<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): September 8, 1999
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 7. Financial Statements and Exhibits
- ------- ---------------------------------
The following pro forma financial information is included as a second amendment
to the Form 8-K dated September 8, 1999 and filed on September 22, 1999 for
Charles E. Smith Residential Realty, Inc.
(A) Pro forma financial information beginning at page F-2
(B) Historical financial information beginning at page F-7
(C) Exhibits
99.2 Consent of Independent Public Accountants dated January 18, 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 18th day of
January 2000.
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
By: /s/ W.D. Minami
------------------------------------------
W.D. Minami
Senior Vice President 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 September 30, 1999 F-3
Pro Forma (Unaudited) Consolidated Statement of
Operations for the nine months ended September 30, 1999 F-4
Pro Forma (Unaudited) Consolidated Statement of
Operations for the year ended December 31, 1998 F-5
Notes and Management's Assumptions to Unaudited Pro Forma
Consolidated Financial Information F-6
ACQUISITION PROPERTY
Report of Independent Public Accountants - Forte Towers F-7
Statements of Revenues and Certain Expenses of Forte
Towers for the nine months ended September 30, 1999
(Unaudited) and for the year ended December 31, 1998. F-8
Notes to Statements of Revenues and Certain Expenses of
Forte Towers for the nine months ended September 30, 1999
(Unaudited) and for the year ended December 31, 1998. F-9
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1999, and
unaudited Pro Forma Consolidated Statements of Operations for the nine months
ended September 30, 1999, and the year ended December 31, 1998, are based on the
historical financial statements of the Company and the Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1999, is
presented as if the Forte Towers acquisition had occurred by September 30, 1999.
The unaudited Pro Forma Consolidated Statements of Operations for the nine
months ended September 30, 1999, and the year ended December 31, 1998, are
presented as if the acquisition 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
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CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS Historical Forte Towers (A)
---------- -------------
<S> <C> <C>
Rental property, net $1,217,012 $ 86,871
Rental property under construction 148,264
Security deposits 2,169
Escrow funds 9,575
Investment in and advances to Property Service Businesses 46,903
Investment in joint ventures 19,555
Deferred charges, net 18,333
Other assets 27,372
---------- ----------
Total $1,489,183 $ 86,871
========== ==========
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 784,081 $ 34,321 (D)
Line of credit and note payable 38,488 1,932
Construction loans 73,095
Accounts payable and accrued expenses 46,175
Security deposits 2,169 1,993
---------- ----------
Total Liabilities 944,008 38,246
Minority Interest 141,825
Shareholders' equity:
Preferred Stock
Series A Cumulative Convertible Redeemable Preferred Stock 71,500
Series C Cumulative Redeemable Preferred Stock 50,000
Series E Cumulative Convertible Redeemable Preferred Stock 25,000
Series H Cumulative Convertible Redeemable Preferred Stock 55,000
Series G Cumulative Convertible Redeemable Preferred Stock - 25,000 (B)
Common Stock 195 7
Additional paid-in capital 207,128 23,618
Retained deficit (5,473)
---------- ----------
Total shareholders' equity 403,350 48,625
---------- ----------
Total Liabilities and Shareholders' equity $1,489,183 $ 86,871
========== ==========
<CAPTION>
Other
ASSETS Adjustments Pro-forma
----------- ----------
<S> <C> <C>
Rental property, net $1,303,883
Rental property under construction 148,264
Security deposits 2,169
Escrow funds 9,575
Investment in and advances to Property Service Businesses 46,903
Investment in joint ventures 19,555
Deferred charges, net 18,333
Other assets 27,372
---------- ----------
Total $1,576,054
========== ==========
LIABILITIES AND EQUITY
Liabilities
Mortgage loans $ 818,402
Line of credit and note payable 40,420
Construction loans 73,095
Accounts payable and accrued expenses 46,175
Security deposits 4,162
---------- ----------
Total Liabilities 982,254
Minority Interest 6,583 (C) 148,408
Shareholders' equity:
Preferred Stock
Series A Cumulative Convertible Redeemable Preferred Stock 71,500
Series C Cumulative Redeemable Preferred Stock 50,000
Series E Cumulative Convertible Redeemable Preferred Stock 25,000
Series H Cumulative Convertible Redeemable Preferred Stock 55,000
Series G Cumulative Convertible Redeemable Preferred Stock 25,000
Common Stock 202
Additional paid-in capital (6,583) (C) 224,163
Retained deficit (5,473)
---------- ----------
Total shareholders' equity (6,583) 445,392
---------- ----------
Total Liabilities and Shareholders' equity $ - $1,576,054
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Forte Other
Historical Towers Adjustments Pro-forma
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Rental Properties:
Revenues $ 218,749 $ 9,171 $ 227,920
Expenses
Operating Costs (70,189) (3,540) 135 (A) (73,594)
Real estate taxes (16,678) (952) (17,630)
Depreciation and amortization (24.304) (1,303) (B) (25,607)
--------- ------- ------- -------
Total expenses (111,171) (4,492) (1,168) (116,831)
--------- ------- ------- -------
Equity in income of joint ventures 408 408
Equity in income of Property Service Businesses 3,255 3,255
Corporate general and administrative expenses (6,785) (6,785)
Interest income 605 605
Interest expense (42,040) (2,320) (C) (44,360)
--------- ------- ------- -------
Income before gain on sales
and extraordinary item 63,021 4,679 (3,488) 64,212
Gain on sales 7,065 7,065
--------- ------- ------- -------
Income before extraordinary item 70,086 4,679 (3,488) 71,277
Extraordinary item - loss on extinguishment of debt (359) (359)
--------- ------- ------- -------
Net Income of the Operating Partnership 69,727 4,679 (3,488) 70,918
Minority Interest (26,239) 508 (D) (25,731)
--------- ------- ------- -------
Net Income 43,488 4,679 (2,980) 45,187
Less: Income attributable to preferred shares (7,845) (1,454) (F) (9,299)
--------- ------- ------- -------
Net Income attributable to common shares $ 35,643 $ 3,225 $(2,980) $ 35,888
========= ======== ======== ========
Net income per common share - basic $ 1.86 $ 1.81
========= ========
Net income per common share - diluted $ 1.81 (E) $ 1.77
========= ========
Weighted average shares outstanding - basic 19,129 19,824
========= ========
Weighted average shares outstanding - diluted 22,314 23,009
========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Forte Other
Historical Towers Adjustments Pro-forma
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Rental Properties:
Revenues $ 250,211 $ 11,441 $ 261,652
Expenses
Operating costs (84,381) (4,448) 150 (A) (88,679)
Real estate taxes (17,254) (1,269) (18,523)
Depreciation and amortization (28,958) (1,737) (B) (30,695)
--------- -------- --------- ---------
Total expenses (130,593) (5,717) (1,587) (137,897)
--------- -------- --------- ---------
Equity in income of Property Service Businesses 8,433 8,433
Corporate general and administrative expenses (8,947) (8,947)
Interest income 1,257 1,257
Interest expense (47,334) (3,093) (C) (50,427)
--------- -------- --------- ---------
Income before gain on sale, loss on unused treasury
lock, and extraordinary item 73,027 5,724 (4,680) 74,071
Gain on sale of property 18,150 18,150
Loss on unused treasury lock (4,923) (4,923)
--------- -------- --------- ---------
Income before extraordinary item 86,254 5,724 (4,680) 87,298
Extraordinary item - loss on extinguishment of debt (16,384) (16,384)
--------- -------- --------- ---------
Net Income of the Operating Partnership 69,870 5,724 (4,680) 70,914
Minority Interest (28,741) 680 (D) (28,061)
--------- -------- --------- ---------
Net Income 41,129 5,724 (4,000) 42,853
Less: Income attributable to preferred shares (10,722) (1,938) (F) (12,660)
--------- -------- --------- ---------
Net Income attributable to common shares $ 30,407 $ 3,786 $ (4,000) $ 30,193
========= ======== ========= =========
Net income per common share - basic $ 1.86 $ 1.77
========= =========
Net income per common share - diluted $ 1.85 (E) $ 1.77
========= =========
Weighted average shares outstanding - basic 16,318 17,013
========= =========
Weighted average shares outstanding - diluted 16,483 17,178
========= =========
</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
(DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
On November 5, 1999, the Company closed the acquisition of Forte Towers, a
five-building high-rise apartment property located in the South Beach
section of Miami Beach, Florida. The capitalized cost of $86,871 consisted
of 694,586 shares of common stock of the Company valued at $23,625,
assumed mortgage debt of $34,321, and cash funded primarily through the
sale of 641,026 shares of Series G Preferred Stock valued at $25,000. The
Company plans to reposition the property by making substantial
renovations, in the range of $15 to $25 million.
The unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1999 and unaudited Pro Forma Consolidated Statements of Operations for the
nine months ended September 30, 1999 and the year ended December 31, 1998
are based on the historical financial statements of the Company and the
Operating Partnership.
The unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1999 is presented as if the Forte Towers acquisition had occurred by
September 30, 1999. The unaudited Pro Forma Consolidated Statements of
Operations for the nine months ended September 30, 1999 and the year ended
December 31, 1998 are presented as if the acquisition 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) Acquisition of Forte Towers
Forte Towers
------------
Purchase price of rental property $ 85,800
Acquisition costs 1,071
---------
Cost basis of rental property $ 86,871
=========
Security deposit liability $ 1,993
Proceeds from line of credit 1,932
Assumption of mortgage loan 34,321
Sale of Preferred Shares 25,000
Sale of Common Shares 23,625
---------
$ 86,871
=========
(B) The Company sold 641,026 shares of Series G Preferred Stock,
$0.01 par value, at $39.00 per share for a value of $25,000. The
proceeds from this sale were used for the acquisition of Forte
Towers. The dividend yield to be paid on these preferred shares
will be 7.75% in year one, 8.25% in year two and 8.5% in year
three, with a minimum equivalent to the dividend rate paid on the
Company's common shares.
(C) To adjust the Minority Interest for the issuance of shares of
Common Stock and shares of Preferred Stock in the Company.
(D) The company assumed debt of $34,321. This debt matures in 2001
and has an effective interest rate of 8.65%.
<PAGE>
3. Adjustments to Pro Forma Consolidated Statements of Operations
(A) Operating expenses have been adjusted to eliminate management
fees since the Company's affiliate manages owned properties.
(B) 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 purchase occurred on January
1, 1999 for the nine months ended September 30, 1999 and January
1, 1998 for the year ended December 31, 1998.
(C) Represents interest expense for draws on the line of credit
(assuming a weighted average interest rate of 6.48% for both the
nine months ended September 30, 1999 and the year ended December
31, 1998, respectively) and interest expense for the assumed
mortgage loan related to the acquisition.
(D) To reflect the minority interest in the Forte Towers acquisition.
(E) Minority Interest is adjusted in the calculation of diluted
earnings per common share to reflect the change in ownership
interest after the inclusion of common stock equivalents.
(F) Represents Series G Preferred Share dividends attributable to the
Series G shareholders.
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
Forte Towers (the "Property") for the year ended December 31, 1998. 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 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 revenue 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 revenues 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 Forte Towers for the year ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Vienna, Virginia
December 6, 1999
F-7
<PAGE>
Forte Towers
Statements Of Revenues And Certain Expenses
For The Nine Months Ended September 30, 1999 (Unaudited)
And The Year Ended December 31, 1998
Nine Months Ended
September 30, 1999 Year Ended
(Unaudited) December 31, 1998
------------------ -----------------
Revenues:
Residential rental income $ 8,434,935 $ 10,585,620
Parking income 460,819 537,595
Other income 275,678 317,947
---------------- ----------------
Total Revenues 9,171,432 11,441,162
---------------- ----------------
Certain Expenses:
Payroll and related costs 1,187,398 1,328,860
Utilities 1,077,243 1,391,516
Real estate taxes 951,608 1,268,810
Repairs and maintenance 703,960 982,156
Administrative 333,258 431,662
Other 238,667 314,480
---------------- ----------------
Total Certain Expenses 4,492,134 5,717,484
---------------- ----------------
Revenues in Excess of Certain Expenses $ 4,679,298 $ 5,723,678
================ ================
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
Forte Towers
Notes to Statements of Revenues and Certain Expenses
For The Nine Months Ended September 30, 1999 (Unaudited) And For
The Year Ended December 31, 1998
1. Basis of Presentation
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of Forte Towers (the "Property") which is a 1,339-unit,
5-building high-rise apartment building located in Miami Beach, Florida.
The Property was acquired by Charles E. Smith Residential Realty, Inc. (the
"Company") on November 5, 1999.
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.
2. 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. Rental income from retail tenants is recorded on a
straight-line basis over the term of the related lease.
3. 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.
F-9
<PAGE>
EXHIBIT 99.2
[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated December 6, 1999, on
our audit of the statement of revenue and certain expenses of Forte Towers for
the year ended December 31, 1998 which report appears in the Form 8-K/A for
Charles E. Smith Residential Realty, Inc. dated January 18, 2000 filed with the
Securities and Exchange Commission.
/s/ ARTHUR ANDERSEN LLP
Vienna, Virginia
January 18, 2000
