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
Date of Report (Date of earliest event reported) September 15, 1997
INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-95758 65-0544042
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(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
950 North Federal Highway, Suite 219, Pompano Beach, Florida 33062
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (954) 783-2004
________________________________________________________________________________
(Former name or former address, if changed since last report)
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Investment Income Properties of America, Inc.
Form 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report
Historical Statement of Income and Direct Operating Expenses
and Note
b. Pro Forma Statement of Operations for the Year Ended December
31, 1996 (unaudited)
Pro Forma Statement of Operations for the Six Months Ended
June 30, 1997 (unaudited)
c. Exhibits
10.1 Purchase Contract for 950 Professional Building*
10.2 Property Management Agreement for the 950 Professional
Building, Pompano Beach, Florida.*
*To be filed by amendment
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Item 2. Acquisition or Disposition of Assets.
On June 30, 1997, Investment Income Properties of America (the "Company")
purchased the 950 Professional Building, a three story office complex consisting
of 40,000 square feet, having an address of 950 North Federal Highway, Pompano
Beach, Florida (the "Property"). The Company purchased the Property for
$2,600,000. The purchase was financed through a purchase money mortgage of
$2,080,000 and funds provided through loans by individuals who also own shares
in the Company. The mortgage bears interest at 1% below the prime rate, is
payable monthly and is collateralized by the property. During any time the
mortgage is outstanding, the seller has the option to convert the mortgage and
note to common stock of the Company. Title to the Property was conveyed by a fee
simple warranty.
The Property consists of 31 rental suites 29 of which are currently leased
to 29 tenants that are engaged in a variety of businesses, including financial
services, investment banking, publishing, computer technology, health care
services, accounting and law. The suites provide for a combined total of 26,000
square feet of rentable area. The Company purchased the Property from a third
party, unaffiliated with the Company, that had owned the Property and leased
office space thereon for the past 28 years. The Company will use one suite on
the Property as its corporate headquarters and continue to use the remainder of
the Property as office building rental or leasing space.
In consideration of services rendered to the Company in connection with
the selection and acquisition of the Property, the Company will pay Professional
Realty and Management Services, Inc. ("PRMS"), an affiliate of the Company, a
property acquisition fee of 4% of the purchase price of the Property or $104,000
when the equity for the acquisition of the property is fully raised. PRMS will
serve as property manager for the Property and will be paid a monthly management
fee equal to 5% of the gross revenues of the Property.
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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 hereunto duly authorized.
INVESTMENT INCOME PROPERTIES OF
AMERICA, INC.
By: /s/ Fredric B. Layne
---------------------------------------
Fredric B. Layne, President/CEO Dated:
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GRANT THORNTON LLP
200 East Broward Boulevard
Suite 2000
Ft. Lauderdale, FL 33301-1915
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Investment Income Properties of America, Inc.
We have audited the accompanying Historical Statement of Income and Direct
Operating Expenses exclusive of items not comparable to the proposed future
operations of the property of 950 Professional Building located in Pompano
Beach, Florida, for the year ended December 31, 1996. This statement is the
responsibility of the management of Investment Income Properties of America,
Inc., Betty A. Ginsburg, and 950 Professional Management Company. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statements. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement referred to above presents fairly, in all material
respects, the operating income and direct operating expenses described in Note A
of the 950 Professional Building for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Fort Lauderdale, Florida
May 17, 1997 (except Note A which is dated June 30, 1997)
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HISTORICAL STATEMENT OF INCOME AND DIRECT OPERATING
EXPENSES EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE
PROPOSED FUTURE OPERATIONS OF THE PROPERTY
December 31, 1996
Income
Rental and other income $ 303,805
Direct operating Expenses (Note A)
Administrative and other 2,695
Insurance 11,889
Repairs and maintenance 44,266
Property taxes 35,824
Utilities 49,131
----------
Total direct operating expenses 143,805
----------
Operating income exclusive of items not
comparable to the proposed future
operations of the property $ 160,000
==========
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
950 Professional Building is a 31 unit business office complex
located in Pompano Beach, Florida. Usable office space totals
approximately 25,500 square feet. On June 30, 1997, Investment Income
Properties of America, Inc. (the "Company") purchased this office complex
for $2,600,000. The purchase was financed through a purchase money
mortgage of $2,080,000 and funds provided through loans by individuals who
also own shares in the Company. The mortgage bears interest at 1% below
the prime rate, is payable monthly, and is collateralized by the property.
During any time the mortgage is outstanding, the seller has the option to
convert the mortgage and note to common stock of the Company.
In accordance with Rule 3.14 of the Regulation S-X of the Securities and
Exchange commission, the statements of income and direct operating
expenses exclude interest income and expenses not considered comparable to
those resulting form the proposed future operations of the property.
Excluded expenses are depreciation, legal fees, accounting fees and
management fees.
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Investment Income Properties of America, Inc.
PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited Pro Forma Statement of Operations for the year
ended December 31, 1996 and the six months ended June 30, 1997, are presented as
if (a) the Company had owned the property acquired in 1997 on January 1, 1996,
and January 1, 1997; (b) the Company had qualified as a REIT, distributed all of
its taxable income and, therefore, incurred no Federal or Florida income tax
expense during the year; and (c) rental expenses have been adjusted to reflect
property management expense based on the Company's contractual arrangement,
depreciation, taxes, and insurance based on the new basis in the property for
each period presented. No Pro Forma balance sheet has been presented since the
acquisition occurred prior to June 30, 1997.
Pro Forma information is not necessarily indicative of what the Company's
financial position or results of operations actually would have been if these
transactions had in fact occurred on the dates indicated.
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Investment Income Properties of America, Inc.
PRO FORMA STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical 950
Statement of Professional Pro Forma Total
Operations Building Adjustments Pro Forma
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue
Rental income and other income $ -- $ 303,805 $ -- $ 303,805
Expenses
Utilities -- 49,131 -- 49,131
Repairs and maintenance -- 44,266 -- 44,266
Property taxes and insurance -- 47,713 (7,317)(2) 40,396
Property management -- -- 15,190(3) 15,190
Advisory fee -- -- 25,637(4) 26,637
Depreciation -- -- 65,736(1) 65,736
Interest expense 40,165 -- 153,791(5) 193,956
General and administrative 528,254 2,695 2,305 533,254
--------- --------- --------- ---------
Total expenses 568,419 143,805 255,342 967,566
--------- --------- --------- ---------
Income (loss) before interest
income and taxes (568,419) 160,000 (255,342) (663,761)
Interest income 1,120 -- -- 1,120
--------- --------- --------- ---------
Income (loss) before taxes (567,299) 160,000 (255,342) (662,641)
Income tax expenses 392 -- -- 392
--------- --------- --------- ---------
Net income (loss) $(567,691) $ 160,000 $(255,342) $(663,033)
========= ========= ========= =========
Net loss per share $ (6.58) $ (7.69)
========= =========
Weighted average number
of shares outstanding 86,236 86,236
========= =========
</TABLE>
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Investment Income Properties of America, Inc.
PRO FORMA ADJUSTMENTS (UNAUDITED)
December 31, 1996
1) To record utility cost for the six months ended June 30, 1997.
2) To record repairs and maintenance to reflect six months of expense.
3) To record property taxes and insurance for new basis in property
4) To record property management fee for new contractual basis. The
management fee is based on 5% of annual gross collected revenues.
5) To reflect new asset management fee. This fee will be paid quarterly equal
to .1% to .25% of "Total Contributions" with a minimum of $25,000 per year
is the Minimum Offering 9$10,000) is sold. For purposes of this pro forma,
the Minimum Offering will be assumed.
6) To record depreciation for new depreciable basis in property of
$2,563,716. Depreciation was provided for using the straight-line method
over an estimated life of 39 years.
7) To adjust general and administrative expenses to reflect six months of
expense.
8) To record interest expense from the mortgage on the property acquired.
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Investment Income Properties of America, Inc.
PRO FORMA STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1997
(Unaudited)
Historical
Statement of Pro Forma Total
Operations Adjustments Pro Forma
---------- ----------- ---------
Revenue
Rental income and other income $ -- $ 151,903 $ 151,903
Expenses
Utilities -- 24,566(1) 24,566
Repairs and maintenance -- 22,133(2) 22,133
Property taxes and insurance -- 20,458(3) 20,458
Property management -- 7,595(4) 7,595
Assessment management fee -- 12,500(5) 12,500
Depreciation -- 32,868(6) 32,868
General and administrative 412,644 2,500(7) 415,144
Interest expense 40,217 77,071(8) 117,288
--------- --------- ---------
Total expenses 452,861 199,691 (652,552)
--------- --------- ---------
Loss before interest
income and taxes (452,861) (47,788) (500,649)
Interest income 980 -- 980
--------- --------- ---------
Loss before taxes -- -- --
Income tax expenses -- -- --
--------- --------- ---------
Net (loss) $(451,881) $ (47,788) $(499,669)
========= ========= =========
Net loss per share $ (3.66) $ (4.05)
========= =========
Weighted average number
of shares outstanding 123,400 123,400
========= =========
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Investment Income Properties of America, Inc.
PRO FORMA ADJUSTMENTS (UNAUDITED)
June 30, 1997
1) To record utility cost for the six months ended June 30, 1997.
2) To record repairs and maintenance to reflect six months of expense.
3) To record property taxes and insurance for new basis in property.
4) To record property management fee for new contractual basis. The
management fee is based on 5% of annual gross collected revenues.
5) To reflect new asset management fee. This fee will be paid quarterly equal
to .1% to .25% of "Total Contributions" with a minimum of $25,000 per year
is the Minimum Offering ($10,000,000) is sold. For purposes of this pro
forma, the Minimum Offering will be assumed.
7) To adjust general and administrative expenses to reflect six months of
expense.
8) To record interest expenses from the mortgage on the property acquired.
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
FORM 8-K
Exhibit Index
Page No.
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Exhibit 10.1 Purchase Contract dated May 20, 1997
pertaining to the 950 Professional Building
Pompano Beach, Florida.*
Exhibit 10.2 Property Management Agreement for the
950 Professional Building, Pompano Beach, Florida.*
*To be filed by amendment
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