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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
May 14, 1997
------------------------------------------------
Date of Report (Date of Earliest Event Reported)
INCOME OPPORTUNITY REALTY INVESTORS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 1-9525 75-2615944
- - --------------------------------------------------------------------------------
(State of Incorporation) (Commission (IRS Employer
File No.) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, TX 75231
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 692-4700
---------------
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 14, 1997, Income Opportunity Realty Investors, Inc. (the "Company")
purchased the La Mesa Village Plaza, a 92,611 square foot office building in La
Mesa, California, for $8.1 million, 13.2% of the Company's assets at December
31, 1996. The seller of the property was La Mesa Village Plaza Associates Joint
Venture, a California general partnership.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December
31, 1996 and the three months ended March 31, 1997. A pro forma balance sheet
as of March 31, 1997 is also presented.
A summary of the pro forma transactions follows:
On May 14, 1997, the Company purchased the La Mesa Village Plaza Office
Building in La Mesa, California, for $8.1 million exclusive of commissions and
closing costs. The Company acquired the property from La Mesa Village Plaza
Associates Joint Venture, a California general partnership. The Company paid
$2.1 million in cash and obtained new mortgage financing for the remaining $6.0
million of the purchase price. The mortgage bears interest at 9.1875%, requires
monthly payments of principal and interest of $51,124 and matures in June 2007.
In addition to the La Mesa Village Plaza acquisition discussed above, in
January 1997, the Company purchase the Chuck Yeager Building, an
industrial/office building in Chantilly, Virginia, for $5.1 million exclusive
of commissions and closing costs, 8.4% of the Company's assets at December 31,
1996. The Company paid $2.0 million in cash and obtained new mortgage financing
for the remaining $3.1 million of the purchase price. The mortgage bears
interest at a variable rate currently 10.75% per annum, requires monthly
payments of principal and interest of $51,017 and matures January 2000.
In March 1997, the Company completed the sale of the Plumtree Apartments, a 116
unit apartment complex in Martinez, California, that was under contract for
sale at December 31, 1996. The apartment complex was sold for $7.8 million in
cash, the Company receiving net cash of $1.6 million after the payoff of $5.7
million in existing mortgage debt and the payment of various closing costs
associated with the sale.
These pro forma statements of operations present the Company's operations as if
purchase transactions described above had occurred at the beginning of each of
the periods presented.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
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INCOME OPPORTUNITY REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
La Mesa Village
Actual(1) Plaza (2) Pro forma
--------- --------- ---------
Assets (dollars in thousands)
<S> <C> <C> <C>
Notes and interest receivable
Performing ................................................ $ 2,001 $ -- $ 2,001
-------- -------- --------
2,001 -- 2,001
Less - allowance for estimated losses ........................ -- -- --
-------- -------- --------
2,001 -- 2,001
Foreclosed real estate held for sale, net of accumulated
depreciation .............................................. 914 -- 914
Less - allowance for estimated losses ........................ -- -- --
-------- -------- --------
914 -- 914
Real estate held for investment, net of accumulated
depreciation .............................................. 51,900 8,545 60,445
Investments in partnerships .................................. 2,351 -- 2,351
Cash and cash equivalents .................................... 2,571 (2,572) (1)
Other assets ................................................. 2,655 27 2,682
-------- -------- --------
$ 62,392 $ 6,000 $ 68,392
======== ======== ========
Liabilities and Shareholders' Equity
Liabilities
Notes and interest payable ................................... $ 36,275 $ 6,000 $ 42,275
Other liabilities ............................................ 2,355 -- 2,355
-------- -------- --------
38,630 6,000 44,630
Commitments and contingencies
Shareholders' equity
Common Stock, $.01 par value; 10,000,000 shares; issued and
outstanding, 1,519,888 shares ............................. 15 -- 15
Paid-in capital .............................................. 64,804 -- 64,804
Accumulated distributions in excess of accumulated
earnings .................................................. (41,057) -- (41,057)
-------- -------- --------
23,762 -- 23,762
-------- -------- --------
$ 62,392 $ 6,000 $ 68,392
======== ======== ========
</TABLE>
- - ----------------------
(1) Includes the Chuck Yeager Building which was acquired in January 1997 and
excludes the Plumtree Apartments that were sold in March 1997.
(2) Assumes the acquisition of the La Mesa Village Plaza occurred on January 1,
1997.
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INCOME OPPORTUNITY REALTY INVESTORS, INC.
PRO FORMA
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
La Mesa Village Plumtree
Actual (1) Plaza (2) Apartments (3) Pro forma
----------- --------------- -------------- ---------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C>
Income
Rents ............................ $ 2,692 $ 358 $ (197) $ 2,853
Interest ......................... 69 -- -- 69
----------- ----- ------- -----------
2,761 358 (197) 2,922
Expenses
Property operations .............. 1,340 108 (109) 1,339
Interest ......................... 877 141 (81) 937
Depreciation ..................... 365 41 (22) 384
Advisory fee to affiliate ........ 123 -- -- 123
Net income fee to affiliate ...... 124 -- -- 124
General and administrative ....... 265 -- -- 265
----------- ----- ------- -----------
3,094 290 (212) 3,172
Net income (loss) from operations .... (333) 68 15 (250)
Equity in income of investees ........ 17 -- -- 17
Gain on sale of real estate .......... 1,849 -- -- 1,849
----------- ----- ------- -----------
Net income (loss) .................... $ 1,533 $ 68 $ 15 $ 1,616
=========== ===== ======= ===========
Earnings per share
Net (loss) ....................... $ 1.01 $ 1.06
=========== ===========
Weighted average shares of Common
Stock used in computing earnings
per share ........................ 1,519,888 1,519,888
=========== ===========
</TABLE>
- - ----------------------
(1) Includes the Chuck Yeager Building acquired January 8, 1997.
(2) Assumes acquisition by the Company on January 1, 1996.
(3) Assumes sale by the Company on January 1, 1997.
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INCOME OPPORTUNITY REALTY INVESTORS, INC.
PRO FORMA
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
La Mesa Chuck
Village Yeager Plumtree
Actual Plaza (1) Building (1) Apartments (2) Pro forma
---------- ----------- ------------ -------------- -----------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C> <C>
Income
Rents .......................... $ 8,666 $1,433 $ 879 $ (1,053) $ 9,925
Interest ....................... 339 -- -- -- 339
----------- ------ ------- -------- -----------
9,005 1,433 879 (1,053) 10,264
Expenses
Property operations ............ 4,358 433 119 (440) 4,470
Interest ....................... 2,629 562 335 (444) 3,082
Depreciation ................... 1,128 164 108 (132) 1,268
Advisory fee to affiliate ...... 227 -- -- -- 227
General and administrative ..... 1,316 -- -- -- 1,316
----------- ------ ------- -------- -----------
9,658 1,159 562 (1,016) 10,363
Income (loss) from operations ..... (653) 274 317 (37) (99)
Equity in losses of investees ..... 85 -- -- -- 85
----------- ------ ------- -------- -----------
Net (loss) ........................ $ (568) $ 274 $ 317 $ (37) $ (14)
=========== ====== ======= ======== ===========
Earnings per share
Net (loss) ...................... $ (.37) $ (.01)
=========== ===========
Weighted average shares of
Common Stock used in
computing earnings per share ... 1,530,008 1,530,008
=========== ===========
</TABLE>
(1) Assumes acquisition by the Company on January 1, 1996.
(2) Assumes sale by the Company on January 1, 1996.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Financial statements of property acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- ---------------------------------------------------------------------
<S> <C>
99.0 Audited Statement of Revenue and Direct Operating Expenses of La Mesa
Village Plaza for the year ended December 31, 1996.
99.1 Audited Statement of Revenue and Direct Operating Expenses of
Chuck Yeager Building for the year ended December 31, 1996.
</TABLE>
---------------------------------
SIGNATURE
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 hereto duly authorized.
INCOME OPPORTUNITY REALTY INVESTORS, INC.
Date: May 27, 1997 By: /s/ Thomas A. Holland
------------------------------ -------------------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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INCOME OPPORTUNITY REALTY INVESTORS, INC.
EXHIBITS TO
CURRENT REPORT ON FORM 8-K
Dated May 14, 1997
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- - ------- ---------------------------------------------- ------
<S> <C>
99.0 La Mesa Village Plaza Audited Statement of 8
Revenues and Direct Operating Expenses for the
year ended December 31, 1996.
99.1 Chuck Yeager Building Audited Statement of 12
Revenues and Direct Operating Expenses for the
year ended December 31, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 99.0
LA MESA VILLAGE PLAZA
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
8
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Independent Auditors' Report
To the Board of Trustees
Income Opportunity Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of La Mesa Village Plaza for the year ended December 31, 1996. This
statement of revenues and direct operating expenses is the responsibility of
the Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating 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 revenues and direct
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of revenues and direct
operating expenses presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement is prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K of Income Opportunity Realty Investors, Inc.) and, as
described in Note 1, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues and
direct operating expenses of La Mesa Village Plaza for the year ended December
31, 1996, in conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
April 2, 1997
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LA MESA VILLAGE PLAZA
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $1,397,402
Common area maintenance charges 36,003
----------
Total revenues 1,433,405
OPERATING EXPENSES
Repairs and maintenance 125,151
Property taxes 113,696
Utilities 94,842
Salaries and benefits 79,395
Insurance 19,510
----------
Total direct operating expenses 432,594
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $1,000,811
==========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 4
LA MESA VILLAGE PLAZA
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
La Mesa Village Plaza is a 92,611 square foot office complex,
consisting of three separate office and retail buildings and one
corner pad building, located in La Mesa, California. During 1996, the
property was owned by La Mesa Village Plaza Associates.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: ACCOUNTING ESTIMATES
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 revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3: SUBSEQUENT EVENT
The property was sold to Income Opportunity Realty Investors, Inc., a
Nevada corporation, on May 14, 1997.
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<PAGE> 1
EXHIBIT 99.1
THE CHUCK YEAGER BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
12
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Income Opportunity Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of The Chuck Yeager Building for the year ended December 31, 1996.
This statement of revenues and direct operating expenses is the responsibility
of the Property's management. Our responsibility is to express an opinion on
this statement of revenues and direct operating 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 revenues and direct
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of revenues and direct
operating expenses presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement is prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K of Income Opportunity Realty Investors, Inc.) and, as
described in Note 1, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues and
direct operating expenses of The Chuck Yeager Building for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
April 17, 1997
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<PAGE> 3
THE CHUCK YEAGER BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $767,670
Other revenues 110,995
--------
Total revenues 878,665
OPERATING EXPENSES
Property taxes 47,644
Repairs and maintenance 44,097
Utilities 10,145
Salaries and benefits 8,688
Insurance 7,996
--------
Total direct operating expenses 118,570
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $760,095
========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 4
THE CHUCK YEAGER BUILDING
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Chuck Yeager Building is a 60,060 square foot office building,
located in Chantilly, Virginia. During 1996, the property was owned
by Orange Nassau Property Services.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: ACCOUNTING ESTIMATES
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 revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Common area maintenance charges $ 82,709
Real estate tax reimbursement 24,336
Late fees and interest 3,950
--------
Total $110,995
========
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Income Opportunity Realty Investors, Inc., a
Nevada corporation, on January 8, 1997.
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