<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
MARCH 3, 1997
(DATE OF REPORT)
AMBASSADOR APARTMENTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
1-14132
(COMMISSION FILE NO.)
MARYLAND 36-3948161
(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
77 W. WACKER DRIVE, CHICAGO, ILLINOIS 60601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(312) 917-1600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Capitalized terms not defined herein are used as defined in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
ITEM 2. ACQUISITIONS OF ASSETS
On October 1, 1996, the Company acquired Crossings of Bellevue
Apartments for $15.6 million. Crossings of Bellevue is a 300 unit apartment
complex located in Bellevue, Tennessee. The Company financed this acquisition
by assuming $8.6 million of variable, tax exempt bonds (the "Bellevue Bonds")
and borrowed the remainder under the Bank One Loan. The Bellevue Bonds were
issued by the Industrial Development Board of the Metropolitan Government of
Nashville and Davidson County and bear interest at 8.3% per annum. The
Crossings of Bellevue was acquired from an unaffiliated third party.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Statements of Revenue and Certain Expenses for the year ended December
31, 1995 and for the nine months ended September 30, 1996 (unaudited) for
Crossings of Bellevue Apartments.
(b) Pro Forma Financial Information (unaudited)
Pro Forma Condensed Consolidated Financial Statements of Ambassador
Apartments, Inc. as of September 30, 1996, and for the year ended December 31,
1995 and the nine months ended September 30, 1996.
(c) Exhibits.
Exhibit Description
Number of Exhibit
------ -----------------
23.1 Consent of Ernst & Young LLP
2
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AMBASSADOR APARTMENTS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Balance Sheet has been
presented as if the acquisition of Crossings of Bellevue had occurred on
September 30, 1996. The unaudited Pro Forma Condensed Consolidated Balance
Sheet should be read in conjunction with the consolidated financial statements
of the Company included in the Quarterly Reports on Form 10-Q for the fiscal
quarter ended September 30, 1996. In management's opinion, all adjustments
necessary to reflect these transactions have been made. The unaudited Pro
Forma Condensed Consolidated Balance Sheet is not necessarily indicative of
what the actual financial position would have been at September 30, 1996, nor
does it purport to present the future financial position of the Company.
<TABLE>
<CAPTION>
AMBASSADOR PREVIOUSLY
APARTMENTS, INC. ACQUIRED PRO FORMA
(HISTORICAL) (E) PROPERTIES (D) ADJUSTMENTS PRO FORMA
------------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Rental property, net $ 408,254 $24,000 $ 15,600 (A) $ 447,854
Cash 2,705 -- -- 2,705
Other assets 57,696 -- -- 57,696
----------- ------- ----------- ----------
Total assets $ 468,655 $24,000 $ 15,600 $ 508,255
=========== ======= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bonds payable $ 231,250 15,500 $ 8,600 (B) $ 255,350
Notes payable 71,984 8,500 7,000 (C) 87,484
Other liabilities 9,115 -- -- 9,115
----------- ------- ----------- ----------
312,349 24,000 15,600 351,949
----------- ------- ----------- ----------
Minority interest 32,319 -- -- 32,319
Preferred Stock 24,394 -- -- 24,394
Stockholders' equity:
Common Stock 90 -- -- 90
Distributing in excess of accumulated
earnings (13,467) -- -- (13,467)
Additional paid in capital 112,970 -- -- 112,970
----------- ------- ----------- ----------
Total stockholders' equity 99,593 -- -- 99,593
----------- ------- ----------- ----------
Total liabilities and stockholders'
equity $ 468,655 $24,000 $ 15,600 $ 508,255
=========== ======= =========== ==========
</TABLE>
See Notes to Pro Forma condensed consolidated Balance Sheet.
3
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NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C>
(A) RENTAL PROPERTY, NET:
Reflects the acquisition of Crossings of Bellevue property. $15,600
=======
(B) BONDS PAYABLE:
Reflects the assumption of bonds payable associated with the acquisition. $8,600
=======
(C) NOTES PAYABLE:
Reflects additional borrowings on the Company's line of credit associated with
the acquisition. $7,000
=======
(D) PREVIOUSLY ACQUIRED PROPERTIES
Represents acquisition of SunLake Apartments and assumption of bonds payable and
additional borrowings on the Company's line of credit in connection therewith as
included in the Company's Current Report on Form 8-K dated February 21, 1997.
(E) HISTORICAL
Reflects the purchase price and related borrowings associated with the
acquisition of Haverhill Commons Apartments and Arbors and Ocean Oaks
Apartments included in the Company's Current Report on Form 8-K dated
February 21, 1997.
</TABLE>
4
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AMBASSADOR APARTMENTS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
The following unaudited Pro Forma Condensed Consolidated Statements of Income
have been presented as if the acquisition of Crossings of Bellevue Apartments
had occurred on January 1, 1995. The unaudited Pro Forma Condensed
Consolidated Statements of Income should be read in conjunction with the
consolidated financial statements of the Company filed on Form 10-K, and Form
10-Q, for the year ended December 31, 1995 and for the period ended September
30, 1996 respectively, and the historical financial statements for Crossings of
Bellevue Apartments purchased by Ambassador Apartments, Inc. included
elsewhere herein. In management's opinion, all adjustments necessary to
reflect this transaction have been made. The unaudited Pro Forma Condensed
Consolidated Statements of Income are not necessarily indicative of what actual
results of operations of the Company would have been had these transactions
actually occurred as of January 1, 1995 nor do they purport to represent the
results of operations of the Company for future periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------
AMBASSADOR PREVIOUSLY
APARTMENTS, INC. ACQUIRED PROFORMA PRO-
(HISTORICAL) PROPERTIES ADJUSTMENTS(G) FORMA
------------------ ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Rental revenues . . . . . . . . . . . . $ 53,381 $ 8,316 $ 2,223(A) $ 63,920
Property operating . . . . . . . . . . 20,835 3,341 555(B) 24,731
Real estate taxes . . . . . . . . . . . 5,255 785 135(C) 6,175
Depreciation & Amortization . . . . . . 11,686 1,686 499(D) 13,871
Gain on sale of property . . . . . . . (966) -- -- (966)
Interest . . . . . . . . . . . . . . . 10,369 2,302 1,295(E) 13,966
------------------ ---------- --------------- ---------
Total Expenses . . . . . . . . . . . . . 47,179 8,114 2,484 57,777
------------------ ---------- --------------- ---------
Net income (loss) before allocation of minority
interest, loss on sale of cap and
extraordinary item . . .. . . . . . . . . . 6,202 202 (261) 6,143
Income (loss) allocated to minority interest . (615) (20) 26(F) (609)
------------------ ---------- --------------- ---------
Income before loss on sale of cap and
extraordinary item . . . . . . . . . . . . 5,587 182 (235) $ 5,535
Loss on sale of cap, net of minority
interest. . . . . . . . . . . . . . . . . . -- -- -- --
------------------ ---------- --------------- ---------
Income before extraordinary item . . . . . 5,587 $ 182 $ (235) $ 5,534
=========== ============== =========
Extraordinary item, net of minority
interest. . . . . . . . . . . . . . . . . . 4,360
------------------
Net income . . . . . . . . . . . . . . . . 9,947
Income allocated to preferred shareholders. --
------------------
Net income applicable to common
shareholders . . . . . . . . . . . . . . . . $ 9,947
==================
Income, before extraordinary item per
weighted average common shares
outstanding. . . . . . . . . . . . . . . . . $ 0.62 $ 0.62
================== ==========
Weighted average Common Shares outstanding . 8,958,525 8,958,525
================== =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------
AMBASSADOR PREVIOUSLY
APARTMENTS, INC. ACQUIRED PROFORMA PRO-
(HISTORICAL) PROPERTIES ADJUSTMENTS(G) FORMA
------------------ ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Rental revenues . . . . . . . . . . . . $ 49,343 $ (A)375 $ 1,660 (A) $ 56,378
Property operating . . . . . . . . . . 18,132 (B)979 471 (B) 20,582
Real estate taxes . . . . . . . . . . . 4,442 (C)523 102 (C) 5,067
Depreciation & Amortization . . . . . . 10,999 (D)054 374 (D) 12,427
Gain on sale of property . . . . . . . -- -- -- --
Interest . . . . . . . . . . . . . . . 11,497 439 971 (E) 13,907
---------------- ---------- ----------- -------
Total Expenses . . . . . . . . . . . . 45,070 4,995 1,918 51,983
---------------- ---------- ----------- -------
Net income (loss) before allocation
of minority interest, loss on sale of
cap and extraordinary item . . . . . . 4,273 380 (258) 4,395
(Income) loss allocated to minority interest (1,032) (38) 26 (F) (1,044)
---------------- ---------- ----------- -------
Income (loss) before loss on sale of cap and
extraordinary item . . . . . . . . . . 3,241 342 (232) 3,351
Loss on sale of cap, net of minority
interest. . . . . . . . . . . . . . . . 2,084 -- -- 2,084
---------------- ---------- ----------- -------
Income before extraordinary item . . . 1,157 $ 342 $ (232) $ 1,267
=========== ========== ========
Extraordinary item, net of minority
interest. . . . . . . . . . . . . . . . --
---------------
Net income . . . . . . . . . . . . . . 1,157
Income allocated to preferred
shareholders . . . . . . . . . . . . . 283
===============
Net income applicable to common
shareholders. . . . . . . . . . . . . . $ 874
===============
Income, before extraordinary item per
weighted average common shares
outstanding . . . . . . . . . . . . . . $ 0.10 $ 0.14
=============== ==========
Weighted average Common Shares
outstanding . . . . . . . . . . . . . . 8,958,525 8,958,525
=============== ==========
See Notes to Pro Forma Condensed Consolidated Statements and Income.
</TABLE>
5
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NOTES TO PROFORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- -----------------
<S> <C> <C>
(A) RENTAL REVENUES:
Reflects the historical results of the Acquired Property $ 1,660 $ 2,223
========= =======
(B) PROPERTY OPERATING:
Reflects the historical results of the Acquired Property $ 471 $ 555
========= =======
(C) REAL ESTATE TAXES:
Reflects the historical results of the Acquired Property $ 102 $ 135
========= =======
(D) DEPRECIATION & AMORTIZATION:
Reflects Depreciation of the Acquired Property's estimated
building basis ($12,480) using an average useful life of
25 years. $ 374 $ 499
========= =======
(E) INTEREST:
Reflects additional interest costs at stated rates on bonds
assumed by the Company and line of credit borrowings with
respect to the Acquisition Property $ 971 $ 1,295
========= =======
(F) MINORITY INTEREST:
To adjust income allocated to minority interest resulting
from Pro Forma adjustments related to the acquisition of the
Acquired Properties. $ 62 $ 26
========= =======
(G) PREVIOUSLY ACQUIRED PROPERTIES:
Reflects previously acquired residential properties which
include Haverhill Commons Apartments, Sun Lake Apartments
and Arbors and Ocean Oaks Apartments (The "Previously
Acquired Properties") as reported in the Company's Current
Report on Form 8-K dated February 21, 1997.
</TABLE>
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STATEMENTS OF REVENUE AND
CERTAIN EXPENSES FOR
CROSSINGS OF BELLEVUE APARTMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
REPORT OF INDEPENDENT AUDITORS 8
STATEMENTS OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) FOR CROSSINGS OF
BELLEVUE APARTMENTS 9
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES 10
</TABLE>
7
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REPORT OF INDEPENDENT AUDITORS
Board of Directors
Ambassador Apartments, Inc.
We have audited the statement of revenue and certain expenses of
Crossings of Bellevue Apartments for the year ended December 31, 1995. This
statement of revenue and certain expenses is the responsibility of Crossings of
Bellevue Apartments' management. Our responsibility is to express an opinion
on the statement of revenue 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 statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenue and certain expenses. An audit also includes assessing the basis of
accounting used and the significant estimates made by management, as well as
evaluating the overall presentation of the statement of revenue and certain
expenses. We believe that our audit of the statement of revenue and certain
expenses 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 on the Current Report on Form 8-K of
Ambassador Apartments, Inc. as described in Note 2 and is not intended to be a
complete presentation of Crossings of Bellevue Apartments' revenue and
expenses.
In our opinion, the statement of revenue and certain expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 2 of Crossings of Bellevue Apartments for the year
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Chicago, Illinois ERNST & YOUNG LLP
February 28, 1997
8
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CROSSINGS OF BELLEVUE APARTMENTS
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1996
1995 (UNAUDITED)
----------------------- ----------------------
<S> <C> <C>
Revenue:
Rental $ 2,135 $ 1,606
Other 88 54
------------ ------------
Total Revenue 2,223 1,660
Certain Expenses:
Real estate taxes 135 102
Utilities 157 132
Insurance 64 56
Property operating and maintenance 334 283
------------ ------------
Total expenses 690 573
------------ ------------
Revenue in excess of certain expenses $ 1,533 $ 1,087
============ ============
</TABLE>
See accompanying notes.
9
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CROSSINGS OF BELLEVUE APARTMENTS
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BUSINESS
The accompanying statements of revenue and certain expenses represent
the operations of Bellevue Crossing Apartments, a 300-unit apartment project in
Bellevue, Tennessee. On October 1, 1996, Ambassador Apartments, Inc. purchased
Bellevue Crossing Apartments from the prior owner, an unaffiliated real estate
company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying statements of revenue 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 Current Report on Form
8-K of Ambassador Apartments, Inc. The statements are not representative of
the actual operations of Bellevue Crossing Apartments for the periods presented
nor indicative of future operations, as certain expenses, consisting of
depreciation, amortization, interest, and management and other professional
fees, have been excluded.
Revenue Recognition
Rental income is recognized as income in the period earned.
Rentals
At September 30, 1996 and December 31, 1995, approximately 95%
(unaudited) and 96% of the apartment units were occupied, respectively.
Use of Estimates
The preparation of these financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMBASSADOR APARTMENTS, INC.
March 3, 1997 By: /s/ Adam D. Peterson
- ------------------- ---------------------------
(Date) Adam D. Peterson
Executive Vice President
and Chief Financial
Officer
11
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Exhibit Index
Exhibit Description
Number of Exhibit
------- -----------
23.1 Consent of Ernst & Young LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 28, 1997, with respect to
the statements of revenue and certain expenses of Crossings of Bellevue
Apartments for the year ended December 31, 1995, included in the Current Report
on Form 8-K for Ambassador Apartments, Inc. dated March 3, 1997, filed with
the Securities and Exchange Commission.
Ernst & Young LLP
Chicago, Illinois
March 3, 1997
