<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
FEBRUARY 21, 1997
(DATE OF REPORT)
AMBASSADOR APARTMENTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
1-14132
(COMMISSION FILE NO.)
<TABLE>
<S> <C>
MARYLAND 36-3948161
(STATE OF OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
77 W. WACKER DRIVE, CHICAGO, ILLINOIS 60601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(312) 917-1600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE> 2
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 August 20, 1996 the Company acquired Haverhill Commons, The Arbors and
Ocean Oaks for $28.7 million (the "Florida Properties") and Sun Lake apartments
on November 21, 1996 for $24.0 million (collectively, the Acquired
Properties"). Haverhill Commons is a 222 unit apartment complex located in
West Palm Beach, Florida; the Arbors is a 224 unit property located in Deland,
Florida and Ocean Oaks is a 296 unit apartment complex located in Port Orange,
Florida. The Company financed the Florida Properties by assuming tax exempt
bonds plus an additional $630,000 from working capital. Sun Lake is a 600 unit
apartment complex located in Lake Mary, Florida. The Company financed this
acquisition by assuming approximately $15.5 million in tax exempt bonds and
borrowing the remaining $8 million from its line of credit from Bank One,
Arizona. The Acquired Properties were purchased from unaffiliated third
parties.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Statement of Revenue and Certain Expenses for the year ended December 31,
1995 and for the six months ended June 30, 1996 (unaudited) for Haverhill
Common Apartments.
Statement of Revenue and Certain Expenses for the year ended December 31,
1995 and for the six months ended June 30, 1996 (unaudited) for Sun Lake
Apartments.
Arbors and Ocean Oaks Real Estate Limited Partnership Financial Statements
as of December 31, 1995 and 1994 and for the year ended December 31, 1995 and
for the period from inception (March 28, 1994) through December 31, 1994.
(b) Pro Forma Financial Information (unaudited)
Pro Forma Condensed Consolidated Financial Statements of Ambassador
Apartments, Inc. As of June 30, 1996, and for the year ended December 31, 1995
and the six months ended June 30, 1996.
(c) Exhibits.
Exhibit Description
Number of Exhibit
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
<PAGE> 3
AMBASSADOR APARTMENTS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
3
<PAGE> 4
AMBASSADOR APARTMENTS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Balance Sheet has been
presented as if the acquisition of the Acquired Properties had occurred on June
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 June 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 June 30, 1996, nor does it purport to
present the future financial position of the Company.
<TABLE>
<CAPTION>
AMBASSADOR
APARTMENTS, INC. PRO FORMA
(HISTORICAL) ADJUSTMENTS PRO FORMA
---------------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Rental property, net $350,839 $52,700 (A) $403,539
Cash 2,587 -- 2,587
Other assets 38,838 -- 38,838
-------- ------- --------
Total assets $392,264 $52,700 $444,964
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bonds payable $192,300 $44,700 (B) $237,000
Notes payable 58,232 8,000 (C) 66,232
Other liabilities 6,897 -- 6,897
-------- ------- --------
257,429 52,700 310,129
-------- ------- --------
Minority interest 32,746 -- 32,746
Stockholders' equity
Common Stock 90 90
Distributing in excess of accumulated
earnings (10,966) -- (10,966)
Additional paid in capital 112,965 -- 112,965
-------- ------- --------
Total stockholders' equity 102,089 -- 102,089
-------- ------- --------
Total liabilities and stockholders' equity $392,264 $52,700 $444,964
======== ======= ========
</TABLE>
See Notes to Pro Forma consolidated Balance Sheet.
4
<PAGE> 5
NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<S> <C>
(A) RENTAL PROPERTY, NET:
Reflects the acquisition of Arbors, Ocean Oaks, Haverhill Commons and
Sun Lake properties. $52,700
=======
(B) BONDS PAYABLE:
Reflects the assumption of bonds payable associated with acquisitions $44,700
=======
(C) NOTES PAYABLE:
Reflects additional borrowings on the Company's line of credit
associated with the acquisitions $ 8,000
=======
</TABLE>
5
<PAGE> 6
AMBASSADOR APARTMENTS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
SIX MONTHS ENDED JUNE 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 the Acquired Properties 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 June 30, 1996
respectively, and the historical financial statements for the Acquired
Properties 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
APARTMENTS, INC.
(HISTORICAL) PRO FORMA ADJUSTMENTS PRO FORMA
---------------- --------------------- ---------
<S> <C> <C> <C>
Rental revenues $ 53,381 $8,316 (A) $ 61,697
Property operating 20,835 3,341 (B) 24,176
Real estate taxes 5,255 785 (C) 6,040
Depreciation & Amortization 11,686 1,686 (D) 13,372
Gain on sale of property (966) -- (966)
Interest 10,369 2,302 (E) 12,671
---------- ------ ---------
Total Expenses 47,179 8,114 55,293
---------- ------ ---------
Net income before allocation of minority, loss on sale
of cap and extraordinary item 6,202 202 6,404
Income allocated to Minority Interest (615) (20) (F) (635)
---------- ------ ---------
Income before loss on sale of cap and extraordinary item 5,587 182 $ 5,769
Loss on sale of cap, net of minority interest --- -- ---
---------- ------ ---------
Income before extraordinary item 5,587 $ 182 $ 5,769
Extraordinary item, net of minority interest 4,360 ====== =========
----------
Net income $ 9,947
==========
Income, before extraordinary item per weighted average
Common Shares outstanding $ 0.62 $ 0.64
========== =========
Weighted average Common Shares outstanding 8,958,525 8,958,525
========== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------
AMBASSADOR
APARTMENTS, INC.
(HISTORICAL) PRO FORMA ADJUSTMENTS PRO FORMA
---------------- --------------------- ---------
<S> <C> <C> <C>
Rental revenues $ 31,860 $ 4,300 (A) $ 36,160
Property operating 11,901 1,583 (B) 13,484
Real estate taxes 2,749 418 (C) 3,167
Depreciation & Amortization 7,293 843 (D) 8,136
Gain on sale of property -- -- --
Interest 7,282 1,151 (E) 8,433
---------- ------- ----------
Total Expenses 29,225 3,995 33,220
---------- ------- ----------
Net income before allocation of minority, loss on sale
of cap and extraordinary item 2,635 305 2,940
Income allocated to Minority Interest (477) (30) (F) (507)
---------- ------- ----------
Income before loss on sale of cap and extraordinary item 2,158 275 2,433
Loss on sale of cap, net of minority interest 2,084 -- 2,084
---------- ------- ----------
Income before extraordinary item 74 $ 275 $ 349
Extraordinary item, net of minority interest --- ======= ==========
----------
Net income 74
==========
Income, before extraordinary item per weighted average
Common Shares outstanding -- $ 0.04
========== ==========
Weighted average Common Shares outstanding 8,958,525 8,958,525
========== ==========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statements and Income.
6
<PAGE> 7
NOTES TO PROFORMA CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- ------------------
<S> <C> <C>
(A) RENTAL REVENUES:
Reflects the historical results of the Acquired Properties $4,300 $8,316
====== ======
(B) PROPERTY OPERATING:
Reflects the historical results of the Acquired Properties $1,583 $3,341
====== ======
(C) REAL ESTATE TAXES:
Reflects the historical results of the Acquired Properties $ 418 $ 785
====== ======
(D) DEPRECIATION & AMORTIZATION:
Reflects Depreciation of the Acquired Properties'
estimated building basis ($42,160) using an average
useful life of 25 years. $ 843 $1,686
====== ======
(E) INTEREST:
Reflects additional interest costs at stated rates on
bonds assumed by the Company with respect to Acquisition
Properties $1,151 $2,302
====== ======
(F) MINORITY INTEREST:
To adjust income allocated to minority interest resulting
from Pro Forma adjustments related to the acquisition of
the Acquired Properties. $ (20) $ (30)
====== ======
</TABLE>
7
<PAGE> 8
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES FOR
HAVERHILL COMMONS APARTMENTS
REQUIRED UNDER ITEM 7(a) of Form 8-K
8
<PAGE> 9
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES FOR
HAVERHILL COMMONS APARTMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
REPORT OF INDEPENDENT AUDITORS 10
STATEMENTS OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER
31, 1995 AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) FOR
HAVERHILL COMMONS APARTMENTS 11
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES 12
</TABLE>
9
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Ambassador Apartments, Inc.
We have audited the statement of revenue and certain expenses of Haverhill
Commons Apartments for the year ended December 31, 1995. This statement of
revenue and certain expenses is the responsibility of Haverhill Commons
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 Haverhill Commons 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 Haverhill Commons Apartments for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
Chicago, Illinois ERNST & YOUNG LLP
February 19, 1997
10
<PAGE> 11
HAVERHILL COMMONS APARTMENTS
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Revenue:
Rental $1,519 $763
Other 64 22
------ ----
Total Revenue 1,583 785
Certain Expenses:
Real Estate taxes 164 87
Utilities 127 55
Insurance 38 18
Property operating and maintenance 340 155
------ ----
Total expenses 669 315
------ ----
Revenue in excess of certain expenses $ 914 $470
====== ====
</TABLE>
See accompanying notes.
11
<PAGE> 12
HAVERHILL COMMONS 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 Haverhill Commons Apartments, a 222-unit apartment project in
West Palm Beach, Florida. On August 20, 1996, Ambassador Apartments, Inc.
purchased Haverhill Commons 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 Haverhill Commons Apartments for the periods presented no
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 December 31, 1995, approximately 94% of the apartment units were
occupied.
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.
12
<PAGE> 13
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES FOR
SUN LAKE APARTMENTS
REQUIRED UNDER ITEM 7(a) of Form 8-K
13
<PAGE> 14
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES FOR
SUN LAKE APARTMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
REPORT OF INDEPENDENT AUDITORS 15
STATEMENTS OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER
31, 1995 AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) FOR
SUN LAKE APARTMENTS 16
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES 17
</TABLE>
14
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Ambassador Apartments, Inc.
We have audited the statement of revenue and certain expenses of Sun Lake
Apartments for the year ended December 31, 1995. This statement of revenue and
certain expenses is the responsibility of Sun Lake 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 Sun Lake 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 Sun Lake Apartments for the year ended December
31, 1995, in conformity with generally accepted accounting principles.
Chicago, Illinois ERNST & YOUNG LLP
February 19, 1997
15
<PAGE> 16
SUN LAKE APARTMENTS
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ----------------
<S> <C> <C>
Revenue:
Rental $3,541 $1,837
Other 145 94
------ ------
Total Revenue 3,686 1,931
Certain Expenses:
Real estate taxes 311 162
Utilities 438 229
Insurance 147 79
Property operating and maintenance 1,098 480
------ ------
Total expenses 1,994 950
------ ------
Revenue in excess of certain expenses $1,692 $ 981
====== ======
</TABLE>
See accompanying notes.
16
<PAGE> 17
SUN LAKE 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 Sun Lake Apartments, a 600-unit apartment project in Lake Mary,
Florida. On November 21, 1996, Ambassador Apartments, Inc. purchased Sun Lake
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 Sun Lake Apartments for the periods presented no
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 June 30, 1996 and December 31, 1995, approximately 99% (unaudited) and
99% 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.
17
<PAGE> 18
FINANCIAL STATEMENTS FOR ARBORS AND OCEAN OAKS
REAL ESTATE LIMITED PARTNERSHIP
REQUIRED UNDER ITEM 7(a) of Form 8-K
18
<PAGE> 19
ARBORS AND OCEAN OAKS
REAL ESTATE LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995 AND 1994
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 20
BALANCE SHEETS - DECEMBER 31, 1995 AND 1994 21
STATEMENTS OF NET LOSS FOR YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM
INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994 22
STATEMENTS OF PARTNERS' DEFICIT FOR YEAR ENDED DECEMBER 31, 1995 AND THE
PERIOD FROM INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994 23
STATEMENTS OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM
INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994 24
NOTES TO FINANCIAL STATEMENTS 25
</TABLE>
19
<PAGE> 20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Arbors and Ocean Oaks Real Estate Limited Partnership:
We have audited the accompanying balance sheets of Arbors and Ocean Oaks Real
Estate Limited Partnership, a Delaware limited partnership, as of December 31,
1995 and 1994, and the related statements of net loss, partners' deficit and
cash flows for the year ended December 31, 1995 and the period from inception
(March 28, 1994) through December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Arbors and Ocean Oaks Real
Estate Limited Partnership as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the year ended December 31, 1995 and the
period from inception (March 28, 1994) through December 31, 1994, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas,
February 15, 1996
20
<PAGE> 21
ARBORS AND OCEAN OAKS REAL ESTATE LIMITED PARTNERSHIP
BALANCE SHEETS - DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
-------- -------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE, net of accumulated
depreciation of $978,453 and $402,192 $17,687,619 $17,928,900
CASH AND CASH EQUIVALENTS 190,778 279,240
ACCOUNTS RECEIVABLE 744 173,880
ORGANIZATION COSTS, net of accumulated amortization of
$4,805 and $2,059 8,923 11,669
----------- -----------
Total assets $17,888,064 $18,393,689
=========== ===========
</TABLE>
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<S> <C> <C>
BONDS PAYABLE $18,200,000 $18,200,000
OTHER LIABILITIES:
Accounts payable and accrued liabilities 390,941 295,055
Accrued bond interest payable 115,960 256,909
Security deposits 105,681 109,175
----------- -----------
Total liabilities 18,812,582 18,861,139
=========== ===========
PARTNERS' DEFICIT:
General partner (453,015) (229,051)
Limited Partner (471,503) (238,399)
----------- -----------
Total partners' deficit (924,518) (467,450)
Total liabilities and partners' deficit $17,888,064 $18,393,689
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE> 22
ARBORS AND OCEAN OAKS REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF NET LOSS
FOR YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM
INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Rental income $3,039,230 $2,134,959
Interest income 7,616 8,310
Other income -- 315
---------- ----------
Total revenues 3,046,846 2,143,584
---------- ----------
EXPENSES:
Property expenses 1,153,465 906,398
Real estate taxes 309,754 325,506
Asset management fees 208,972 136,595
Interest expense 1,189,302 835,868
Depreciation expense 576,261 402,192
Amortization expense 2,746 2,059
Other 63,414 12,416
---------- ----------
Total Expenses 3,503,914 2,621,034
---------- ----------
NET LOSS $ (457,068) $ (477,450)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
ARBORS AND OCEAN OAKS REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' DEFICIT
FOR YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM
INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
Total General Partner Limited Partner
---------- --------------- ---------------
<S> <C> <C> <C>
CAPITAL CONTRIBUTIONS AT INCEPTION $ 10,000 $ 4,900 $ 5,100
Allocation of net loss (477,450) (233,951) (243,499)
--------- -------------- --------------
PARTNERS' DEFICIT, December 31, 1994 (467,450) (229,051) (238,399)
Allocation of net loss (457,068) (223,964) (233,104)
--------- -------------- --------------
BALANCE, December 31, 1995 $(924,518) $(453,015) $(471,503)
========= ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 24
ARBORS AND OCEAN OAKS REAL ESTATE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1995 AND THE PERIOD FROM
INCEPTION (MARCH 28, 1994) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (457,068) $ (477,450)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 576,261 402,192
Amortization expense 2,746 2,059
Decrease (increase ) in accounts receivable 173,136 (163,880)
Increase in accounts payable and accrued liabilities 95,886 295,055
Increase (decrease) in security deposits (3,494) 109,175
Increase (decrease) in accrued bond interest payable (140,949) 256,909
---------- -----------
Total adjustments 703,586 901,510
---------- -----------
Net cash provided by operating activities 246,518 424,060
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (334,980) (131,092)
Increase in organization costs -- (13,728)
---------- -----------
Net cash used in investing activities (334,980) (144,820)
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (88,462) 279,240
CASH AND CASH EQUIVALENTS, beginning of period 279,240 --
---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 190,778 $ 279,240
========== ===========
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING
ACTIVITIES:
Liabilities assumed in connection with the acquisition of the
real estate:
Bonds Payable $ -- $18,200,000
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $1,330,251 $ 578,959
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
ARBORS AND OCEAN OAKS REAL ESTATE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. ORGANIZATION:
Arbors and Ocean Oaks Real Estate Limited Partnership (the "Partnership") was
formed on March 28, 1994 under the Uniform Limited Partnership Act of the State
of Delaware. The Partnership was formed to acquire, improve, operate and
dispose of the Partnership properties, as provided for in the Limited
Partnership Agreement (the "Partnership Agreement").
At December 31, 1995, the Partnership is comprised of the managing partner MFH
Realty Limited Partnership ("MFH"), as general partner and WH-JER TE-2
Investors, L.P. ("WH-JER"), as the limited partner. Effective November 15,
1995, WH-JER purchased the limited partner interest from Arbor Oaks Ventures,
Inc. The general and limited partners have ownership interests of 49% and 51%,
respectively, and have contributed a total of $10,000 to the Partnership. In
addition, the partners may be required to make additional capital contributions
to the Partnership. The general partner is an affiliate of the limited
partner, the bond holder and the asset manager (Note 3).
The Partnership will continue in existence until March 28, 2044, unless
terminated sooner, as provided in the Partnership Agreement. Net income and
net loss are allocated in accordance with their respective partnership
interests.
2. SUMMARY OF ACCOUNTING POLICIES:
Basis of accounting and use of estimates
The Partnership prepares its financial statements in accordance with generally
accepted accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Investments in real estate
Real estate investments are carried at the lower of cost or market value.
Depreciation is computed on a straight-line basis using an estimated useful
life of 27 1/2 years.
As of December 31, 1995, the Partnership has elected to early adopt Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Adoption of
this standard has resulted in no material financial statement impact.
Organization costs
Organization cots are amortized on a straight-line basis over a 60 month
period.
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Statement of cash flows
The Partnership considers all highly liquid investments purchased with an
original maturity of three months or less that are not restricted to be cash
equivalents.
Income taxes
The Partnership is not a taxpaying entity, and accordingly, records no income
taxes. The partners are individually responsible for reporting their shares of
the Partnership's taxable income or loss on their income tax returns.
Certain transactions of the Partnership may be subject to accounting methods
for income tax purposes which differ from the accounting methods used in
preparing these financial statements in accordance with generally accepted
accounting principles. Accordingly, the net income or loss on the capital
accounts reported for income tax purposes may differ from the balances reported
for those same items in these financial statements.
3. ASSET MANAGEMENT AND LOAN SERVICING AGREEMENT:
The Asset Management and Loan Servicing Agreement (the "Management Agreement")
between the owner of the general partner of the Partnership and Sixth JAR
Investment Management Inc., a Virginia corporation (the "Asset Manager"), was
effective June 4, 1993 and will continue in force until December 31, 2000. The
fees for such asset management services are paid to the owner of the general
partner. Either the Partnership or the Asset Manager may terminate the
Management Agreement without cause upon 30 days written notice to the other
party at any time following the liquidation of all the Partnership real estate
investments (the "Investments"). The Management Agreement may also be
terminated by either party upon the occurrence of certain events of default by
the other party.
As stipulated in the Management Agreement, the Asset Manager's duties are: (a)
to provide customary asset management for the Investments, (b) to prepare a
portfolio business plan for such Investments and (c) to advise the Partnership
on the optimal manner in which to manage, dispose and collect on such
Investments in accordance with the approved asset management and disposition
plans.
Until November 15, 1995, the Asset Manager was owed a monthly fee by the
Partnership for its asset management and asset disposition services in an
amount equal to the sum of the Asset Manager expenses, plus .25% (per annum) of
the average monthly balances of the Investments. After November 15, 1995, the
management fee is paid by the limited partner.
The Asset Manager is entitled to receive a disposition fee from the limited
partner equal to 2% of the gross proceeds received by the Partnership in
connection with the sale of any asset.
The Asset Manager rebates a portion of each of the earned fees to certain
affiliates of the Partnership.
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4. INVESTMENTS IN REAL ESTATE:
The Partnership's investment in real estate consists of two multifamily
complexes. The Arbors is a 224-unit property located on 14.23 acres in Deland,
Florida. The Ocean Oaks is a 296 unit property located on 21.06 acres in Port
Orange, Florida.
At December 31, 1995 and 1994, real estate is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Land $ 2,730,000 $ 2,730,000
Building and improvements 15,936,072 15,601,092
Less accumulated depreciation (978,453) (402,192)
----------- -----------
Real estate, net $17,687,619 $17,928,900
=========== ===========
</TABLE>
5. Bonds Payable
In connection with the acquisition of the real estate, the Partnership assumed
collateralized bonds of $18,200,000. The bonds were issued by the Housing
Finance Authority of Volusia County, Florida.
The bonds accrue interest from the date of the bonds (August 1, 1985) with such
amount due monthly. The bond interest rate is 3% over the J. Kenney Index
(8.19% and 8.39% at December 31, 1995 and 1994, respectively).
The bonds mature on August 1, 2015 with $3,800,000 as the outstanding principal
at such time. During 1995, the bond holder waived the payment of the $300,000
principal payment due in 1995, resulting in such amount now being due at
maturity of the bond. Minimum principal payments due on the bonds payable are
as follows:
Year ending December 31 -
<TABLE>
<S> <C>
1996 300,000
1997 300,000
1998 400,000
1999 400,000
2000 400,000
Thereafter 16,400,000
-----------
$18,200,000
===========
</TABLE>
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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.
February 21, 1997 By: /s/ Adam D. Peterson
- ----------------- --------------------
(Date) Adam D. Peterson
Executive Vice President and Chief
Financial Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit Description
Number of Exhibit
<S> <C>
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Form 8-K filed on February 21, 1997, of our
report dated February 15, 1996, on our audits of the financial statements of
Arbors and Ocean Oaks Real Estate Limited Partnership as of December 31, 1995
and 1994 and for the year ended December 31, 1995 and the period from inception
(March 28, 1994) through December 31, 1994.
Coopers & Lybrand L.L.P.
Dallas, Texas
February 21, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated February 19, 1997, with respect to
the statements of revenue and certain expenses of Sun Lake Apartments and
Haverhill Commons Apartments, for the year ended December 31, 1995, included
in this Form 8-K.
Ernst & Young LLP
Chicago, Illinois
February 20, 1997
