030,986
Depreciation 534,077
------------
2,728,808
------------
Net income $ 829,734
============
See accompanying notes.
F-17
<PAGE>
2900 Van Ness Associates
Statement of Partners' Capital
Year ended December 31, 1998
Partners' capital at January 1, 1998 $ 5,434,273
Net income 829,734
------------
Partners' capital at December 31, 1998 $ 6,264,007
============
See accompanying notes.
F-18
<PAGE>
2900 Van Ness Associates
Statement of Cash Flows
Year ended December 31, 1998
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Revenue
Rental income $ 3,480,468
Interest 24,016
Other 98,702
--------------
3,603,186
Expenses
Payroll and related expenses (278,802)
Utilities (83,639)
Repairs and maintenance (148,432)
Advertising (52,826)
Real estate and personal property taxes (192,966)
Insurance (14,734)
General and administrative (131,392)
Management fee (208,303)
Interest (961,590)
--------------
(2,072,684)
--------------
Net cash provided by operating activities 1,530,502
CASH FLOW FROM INVESTING ACTIVITIES
Tenant security deposits (asset) (6,428)
Net change in escrow deposits 41,207
Real estate additions (890,663)
--------------
Net cash used in investing activities (855,884)
</TABLE>
F-19
<PAGE>
<TABLE>
<S> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Tenant security deposits (liability) 734
Mortgage principal payments (266,286)
Sundry 173
--------------
Net cash used in financing activities (265,379)
--------------
Net increase in cash and cash equivalents 409,239
Cash and cash equivalents at beginning of year 578,126
--------------
Cash and cash equivalents at end of year $ 987,365
==============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 829,734
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 534,077
Amortization of deferred costs 69,396
Changes in operating assets and liabilities:
Receivable from tenants (17,486)
Prepaid expenses 28,553
Accounts payable and accrued expenses 14,514
Accrued real estate taxes 9,584
Unearned rent 62,130
--------------
Net cash provided by operating activities $ 1,530,502
==============
</TABLE>
See accompanying notes.
F-20
<PAGE>
2900 Van Ness Associates
Notes to Financial Statements
December 31, 1998
NOTE 1 - ORGANIZATION
2900 Van Ness Associates (the "Partnership") was formed as a limited partnership
under the laws of the District of Columbia on April 15, 1976, for the purpose of
operating a 269 unit apartment community (the "Property"). The Property is
located in Washington, D.C. and is currently operating under the name of The
Consulate.
The Partnership is owned 1% by the general partners and 99% by the limited
partners. Allocations of cash distributions and net income and losses are made
in accordance with the Partnership Agreement.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The Partnership's significant accounting policies are as follows:
Real estate is recorded on the basis of cost. Depreciation is computed
generally by the straight-line method over the estimated useful lives of the
related assets.
Cash and cash equivalents include all cash balances, bank overdrafts, and highly
liquid short-term investments, if any, with a maturity of three months or less
when purchased.
Deferred costs consist primarily of financing fees which are amortized by the
straight-line method over the related term of the note.
The Partnership is not subject to federal income taxes. Instead, each partner
reports his distributive share of the Partnership's profits or losses on his
personal income tax return.
Preparation of financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Year 2000 Readiness (unaudited) - The Partnership's general partner and its
affiliated property management agent are currently implementing changes to their
accounting software to accommodate year 2000 issues. The general partner expects
its computer systems to be year 2000 compliant no later than the third quarter
of 1999.
F-21
<PAGE>
NOTE 3 - MORTGAGE NOTE PAYABLE
The mortgage note payable is due in monthly installments of $102,323, including
interest at 7.38%, through April 1, 2001. The monthly payment is based on a 25
year amortization with a final payment due of $12,243,940. The mortgage may be
prepaid with the payment of a fee as outlined in the note agreement.
Principal payments as of December 31, 1998 are due as follows:
1999 $ 261,907
2000 306,585
2001 12,324,173
NOTE 4 - OTHER LIABILITIES
Pursuant to the Partnership Agreement, a defaulting Investor Limited Partner is
not entitled to receive distributions of cash flow unless and until such time as
the default is cured. As of December 31, 1998, the Partnership has recorded a
net liability of $40,700 for distributions payable to defaulting Investor
Limited Partners.
NOTE 5 - RELATED PARTY TRANSACTIONS
AIMCO Properties, L.P., the managing agent through November 16, 1998, is an
indirectly owned subsidiary of Apartment Investment and Management Company
("AIMCO"), an affiliate of the general partner of the Partnership. Personnel
working at the project are employees of affiliates of AIMCO. The Partnership
reimburses the affiliates for the actual salaries and related benefits, as
reflected in the accompanying financial statements. Smith Realty Company (not
affiliated with AIMCO) was engaged as the managing agent for the period
November 17, 1998 to December 31, 1998 and received a management fee equal to
3.50% of gross rental collections. Following are the related party transactions
for the described services provided to the project:
Amount
----------------
General partner and/or its affiliates:
Management fee $ 197,172
F-22
<PAGE>
NOTE 6 - CONTINGENCY
In July 1998, certain limited partners in eleven limited partnerships owning
multi-family properties, including the Partnership, initiated a lawsuit against
the general partners and certain of their affiliates, including AIMCO alleging
breach of the partnership agreements, breach of fiduciary duty, breach of duty
of good faith and fair dealing and diversion of a corporate opportunity. The
complaints also seek dissolution of the partnerships and sale of the properties.
The general partners believe that these lawsuits are without merit and are
defending them vigorously. Pursuant to the partnership agreements, the general
partners and their affiliates will be indemnified by the relevant Partnership
upon conclusion of each lawsuit for expenses sustained by the general partners
and their affiliates in connection with the pending lawsuits, provided that the
general partners and their affiliates have not been negligent and have not
committed acts of misconduct.
NOTE 7 - SUBSEQUENT EVENT - SALE OF PROPERTY (UNAUDITED)
On July 15, 1999, the Partnership sold substantially all of its assets,
including its real estate and the related mortgage note payable, to Charles E.
Smith Residential Realty, Inc. for approximately $30.75 million.
F-23
<PAGE>
EXHIBIT 99.4
[LETTERHEAD OF KLAYMAN & KORMAN LLC APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated February 1, 1999, on
our audit of the statement of revenue and certain expenses of Countryside
Residential Partners, Ltd. for the year ended December 31, 1998 which report
appears in the Form 8-K/A for Charles E. Smith Residential Realty, Inc. dated
July 2, 1999 filed with the Securities and Exchange Commission.
/s/ KLAYMAN & KORMAN LLC
Chicago, Illinois
September 14, 1999
<PAGE>
EXHIBIT 99.5
[LETTERHEAD OF KLAYMAN & KORMAN LLC APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated February 3, 1999, on
our audit of the statement of revenue and certain expenses of Somerset Limited
Partnership for the year ended December 31, 1998 which report appears in the
Form 8-K/A for Charles E. Smith Residential Realty, Inc. dated July 2, 1999
filed with the Securities and Exchange Commission.
/s/ KLAYMAN & KORMAN LLC
Chicago, Illinois
September 14, 1999
<PAGE>
EXHIBIT 99.6
Consent of Independent Auditors
We consent to the use of our report dated May 25, 1999 with respect to the
financial statements of 2900 Van Ness Associates for the year ended December 31,
1998 included in the Form 8-K/A (pages F-15 through F-23) of Charles E. Smith
Residential Realty, Inc. dated July 2, 1999, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
September 16, 1999
Indianapolis, Indiana
