<PAGE> 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
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) MAY 2, 1996
COMMISSION FILE NUMBER: 1-12546
PACIFIC GULF PROPERTIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MARYLAND 33-0577520
(STATE OF INCORPORATION) (I.R.S. EMPLOYER)
IDENTIFICATION NO.)
</TABLE>
363 SAN MIGUEL DRIVE, SUITE 100, NEWPORT BEACH, CALIFORNIA 92660-7805
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) 714-721-2700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
FORM 8-K/A
The attached pro forma and audited financial statements are provided as an
amendment to the Form 8-K dated May 7, 1996.
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pacific Gulf Properties Inc. (the "Company") completed the following
acquisitions and dispositions in the third and fourth quarter of 1995:
TUKWILA BUSINESS PARK ACQUISITION
On December 15, 1995, the Company acquired an industrial business park
containing four multitenant buildings with 475,629 leasable square feet located
in Tukwila, Washington (the "Tukwila Business Park"). The Company purchased
Tukwila Business Park from Koll Business Center -- Seattle, a Washington limited
partnership for a total consideration of $17,361,000. The Company funded the
acquisition with proceeds from the Texas apartment portfolio disposition
described below and from a mortgage note payable to a bank totaling $11,765,000,
bearing interest at LIBOR plus 1.5% (at date of acquisition), maturing December
2002.
KONWISER ACQUISITION PROPERTIES
On August 16, 17 and 29, 1995 the Company acquired a majority interest in
11 multifamily properties located in Southern California (the "Konwiser
Acquisition Properties") from a consortium group of partnerships headed by Mr.
John Konwiser. The Konwiser Acquisition Properties consist of the following
properties:
<TABLE>
<CAPTION>
DATE OF
PROPERTY LOCATION UNITS ACQUISITION
--------------- ---------------- ------ ----------------
<S> <C> <C> <C>
Daisy V Covina, CA 38 August 29, 1995
Daisy VII Diamond Bar, CA 204 August 17, 1995
Daisy XII San Dimas, CA 102 August 29, 1995
Daisy XVI West Covina, CA 250 August 17, 1995
Daisy XVII San Dimas, CA 156 August 17, 1995
Lariat San Dimas, CA 30 August 29, 1995
Daisy XIX Ontario, CA 125 August 16, 1995
Daisy XX Ontario, CA 155 August 16, 1995
Sunnyside I San Dimas, CA 164 August 16, 1995
Sunnyside II Ontario, CA 60 August 16, 1995
Sunnyside III Ontario, CA 84 August 16, 1995
------
1,368
=====
</TABLE>
The Company is the sole general partner of PGP Inland Communities, L.P.
("PGP Inland"), the new limited partnership to which the consortium group of
partnerships contributed the Konwiser Acquisition Properties. The Company
received a 78% ownership interest in PGP Inland in exchange for a cash
contribution of approximately $12,800,000. The owners of the consortium group of
partnerships contributing the Konwiser Acquisition Properties received limited
partnership units in PGP Inland, representing a combined ownership interest of
22%. In connection with the contribution of the Konwiser Acquisition Properties
at a gross asset value of approximately $71,469,000, PGP Inland assumed
$24,850,000 of existing tax-exempt indebtedness and obtained $30,263,000 of new
indebtedness secured by the properties.
TEXAS APARTMENT PORTFOLIO DISPOSITION.
In November of 1995, the Company sold its Texas apartment portfolio to four
entities controlled by Capitol Investment Associates Corporation. The Texas
apartment portfolio consisted of four properties containing 1,085 apartment
units in San Antonio, Austin and Houston, and represented the Company's entire
holdings in the state of Texas. The Company received consideration totaling
$31,125,000: $30,125,000 in cash
1
<PAGE> 3
and four notes receivable totaling $1,000,000. The notes receivable mature in
seven years, bear interest at 9%, require monthly interest-only payments and are
secured by limited partnership interests in the purchasing entities. In
conjunction with the sale, the Company repaid the related mortgage notes payable
secured by the Texas apartment portfolio which totaled $14,438,000 and
$2,000,000 of the Company's revolving line of credit.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
None.
ITEM 5. OTHER EVENTS.
None.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
None.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) See index to Financial Statements attached hereto
2
<PAGE> 4
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.
PACIFIC GULF PROPERTIES INC.
/s/ Donald G. Herrman
-------------------------------------
Donald G. Herrman
Executive Vice President,
Chief Financial Officer and Secretary
DATED: May 20, 1996
------------------------------
3
<PAGE> 5
PACIFIC GULF PROPERTIES INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 1995.................................................................. 5
Notes to Pro Forma Condensed Consolidated Statement of Operations..................... 6
TUKWILA BUSINESS PARK
Report of Independent Auditors........................................................ 8
Statement of Revenues and Certain Expenses for the Period January 1, 1995
Through Date of Acquisition by Pacific Gulf Properties Inc......................... 9
Notes to Statement of Revenues and Certain Expenses................................... 10
KONWISER ACQUISITION PROPERTIES
Report of Independent Auditors........................................................ 12
Statement of Revenues and Certain Expenses for the Period January 1, 1995
Through the Date Pacific Gulf Properties Inc. Acquired its Ownership Interest...... 13
Notes to Statement of Revenues and Certain Expenses................................... 14
</TABLE>
4
<PAGE> 6
PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
REVENUE
Rental income
Multifamily................................... $ 24,898 $ 926(A) $ 25,824
Industrial.................................... 12,193 3,272(A) 15,465
---------- ------- ----------
37,091 4,198 41,289
EXPENSES
Rental property expenses
Multifamily................................... 10,215 574(A) 10,789
Industrial.................................... 2,567 1,317(A) 3,884
---------- ------- ----------
12,782 1,891 14,673
Depreciation..................................... 6,081 584(B) 6,665
Interest (including amortization of
financing costs)............................... 14,066 3,237(C) 17,303
General and administrative....................... 2,423 -- 2,423
---------- ------- ----------
35,352 5,712 41,064
---------- ------- ----------
INCOME BEFORE GAIN ON SALE OF
PROPERTIES(D).................................... $ 1,739 $(1,514) $ 225
========== ======= ==========
WEIGHTED AVERAGE COMMON SHARES (E)................. 4,830,723 4,830,723
========== ==========
INCOME BEFORE GAIN ON SALE OF PROPERTIES
PER COMMON SHARE................................. $ .36 $ .05
========== ==========
</TABLE>
---------------
The accompanying notes are an integral part of the pro forma financial
statement. References in parentheses are to Note 2.
5
<PAGE> 7
PACIFIC GULF PROPERTIES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1. -- BASIS OF PRESENTATION
The Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1995 for Pacific Gulf Properties Inc. (the "Company") is
based on the audited historical financial statements of the Company and has been
prepared as if each of the following transactions had occurred as of January 1,
1995: (i) the purchase of an industrial business park comprised of four
multitenant buildings with 475,629 leasable square feet located in Tukwila,
Washington (the "Tukwila Business Park"), (ii) the acquisition of a majority
ownership interest in the Konwiser Acquisition Properties consisting of 11
multifamily properties containing 1,368 units and located in Southern
California, and (iii) the sale of the Company's Texas apartment portfolio. In
management's opinion, all adjustments necessary to reflect the effect of the
acquisition and disposition transactions referred to above have been made. The
pro forma financial statement should be read in conjunction with the historical
financial statements of the Company included in the annual report on Form 10-K
and in quarterly filings with the Securities and Exchange Commission.
The pro forma condensed consolidated information is not necessarily
indicative of what the Company's financial position or results of operations
would have been assuming the completion of the described transactions as of the
beginning of the periods indicated, nor does it purport to project the Company's
financial position or results of operations at any future date or for any future
period.
NOTE 2. -- PRO FORMA ADJUSTMENTS
(A) The pro forma adjustments for the year ended December 31, 1995 include the
actual revenues and certain expenses of multifamily and industrial
properties for the period prior to their acquisition or disposal by the
Company as follows:
<TABLE>
<CAPTION>
ACQUISITIONS
---------------------- DISPOSITION
TUKWILA KONWISER TEXAS TOTAL
BUSINESS ACQUISITION APARTMENT PRO FORMA
PARK PROPERTIES PORTFOLIO ADJUSTMENT
-------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Rental income
Multifamily..................................... $ -- $6,404 $(5,478) $ 926
Industrial...................................... 3,272 -- 3,272
------ ------ ------- ------
3,272 6,404 (5,478) 4,198
------ ------ ------- ------
Rental property expenses
Multifamily..................................... -- 2,976 (2,402) 574
Industrial...................................... 1,317 -- 1,317
------ ------ ------- ------
1,317 2,976 (2,402) 1,891
------ ------ ------- ------
$1,955 $3,428 $(3,076) $2,307
====== ====== ======= ======
</TABLE>
Certain rental property expenses have been adjusted to reflect increased
property taxes based on the properties' acquisition cost and current
property tax rates.
(B) Reflects additional depreciation expense of $1,117 relating to the
multifamily and industrial properties acquired by the Company, net of
the reduction in depreciation due to the sale of the Company's Texas
apartment portfolio of $533, which represents the actual depreciation
relating to the Texas apartment portfolio for the year ended December 31,
1995. The additional depreciation expense on the multifamily and
industrial properties acquired by the Company during 1995 is computed for
the period prior to their acquisition utilizing the estimated remaining
useful lives of 40 years and the depreciable cost basis of the properties
as follows:
<TABLE>
<CAPTION>
DEPRECIABLE PRO FORMA
DATE OF PURCHASE BASIS DEPRECIATION
PROPERTY ACQUISITION PRICE (EXCLUDING LAND) EXPENSE
------------------------- ------------------ -------- ---------------- ------------
<S> <C> <C> <C> <C>
Konwiser Acquisition
Properties............. August 16, 1995 $71,469 $ 52,281 $ 817
Tukwila Business Park.... December 15, 1995 17,250 11,019 264
Personal Property
(5 year life).......... August 16, 1995 289 289 36
------
$1,117
======
</TABLE>
(C) Reflects additional interest expense of $3,983 relating to the multifamily
and industrial properties acquired by the Company, net of the reduction in
interest due to the sale of the Company's Texas apartment portfolio of
$746, which represents the actual interest relating to the Texas apartment
portfolio for the year ended December 31, 1995. The additional interest
expense associated with the borrowings used to finance the purchase of the
multifamily and industrial properties acquired by the Company during 1995
was calculated for the period prior to their acquisition based on existing
rates for assumed debt and specific interest rates on new borrowings as
follows:
<TABLE>
<CAPTION>
PRO FORMA
INTEREST INTEREST
PROPERTY DEBT RATE EXPENSE
----------------------------------------------------- ------- -------- -----------
<S> <C> <C> <C>
Konwiser Acquisition Properties...................... $30,263 8.0% $ 1,513
13,000 8.0% 650
24,850 5.7% 885
Tukwila Business Park................................ 11,765 7.4% 838
Amortization of loan fees and financing costs on
related borrowings financing the acquisitions...... 97
-----------
$ 3,983
===========
</TABLE>
6
<PAGE> 8
(D) Excludes the nonrecurring gain on the sale of the Texas apartment
portfolio in November 1995 of $6,664.
(E) Represents the weighted average of common shares and common stock
equivalents outstanding during the year ended December 31, 1995. Common
stock equivalents include stock options which are considered dilutive for
purposes of computing primary earnings per share.
7
<PAGE> 9
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying statement of revenues and certain expenses
of Tukwila Business Park for the period January 1, 1995 through date of
acquisition by Pacific Gulf Properties Inc. The statement is the responsibility
of management. Our responsibility is to express an opinion on the 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 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 presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of Pacific Gulf Properties
Inc.) as described in Note 2 to the statement and is not intended to be a
complete presentation of the revenues and expenses of Tukwila Business Park.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of
Tukwila Business Park for the period January 1, 1995 through date of acquisition
by Pacific Gulf Properties Inc., in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
April 30, 1996
8
<PAGE> 10
TUKWILA BUSINESS PARK
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1995 THROUGH DATE OF ACQUISITION BY
PACIFIC GULF PROPERTIES
<TABLE>
<S> <C>
REVENUES
Rental and other income........................................................ $3,272,000
CERTAIN EXPENSES
Property operating and maintenance............................................. 735,000
Real estate taxes.............................................................. 215,000
Management fees................................................................ 334,000
----------
1,284,000
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES........................................... $1,988,000
==========
</TABLE>
See accompanying notes.
9
<PAGE> 11
TUKWILA BUSINESS PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1995 THROUGH DATE OF ACQUISITION BY
PACIFIC GULF PROPERTIES INC.
NOTE 1. -- ORGANIZATION
Tukwila Business Park (the "Property") contains 475,629 leasable square
feet of industrial space and is located in Tukwila, Washington. Pacific Gulf
Properties Inc. (the "Company") purchased the Property on December 15, 1995 from
Koll Business Center -- Seattle, a Washington limited partnership ("Koll") and
The New England Life Insurance Company for a total consideration of $17,361,000.
NOTE 2. -- BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the period January 1, 1995 through date of acquisition by
Pacific Gulf Properties Inc., and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and amortization
of loan fees. Consequently, the revenues in excess of certain expenses as
presented is not intended to be a complete presentation of the Property's
revenues and expenses nor is it intended to be comparable to the proposed future
operations of the Property.
NOTE 3. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than a year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
NOTE 4. -- MANAGEMENT FEES
The Property is subject to agreements with Koll Management Services, Inc.,
a property management company affiliated with Koll, to maintain and manage the
operations of the Property. Management fees are based on 3% of income, as
defined, from the Property.
10
<PAGE> 12
TUKWILA BUSINESS PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
FOR THE PERIOD JANUARY 1, 1995 THROUGH DATE OF ACQUISITION BY
PACIFIC GULF PROPERTIES INC.
NOTE 5. -- FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year 2000. These leases contain provisions for rent increases based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................... $1,879,000
1997..................................................... 1,180,000
1998..................................................... 541,000
1999..................................................... 263,000
2000..................................................... 120,000
</TABLE>
11
<PAGE> 13
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of the eleven multifamily properties in which Pacific Gulf Properties
Inc. (the "Company") acquired a majority interest from a consortium group of
partnerships headed by Mr. John Konwiser (the "Konwiser Acquisition Properties")
for the period January 1, 1995 through the date the Company acquired its
ownership interest. The statement is the responsibility of management. Our
responsibility is to express an opinion on the 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 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 presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of Pacific Gulf Properties
Inc.) as described in Note 2 to the statement and is not intended to be a
complete presentation of the revenues and expenses of the aforementioned
properties.
In our opinion, the statement referred to above presents fairly, in all
material respects, the combined revenues and certain expenses, as defined above,
of the Konwiser Acquisition Properties for the period January 1, 1995 through
the date the Company acquired its ownership interest, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
April 12, 1996
12
<PAGE> 14
KONWISER ACQUISITION PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1995 THROUGH THE DATE PACIFIC GULF PROPERTIES INC.
ACQUIRED ITS OWNERSHIP INTEREST
<TABLE>
<S> <C>
REVENUES
Rental and other income $6,404,000
CERTAIN EXPENSES
Property operating and maintenance 2,151,000
Real estate taxes 430,000
Management fees 320,000
----------
2,901,000
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $3,503,000
==========
</TABLE>
See accompanying notes.
13
<PAGE> 15
KONWISER ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE PERIOD JANUARY 1, 1995 THROUGH THE DATE PACIFIC GULF PROPERTIES INC.
ACQUIRED ITS OWNERSHIP INTEREST
NOTE 1 -- ORGANIZATION
In 1995, Pacific Gulf Properties Inc. (the "Company") acquired a majority
interest in 11 multifamily properties located in Southern California (the
"Konwiser Acquisition Properties") from a consortium group of partnerships
headed by Mr. John Konwiser. The Konwiser Acquisition Properties consist of the
following properties:
<TABLE>
<CAPTION>
PROPERTY LOCATION UNITS DATE OF ACQUISITION
--------------- ----------------- ----- -------------------
<S> <C> <C> <C>
Daisy V Covina, CA 38 August 29, 1995
Daisy VII Diamond Bar, CA 204 August 17, 1995
Daisy XII San Dimas, CA 102 August 29, 1995
Daisy XVI West Covina, CA 250 August 17, 1995
Daisy XVII San Dimas, CA 156 August 17, 1995
Lariat San Dimas, CA 30 August 29, 1995
Daisy XIX Ontario, CA 125 August 16, 1995
Daisy XX Ontario, CA 155 August 16, 1995
Sunnyside I San Dimas, CA 164 August 16, 1995
Sunnyside II Ontario, CA 60 August 16, 1995
Sunnyside III Ontario, CA 84 August 16, 1995
-----
1,368
=====
</TABLE>
The Company is the sole general partner of PGP Inland Communities, L.P.
("PGP Inland"), the new limited partnership to which the consortium group of
partnerships contributed the Koniser Acquisition Properties. The Company
received a 78% ownership interest in PGP Inland in exchange for a cash
contribution of approximately $12,800,000. The owners of the consortium group of
partnerships contributing the Konwiser Acquisition Properties received limited
partnership units in PGP Inland, representing a combined ownership interest of
22%. In connection with the contribution of the Konwiser Acquisition Properties
at a gross asset value of approximately $71,469,000, PGP Inland assumed
$24,850,000 of existing tax-exempt indebtedness and obtained $30,263,000 of new
indebtedness secured by the properties.
NOTE 2 -- BASIS OF PRESENTATION
The combined statement of revenues and certain expenses presents the
operations of the Konwiser Acquisition Properties for the period January 1, 1995
through the date the Company acquired its ownership interest, and has been
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in a Registration Statement on
Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the properties have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and the
amortization of loan fees. Consequently, the combined revenues in excess of
certain expenses as presented is not intended to be a complete presentation of
the properties' revenues and expenses nor is it intended to be comparable to the
proposed future operations of the properties.
14
<PAGE> 16
KONWISER ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
FOR THE PERIOD JANUARY 1, 1995 THROUGH THE DATE
THE COMPANY ACQUIRED ITS OWNERSHIP INTEREST
NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Rental income attributable to residential leases is recorded when due from
tenants. Apartment units are rented under lease agreements with terms of one
year or less.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
NOTE 4 -- MANAGEMENT FEES
The properties are subject to agreements with The Konwiser Corporation, a
property management company substantially owned by Mr. John Konwiser, to
maintain and manage the operations of the properties. Management fees are based
on 5% of the gross receipts of the properties.
15
