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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) June 30, 1997
IRVINE APARTMENT COMMUNITIES, INC.
IRVINE APARTMENT COMMUNITIES, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Maryland 1-12478 33-0698698
Delaware 0-22569 33-0587829
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
550 Newport Center Drive, Suite 300, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 720-5500
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ITEM 2. ACQUISITION OF ASSETS
Irvine Apartment Communities, L.P. is a Delaware limited partnership (the
"Operating Partnership"). As of March 31, 1997, Irvine Apartment Communities,
Inc., a Maryland corporation (the "Company"), owned a 45.1% general partnership
interest in and was the sole general partner of the Operating Partnership.
On June 30, 1997, the Operating Partnership purchased a 923-unit apartment
community (the "Property") located in La Jolla, California from AOKI
Construction (CA) Co., Ltd. (the "Seller") for $127.0 million. $118.0 million of
the purchase price was funded by borrowings under the Operating Partnership's
$250 million unsecured line of credit wherein Bank of America is lead agent with
seven other banks. The balance of the purchase price was paid in cash. Neither
the Operating Partnership, the Company, any subsidiary of the Company, any
subsidiary of the Operating Partnership nor any director or officer of the
Company was affiliated with or had a material relationship with the Seller.
The Property was completed in 1992 and is situated on 15.5 acres. It includes a
mix of studio, one-, two-, and three-bedroom apartment units in 13 three- and
four-story buildings built over seven garage structures. Amenities include four
swimming pools and spas and a 10,000 square-foot clubhouse with fitness club,
aerobics studio and recreation center. The physical occupancy rate of the
Property was approximately 92% and average rental revenue per occupied unit was
approximately $1,200 at June 30, 1997. The Company intends to continue operating
the Property and to fund in cash from continuing operations $4.0 million to $5.0
million to replace carpeting, windows and cabinet doors, repaint the Property's
exterior, renovate the leasing office and clubhouse, upgrade the landscaping,
improve the Property's water proofing and make certain other improvements.
The Property is located in an area within the county of San Diego known as the
Golden Triangle which is comprised of portions of three communities: University
Towne Center, La Jolla and University City. The Golden Triangle area and nearby
Sorrento Valley are large employment bases for the bioscience and
telecommunications industries, which are experiencing rapid growth. The Golden
Triangle area contains twelve apartment communities, excluding the Property,
consisting of approximately 6,400 rental units.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a. Pro forma financial information -
Irvine Apartment Communities, Inc.
- Pro Forma Consolidated Balance Sheet as of March 31, 1997 1
- Pro Forma Consolidated Statement of Operations for the
three months ended March 31, 1997 2
- Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996 3
Irvine Apartment Communities, L.P.
- Pro Forma Consolidated Balance Sheet as of March 31, 1997 4
- Pro Forma Consolidated Statement of Operations for the
three months ended March 31, 1997 5
- Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996 6
Notes to Pro Forma Consolidated Financial Statements 7
<PAGE> 3
b. Financial statements of the Property -
- Independent Accountants' Report 9
- Statements of Revenues and Certain Operating Expenses for
the three months ended March 31, 1997 (unaudited) and the
year ended December 31, 1996 10
- Notes to Financial Statements 11
Signatures 12
Exhibits -
- Exhibit 23.1--Independent Accountants' Consent 13
<PAGE> 4
Irvine Apartment Communities, Inc.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1997
<TABLE>
<CAPTION>
(unaudited, in thousands, except per share amounts) Historical Acquisition Pro Forma
- --------------------------------------------------- ----------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate assets, at cost
Land $ 178,808 $ 23,075 $ 201,883
Buildings and improvements 868,352 104,363 972,715
----------- ----------- -----------
1,047,160 127,438 (a) 1,174,598
Accumulated depreciation (225,890) (225,890)
----------- ----------- -----------
821,270 127,438 948,708
Under development, including land 74,925 74,925
----------- ----------- -----------
896,195 127,438 1,023,633
Cash and cash equivalents 30,283 (8,388)(b) 21,895
Restricted cash 1,459 1,459
Deferred financing costs, net 19,537 19,537
Other assets 13,287 18 (c) 13,305
----------- ----------- -----------
$ 960,761 $ 119,068 $ 1,079,829
=========== =========== ===========
LIABILITIES
Mortgages and notes payable
Line of credit $118,000 (d) $ 118,000
Tax-exempt mortgage bond financings $ 328,372 328,372
Conventional mortgage financings 134,150 134,150
Mortgage notes payable to The Irvine Company 51,023 51,023
Tax-exempt assessment district debt 21,793 21,793
----------- ----------- -----------
535,338 118,000 653,338
Accounts payable and accrued liabilities 22,355 550 (e) 22,905
Security deposits 6,412 518 (f) 6,930
----------- ----------- -----------
564,105 119,068 683,173
MINORITY INTEREST 186,362 186,362
Shareholders' Equity
Preferred stock, par value $1.00 per share; 10,000 shares authorized;
no shares issued or outstanding
Common stock, par value $0.01 per share; 150,000 shares authorized;
19,783 shares issued and outstanding 198 198
Excess stock, par value $0.01 per share; 160,000 shares authorized;
no shares issued or outstanding
Additional paid-in capital 233,048 233,048
Retained earnings (deficit) (22,952) (22,952)
----------- ----------- -----------
210,294 210,294
----------- ----------- -----------
$ 960,761 $ 119,068 $ 1,079,829
=========== =========== ===========
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, Inc.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
(unaudited, in thousands, except per share amounts) Historical Acquisition Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES
Rental income $42,092 $2,992 (g) $45,084
Other income 940 44 (g) 984
Interest income 248 248
------- ------ -------
43,280 3,036 46,316
------- ------ -------
EXPENSES
Property expenses 9,186 591 (h) 9,777
Real estate taxes 3,465 356 (i) 3,821
Property management fees 1,215 60 (j) 1,275
Interest expense, net 6,861 1,973 (k) 8,834
Amortization of deferred financing costs 649 649
Depreciation and amortization 6,751 697 (l) 7,448
General and administrative 1,634 1,634
------- ------ -------
29,761 3,677 33,438
------- ------ -------
INCOME BEFORE MINORITY INTEREST IN INCOME 13,519 (641) 12,878
Minority interest in income 7,408 (351)(m) 7,057
------- ------ -------
NET INCOME $6,111 ($290) $5,821
======= ====== =======
SHARE DATA:
Weighted average number of shares outstanding 19,096 19,096
Net income per share $0.32 $0.30
Cash distributions declared and paid per share $0.365 $0.365
======= =======
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, Inc.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
(unaudited, in thousands, except per share amounts Historical Acquisition Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES
Rental income $154,925 $11,591 (g) $166,516
Other income 3,162 173 (g) 3,335
Interest income 611 611
-------- ------- --------
158,698 11,764 170,462
-------- ------- --------
EXPENSES
Property expenses 33,859 2,176 (h) 36,035
Real estate taxes 13,496 1,422 (i) 14,918
Property management fees 4,502 240 (j) 4,742
Interest expense, net 29,506 7,891 (k) 37,397
Amortization of deferred financing costs 2,627 2,627
Depreciation and amortization 27,239 2,786 (l) 30,025
General and administrative 6,277 6,277
-------- ------- --------
117,506 14,515 132,021
-------- ------- --------
INCOME BEFORE MINORITY INTEREST IN INCOME 41,192 (2,751) 38,441
Minority interest in income 22,446 (1,500) (m) 20,946
-------- ------- --------
NET INCOME $18,746 ($1,251) $17,495
======== ======= ========
SHARE DATA:
Weighted average number of shares outstanding 17,732 17,732
Net income per share $1.06 $0.99
Cash distributions declared and paid per share $1.440 $1.440
======== ========
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1997
<TABLE>
<CAPTION>
(unaudited, in thousands) Historical Acquisition Pro Forma
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Real estate assets, at cost
Land $178,808 $23,075 $201,883
Buildings and improvements 868,352 104,363 972,715
-------- -------- ----------
1,047,160 127,438 (a) 1,174,598
Accumulated depreciation (225,890) (225,890)
-------- -------- ----------
821,270 127,438 948,708
Under development, including land 74,925 74,925
-------- -------- ----------
896,195 127,438 1,023,633
Cash and cash equivalents 30,283 (8,388)(b) 21,895
Restricted cash 1,459 1,459
Deferred financing costs, net 19,537 19,537
Other assets 13,287 18 (c) 13,305
-------- -------- ----------
$960,761 $119,068 $1,079,829
======== ======== ==========
LIABILITIES
Mortgages and notes payable
Line of credit $118,000 (d) $118,000
Tax-exempt mortgage bond financings $328,372 328,372
Conventional mortgage financings 134,150 134,150
Mortgage notes payable to The Irvine
Company 51,023 51,023
Tax-exempt assessment district debt 21,793 21,793
-------- -------- ----------
535,338 118,000 653,338
Accounts payable and accrued liabilities 22,355 550 (e) 22,905
Security deposits 6,412 518 (f) 6,930
-------- -------- ----------
564,105 119,068 683,173
PARTNERS' CAPITAL
43,864 partnership units outstanding
General partner, 19,783 partnership units 210,294 210,294
Limited partners, 24,081 partnership units 186,362 186,362
-------- -------- ----------
396,656 396,656
-------- -------- ----------
$960,761 $119,068 $1,079,829
======== ======== ==========
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
(unaudited, in thousands, except per unit amounts) Historical Acquisition Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES
Rental income $42,092 $2,992 (g) $45,084
Other income 940 44 (g) 984
Interest income 248 248
------- ------ -------
43,280 3,036 46,316
------- ------ -------
EXPENSES
Property expenses 9,186 591 (h) 9,777
Real estate taxes 3,465 356 (i) 3,821
Property management fees 1,215 60 (j) 1,275
Interest expense, net 6,861 1,973 (k) 8,834
Amortization of deferred financing costs 649 649
Depreciation and amortization 6,751 697 (l) 7,448
General and administrative 1,634 1,634
------- ------ -------
29,761 3,677 33,438
------- ------ -------
NET INCOME $13,519 ($641) $12,878
======= ====== =======
ALLOCATION OF NET INCOME (LOSS):
General partner $6,111 ($290) $5,821
Limited partners $7,408 ($351) $7,057
UNIT DATA:
Weighted average number of units outstanding 42,230 42,230
Net income per unit $0.32 $0.30
Cash distributions declared and paid per unit $0.365 $0.365
======= =======
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
(unaudited, in thousands, except per unit amounts) Historical Acquisition Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUES
Rental income $154,925 $11,591 (g) $166,516
Other income 3,162 173 (g) 3,335
Interest income 611 611
-------- ------- --------
158,698 11,764 170,462
-------- ------- --------
EXPENSES
Property expenses 33,859 2,176 (h) 36,035
Real estate taxes 13,496 1,422 (i) 14,918
Property management fees 4,502 240 (j) 4,742
Interest expense, net 29,506 7,891 (k) 37,397
Amortization of deferred financing costs 2,627 2,627
Depreciation and amortization 27,239 2,786 (l) 30,025
General and administrative 6,277 6,277
-------- ------- --------
117,506 14,515 132,021
-------- ------- --------
NET INCOME $41,192 ($2,751) $38,441
======== ======= ========
ALLOCATION OF NET INCOME (LOSS):
General partner $18,746 ($1,251) $17,495
Limited partner $22,446 ($1,500) $20,946
UNIT DATA:
Weighted average number of units outstanding 38,953 38,953
Net income per unit $1.06 $0.99
Cash distributions declared and paid per unit $1.440 $1.440
======== ========
</TABLE>
See accompanying notes.
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Irvine Apartment Communities, Inc. and
Irvine Apartment Communities, L.P.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. BASIS OF PRESENTATION
Irvine Apartment Communities, L.P. (the "Operating Partnership")
acquired a 923-unit apartment community (the "Property") located in La
Jolla, California on June 30, 1997. As of March 31, 1997, Irvine
Apartment Communities, Inc. (the "Company"), owned a 45.1% general
partnership interest in and was the sole general partner of the
Operating Partnership.
The pro forma consolidated financial statements of the Company and the
Operating Partnership are unaudited and have been prepared based on the
historical financial statements of the Company and the Operating
Partnership as of March 31, 1997 and for the three months then ended and
the year ended December 31, 1996.
The unaudited pro forma consolidated balance sheets as of March 31, 1997
are based on the unaudited historical financial statements of the Company
and the Operating Partnership and have been prepared as if the acquisition
of the Property (referred to as the "Acquisition Transaction") had occurred
as of March 31, 1997. The unaudited pro forma consolidated statements of
operations for the three months ended March 31, 1997 have been prepared
based on the historical operations of the Company and Operating Partnership
for such period as if the Acquisition Transaction occurred at the beginning
of the period presented. The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1996 have been prepared based on
the historical operations of the Company and the Operating Partnership for
1996 as if the Acquisition Transaction occurred as of January 1, 1996. In
management's opinion, all adjustments necessary to reflect the effect of
the Acquisition Transaction have been made.
The pro forma information is not necessarily indicative of what the
Company's and the Operating Partnership's financial condition or results of
operations would have been if the Acquisition Transaction had occurred at
the beginning of the periods presented, nor does it purport to project the
Company's and the Operating Partnership's financial position or results of
operations at any future date or for any future period. In addition, the
historical operating results for the three months ended March 31, 1997 are
not necessarily indicative of the results to be obtained by the Company and
the Operating Partnership for the year ending December 31, 1997. The
following information should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
and all of the financial statements in the Company's annual report on Form
10-K, the Operating Partnership's Registration Statement on Form 10 and
quarterly filings with the Securities and Exchange Commission.
2. PRO FORMA ADJUSTMENTS
(a) Increase in real estate assets results from the purchase of the Property
for $127,000 and related closing and preacquisition costs of $438.
(b) Decrease in cash and cash equivalents reflects the cash used to fund a
portion of the purchase price of the Property.
(c) Increase in other assets results from prepaid costs of $18 related to the
Property at the time of acquisition.
(d) Increase in the line of credit reflects the use of the Operating
Partnership's unsecured line of credit to fund a portion of the purchase
price of the Property.
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(e) Increase in accounts payable and accrued liabilities results from unearned
rent of $130 and accrued preacquisition costs of $420 related to the
Property at the time of acquisition.
(f) Increase in security deposits related to the Property at the time of
the acquisition.
(g) Increase in rental income and other income reflects the operations of the
Property for the period indicated.
(h) Increase in property expenses reflects the operations of the Property
reduced for the estimated savings in property and liability insurance
expense in the amount of $134 for the year ended December 31, 1996 and $16
for the three months ended March 31, 1997. It is the opinion of management
that the Property is adequately covered by insurance.
(i) Increase in real estate taxes based on an estimated increase in the
assessed value of the Property resulting from the purchase. The estimated
assessed value is $127,000 with an effective annual tax rate of 1.12%.
(j) Increase in property management fees based on the negotiated independent
third party property management contract for the Property in the amount of
$20,000 per month.
(k) Reflects additional interest expense associated with borrowings used to
finance the acquisition, calculated based on the interest rate in effect at
the time of the borrowing of 6.69%. A .125% change in the interest rate of
the variable rate borrowings used to finance the acquisition would change
pro forma interest expense by $147 for the year ended December 31, 1996 and
$37 for the three months ended March 31, 1997.
(l) Represents additional depreciation computed on a straight line basis using
(1) estimated remaining useful life of 40 years and the depreciable cost
basis of the Property ($102,863, excluding land and personal property) and
(2) estimated seven year useful life for the related personal property
($1,500).
(m) Represents the portion of all preceding pro forma adjustments attributable
to the minority interests in the Operating Partnership based on an average
ownership interest in the Company of 54.51% for the year ended December 31,
1996 and 54.80% for the three months ended March 31, 1997.
3. ACQUISITION CONSIDERATIONS
In assessing the Property, the Company's and the Operating Partnership's
management considered the existing leases, which are the primary source of
revenue, the occupancy rates, the competitive nature of the markets and
comparative rental rates. Furthermore, current and anticipated maintenance
and repair costs, real estate taxes and capital improvement requirements
were evaluated. Management is not aware of any material factors that would
cause the reported financial information in the accompanying pro forma
consolidated balance sheets as of March 31, 1997, pro forma consolidated
statements of operations for the three months ended March 31, 1997 and the
pro forma consolidated statements of operations for the year ended December
31, 1996 to be misleading.
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INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
Irvine Apartment Communities, Inc.:
We have audited the accompanying statement of revenues and certain operating
expenses of Renaissance Villas (the "Property") for the year ended December 31,
1996. This financial statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this financial
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 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 operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the current report on Form
8-K of Irvine Apartment Communities, Inc. and Irvine Apartment Communities, L.P.
(described in Note 1) and is not intended to be a complete presentation of the
Property's revenues and operating expenses.
In our opinion, the financial statement presents fairly, in all material
respects, the statement of revenues and certain operating expenses of the
Property for the year ended December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
June 18, 1997
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Renaissance Villas
STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months Ended Year Ended
(in thousands) March 31, 1997 December 31, 1996
------------------ -----------------
(unaudited)
<S> <C> <C>
REVENUES
Rental income $2,992 $11,591
Other income 44 173
------ -------
3,036 11,764
------ -------
CERTAIN OPERATING EXPENSES
Property expenses 607 2,310
Real estate taxes 238 901
Property management fees 129 402
------ -------
974 3,613
------ -------
NET INCOME $2,062 $8,151
====== =======
</TABLE>
See accompanying notes.
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Renaissance Villas
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The Property, a luxury apartment community consisting of 923 units, common area
improvements, recreational facilities, and amenities located in La Jolla,
California, is in the process of being sold by AOKI Construction (CA) Co., Ltd.,
a California corporation ("ACCA"), to Irvine Apartment Communities, L.P., a
Delaware limited partnership (the "Operating Partnership"). Irvine Apartment
Communities, Inc., a Maryland corporation, owns a 45.1% general partnership
interest in and is the sole general partner of the Operating Partnership. Prior
to April 7, 1997, ACCA was a 99.5% general partner and AOKI Pacific Corporation
("APC") was a .5% general partner in Renaissance Villas Associates, a California
general partnership (the "Partnership"). On April 7, 1997, APC assigned its
interest in the Partnership to ACCA, thus making ACCA the sole remaining
partner.
Interest, depreciation and amortization not directly related to the future
operations of the Property have been excluded from the statement of revenues and
certain operating expenses in accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. ACCA and APC are not aware of any material
factors relating to the Property that would cause the reported financial
information not to be indicative of future operating results.
The unaudited statement of revenues and certain operating expenses for the three
months ended March 31, 1997 has been prepared in accordance with the
Partnership's accounting policies applied to the year ended December 31, 1996.
In the opinion of management, all adjustments and eliminations, consisting only
of normal recurring adjustments, necessary to present fairly the statement of
revenues and certain operating expenses of the Property for the three months
ended March 31, 1997 have been included. The results of operations for this
interim period are not necessarily indicative of the results for the full year.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Apartment units are leased for terms of one year or less. Rental revenue is
recognized on an accrual basis.
REPAIR AND MAINTENANCE
Recurring repair and maintenance costs are expensed as incurred.
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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.
IRVINE APARTMENT COMMUNITIES, INC.
Date: July 22, 1997 By: /s/ SHAWN HOWIE
-------------------------------------
Shawn Howie
Vice President, Corporate Finance
and Controller
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities, Inc.,
its sole general partner
Date: July 22, 1997 By: /s/ SHAWN HOWIE
-------------------------------------
Shawn Howie
Vice President, Corporate Finance
and Controller
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EXHIBIT 23.1
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-27183 of Irvine Apartment Communities, Inc. and Registration Statement No.
333-27181 of Irvine Apartment Communities, L.P., all on Form S-3, in
Registration Statement No. 333-4390 of Irvine Apartment Communities, Inc. on
Form S-8 and in the Post-Effective Amendment No. 1 to Registration Statement
Nos. 33-77808 and 33-77810 on Form S-8 of Irvine Apartment Communities, Inc. of
our report dated June 18, 1997 on the statement of revenues and certain
operating expenses of Renaissance Villas for the year ended December 31, 1996,
appearing in this Current Report on Form 8-K/A of Irvine Apartment Communities,
Inc. and Irvine Apartment Communities, L.P. dated July 22, 1997.
DELOITTE & TOUCHE LLP
Los Angeles, California
July 22, 1997
