UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 31, 1999
COMMERCIAL ASSETS, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-2262 84-1240911
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
3410 South Galena Street, Suite 210 80231
Denver, Colorado (Zip Code)
(Address of principal executive offices)
(303) 614-9410
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address,
if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On March 31, 1999, Commercial Assets, Inc. (the "Company") acquired a
manufactured home community located in Tampa, Florida from Lake Shore Villas,
Inc., The Inn at Lakeshore Villas, Ltd., and Lakeshore Villa Health Care, LTD.
The community consists of 290 developed homesites. The developed homesites are
95% occupied.
The consideration for the community was determined through arms-length
negotiations with the sellers. Total consideration for the community was
$8,300,000 of which $8,000,000 was paid in cash on hand and $300,000 represents
estimated initial capital expenditures to be made at the community by the
Company. The Company generally intends to continue to utilize the assets
acquired in the transaction as rental properties which is the same manner as
they were employed prior to the acquisition.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this Report, the Company's Annual Report to Stockholders and other
Company filings (collectively "SEC Filings") under the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended (as well as
information communicated orally or in writing between the dates of such SEC
Filings) contains or may contain information that is forward looking, including,
without limitation, statements regarding projections of the Company's future
financial performance, cash flow, dividends and anticipated returns on real
estate investments. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include: general economic and business
conditions; interest rate changes; financing and refinancing risks; risks
inherent in owning real estate or debt secured by real estate; future
development rate of homesites; competition; the availability of real estate
assets at prices which meet the Company's investment criteria; the Company's
ability to reduce expense levels, implement rent increases and use leverage; and
other risks set forth in the Company's Securities and Exchange Commission
filings. Readers should carefully review the Company's financial statements and
the notes thereto, as well as the risk factors described in the SEC Filings.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Statement of Excess of Revenues Over Specific Operating Expenses of the
Lakeshore Villas Manufactured Home Community for the year ended
September 30, 1998 (audited) and the period from October 1, 1998 to
December 31, 1998 (unaudited).
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet of Commercial Assets,
Inc. and Subsidiaries as of December 31, 1998.
Pro Forma Condensed Consolidated Statement of Income of Commercial
Assets, Inc. and Subsidiaries for the year ended December 31, 1998.
(c) Exhibits
Exhibit No. Description
10.12 Restated Purchase Agreement dated as of April 20,
1998, between Lake Shore Villas, Inc., The Inn at
Lakeshore Villas, Ltd., and Lakeshore Villa Health
Care, LTD. and Senior Care Group, Inc., Heights
Healthcare Company, L.L.C., Community Acquisition and
Development Corporation, CAX Lakeshore, L.L.C. and
Lakeshore Utilities, L.L.C. (incorporated herein by
reference to Exhibit 10.12 to the Registrant's
Current Report on Form 8-K dated March 31, 1999,
Commission File No. 1-2262, filed on April 13, 1999).
10.12(a) Seventh Amendment to Purchase Agreement dated as of
March 30, 1999, between Heights Healthcare Company,
L.L.C., CAX Lakeshore, L.L.C., Lakeshore Utilities,
L.L.C. and Senior Care Group, Inc. and Lake Shore
Villas, Inc., The Inn at Lakeshore Villas, LTD. and
Lakeshore Villa Health Care, LTD. (incorporated
herein by reference to Exhibit 10.12(a) to the
Registrant's Current Report on Form 8-K dated March
31, 1999, Commission File No. 1-2262, filed on April
13, 1999).
10.12(b) Agreement to Assign dated as of March 31, 1999,
between Heights Healthcare Company, L.L.C. and CAX
Lakeshore, L.L.C. (incorporated herein by reference
to Exhibit 10.12(b) to the Registrant's Current
Report on Form 8-K dated March 31, 1999, Commission
File No. 1-2262, filed on April 13, 1999).
23 Consent of Independent Auditors - Ernst & Young LLP
<PAGE>
SIGNATURE
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.
COMMERCIAL ASSETS, INC.
Date: April 30, 1999
By: /s/David M. Becker
--------------------------
David M. Becker
Chief Financial Officer
<PAGE>
Statement of Excess of Revenues Over Specific Operating Expenses
Lakeshore Villas Manufactured Home Community
Year ended September 30, 1998
<PAGE>
Lakeshore Villas Manufactured Home Community
Statement of Excess of Revenues
Over Specific Operating Expenses
Year ended September 30, 1998
Contents
Report of Independent Auditors.................................................1
Statement of Excess of Revenues Over Specific Operating Expenses...............2
Notes to Statement of Excess of Revenues Over Specific Operating Expenses......3
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Commercial Assets, Inc.
We have audited the accompanying statement of excess of revenues over specific
operating expenses of the Lakeshore Villas Manufactured Home Community (Note 1)
for the year ended September 30, 1998. This statement is the responsibility of
the management of Lakeshore Villas Manufactured Home Community. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of excess of revenues over specific
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As described in Note 1, the statement of excess of revenues over specific
operating expenses excludes certain expenses that would not be comparable to the
operations of the community after acquisition by Commercial Assets, Inc.. The
accompanying statement was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission and is not intended to
be a complete presentation of the community's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the excess of revenues over specific operating expenses (exclusive of
expenses described in Note 1) of Lakeshore Villas Manufactured Home Community
for the year ended September 30, 1998 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
December 3, 1998
1
<PAGE>
Lakeshore Villas Manufactured Home Community
Statement of Excess of Revenues
Over Specific Operating Expenses
<TABLE>
<CAPTION>
Period from
Year ended October 1, 1998 to
September 30, 1998 December 31, 1998
----------------------------------------
(Unaudited)
Revenues
<S> <C> <C>
Rental $ 1,040,065 $ 264,201
Other 7,233 1,605
----------------------------------------
1,047,298 265,806
Specific operating expenses
Property operations and maintenance 387,953 80,691
Real estate taxes 129,634 31,649
----------------------------------------
517,587 112,340
----------------------------------------
Excess of revenues over specific operating expenses $ 529,711 $ 153,466
========================================
</TABLE>
See accompanying notes. 2
<PAGE>
Lakeshore Villas Manufactured Home Community
Notes to Statement of Excess of Revenues
Over Specific Operating Expenses
1. Organization and Significant Accounting Policies
Description of Properties
The Lakeshore Villas Manufactured Home Community is a manufactured home
community located in Hillsborough County, Florida which contains 290 developed
homesites. In March 1999, the Community was sold to Commercial Assets, Inc.
Basis of Accounting
The accompanying statement of excess of revenues over specific operating
expenses is presented on the accrual basis. This statement has been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties. Accordingly, the statement
excludes certain historical expenses not comparable to the operations of the
property after acquisition, such as professional fees, management fees,
depreciation, amortization and interest.
Revenue Recognition
Rental income attributable to manufactured home lots is recorded when due from
residents.
Use of Estimates
The preparation of the statement of excess of revenues over specific operating
expenses in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the statement and accompanying notes. Actual results could differ from those
estimates.
3
<PAGE>
Item 7(b).
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
As Previously Pro Forma Pro Forma
Reported Adjustments Results
------------------ ------------------ -------------------
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 3,292 $ -- $ 3,292
Short-term investments 45,066 (8,000) (a) 37,066
Real estate, net 12,628 8,300 (a) 20,928
Investment in participating mortgages and leases 9,328 -- 9,328
Investments in real estate joint ventures 1,280 -- 1,280
Investments in and notes receivable from Westrec 4,011 -- 4,011
CMBS bonds 1,739 -- 1,739
Other assets, net 890 -- 890
---------- ---------- ----------
Total Assets $ 78,234 $ 300 $ 78,534
========== ========== ==========
LIABILITIES
Accounts payable and accrued liabilities $ 872 $ 300 (a) $ 1,172
Management fees payable to related parties 108 -- 108
---------- ---------- ----------
980 300 1,280
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock -- -- --
Common stock 104 -- 104
Additional paid-in capital 76,874 -- 76,874
Retained earnings 276 -- 276
---------- ---------- ----------
77,254 -- 77,254
---------- ---------- ----------
Total Liabilities and Stockholders' Equity $ 78,234 $ 300 $ 78,534
========== ========== ==========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
As Previously Pro Forma Pro Forma
Reported Adjustments Results
-----------------------------------------------
RENTAL PROPERTY OPERATIONS
<S> <C> <C> <C>
Rental and other property revenues $ -- $ 1,047 (b) $ 1,047
Income from participating mortgages and leases 587 -- 587
Property operating expenses -- (518) (b) (518)
-------- -------- --------
Income from property operations before depreciation 587 529 1,116
Depreciation (50) (295) (c) (345)
-------- -------- --------
Income from rental property operations 537 234 771
-------- -------- --------
Interest and other income 3,874 (440) (d) 3,434
CMBS bonds revenue 161 -- 161
General and administrative expenses (420) -- (420)
Management fees paid to manager (87) (83) (e) (170)
-------- -------- --------
OPERATING INCOME 4,065 (289) 3,776
Acquisition fees paid to manager (124) (42) (f) (166)
Costs related to potential marina investments (500) -- (500)
-------- -------- --------
NET INCOME $ 3,441 $ (331) $ 3,110
======== ======== ========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.33 $ (0.03) $ 0.30
======= ======= =======
Weighted-Average Common Shares Outstanding 10,357 10,357 10,357
Weighted-Average Common Shares and Common Share Equivalents
Outstanding 10,372 10,372 10,372
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
<PAGE>
COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The pro forma condensed consolidated balance sheet of the Company as of December
31, 1998, is presented as if the March 31, 1999 acquisition of a manufactured
home community had occurred on December 31, 1998. The pro forma condensed
consolidated statement of income is presented assuming the acquisition had been
completed on January 1, 1998. In management's opinion, all adjustments necessary
to reflect the acquisitions have been made. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or results of
operations would have been assuming the transaction had been completed as of the
dates indicated, nor does it purport to represent the future financial position
or results of operations of the Company.
(a) Reflects the purchase of Lakeshore Villas Manufactured Home Community for
$8,300,000. The Company sold short-term investments and paid $8,000,000 of
the acquisition price in cash and recorded $300,000 of estimated initial
capital expenditures.
(b) Reflects adjustment for the revenues and property expenses of the community
acquired.
(c) Reflects depreciation of acquired assets on the straight-line basis over
an estimated useful life of 25 years for land improvements and buildings.
(d) Eliminates the short-term investment income at 5.5% per annum on the cash
used to acquire the manufactured home community.
(e) Reflects management fees payable to the Company's manager based upon 1% per
annum of the average amount invested.
(f) Reflects acquisition fees paid to the Company's manager based upon 0.5% of
the cost of the acquired community.
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-74689) of Commercial Assets, Inc. of our report dated December 3,
1998, with respect to the Statement of Excess of Revenues over Specific
Operating Expenses of the Lakeshore Villas Manufactured Home Community for the
year ended September 30, 1998 which is included in the Current Report (Form 8-K)
dated April 29, 1999.
ERNST & YOUNG LLP
Denver, Colorado
April 28, 1999
