<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): October 3, 1997
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 1934 Act File Number: 1-13174
Maryland 54-1681655
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2345 Crystal Drive
Crystal City, VA 22202
(Address of principal (Zip Code)
executive offices)
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 second amendment
to the Form 8-K dated October 3, 1997 and filed on October 20, 1997 and the 8-
K/A filed on November 10, 1997 for Charles E. Smith Residential Realty, Inc.
(A) Pro Forma financial information beginning at page F-2
(B) Exhibits
99.1 Report of Independent Public Accountants--Lincoln Towers
99.2 Statement of Revenues and Certain Expenses of Lincoln Towers for the
nine months ended September 30, 1997 (unaudited) and the year ended
December 31, 1996 (audited).
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
Page
----
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Pro Forma (unaudited) Consolidated Balance Sheet F-2
as of September 30, 1997
Pro Forma (unaudited) Consolidated Statement of F-3
Operations for the nine months ended September 30, 1997
Pro Forma (unaudited) Consolidated Statement of F-4
Operations for the year ended December 31, 1996
Notes and Management's Assumptions to Unaudited Pro Forma
Consolidated Financial Information F-5
F-1
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------
Acquisitions
-----------------------------------------
Lincoln One East 2000
ASSETS Historical Towers (A) Delaware (C) Commonwealth (D)
---------- ------ -------- ------------
<S> <C> <C> <C> <C>
Rental property, at predecessor cost, net $ 262,808
Rental property, acquired and developed, net 329,338 88,878 (F) 42,550 (F) 27,432 (F)
Rental property under development 14,708
Cash and cash equivalents 5,216 (828) (82)
Tenants' security deposits 2,379 117 436 130
Escrow funds 8,297
Investment in and advances to Property Service Businesses and other 16,603
Deferred charges, net 16,216
Other assets 23,903
-------------
Total assets $ 679,468
=============
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 486,942 13,310
Notes payable 68,000 12,000 42,500
Accounts payable and accrued expenses 12,079 150 50 100
Tenants' security deposits 2,379 117 436 130
-------------
Total liabilities 569,400
-------------
Minority Interest 55,427 13,940
-------------
Shareholders' equity
Preferred stock
Series A Cumulative Convertible Redeemable Preferred Stock 19,772
Series B Cumulative Convertible Redeemable Preferred Stock - 34,629 (B)
Common stock 135 15 (B)
Additional paid-in capital 41,840 41,256 (B)
Retained deficit (7,106)
-------------
Total shareholder's equity 54,641
-------------
Total liabilities and shareholder's equity $ 679,468
=============
<CAPTION>
Other
ASSETS Adjustments Pro Forma
----------- ---------
<S> <C> <C>
Rental property, at predecessor cost, net $ 262,808
Rental property, acquired and developed, net 488,198
Rental property under development 14,708
Cash and cash equivalents 4,306
Tenants' security deposits 3,062
Escrow funds 8,297
Investment in and advances to Property Service Businesses and other 16,603
Deferred charges, net 16,216
Other assets 23,903
------------
Total assets $ 838,101
============
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 500,252
Notes payable 122,500
Accounts payable and accrued expenses 12,379
Tenants' security deposits 3,062
------------
Total liabilities 638,193
------------
Minority Interest 23,670 (E) 93,037
------------
Shareholders' equity
Preferred stock
Series A Cumulative Convertible Redeemable Preferred Stock 19,772
Series B Cumulative Convertible Redeemable Preferred Stock 34,629
Common stock 150
Additional paid-in capital (23,670)(E) 59,426
Retained deficit (7,106)
------------
Total shareholder's equity 106,871
------------
Total liabilities and shareholder's equity $ 838,101
============
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro forma Adjustments
--------------------------------------------------
Acquisitions
--------------------------------------------------
Crystal Crystal The Lincoln
RENTAL PROPERTIES Historical Plaza (A) Towers (A) Kenmore (A) Towers
---------- ------- ------- ------- -------
<S> <S> <C> <C> <C> <C>
Revenues $ 145,088 1,058 1,893 517 8,378
Expenses
Operating costs 52,062 440 625 258 2,743
Real estate taxes 9,096 58 116 37 530
Depreciation and amortization 15,440 - - - -
----------- ------ ------- ------- -------
Total expenses 76,598 498 741 295 3,273
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 3,636
Corporate general and administrative expenses (4,583)
Interest income 768
Interest expense (33,664) (451) (D) (576) (D) (18) (D) (638) (D)
----------- ------ ------- ------- -------
Net income of the Operating Partnership 34,647 109 576 204 4,467
Minority Interest (17,435)
-----------
Net income 17,212
Less: Income attributable to Series A preferred shares 384
Income attributable to Series B preferred shares -
------------
$ 16,828
============
Net income per common share $ 1.32
============
Weighted average common shares outstanding 12,795
============
<CAPTION>
Pro forma Adjustments
---------------------------------------------
Acquisitions
---------------------------
One East 2000 Other
RENTAL PROPERTIES Delaware Commonwealth Adjustments Pro Forma
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues 4,789 2,624 $ 164,347
Expenses
Operating costs 1,333 1,045 (676) (B) 57,830
Real estate taxes 725 182 10,744
Depreciation and amortization - - 2,983 (C) 18,423
--------- ------------ ----------- ----------
Total expenses 2,058 1,227 2,307 86,997
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses (141) (B) 3,495
Corporate general and administrative expenses (4,583)
Interest income 768
Interest expense (2,260) (D) (581) (D) 853 (D) (37,335)
--------- ------------ ----------- ----------
Net income of the Operating Partnership 471 816 (1,595) 39,695
Minority Interest (1,039) (E) (18,474)
----------- ----------
Net income 21,221
Less: Income attributable to Series A preferred shares 384
Income attributable to Series B preferred shares 1,861 (G) 1,861
----------
$ 18,976
==========
Net income per common share $ 1.33
==========
Weighted average common shares outstanding 14,245
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Proforma Adjustments
------------------------------------------------------------
Acquisitions
------------------------------------------------------------
Crystal Crystal The Lincoln One East
RENTAL PROPERTIES Historical Plaza Towers Kenmore Towers Delaware
------------ -------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 166,283 7,557 11,463 3,058 11,001 6,308
Expenses
Operating costs 65,350 2,772 4,199 1,311 3,575 2,015
Real estate taxes 10,429 390 671 229 669 925
Depreciation and amortization 17,931 - - - - -
------------ -------- --------- ------- --------- ---------
Total expenses 93,710 3,162 4,870 1,540 4,244 2,940
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 7,846
Corporate general and administrative expenses (3,025)
Interest income 1,029
Interest expense (43,606) (2,704) (D) (3,456) (D) (109) (D) (860) (D) (3,047) (D)
------------ -------- --------- ------- --------- ---------
Net income of the Operating Partnership 34,817 1,691 3,137 1,409 5,897 321
Minority Interest (19,062)
Distributions in excess of earnings allocated to
Minority Interest (4,778)
------------
Net income 10,977
Less: Income attributable to Series
B preferred shares -
------------
$ 10,977
============
Net income per common share $ 1.11
============
Weighted average common shares outstanding 9,913
============
</TABLE>
<TABLE>
<CAPTION>
Proforma Adjustments
---------------------------------
Acquisitions
---------------------------------
2000 Other
RENTAL PROPERTIES Commonwealth Adjustments Pro Forma
--------------- ----------- ------------
<S> <C> <C> <C>
Revenues $ 3,353 $ 209,023
Expenses
Operating costs 1,375 (1,075) (B) 79,522
Real estate taxes 282 13,595
Depreciation and amortization - 6,020 (C) 23,951
--------------- ----------- ------------
Total expenses 1,657 4,945 117,068
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses (475) (B) 7,371
Corporate general and administrative expenses (3,025)
Interest income 1,029
Interest expense (904) (D) 5,174 (D) (49,512)
--------------- ----------- ------------
Net income of the Operating Partnership 792 (246) 47,818
Minority Interest (6,224) (E) (25,286)
Distributions in excess of earnings allocated to
Minority Interest 4,778 (F) -
------------
Net income 22,532
Less: Income attributable to Series
B preferred shares 2,421 (G) 2,421
------------
$ 20,111
============
Net income per common share $ 1.77
============
Weighted average common shares outstanding 11,363
============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
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 September 30, 1997
and the unaudited Pro Forma Consolidated Statements of Operations for the
nine months ended September 30, 1997 and the year ended December 31, 1996
are based on the historical financial statements of the Company and
Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1997
is presented as if the Lincoln Towers, One East Delaware, and 2000
Commonwealth acquisitions and related offerings of common and preferred
stock had occurred on September 30, 1997. The unaudited Pro Forma
Consolidated Statement of Operations for the nine months ended September 30,
1997 and the year ended December 31, 1996 are presented as if the
acquisitions of Crystal Plaza, Crystal Towers, The Kenmore, Lincoln Towers,
One East Delaware, and 2000 Commonwealth and related offerings had occurred
at the beginning of the periods. The unaudited pro forma information should
be read in conjunction with the historical financial statements and notes
related thereto appearing in the Company's Form 10-Q and 10-K.
Preparation of the pro forma financial information was based on assumptions
considered appropriate by the Company'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
these transactions have been made.
F-5
<PAGE>
2. Adjustments to Pro Forma Consolidated Balance Sheet:
<TABLE>
<CAPTION>
<S> <C>
(A) Acquisition of Lincoln Towers
Purchase price of rental property $88,500
Acquisition costs 378
--------
Cost basis of rental property $88,878
========
Proceeds from stock sales $75,900
Proceeds from line of credit 12,000
Other 978
--------
$88,878
========
(B) Sale of 1,450,000 shares of Common Stock ($28.50 share price)
Sale of 1,216,666 shares of Series B Preferred Stock ($28.50 share
price)
Proceeds from sale $76,000
Costs (100)
--------
Net proceeds $75,900
========
Par value of common stock issued $ 15
Additional paid-in capital 41,256
Value of Series B preferred stock issued 34,629
--------
$75,900
========
(C) Acquisition of One East Delaware
Purchase price of rental property $42,500
Acquisition costs 50
--------
Cost basis of rental property $42,550
========
Proceeds from line of credit $42,500
Other 50
--------
$42,550
========
</TABLE>
F-6
<PAGE>
<TABLE>
<S> <C>
(D) Acquisition of 2000 Commonwealth
Purchase price of rental property $ 27,250
Acquisition costs 182
---------
Cost basis of rental property $ 27,432
=========
Value of Operating Partnership units issued $ 13,940
Mortgage debt assumed 13,310
Other 182
---------
$ 27,432
=========
Number of Operating Partnership units issued 464,667
=========
</TABLE>
(E) To adjust the Minority Interest for the issuance of common and
preferred stock and Operating Partnership Units.
(F) Historical and Pro Forma balances for each rental property acquired
subsequent to September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Total Assets
------------------------------------
Historical Purchase Pro Forma
@ 9/30/97 Adjustment @ 9/30/97
---------- ---------- ---------
<S> <C> <C> <C>
Lincoln Towers 81,771 7,107 88,878
One East Delaware 35,011 7,539 42,550
2000 Commonwealth 6,633 20,799 27,432
------- ------ -------
Totals: 123,415 35,445 158,860
======= ====== =======
</TABLE>
F-7
<PAGE>
3. Adjustments to Pro Forma Consolidated Statements of Operations:
(A) Crystal Plaza, Crystal Towers and The Kenmore were all purchased
during the first quarter of 1997. Therefore, for the nine months
ended September 30, 1997, the respective pro forma adjustments
represent the operating results from January 1, 1997 through the
date of purchase.
(B) Operating expenses have been adjusted to eliminate management fees
since the Company's affiliate manages owned properties. For Crystal
Plaza and Crystal Towers, Equity in Income of Property Service
Businesses has also been adjusted to eliminate management fee income
earned on these properties prior to purchase.
(C) 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 purchases occurred on January 1,
1997 for the nine months ended September 30, 1997 and January 1,
1996 for the year ended December 31, 1996.
(D) Represents interest expense for draws on the line-of-credit
(assuming a weighted average interest rate of 7.09% for the nine
months ended September 30, 1997 and 7.17% for the year ended
December 31, 1996) and interest expense for assumed mortgage loans
as follows:
Fixed Rate:
-----------
Crystal Plaza 8.19%
Crystal Towers 7.51%
The Kenmore 9.25%
Variable Rate:
--------------
2000 Commonwealth = 30 Day London Inter Bank Offer Rate
(LIBOR) + 1.10% (6.65% at 12/31/96 and 6.78% at 9/30/97)
The adjustment to reduce interest expense is based on the line-of-
credit interest rates and is due to the pay down of notes payable
with proceeds from the February 1997 common stock offering.
(E) To adjust the Minority Interest for the issuance of common and
preferred stock and Operating Partnership Units.
(F) There are no distributions in excess of earnings allocated to
Minority Interest as a result of the issuance of common and
preferred stock and units in the Operating Partnership restoring a
positive balance in the Minority Interest account.
(G) Represents dividends on the 1,216,666 shares of Series B Preferred
Stock issued to finance the Lincoln Towers acquisition. Dividends
declared were $1.53 per share for the nine months ended September
30, 1997 and $1.99 per share for the year ended December 31, 1996.
F-8
<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 the 6th day of
January 1998.
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
By: /s/ W. D. Minami
----------------
W. D. Minami
Senior Vice President and Chief Financial
Officer of the Registrant
By: /s/ Steven. E. Gulley
---------------------
Steven E. Gulley
Vice President and Controller
of the Registrant
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charles E. Smith Residential Realty, Inc.
We have audited the accompanying statement of revenues and certain expenses of
Lincoln Towers ("the Property") for the year ended December 31, 1996. 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 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.
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. Material amounts, described in Note 1 to the statement
of revenue and certain expenses, that would not be comparable to those resulting
from the proposed future operations of the Property are excluded and the
statement 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 Lincoln Towers for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Washington, D.C.,
October 17, 1997
<PAGE>
LINCOLN TOWERS
--------------
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
-------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------------ -----------------
<S> <C> <C>
REVENUES:
Rental income $8,166,939 $10,620,399
Other income 211,127 380,174
---------- -----------
Total Revenue 8,378,066 11,000,573
CERTAIN EXPENSES:
Payroll and related costs 510,700 643,127
Utilities 670,465 851,251
Repairs and maintenance 459,378 462,786
Real estate taxes 529,695 668,880
Administrative 321,052 522,678
Management fees 269,762 355,339
Other expenses 511,764 739,827
---------- -----------
Total Expenses 3,272,816 4,243,888
---------- -----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $5,105,250 $ 6,756,685
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
LINCOLN TOWERS
--------------
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
----------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
--------------------------------------------------------
AND FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of Lincoln Towers (the "Property") which is a residential
apartment complex in Arlington, VA. The Property consists of two apartment
buildings containing 714 residential units. The Property was acquired by
Charles E. Smith Residential Realty, Inc. (the "Company") on October 3,
1997.
The accompanying statements have been prepared for the purpose of complying
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
and thus, exclude certain expenses, such as interest expense, depreciation
and amortization, certain professional fees and other costs not related to
the future operations of the Property. Management is not aware of any
material factors relating to the Property which would cause the reported
financial information not to be indicative of future operating results.
Significant Accounting Policies
-------------------------------
The accompanying statements were prepared on the accrual basis of
accounting. Rental income attributable to residential leases is recognized
when due from tenants.
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 fiscal year.