SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 25, 2000 -------------------- Presidential Realty Corporation - --------------------------------------------------------------------- (Exact name of registrant as specified in charter) DELAWARE 1-8594 13-1954619 - ---------------------------- ------------ ------------ (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification Number) 180 South Broadway, White Plains, New York 10605 - ------------------------------------------- ------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 948-1300 -------------- No change since last Report - ------------------------------------------------- (Former name or former address, if changed since last report) PRESIDENTIAL REALTY CORPORATION AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K/A Presidential Realty Corporation hereby amends Item 2 of its Current Reports on Form 8-K, which were filed on March 27, 2000 and April 10, 2000, as set forth in the pages attached hereto: Item 2. Acquisition of Assets. Financial Statements for Farrington Apartments and Preston Lake Apartments purchased on March 15, 2000 and March 30, 2000, respectively, and pro forma financial information are presented in Item 7. Item 7. Financial Statements and Exhibits. Financial Statements of the business acquired: Independent Auditors' Report Audited Statement of Revenue and Certain Expenses of Farrington Apartments for the Year Ended December 31, 1999. Notes to Statement of Revenue and Certain Expenses. Independent Auditors' Report Audited Statement of Revenue and Certain Expenses of Preston Lake Apartments for the Year Ended December 31, 1999. Notes to Statement of Revenue and Certain Expenses. Pro Forma Financial Information: Pro Forma Consolidated Statements of Operations for the Year Ended December 31, 1999 and for the Three Months Ended March 31,2000. Notes to the Pro Forma Consolidated Statements of Operations INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Presidential Realty Corporation White Plains, New York We have audited the accompanying statement of revenue and certain expenses of the Farrington Apartments ("Farrington"), as described in Note 1, for the year ended December 31, 1999. This financial statement is the responsibility of Presidential Realty Corporation's management. Our responsibility is to express an opinion on this financial 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 financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit 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 in the filing of Form 8-K/A of Presidential Realty Corporation) as described in Note 1 and is not intended to be a complete presentation of Farrington's revenues and expenses. In our opinion, such financial statement presents fairly, in all material respects, the revenue and certain expenses of the Farrington Apartments for the year ended December 31, 1999, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Stamford, Connecticut April 20, 2000 FARRINGTON APARTMENTS STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999 Revenue: Rental $1,628,212 ---------- Total revenue 1,628,212 ---------- Certain Expenses: Operating expenses 552,887 Real estate taxes 118,474 ---------- Total certain expenses 671,361 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $956,851 ========== See notes to statement of revenue and certain expenses. FARRINGTON APARTMENTS NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES 1. ORGANIZATION AND BASIS OF PRESENTATION BUSINESS The accompanying Statement of Revenue and Certain Expenses includes the operations (see "Basis of Presentation" below) of Farrington Apartments, a 224 unit garden apartment property, located in Clearwater, Florida. During the year ended December 31, 1999, Farrington Apartments was owned by Royal River Partners, L.P., which is not related to Presidential Realty Corporation (the "Company"). On March 15, 2000, the Company acquired Farrington Apartments. The acquisition was funded from the proceeds of a new $7,900,000 first mortgage loan on the property and $2,005,739 of the Company's available cash. The mortgage has an interest rate of 8.25% per annum, matures on May 1, 2010 and has a balloon payment of $7,106,299 due at maturity. BASIS OF PRESENTATION The accompanying financial statement has been prepared on the accrual basis of accounting, but is not representative of the actual operations of Farrington Apartments for the period shown. As required by the Securities and Exchange Commission Regulation S-X, Rule 3-14, certain expenses have been excluded which may not be comparable to the proposed future operations of Farrington Apartments. Expenses excluded relate to property management fees, interest expense, depreciation and amortization expenses and other expenses not directly related to the future operations of Farrington Apartments. The Company is not aware of any material factors relating to Farrington Apartments that would cause the reported financial information not to be necessarily indicative of future operating results. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Rental income, attributable to residential leases, is recognized as earned over the lease term. Leases are generally for terms of one year. MANAGEMENT'S ESTIMATES The financial statement has been prepared in conformity with generally accepted accounting principles. In preparing the financial statement, management is required to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Presidential Realty Corporation White Plains, New York We have audited the accompanying statement of revenue and certain expenses of the Preston Lake Apartments ("Preston Lake"), as described in Note 1, for the year ended December 31, 1999. This financial statement is the responsibility of Presidential Realty Corporation's management. Our responsibility is to express an opinion on this financial 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 financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit 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 in the filing of Form 8-K/A of Presidential Realty Corporation) as described in Note 1 and is not intended to be a complete presentation of Preston Lake's revenues and expenses. In our opinion, such financial statement presents fairly, in all material respects, the revenue and certain expenses of the Preston Lake Apartments for the year ended December 31, 1999, in conformity with generally accepted accounting principles. Deloitte & Touche LLP Stamford, Connecticut April 25, 2000 PRESTON LAKE APARTMENTS STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999 Revenue: Rental $2,651,118 ---------- Total revenue 2,651,118 ---------- Certain Expenses: Operating expenses 648,261 Real estate taxes 212,628 ---------- Total certain expenses 860,889 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $1,790,229 ========== See notes to statement of revenue and certain expenses. PRESTON LAKE APARTMENTS NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES 1. ORGANIZATION AND BASIS OF PRESENTATION BUSINESS The accompanying Statement of Revenue and Certain Expenses includes the operations (see "Basis of Presentation" below) of Preston Lake Apartments, a 320 unit garden apartment property, located in Tucker, Georgia. During the year ended December 31, 1999, Preston Lake Apartments was owned by EQR Preston Lake Vistas, Inc., which is not related to Presidential Realty Corporation (the "Company"). On March 30, 2000, the Company acquired Preston Lake Apartments. The acquisition was funded from the proceeds of a new $14,000,000 first mortgage loan on the property, the proceeds from the sale of $1,285,263 of securities available for sale and $2,727,999 of the Company's available cash. The mortgage has an interest rate of 8.15% per annum, matures on May 1, 2010 and has a balloon payment of $12,564,077 due at maturity. BASIS OF PRESENTATION The accompanying financial statement has been prepared on the accrual basis of accounting, but is not representative of the actual operations of Preston Lake Apartments for the period shown. As required by the Securities and Exchange Commission Regulation S-X, Rule 3-14, certain expenses have been excluded which may not be comparable to the proposed future operations of Preston Lake Apartments. Expenses excluded relate to property management fees, interest expense, depreciation and amortization expenses and other expenses not directly related to the future operations of Preston Lake Apartments. The Company is not aware of any material factors relating to Preston Lake Apartments that would cause the reported financial information not to be necessarily indicative of future operating results. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Rental income, attributable to residential leases, is recognized as earned over the lease term. Leases are generally for terms of one year. MANAGEMENT'S ESTIMATES The financial statement has been prepared in conformity with generally accepted accounting principles. In preparing the financial statement, management is required to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE THREE MONTHS ENDED MARCH 31, 2000 The unaudited Pro Forma Consolidated Statements of Operations of Presidential Realty Corporation (the "Company") for the year ended December 31, 1999 and for the three months ended March 31, 2000 are presented as if the acquisitions of Farrington Apartments and Preston Lake Apartments had occurred on January 1, 1999. The unaudited Pro Forma Consolidated Statements of Operations should be read in conjunction with the Statements of Revenue and Certain Expenses for the year ended December 31, 1999 of Farrington Apartments and of Preston Lake Apartments and notes thereto included elsewhere herein. In the opinion of Company management, all adjustments necessary to reflect the effects of the purchase of Farrington Apartments and Preston Lake Apartments have been made. The unaudited Pro Forma Consolidated Statements of Operations are prepared for informational purposes only and are not necessarily indicative of the Company's future results or of actual results that would have been achieved if these acquisitions had been completed as of the date indicated above. PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (Unaudited) Pro Forma Adjustments Presidential --------------------------------- Pro Realty Farrington Preston Lake Forma Corporation (a) Apartments Apartments Total ------------------- ---------- ------------ ----------- Income: Rental $10,672,236 $1,628,212 (b) $2,651,118 (b) $14,951,566 Interest on mortgages - sold properties 3,074,034 3,074,034 Interest on wrap mortgages 528,173 528,173 Interest on mortgages - related parties 250,491 250,491 Investment income 648,221 648,221 Other 71,127 71,127 --------------- -------------- --------------- ---------------- Total 15,244,282 1,628,212 2,651,118 19,523,612 --------------- -------------- --------------- ---------------- Costs and Expenses: General and administrative 3,098,272 3,098,272 Interest on note payable and other 236,739 236,739 Interest on wrap mortgage debt 54,586 54,586 Amortization of loan acquisition costs 3,128 3,128 Depreciation on non-rental property 25,497 25,497 Rental property: Operating expenses 4,684,312 552,887 (b) 648,261 (b) 65,128 (c) 106,045 (c) 6,056,633 Interest on mortgages 2,952,811 658,860 (d) 1,153,353 (d) 4,765,024 Real estate taxes 927,344 118,474 (b) 212,628 (b) 1,258,446 Depreciation on real estate 1,008,051 226,014 (e) 435,815 (e) 1,669,880 Amortization of mortgage costs 273,752 10,633 (f) 14,063 (f) 298,448 Minority interest share of partnership income 601,489 601,489 --------------- -------------- --------------- ---------------- Total 13,865,981 1,631,996 2,570,165 18,068,142 --------------- -------------- --------------- ---------------- Income (loss) before net gain from sales of properties, notes, and securities 1,378,301 (3,784) 80,953 1,455,470 Net gain from sales of properties, notes and securities 7,703,081 7,703,081 --------------- -------------- --------------- ---------------- Net Income (Loss) $9,081,382 ($3,784) $80,953 $9,158,551 =============== ============== =============== ================ Historical earnings per share (basic and diluted): Income before net gain from sales of properties, notes, and securities $0.38 Net gain from sales of properties, notes and securities 2.12 --------------- Net Income $2.50 =============== Pro forma earnings per share (basic and diluted): Income before net gain from sales of properties, notes, and securities $0.40 Net gain from sales of properties, notes and securities 2.12 ---------------- Net Income $2.52 ================ Weighted Average Number of Shares Outstanding 3,629,333 =============== See notes to pro forma consolidated statement of operations. PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (Unaudited) Pro Forma Adjustments Presidential -------------------------------- Pro Realty Farrington Preston Lake Forma Corporation (a) Apartments Apartments Total ----------------- ---------- ------------ ----------- Income: Rental $2,880,532 $314,093 (b) $677,512 (b) $3,872,137 Interest on mortgages - sold properties 744,165 744,165 Interest on mortgages - related parties 45,209 45,209 Investment income 126,753 126,753 Other 20,314 20,314 -------------- -------------- --------------- ---------------- Total 3,816,973 314,093 677,512 4,808,578 -------------- -------------- --------------- ---------------- Costs and Expenses: General and administrative 721,169 721,169 Depreciation on non-rental property 5,675 5,675 Rental property: Operating expenses 1,158,270 141,177 (b) 164,582 (b) 12,564 (c) 27,100 (c) 1,503,693 Interest on mortgages 766,049 135,781 (d) 281,914 (d) 1,183,744 Real estate taxes 247,392 23,958 (b) 50,721 (b) 322,071 Depreciation on real estate 270,584 47,086 (e) 108,954 (e) 426,624 Amortization of mortgage costs 20,741 2,152 (f) 3,419 (f) 26,312 Minority interest share of partnership income 168,195 168,195 -------------- -------------- --------------- ---------------- Total 3,358,075 362,718 636,690 4,357,483 -------------- -------------- --------------- ---------------- Income (loss) before net gain from sales of properties, notes, and securities 458,898 (48,625) 40,822 451,095 Net gain from sales of properties, notes and securities 12,703 12,703 -------------- -------------- --------------- ---------------- Net Income (Loss) $471,601 ($48,625) $40,822 $463,798 ============== ============== =============== ================ Historical earnings per share (basic and diluted): Income before net gain from sales of properties, notes, and securities $0.13 Net gain from sales of properties, notes and securities 0.00 -------------- Net Income $0.13 ============== Pro forma earnings per share (basic and diluted): Income before net gain from sales of properties, notes, and securities $0.13 Net gain from sales of properties, notes and securities 0.00 ---------------- Net Income $0.13 ================ Weighted Average Number of Shares Outstanding 3,692,081 ============== See notes to pro forma consolidated statement of operations. PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) a) Reflects the historical consolidated statements of operations for the Company for the year ended December 31, 1999 as reported on Form 10-K and for the three months ended March 31, 2000 as reported on Form 10-Q. b) Reflects the historical rental income and operating expenses of Farrington Apartments and Preston Lake Apartments. c) Reflects an adjustment for property management fees. The property management fees included in operating expenses are based on a fee of 4% of rental income, which is the standard rental property management fee paid for other properties owned by the Company and managed by the unaffiliated rental property management company. d) Reflects interest expense on the debt used to fund the acquisitions. The mortgage interest rates for Farrington Apartments and Preston Lake Apartments are 8.25% and 8.15%, per annum, respectively. Interest is calculated on the actual number of days elapsed divided by 360 days, on principal balances of $7,900,000 for the debt on Farrington Apartments and $14,000,000 for Preston Lake Apartments. e) Reflects depreciation on the acquired assets. Depreciation expense on the buildings is recorded using the straight-line method over 35 years. Depreciation expense on the equipment is recorded using the straight-line method over 5 years. f) Reflects amortization of costs incurred to obtain mortgage financing. The interest method is used for the amortization of mortgage costs, over the life of the mortgage debt. 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. PRESIDENTIAL REALTY CORPORATION By: Jeffrey F. Joseph ----------------- Jeffrey F. Joseph President Date: May 25, 2000