SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1 to
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 1998
GROVE PROPERTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-13080 06-1391084
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification Number)
598 Asylum Avenue, Hartford, Connecticut 06105
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (860) 246-1126
N/A
(Former name or former address, if changed since last report)
<PAGE>
2
Item 7
(a) and (b)
Grove Property Trust
Financial Statements of Properties Acquired and Pro Forma
Financial Information
Pro Forma Condensed Consolidated Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1998.................................................. 3
Notes to Pro Forma Condensed Consolidated Balance Sheet.................. 5
Pro Forma Condensed Consolidated Statements of Income
for the Nine Months Ended September 30, 1998 and for
the Year Ended December 31, 1997.................................... 7
Notes to Pro Forma Condensed Consolidated Statements of Income........... 10
Properties Acquired:
Colonial Park Royal
Financial Statements:
Report of Independent Auditors........................................... 15
Statements of Revenues and Certain Expenses for the Six
Months Ended June 30, 1998 (Unaudited) and for the Year
Ended December 31, 1997............................................. 16
Notes to the Statements of Revenues and Certain Expenses................. 17
Sturbridge Meadows and Hobbes Farms
Financial Statements:
Report of Independent Auditors........................................... 19
Combined Statements of Revenues and Certain Expenses for
the Six Months Ended June 30, 1998 (Unaudited) and for
the Year Ended December 31, 1997.................................... 20
Notes to the Combined Statements of Revenues and Certain Expenses........ 21
McNeil Properties
Financial Statements:
Report of Independent Auditors........................................... 23
Combined Statements of Revenues and Certain Expenses for
the Nine Months Ended September 30, 1998 (Unaudited) and
for the Year Ended December 31, 1997................................ 24
Notes to the Combined Statements of Revenues and Certain Expenses........ 25
<PAGE>
3
Grove Property Trust
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1998
(Unaudited)
This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if
the acquisitions including related financing subsequent to September 30, 1998,
had occurred as of September 30, 1998. The unaudited Pro Forma Condensed
Consolidated Balance Sheet should be read in conjunction with the consolidated
financial statements and notes thereto of the Company, on Form 10-K for the year
ended December 31, 1997, on Form 10-Q for the nine months ended September 30,
1998 and Forms 8-K, as amended, during 1998, all as filed with the Securities
and Exchange Commission. In management's opinion, all adjustments necessary to
present fairly the effects of the above mentioned transactions have been made.
The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the date
specified, nor is it indicative of the Company's future results.
<PAGE>
4
Grove Property Trust
Pro Forma Condensed Consolidated Balance Sheet (continued)
September 30, 1998
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical October Pro Forma
Company(A) Acquisitions(B) Consolidated
----------------------------------------------------------------
<S> <C> <C> <C>
Assets
Real estate, net $ 190,488 $ 89,367 $ 279,855
Cash and cash equivalents, including resident
security deposits 2,950 2,589 5,539
Construction- escrow - 1,211 1,211
Deferred charges, net 971 199 1,170
Due from affiliates 564 - 564
Other assets 3,039 5,355 8,394
----------------------------------------------------------------
Total assets $ 198,012 $ 98,721 $ 296,733
================================================================
Liabilities and shareholders' equity
Mortgage notes payable $ 92,771 $ 59,549 $ 152,320
Acquisition notes payable - 16,732 16,732
Revolving credit facility 9,600 17,262 26,862
Accounts payable and other liabilities 1,623 1,380 3,003
Due to affiliates 209 - 209
Resident security deposits 2,485 373 2,858
Distributions payable 1,923 - 1,923
----------------------------------------------------------------
Total liabilities 108,611 95,296 203,907
----------------------------------------------------------------
Minority interests in consolidated partnerships
1,065 - 1,065
Minority interest in operating partnership 21,804 5,559 27,363(C)
Shareholders' equity:
Common shares 84 - 84
Additional paid-in capital 68,389 2,510(C) 70,899
Distributions in excess of earnings (1,941) (4,644) (6,585)
----------------------------------------------------------------
Total shareholders' equity 66,532 (2,134) 64,398
----------------------------------------------------------------
Total liabilities and shareholders' equity $ 198,012 $ 98,721 $ 296,733
================================================================
</TABLE>
See accompanying notes.
<PAGE>
5
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Balance Sheet
September 30, 1998
(Unaudited)
(In thousands, except share data)
(A) Balance sheet data was derived from the Company's consolidated financial
statements as of September 30, 1998, as filed on its Form 10-Q.
(B) Reflects the acquisition of the 17 McNeil Properties which were consummated
by the Company on October 30, 1998, as follows: Total sources and
allocation of the purchase price of $101,612 is as follows:
Sources of Funds Uses of Funds
Revolving Credit Facility $ 17,262 Real estate assets $ 89,367
Mortgage Notes Payable (1) 59,549 Operating assets and
liabilities, net 7,601
Acquisition Notes Payable (2) 16,732 Management contracts (3) 4,644
Operating Partnership Units 8,069
--------- ---------
Total $ 101,612 Total $ 101,612
========= =========
(1) As of October 31, 1998, Mortgage Notes Payable had an outstanding balance
of $51,856 with a weighted average interest rate of 8.73%. The pro forma
Mortgage Notes Payable amount of $59,549 has been adjusted up to reflect
the fair value of the notes assuming a borrowing cost of approximately
7.0%.
(2) The Acquisition Notes Payable relates to an obligation, related to three
McNeil Properties (Rockingham Glen, 929 House, and Glen Meadow), to pay
additional cash and issue additional Operating Partnership Units when the
properties are converted to market rate properties. On November 30, 1998,
the mortgages on two of the properties (Glen Meadow and 929 House) were
modified to allow these properties to be converted to 80% market rate units
and 20% moderate income units. The Rockingham Glen's mortgage was modified
in the third quarter of 1998 to allow this property to be converted to 80%
market rate units and 20% moderate income units. It is anticipated that
approximately $15.8 million of the Acquisition Notes Payable will be paid
on April 30, 1999, approximately $6.5 million in cash and $9.3 million in
Operating Partnership Units. The remaining balance of the Acquisition Notes
Payable of approximately $0.9 million is expected to be paid over a
three-year period.
<PAGE>
6
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Balance Sheet (continued)
(3) The management contracts were purchased for $4,644 from an unrelated third
party management company. The term of the contracts was for an average of
approximately 20 years. The cost of the management contracts has been
expensed in the Pro Forma Condensed Consolidated Statements of Income. The
Company plans to self manage the McNeil Properties.
(C) To adjust minority interest in the Company to reflect the McNeil Properties
acquisition as follows:
Total shareholders' equity and minority interest $ 91,761
Percentage of Units which are not owned by the Company 29.82%
-------------
Minority interest in the operating partnership $ 27,363
=============
Historical minority interest in operating partnership $ 21,804
Operating partnership Units issued 8,069
Minority interest in operating partnership (27,363)
-------------
$ 2,510
=============
<PAGE>
7
Grove Property Trust
Pro Forma Condensed Consolidated Statements of Income
(Unaudited)
These unaudited Pro Forma Condensed Consolidated Statements of Income are
presented as if (i) the Company had acquired Grove Property Services Limited
Partnership and Property Partnerships and completed various other 1997 and
January 1998 through June 1998 Property acquisitions , Colonial Park Royal, and
Sturbridge and Hobbes Farms (the "August 1998 Acquisitions") and the McNeil
Portfolio (the "October Acquisitions"), (ii) the Consolidation Transactions (see
notes to Pro Forma Condensed Consolidation Statements of Income), including the
New Equity Investment and Refinancings and (iii) the November 1997 Offerings and
the application of the net proceeds therefrom, as if all had occurred as of
January 1, 1997 and the effect thereof was carried forward through the nine
months ended September 30, 1998. The unaudited Pro Forma Condensed Consolidated
Statements of Income should be read in conjunction with the consolidated
financial statements of the Company, Grove Property Services Limited Partnership
and Property Partnerships and various other properties acquired during 1997 and
January 1998 through June 1998 and the August 1998 Acquisitions and the October
Acquisitions, which financial statements are included herein or have been filed
with the Securities and Exchange Commission on various Forms 8-K, as amended,
during 1997 and 1998, Form 10-K for the year ended December 31, 1997 and Form
10-Q for the nine months ended September 30, 1998. In management's opinion, all
adjustments necessary to present fairly the effects of the above mentioned
transactions have been made.
The pro forma information is not necessarily indicative of the results that
would have been reported had such events actually occurred on the date
specified, nor is it indicative of the Company's future results.
<PAGE>
8
Grove Property Trust
Pro Forma Condensed Consolidated Statements of Income (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
(in thousands)
-----------------------------------------------------------------------------------------------------
Pro Forma
Consolidated
January 1998 Excluding
through June August 1998
Historical 1998 and October August 1998 October
Company Acquisitions 1998 Acquisitions Acquisitions ProForma Pro Forma
(A) (B) Acquisitions (C) (D) Adjustments Consolidated
------------- -------------- ------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income $ 25,130 $ 1,234 $ 26,364 $ 714 $ 7,161 $ - $ 34,239
Rental subsidies - - - - 5,982 - 5,982
Mortgage interest - - - 506 - 506
subsidies
Property management 341 - 341 - - - 341
Interest on restricted - - - - 221 - 221
cash
Interest and other 231 24 255 8 99 - 362
------------- -------------- ------------- ------------- ------------- --------------- --------------
Total revenues 25,702 1,258 26,960 722 13,969 - 41,651
------------- -------------- ------------- ------------- ------------- --------------- --------------
Expenses:
Real estate taxes 2,561 147 2,708 79 1,036 - 3,823
Other property operating 8,600 288 8,888 184 4,283 $419M 13,774
Interest expense 4,056 556 4,612 348 3,614 1,004O 10,484
906E
Depreciation and
amortization 4,094 224 4,318 110 1,442 - 5,870
General and 1,242 - 1,242 - - 280M 1,522
administrative
------------- -------------- ------------- ------------- ------------- --------------- --------------
Total expenses 20,553 1,215 21,768 721 10,375 2,609 35,473
------------- -------------- ------------- ------------- ------------- --------------- --------------
Income before minority
interests 5,149 43 5,192 1 3,594 (2,609) 6,178
Minority interests in
earnings of consolidated 58 - 58 - - - 58
partnerships
Minority interest in
earnings of Operating 1,303 12 1,315 - - 510L 1,825
Partnership
Income before extraordinary
expenses 3,788 31 3,819 1 3,594 (3,119) 4,295
Extraordinary expenses
related to debt
refinancing, net of 838 - 838 - - - 838
minority interests
------------- -------------- ------------- ------------- ------------- --------------- --------------
Net income $ 2,950 $ 31 $ 2,981 $ 1 $ 3,594 $ (3,119) $ 3,457
============= ============== ============= ============= ============= =============== ==============
</TABLE>
See accompanying notes.
<PAGE>
9
Grove Property Trust
Pro Forma Condensed Consolidated Statements of Income (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
(in thousands)
------------------------------------------------------------------------------------------------------
1997 and
January 1998
through
Historical June 1998 Management August 1998 October
Company Acquisitions Company Acquisitions Acquisitions Pro Forma Pro Forma
(A) (B) Adjustments (C) (D) Adjustments Consolidated
-------------- ------------- -------------- ------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income $ 17,111 $ 17,029 $ (9) I $ 1,414 $ 8,865 $ - $44,410
Rental subsidies - - - - 7,966 7,966
Mortgage interest - - - - 675 675
subsidies
Property management 518 - (207) J - - 311
Interest on restricted - - - - 315 - 315
cash
Interest and other 309 351 (4) I 10 135 - 801
-------------- ------------- -------------- ------------- --------------- --------------- ------------
Total revenues 17,938 17,380 (220) 1,424 17,956 - 54,478
-------------- ------------- -------------- ------------- --------------- --------------- ------------
Expenses:
Related party management
fees 22 185 (207) J - - - -
Real estate taxes 1,770 1,834 - 158 1,296 - 5,058
Other property operating 6,078 6,036 (71) I 421 6,065 (20)I 19,183
135 I 539 M
Interest expense 2,741 2,092 - 486 4,897 2,683 E 14,237
1,338 O
Depreciation and 10 F
amortization 2,701 848 - 188 1,923 2,172 G 7,842
General and 908 - 71 I - - (35)I 1,333
administrative 30 H
359 M
Other expense 4,644 N 4,644
-------------- ------------- -------------- ------------- --------------- --------------- ------------
Total expenses 14,220 10,995 (72) 1,253 14,181 11,720 52,297
-------------- ------------- -------------- ------------- --------------- --------------- ------------
Income before minority
interests 3,718 6,385 (148) 171 3,775 (11,720) 2,181
Minority interests in
earnings of consolidated 155 - - - (23)K 132
partnerships
Minority interest in
earnings of Operating 1,267 361 - - - (1,017)L 611
Partnership
-------------- ------------- -------------- ------------- --------------- --------------- ------------
Net income $ 2,296 $ 6,024 ($ 148) $171 $ 3,775 $ (10,680) $ 1,438
============== ============= ============== ============= =============== =============== ============
</TABLE>
See accompanying notes.
<PAGE>
10
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except share data)
On March 14, 1997, the Company entered into a series of Consolidation
Transactions. The Consolidation Transactions were a business combination of the
Company and Grove Property Services Limited Partnership (the "Management
Company") and Property Partnerships. In addition, the Company simultaneously
issued 3,333,333 common shares at $9 per share ("New Equity Investment") and
retired or refinanced certain mortgage and credit facility debt ("Refinancing").
The effect of these transactions on the accompanying pro forma Condensed
Consolidated Statements of Income is reflected as outlined in the Notes below.
(A) Historical results of operations data were derived from the financial
statements of the Company as filed with the Securities and Exchange Commission
on the Company's Form 10-K for the year ended December 31, 1997 and on Form 10-Q
for the nine months ended September 30, 1998.
(B) The historical financial statements of the Company contain results of
operations data for the properties and Management Company identified below
from the date of acquisition to the end of the respective period. The
results of operations from the beginning of the respective period to the
acquisition date is included in this column, except for Sturbridge Meadows
and Hobbes Farm and Colonial Park Royal which are included in column C.
Property/Entity -Acquisitions Date Acquired
- ------------------------------------------------------------------------------
1. Grove Property Services Limited Partnership
and Property Partnerships (20 properties and
management company) March 14, 1997
2. Four Winds June 1, 1997
3. Brooksyde June 1, 1997
4. River's Bend June 1, 1997
5. Greenfield Village July 1, 1997
6. Glastonbury Center September 1, 1997
7. Summit & Birch Hill September 1, 1997
8. Corner Block and Wharf Building (2 properties) October 31, 1997
9. High Meadow Apartments October 31, 1997
10. Village Arms December 31, 1997
11. Ribbon Mill December 31, 1997
12. Briar Knoll December 31, 1997
13. Hill Top December 31, 1997
14. Tangelwood January 23, 1998
15. Coachlight Village April 1, 1998
16. Freeport Properties April 1, 1998
17. Village Park and Winchester Woods June 1, 1998
18. Sturbridge Meadows and Hobbes Farm August 7, 1998
19. Colonial Park Royal August 31, 1998
<PAGE>
11
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Statements of Income (continued)
(C) Reflects the results of operations for Colonial Park Royal and Sturbridge
Meadows and Hobbes Farms for the period from January 1, 1998 through June
30, and for the year ended December 31, 1997. Pro forma depreciation and
interest expense are also included for the aforementioned periods.
(D) Reflects the results of operations for McNeil Properties for the period
January 1, 1998 through September 30, 1998 and for the year ended December
31, 1997. Pro forma depreciation, interest expense, and minority interest
in Operating Partnership are also included for the aforementioned periods.
(E) Represents the following:
<TABLE>
<CAPTION>
Year Ended
December 31, Nine Months Ended
1997 September 30, 1998
<S> <C> <C>
Pro forma interest expense on new (or assumed) or refinanced
mortgage debt and the Revolving Credit Facility
$4,947 $3,647
Historical interest expense on refinanced or retired mortgage
debt (2,264) (2,741)
----------------------------------------
$2,683 $ 906
========================================
</TABLE>
Pro forma interest expense is based on rates ranging from 6.5% to 8.3% per annum
and assumes proceeds of $30 million ($27.5 million after costs) from the New
Equity Investment on March 14, 1997 and $48.9 million ($45.3 million after
costs) from the November 1997 Offerings were received by the Company on January
1, 1997.
<PAGE>
12
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Statements of Income (continued)
(F) Represents the following:
Year Ended
December 31,
1997 (1)
------------
Pro forma deferred financing cost amortization
on new or refinanced mortgage debt and the
Revolving Credit Facility $ 138
Historical deferred financing cost amortization
on refinanced or retired mortgage debt (128)
--------
$ 10
=========
(1) The New Equity Investment was effective on March 14, 1997. The historical
financial information for the period March 15, 1997 to December 31, 1997
reflects this transaction.
(G) Represents adjustment to record depreciation on the excess of the purchase
price relating to the purchase of certain partnership interests from
partners, over the net book amount and for properties acquired during 1997
through June 1, 1998, to the extent depreciation was not reflected in the
historical financial statements during the period.
(H) Represents adjustment to record non-cash compensation expense in the first
quarter of 1997 associated with the Deferred Stock Grants granted to
Executive Officers in connection with the consummation of the Consolidation
Transactions, pursuant to the 1996 Plan. Such compensation expense was
recorded by the Company commencing March 15, 1997 in its historical
financial statements.
(I) Represents adjustments to: (i) exclude certain non-recurring expenses and
(ii) revenues, including (iii) those of the Management Company attributable
to brokerage and other services, (iv) reclassify certain expenses
historically classified by the Management Company as property operating
expenses to general and administrative expenses, (v) decrease general and
administrative expenses to reflect the cost savings (predominately
professional fees) associated with operating all Properties on a combined,
self-managed basis offset by an increase in compensation expense to the
Company's officers which took effect after the November 1997 Offerings, and
(vi) increase property operating costs subsequent to the Consolidation
Transactions to reflect the recombining of certain property leasing costs
that the Management
<PAGE>
13
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Statements of Income (continued)
Company provided prior to the Consolidation Transactions and that the
Company commenced providing subsequent to the November 1997 Offerings as
follows:
Year Ended
December 31,
1997
------------
(i) Non-recurring property operating expenses $ 20
(ii) Non-recurring rental revenues 9
(iii) Non-recurring brokerage services 4
(iv) Reclassification of other property operating to
general and administrative 71
(v) Decrease in general and administrative 35
(vi) Increase in property operating expenses 135
(J) Elimination of intercompany management fees.
(K) Elimination of minority interest in a consolidated partnership (acquired in
June 1997) where the Company acquired the remaining interest in such
property partnership on September 30, 1997.
(L) Based upon Operating Partnership Units, which are exchangeable on a
one-for-one basis into Common Shares, assumed to be owned by the Limited
Partners and Common Shares assumed to be outstanding as follows:
Nine
Months
Year End Ended
December September
31,1997 30, 1998
Income before minority interests $2,181 $6,178
Less:Minority interests in earnings of consolidated
partnerships (132) (58)
-------- -------
$2,049 $6,120
Percentage of Units which are not owned by the
Company 29.82% 29.82%
-------- -------
Minority interest in earnings of Operating
Partnership $611 $1,825
======== =======
<PAGE>
14
Grove Property Trust
Notes to Pro Forma Condensed Consolidated Statements of Income (continued)
<TABLE>
<CAPTION>
Operating
Common Shares Partnership Units
------------------------------------
<S> <C> <C>
Grove Property Trust at December 31, 1996 620,102 -
New Equity in March 1997 3,333,333 -
Consolidation Transactions in March 1997:
Affiliates - 909,115
Non-affiliates - 1,205,324
June 1997 acquisitions - 420,183
Exercise of stock options in May 1997 394 -
September 1997 acquisitions - 325,836
October 1997 acquisitions - 143,334
The November 1997 Offerings 4,500,000 -
April 1998 acquisition - 5,818
--------------------------------
OP Units redeemed April 1998 through September 1998
- (213,264)
--------------------------------
OP Units exchanged July 1998 through September 1998
25,722 (25,722)
--------------------------------
Common Shares repurchased by the Company during September 1998
(83,950) -
Executive stock grants- September 1998 63,153 -
October 1998 acquisition 823,421
================================
8,458,754 3,594,045
================================
70.18% 29.82%
================================
</TABLE>
(M) Represents adjustments to include additional operating expenses and
additional general and administrative expenses anticipated from the McNeil
portfolio acquisition.
(N) Represents adjustment to expense the 20 year McNeil management company
contracts acquired.
(O) Represents adjustment to include interest expense relating to the
acquisition notes resulting from the McNeil portfolio acquisition.
<PAGE>
15
Report of Independent Auditors
To the Shareholders and Board of Trust Managers
Grove Property Trust
We have audited the statement of revenues and certain expenses of Colonial Park
Royal (the "Property") for the year ended December 31, 1997. The statement of
revenues and certain expenses is the responsibility of the Property's
management. Our responsibility is to express an opinion on the statement of
revenues and certain expenses 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 combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statement of revenues and
certain expenses. 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 Form 8-K of Grove Property Trust, as
described in Note 2, and is not intended to be a complete presentation of the
Property's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses, as
described in Note 2, of Colonial Park Royal for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
July 31, 1998
<PAGE>
16
Colonial Park Royal
Statements of Revenues and Certain Expenses
Six Months Ended Year Ended
June 30, 1998 December 31,
1997
-----------------------------------
(Unaudited)
Revenues:
Rental $ 344,544 $ 669,969
Other 2,345 3,784
-----------------------------------
346,889 673,753
-----------------------------------
Certain expenses:
Property operating and maintenance (Note 3) 64,221 138,598
Real estate taxes 52,897 105,735
-----------------------------------
117,118 244,333
-----------------------------------
Revenues in excess of certain expenses $ 229,771 $ 429,420
===================================
See accompanying notes.
<PAGE>
17
Colonial Park Royal
Notes to the Statements of Revenues and Certain Expenses
Year Ended December 31, 1997
1. Business
The accompanying Statements of Revenues and Certain Expenses relate to the
operations of an apartment complex located in East Haven, Connecticut, known as
Colonial Park Royal (the "Property"). Grove Property Trust (the "Company") has
contracted to acquire the Property from an unrelated party and expects to
purchase the property in August 1998.
The Property is collateral for a mortgage insured by the U.S. Department of
Housing and Urban Development. The mortgage is expected to be repaid concurrent
with the Company's acquisition of the Property.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Statements of Revenues and Certain Expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Company's Form 8-K. Accordingly, the
statements exclude certain expenses that may not be comparable to those expected
to be incurred by the Company in the proposed future operations of the Property.
Items excluded consist of depreciation, amortization, interest and certain
non-operating expenses. Management fees were also excluded as the Company
expects to self-manage the Property.
Use of Estimates
The preparation of the Statements of Revenues and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the Statements of
Revenues and Certain Expenses and accompanying notes. Actual results could
differ from those estimates.
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the
leases, which are generally one year.
<PAGE>
18
Colonial Park Royal
Notes to the Statements of Revenues and Certain Expenses (continued)
2. Summary of Significant Accounting Policies (continued)
Capitalization Policy
Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterments are capitalized.
Interim Unaudited Information
The accompanying Statement of Revenues and Certain Expenses for the six months
ended June 30, 1998, is unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the Statement of Revenues and Certain Expenses for this
interim period have been included. The results of this interim period are not
necessarily indicative of the results to be obtained for a full fiscal year.
<PAGE>
19
Report of Independent Auditors
To the Shareholders and Board of Trust Managers
Grove Property Trust
We have audited the combined statement of revenues and certain expenses of
Sturbridge Meadows and Hobbes Farms (the "Properties") for the year ended
December 31, 1997. The combined statement of revenues and certain expenses is
the responsibility of the Properties' management. Our responsibility is to
express an opinion on the combined statement of revenues and certain expenses
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 combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined 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 Form 8-K, as described in
Note 2, and is not intended to be a complete presentation of the Properties
revenues and expenses.
In our opinion, the combined statement of revenues and certain expenses referred
to above presents fairly, in all material respects, the revenues and certain
expenses as described in Note 2 of Sturbridge Meadow and Hobbes Farm for the
year ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
New York, New York
July 15, 1998
<PAGE>
20
Sturbridge Meadows and Hobbes Farm
Combined Statements of Revenues and Certain Expenses
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
------------------------------------
(Unaudited)
Revenues:
Rental income $ 369,360 $ 743,604
Other 5,889 6,274
------------------------------------
375,249 749,878
------------------------------------
Certain expenses:
Property operating and maintenance 119,314 282,791
Real estate taxes 26,611 52,449
------------------------------------
145,925 335,240
------------------------------------
Revenues in excess of certain expenses $ 229,324 $ 414,638
====================================
See accompanying notes.
<PAGE>
21
Sturbridge Meadows and Hobbes Farms
Notes to the Combined Statements of Revenues and Certain Expenses
Year Ended December 31, 1997
1. Business
The accompanying Combined Statements of Revenues and Certain Expenses relate to
the operations of certain properties known as Sturbridge Meadows and Hobbes
Farms, residential apartment buildings located in Sturbridge, Massachusetts (the
"Properties"). Grove Property Trust (the "Company") has contracted to acquire
the Properties from an unrelated party on July 29, 1998.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Combined Statements of Revenues and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Company's Form 8-K.
Accordingly, the combined financial statements exclude certain expenses that may
not be comparable to those expected to be incurred by the Company in the
proposed future operations of the Properties. Items excluded consist of
depreciation, amortization, interest and certain non-operating expenses.
Management fees were also excluded as the Company expects to self-manage the
Properties.
Use of Estimates
The preparation of the Combined Statements of Revenues and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the Combined
Statements of Revenues and Certain Expenses and accompanying notes. Actual
results could differ from those estimates.
Revenue Recognition
Rental income attributable to leases is recognized on a straight-line basis over
the term of the leases, which are generally one year.
<PAGE>
22
Sturbridge Meadows and Hobbes Farms
Notes to the Combined Statements of Revenues and Certain Expenses
(continued)
2. Summary of Significant Accounting Policies (continued)
Capitalization Policy
Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterments are capitalized.
Interim Unaudited Information
The accompanying Combined Statement of Revenues and Certain Expenses for the six
months ended June 30, 1998 is unaudited; however, in the opinion of management,
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the Combined Statement of Revenues and Certain
Expenses for this interim period have been included. The results of this interim
period are not necessarily indicative of the results to be obtained for a full
fiscal year.
<PAGE>
23
Report of Independent Auditors
To the Shareholders and Board of Trust Managers
Grove Property Trust
We have audited the combined statement of revenues and certain expenses of the
McNeil Properties (the "Properties") for the year ended December 31, 1997. The
combined statement of revenues and certain expenses is the responsibility of the
Properties' management. Our responsibility is to express an opinion on the
combined statement of revenues and certain expenses 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 combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined 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 Form 8-K of Grove Property
Trust, as described in Note 2, and is not intended to be a complete presentation
of the Properties' revenues and expenses.
In our opinion, the combined statement of revenues and certain expenses referred
to above presents fairly, in all material respects, the combined revenues and
certain expenses, as described in Note 2, of the McNeil Properties for the year
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York
October 23, 1998
<PAGE>
24
McNeil Properties
Combined Statements of Revenues and Certain Expenses
(Notes 1 and 2)
Nine Months Ended
September 30, Year Ended
1998 December 31, 1997
--------------------------------------
(Unaudited)
Revenues:
Rental $ 7,160,870 $ 8,865,311
Rental subsidies (Note 3) 5,982,037 7,965,887
Mortgage interest subsidies (Note 3) 505,998 674,665
Interest on restricted cash 220,716 314,918
Other 99,171 135,780
--------------------------------------
13,968,792 17,956,561
--------------------------------------
Certain expenses:
Property operating and maintenance 4,283,311 6,064,776
Real estate taxes 1,036,428 1,295,834
Mortgage interest (Note 4) 3,613,532 4,896,653
--------------------------------------
8,933,271 12,257,263
--------------------------------------
Revenues in excess of certain expenses $5,035,521 $ 5,699,298
======================================
See accompanying notes.
<PAGE>
25
McNeil Properties
Notes to the Combined Statements of Revenues and Certain Expenses
Year Ended December 31, 1997
1. Business
The accompanying Combined Statements of Revenues and Certain Expenses of the
McNeil Properties relate to the operations of 17 residential apartment buildings
located in Massachusetts (collectively, the "Properties"). Grove Property Trust
(the "Company") has contracted to acquire all interests in the partnerships that
own the Properties from an unrelated party on or about October 30, 1998. In
addition to the Properties, the Company will be acquiring certain of the related
partnerships' operating assets and liabilities and will assume the underlying
mortgage notes payable.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Combined Statements of Revenues and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the Company's Form 8-K.
Accordingly, the combined statements exclude certain expenses that may not be
comparable to those expected to be incurred by the Company in the proposed
future operations of the Properties. Items excluded consist of depreciation,
amortization, and certain non-operating expenses. Management fees were also
excluded as the Company will self-manage the Properties.
Use of Estimates
The preparation of the Combined Statements of Revenues and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the Combined
Statements of Revenues and Certain Expenses and accompanying notes. Actual
results could differ from those estimates.
<PAGE>
26
McNeil Properties
Notes to the Combined Statements of Revenues and Certain Expenses
(continued)
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Rental income is recognized on a straight-line basis over the term of the
leases, which are generally one year. Interest income related to earnings on
various restricted cash accounts which are required by certain mortgages which
are being acquired by the Company (see Note 4) have been included on the
accompanying Combined Statements of Revenues and Certain Expenses.
Capitalization Policy
Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterment's are capitalized.
Unaudited Information
The Combined Statement of Revenues and Certain Expenses for the nine months
ended September 30, 1998, is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such information have been
included. The results of operations for this period are not necessarily
indicative of the results to be obtained for a full fiscal year.
3. Government Subsidies
Certain of the Properties (the "Subsidized Properties") are subject to various
forms of federal or state subsidy programs. The subsidies are provided to the
Subsidized Properties through direct rental payments, mortgage interest
reimbursements and/or real estate tax abatements. The Subsidized Properties are
regulated by the Massachusetts Housing Finance Agency ("MHFA") and/or the United
States Department of Housing and Urban Development ("HUD") as to rental changes
and operating methods. In exchange for the various subsidies, the Subsidized
Properties are required to set aside a certain number of apartment units to
qualified low-income elderly tenants for various periods of time.
<PAGE>
27
McNeil Properties
Notes to the Combined Statements of Revenues and Certain Expenses
(continued)
4. Mortgage Notes Payable
The Properties' partnerships have a total $52,010,914 in outstanding mortgage
notes payable as of December 31, 1997. In addition to the monthly installments
of interest and principal, fourteen partnerships must also pay an additional
fixed monthly interest of .5%, computed based on the original amount of the
mortgage. The mortgages are non-recourse and are generally collateralized by the
related property and rents. Certain loan documents also: (i) place restrictions
on amounts of distributions, and (ii) require the related partnership to
maintain various financial covenants.
<TABLE>
<CAPTION>
Interest Balance at December Additional Fixed
Property Maturity Date Rate 31, 1997 Monthly Interest
-------- ------------- ---- -------- ----------------
<S> <C> <C> <C> <C>
Glen Meadow March 1, 2013 5.6850% $ 3,013,764 .5%
Westwood Glen March 1, 2013 5.6850% 1,914,090 .5%
Wilkins Glen May 1, 1999 8.4569% 2,011,232 .5%
Summer Hill Glen April 1, 2018 6.9575% 2,264,420 .5%
Nehoiden Glen May 1, 2009 7.7000% 1,215,560 .5%
Nehoiden Glen (2) May 1, 2009 7.0000% 68,890 --
Gosnold Grove April 1, 2016 7.0186% 769,906 .5%
Gosnold Grove (1) May 1, 2009 8.0000% 51,217 --
Glen Grove October 1, 2009 7.7000% 3,115,794 .5%
Glen Grove October 1, 2009 7.0000% 707,131 --
Conway Court April 1, 2017 7.9040% 528,852 .5%
Norton Glen July 1, 2013 12.4647% 5,431,596 --
Cedar Glen October 1, 2010 7.9000% 2,828,945 .5%
Cedar Glen (2) October 1, 2010 7.0000% 778,491 --
Chestnut Glen December 1, 2012 9.7000% 5,099,590 --
Chestnut Glen (2) December 1, 2012 8.0000% 548,577 --
Noonan Glen June 1, 2012 9.7530% 687,164 --
Old Mill Glen November 1, 2013 11.7633% 2,274,480 .5%
Longfellow Glen June 1, 2014 11.7633% 5,450,656 .5%
Webster Green December 1, 2005 7.5500% 4,653,547 --
929 House April 1, 2019 6.9005% 5,475,616 .5%
Phillips Park November 1, 2006 8.3900% 3,121,396 --
-------------------
Total $ 52,010,914
===================
</TABLE>
<PAGE>
28
McNeil Properties
Notes to the Combined Statements of Revenues and Certain Expenses
(continued)
4. Mortgage Notes Payable (continued)
(1) Gosnold Grove obtained an amendment to its initial mortgage note during 1998
and received additional funds totaling $85,975.
(2) These partnerships obtained second mortgages from the MHFA under HUD's
Section 8 Recapitalization Program. The notes are payable in monthly
installments ranging from $160 to $22,152, including interest at 7% to 8%, and
payment is limited to cash surplus before debt service on these notes. Cash
surplus, if any after eligible distributions, shall be used to prepay these
notes. The notes are due between 2009 and 2012, and are subordinated to the
respective first mortgages. The notes must be prepaid to the extent the first
mortgages are prepaid. If the notes are prepaid, MHFA is entitled to receive
50.36% of the cash surplus through the respective maturity dates of the original
notes.
The following represents scheduled principal payments on the mortgage notes
outstanding as of December 31, 1997.
In the Year Ending December 31,
-------------------------------
1998 $ 2,104,768
1999 2,095,661
2000 2,615,985
2001 2,236,826
2002 2,173,472
Thereafter 40,784,202
------------
Total $ 52,010,914
============
<PAGE>
29
(c) Exhibits
Exhibit No. Description
2.1 Agreement dated as of April 22, 1998 among The Grove Corporation
and the twenty-two limited partnerships identified on Schedule 1
thereto (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 30, 1998
(Commission File No. 1-13080))
2.2 Amendment dated as of August 31, 1998 to Conveyance Agreement
dated as of April 22, 1998 among The Grove Corporation and the
twenty-one limited partnerships identified on Schedule 1 thereto
(incorporated by reference to Exhibit 2.2 to the Company's
Current Report on Form 8-K dated October 30, 1998 (Commission
File No. 1-13080))
<PAGE>
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amendment to its report to be signed on its behalf
by the undersigned hereunto duly authorized.
GROVE PROPERTY TRUST
Date: January 13, 1999 By: /s/ JOSEPH R. LABROSSE
----------------------------------
Joseph R. LaBrosse
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement dated as of April 22, 1998 among The Grove Corporation
and the twenty-two limited partnerships identified on Schedule 1
thereto (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 30, 1998
(Commission File No. 1-13080))
2.2 Amendment dated as of August 31, 1998 to Conveyance Agreement
dated as of April 22, 1998 among The Grove Corporation and the
twenty-one limited partnerships identified on Schedule 1 thereto
(incorporated by reference to Exhibit 2.2 to the Company's
Current Report on Form 8-K dated October 30, 1998 (Commission
File No. 1-13080))
