<PAGE>
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 25, 2000
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 22202
Crystal City, VA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number including area code: (703) 920-8500
==============================================================================
<PAGE>
Item 2. Property Acquisitions
------- ---------------------
On October 25, 2000, Charles E. Smith Residential Realty L.P. ("the Operating
Partnership"), of which Charles E. Smith Residential Realty, Inc. ("the
Company") is the sole general partner, acquired Harbour House, an 804 unit,
high-rise apartment property located on a 10.6 acre, oceanfront site in
Southeast Florida. The property consists of two 14-story towers constructed in
1962 and 1964, respectively, with amenities including two pools, 26 cabanas, a
tennis court, underground parking and direct beachfront access. The average
unit size is approximately 992 square feet. The purchase price of $94.3 million
was funded through draws on the Company's lines of credit. The Company plans
to invest an additional $25 to $45 million over the next several years,
depending upon the incremental return on investment, to upgrade and reposition
the property.
Item 7. Financial Statements and Exhibits
------- ---------------------------------
(A) Pro forma financial information beginning at page F-2
(B) Historical financial information beginning at page F-7
(C) Exhibits
23 Consent of Independent Public Accountants dated November 7, 2000
<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 8th day of
November 2000.
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
By: /s/ W.D. Minami
-------------------------------------------------
W.D. Minami
Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant
/s/ Steven E. Gulley
-------------------------------------------------
Steven E. Gulley
Chief Accounting Officer of the Registrant
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
Page
----
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Pro Forma (Unaudited) Consolidated Balance Sheet
as of June 30, 2000 F-3
Pro Forma (Unaudited) Consolidated Statement of
Operations for the six months ended June 30, 2000 F-4
Pro Forma (Unaudited) Consolidated Statement of
Operations for the year ended December 31, 1999 F-5
Notes and Management's Assumptions to Unaudited Pro Forma
Consolidated Financial Information F-6
ACQUISITION PROPERTY
Report of Independent Public Accountants - F-7
Statements of Revenues and Certain Expenses of
Harbo L.P. for the six months ended June 30, 2000
(Unaudited) and for the year ended December 31, 1999. F-8
Notes to Statements of Revenues and Certain Expenses
of Harbo L.P. for the six months ended
June 30, 2000 (Unaudited) and for the year
ended December 31, 1999. F-9
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000, and
unaudited Pro Forma Consolidated Statements of Operations for the six months
ended June 30, 2000, and the year ended December 31, 1999, are based on the
historical financial statements of the Company and the Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000, is
presented as if acquisitions had occurred by June 30, 2000. The unaudited Pro
Forma Consolidated Statements of Operations for the six months ended June 30,
2000, and the year ended December 31, 1999, are presented as if the acquisitions
and dispositions 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
Company's Forms 10-Q and 10-K.
Preparation of the unaudited 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 the
transaction have been made.
F-2
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30,2000
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS Historical Acquisitions Dispositions Other Adjustments Pro-forma
----------- ------------- -------------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Rental property, net 1,652,981 94,300 (A) 1,747,281
Rental property under construction 51,662 51,662
Tenants' security deposits 8,219 8,219
Escrow funds 6,641 6,641
Investment in and advances to Property
Service Businesses 61,230 61,230
Investment in joint ventures 29,649 29,649
Deferred charges, net 16,545 16,545
Other assets 12,468 12,468
- -
----------- ----------- ----------- ----------- -----------
Total 1,839,395 94,300 - 1,933,695
========== =========== =========== =========== ===========
LIABILITIES AND EQUITY
Liabilities
Mortgage loans 917,527 917,527
Lines of credit 74,000 94,300 (A) 168,300
Construction loans 86,306 86,306
Accounts payable and accrued expenses 50,619 50,619
Security deposits 8,219 - 8,219
----------- ----------- ----------- ----------- -----------
Total Liabilities 1,136,671 94,300 - - 1,230,971
Minority Interest 205,981 10,560 (B) 216,541
Shareholders' equity:
Preferred Stock
Series A Cumulative Convertible
Redeemable Preferred Stock 71,500 71,500
Series C Cumulative Redeemable
Preferred Stock 50,000 50,000
Series E Cumulative Redeemable
Preferred Stock 25,000 25,000
Series H Cumulative Redeemable
Preferred Stock 55,000 55,000
Series G Cumulative Redeembable
Preferred Stock 50,000 - 50,000
Common Stock 213 - 213
Additional paid-in capital 214,006 - (10,560) (B) 203,446
Retained deficit 31,024 31,024
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 496,743 - (10,560) 486,183
----------- ----------- ----------- ----------- -----------
Total Liabilities and Shareholders'
equity 1,839,395 94,300 - 1,933,695
========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Other
RENTAL PROPERTIES Historical Acquisitions(C) Dispositions(D) Adjustments Pro-forma
---------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $183,570 $10,168 $(3,259) $ - $190,479
Expenses
Operating (54,981) (3,695) 387 116 (E) (58,173)
Real estate taxes (15,602) (811) 316 (16,097)
Depreciation and amortization (21,462) 675 (1,608)(F) (22,395)
---------- --------------- --------------- ----------- --------
Total expenses (92,045) (4,506) 1,378 (1,492) (96,665)
---------- --------------- --------------- ----------- --------
Equity in income of joint ventures 1,325 1,325
Equity in income of Property Service
Businesses 2,155 2,155
Corporate general and administrative expenses (5,697) (5,697)
Interest income 144 144
Interest expense (37,985) 70 (3,462)(G) (41,377)
Non-operating income / Other distributions - -
---------- --------------- --------------- ----------- --------
Income before gain on sale, loss on unused
treasury lock and extraordinary item. 51,467 5,662 (1,811) (4,954) 50,364
Gain on sale of property 4,161 4,161
Loss on unused treasury lock - -
---------- --------------- --------------- ----------- --------
Income before extraordinary item 55,628 5,662 (1,811) (4,954) 54,525
Extraordinary Item - loss on extinguishment
of debt - -
---------- --------------- --------------- ----------- --------
Net Income of the Operating Partnership 55,628 5,662 (1,811) (4,954) 54,525
Minority Interest (19,177) 382 (H) (18,795)
---------- --------------- --------------- ----------- --------
Net Income 36,451 5,662 (1,811) (4,572) 35,730
Less: Income attributable to preferred
shares (10,022) (10,022)
---------- --------------- --------------- ----------- --------
Net Income attributable to common shares $ 26,429 $ 5,662 $(1,811) $(4,572) $ 25,708
========== =============== =============== =========== ========
Net income per common share - basic $ 1.26 $ 1.23
========== ========
Net income per common share - diluted $ 1.24 $ 1.19 (F)
========== ========
Weighted average shares outstanding - basic 20,948 20,948
========== ========
Weighted average shares outstanding - diluted 23,987 23,987
========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Other
RENTAL PROPERTIES Historical Acquisitions(C) Dispositions(D) Adjustments Pro-forma
---------- --------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 301,233 $ 57,102 (15,025) $ - $343,310
Expenses
Operating (95,777) (24,198) 4,322 1,491 (E) (114,162)
Real estate taxes (23,173) (5,892) 999 (28,066)
Other Non-operating expenses - 685 685
Depreciation and amortization (33,906) 1,357 (9,357)(F) (41,906)
---------- --------------- -------------- ----------- ---------
Total expenses (152,856) (30,090) 7,363 (7,866) (183,449)
---------- --------------- -------------- ----------- ---------
Equity in income of Property Service
Businesses 6,542 6,542
Equity in income of Joint Ventures 744 744
Corporate general and administrative expenses (9,607) (9,607)
Interest income 1,539 - 1,539
Interest expense (57,094) 1,164 (18,404)(G) (74,334)
---------- --------------- -------------- ----------- ---------
Income before gain on sale, loss on unused
treasury lock and extraordinary item. 90,501 27,012 (6,498) (26,270) 84,745
Gain on sale of property 63,673 63,673
Loss on unused treasury lock - -
---------- --------------- -------------- ----------- ---------
Income before extraordinary item 154,174 27,012 (6,498) (26,270) 148,418
Extraordinary Item - loss on
extinguishment of debt (360) (360)
---------- --------------- -------------- ----------- ---------
Net Income of the Operating Partnership 153,814 27,012 (6,498) (26,270) 148,058
Minority Interest (58,536) 2,098 87 (H) (56,351)
---------- --------------- -------------- ----------- ---------
Net Income 95,278 29,110 (6,498) (26,183) 91,707
Less: Income attributable to preferred shares (13,041) (13,041)
---------- --------------- -------------- ----------- ---------
Net Income attributable to common shares $ 82,237 $ 29,110 $(6,498) $(26,183) $ 78,666
========== =============== ============== =========== =========
Net income per common share - basic $ 4.24 $ 4.05
========== =========
Net income per common share - diluted $ 4.04 $ 3.76 (F)
========== =========
Weighted average shares outstanding - basic 19,416 19,416
========== =========
Weighted average shares outstanding - diluted 22,531 22,531
========== =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
On October 25, 2000, Charles E. Smith Residential Realty L.P. ("the Operating
Partnership"), of which Charles E. Smith Residential Realty, Inc. ("the
Company") is the sole general partner, acquired Harbour House, an 804 unit,
high-rise apartment property located on a 10.6 acre, oceanfront site in
Southeast Florida. The property consists of two 14-story towers constructed
in 1962 and 1964, respectively, with amenities including two pools, 26
cabanas, a tennis court, underground parking and direct beachfront access.
The average unit size is approximately 992 square feet. The purchase price of
$94.3 million was funded through draws on the Company's lines of credit. The
Company plans to invest an additional $25 to 45 million over the next several
years, depending upon the incremental return on investment, to upgrade and
reposition the property.
Additionally, the Pro Forma information contained within reflects other
acquisitions and dispositions of the Company as of June 30, 2000 and during
the year ending December 31, 1999.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000 and
unaudited Pro Forma Consolidated Statements of Operations for the six months
ended June 30, 2000 and the year ended December 31, 1999 are based on the
historical financial statements of the Company and Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2000 is
presented as if the acquisitions had occurred by June 30, 2000. The unaudited
Pro Forma Consolidated Statements of Operations for the six months ended
ended June 30, 2000 and the year ended December 31, 1999 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
Company's Forms 10-Q and 10-K.
2. Adjustments to Pro Forma Consolidated Balance Sheet
(A) Acquisitions (in thousands):
Harbour
House
-------
Purchase price of rental property $94,300
=======
Proceeds from line of credit $94,300
-------
$94,300
=======
(B) To adjust the Minority Interest for the Harbour House acquisition
3. Adjustments to Pro Forma Consolidated Statements of Operations
(C) The proforma statements of operations for the year ended December 31,
1999, includes or excludes the results of operations of the properties
prior to acquisition as follows:
<TABLE>
<CAPTION>
Date Period Period
Acquired Included Excluded
-------- -------- --------
<S> <C> <C> <C>
Buchanan 1/6/99 1/6/99-12/31/99 1/1/99-1/5/99
Consulate 7/16/99 1/1/99-6/30/99 7/1/99-7/15/99
Forte Towers 11/6/99 1/1/99-9/30/99 10/1/99-11/05/99
Ocean View at 12/22/99 1/1/99-9/30/99 10/1/99-12/21/99
Aventura
Ocean View at 1/14/00 1/1/99-9/30/99 10/1/99-12/31/99
Sunset Point
Country Side 7/2/99
Stonegate 7/2/99 1/1/99-12/31/99
Dearborn Place 4/1/00 1/1/99-12/31/99
Reston Landing 6/1/00 1/1/99-12/31/99
Harbour House 10/25/00 1/1/99-12/31/99
</TABLE>
Management believes that the amounts excluded are not material to the
proforma statements taken as a whole.
For the year ended December 31, 1999, adjustments to results of
operations for acquisitions are as follows:
<TABLE>
<CAPTION>
Period
Included Revenues Operating Real Estate
-------- -------- --------- -----------
<S> <C> <C> <C> <C>
Ocean View at 1/1/99-9/30/99 $ 9,321 $ (3,819) $ (768)
Aventura 12/22/99-12/31/99
Ocean View at 1/1/99-9/30/99 12,172 (4,944) 1,357)
Sunset Pointe
Countryside 1/1/99-12/31/99 3,989 (1,113) (726)
Stonegate 1/1/99-12/31/99 5,075 (1,682) (431)
Consulate 1/1/99-6/30/99 1,870 (504) (153)
7/16/99-12/31/99
Forte Towers 1/1/99-9/30/99 9,171 (3,540) (952)
11/6/99-12/31/99
Harbour House 1/1/99-12/31/99 10,370 (4,741) (1,018)
Reston Landing 1/1/99-12/31/99 1,629 (708) -
Dearborn Place 1/1/99-12/31/99 3,505 (3,147) (487)
-------- --------- --------
Total $ 57,102 $ (24,198) $ (5,892)
======== ========= ========
</TABLE>
The proforma statements of operations for the six months ended June
30, 2000 includes or excludes the results of operations of the
properties prior to acquisition as follows:
<TABLE>
<CAPTION>
Date Period Period
Acquired Included Excluded
-------- -------- --------
<S> <C> <C> <C>
Ocean View at 1/14/00 - 1/1/00-1/13/00
Aventura
Dearborn Place 4/1/00 - 1/1/00-3/1/00
Reston Landing 6/30/00 1/1/00-6/30/00 -
Harbour House 10/25/00 1/1/00-6/30/00 -
</TABLE>
Management believes that the amounts excluded are not material to the
proforma statements taken as a whole.
For the six months ended June 30, 2000, adjustments to results of
operations are as follows:
<TABLE>
<CAPTION>
Period
Included Revenues Operating Real Estate
-------- -------- --------- -----------
<S> <C> <C> <C> <C>
Harbour House 1/1/00-6/30/00 $ 5,922 $ (2,329) $ (630)
Reston Landing 1/1/00-6/30/00 2,904 (675) -
Dearborn Place 4/1/00-6/30/00 1,342 (691) (181)
-------- ---------- -------
Total $ 10,168 $ (3,695) $ (811)
======== ========== =======
</TABLE>
(D) Properties included within Dispositions are as follows:
For the year ended December 31, 1999
<TABLE>
<CAPTION>
Real Estate Other Depreciation Interest
Revenues Operating Taxes Non-Operating Amortization Expense
-------- --------- ----- ------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Worldgate 6,521 (799) (641) - (1,357) (320)
1999 1031
Properties 8,504 (3,523) (358) (685) - (844)
-------- -------- ---- ------- ------- -------
Total $ 15,025 $ (4,322) (999) $ (685) $(1,357) $(1,164)
======== ======== ==== ======= ======= =======
</TABLE>
The 1999 1031 properties include Surburban Towers, Columbian
Stratford, Windsor Towers and Fort Chaplin
For the six months ended June 30, 2000
<TABLE>
<CAPTION>
Real Estate Other Depreciation Interest
Revenues Operating Taxes Non-Operating Amortization Expense
-------- --------- ----- ------------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Worldgate 3,259 (387) (316) - (675) (70)
------- ---- -------- ------ ------- -------
Total $ 3,259 (387) $ (316) $ - $ (675) $ (70)
======= ==== ======== ====== ======= =======
</TABLE>
(E) Operating expenses have been adjusted to eliminate management fees
since the Company's affiliate manages owned properties.
(F) 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,
2000 for the six months ended June 30, 2000 and January 1, 1999 for
the year ended December 31, 1999.
(G) Represents interest expense for draws on the line of credit
(assuming weighted average interest rates of 7.33% and 7.14% for the
six months ended June 30, 2000 and the year ended December 31, 1999,
respectively) and interest expense for the assumed mortgage loan
related to the acquisition.
(H) To reflect the minority interest shareholders interest in the
acquisitions and dispositions.
F-6
<PAGE>
[ARTHUR ANDERSEN, LLP 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
Harbo, L.P. (the "Property") for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 statements
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 Harbo, L.P. for the year ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
/s/ ARTHUR ANDERSEN LLP
Vienna, VA
October 20, 2000
F-7
<PAGE>
Harbo, L.P.
Statement Of Revenues And Certain Expenses
For The Six months Ended June 30, 2000 (Unaudited)
And The Year Ended December 31, 1999
<TABLE>
<CAPTION>
Six months Ended
June 30,2000 Year Ended
(Unaudited) December 31, 1999
------------- -----------------
<S> <C> <C>
Revenues:
Rental Revenue $5,377,206 $ 9,528,399
Other Revenue 544,572 841,638
---------- -----------
Total Revenues 5,921,778 10,370,037
Certain Expenses:
Payroll and related costs 569,061 1,066,635
Utilities 627,358 1,183,461
Repairs and maintenance 599,593 1,304,982
Administrative and other 283,681 750,536
Real estate taxes 630,327 1,018,450
Insurance 92,825 156,338
Management fees 156,273 279,020
---------- -----------
Total Certain Expenses 2,959,118 5,759,422
---------- -----------
Revenues in Excess of Certain Expenses $2,962,660 $ 4,610,615
========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-8
<PAGE>
Harbo, L.P.
Notes to Statement of Revenues and Certain Expenses
For The Six months Ended June 30, 2000 (Unaudited) And For
The Year Ended December 31, 1999
1. Basis of Presentation
---------------------
The accompanying statement of revenues and certain expenses relates to the
operations of Harbo, L.P. which owns an 804 unit, 2-building high-rise
apartment complex located in Bal Harbour, Florida. The Property was acquired
by Charles E. Smith Residential Realty, Inc. (the "Company") on October 25,
2000.
The accompanying statement has been prepared for the purpose of complying with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and thus
excludes 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.
2. Significant Accounting Policies
-------------------------------
The accompanying statement was prepared on the accrual basis accounting.
Rental income attributable to residential leases is recognized when due from
tenants.
3. Interim Financial Information
------------------------------
The interim statement of revenues and certain expenses is unaudited but
reflect 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 statement of revenues and certain expenses for the interim period will not
necessarily be indicative of the operating results of the fiscal year.
F-9
