SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 1996 Commission file number 0-13693
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Massachusetts 13-6850434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3111 Paces Mill Road, Suite A-200, Atlanta, GA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 984-9500
-----------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest without par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Based on the average bid and asking price on March 21, 1997, the aggregate
market value of the Registrant's shares held by non-affiliates of the Registrant
was $3,119,262.
The number of shares outstanding as of March 21, 1997 was 1,080,517.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's Proxy Statement relating
to its 1997 Annual Meeting of
Shareholders are incorporated by reference into Part III
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
INDEX TO FORM 10-K
PART I.....................................................................3
ITEM 1 - Business......................................................3
ITEM 2 - Properties....................................................7
ITEM 3 - Legal Proceedings.............................................8
ITEM 4 - Submission of Matters to a Vote of Shareholders...............8
PART II....................................................................9
ITEM 5 - Market for Registrant's Shares of Beneficial Interest.........9
ITEM 6 - Selected Financial Information...............................11
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...................12
ITEM 8 - Financial Statements and Supplementary Data..................17
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................17
PART III..................................................................18
ITEM 10 - Directors and Executive Officers of the Registrant..........18
ITEM 11 - Executive Compensation......................................18
ITEM 12 - Security Ownership of Certain Beneficial Owners
and Management......................................18
ITEM 13 - Certain Relationships and Related Transactions..............18
PART IV...................................................................19
ITEM 14 - Exhibits, Financial Statements and Schedule and
Reports on Form 8-K.................................19
Signatures ...............................................................21
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those projected
in the forward-looking statements. Certain factors that might cause such a
difference are set forth in the section entitled "Certain Factors Affecting
Future Operating Results", in the relevant paragraphs of "Management's
Discussion and Analysis of Results of Operations and Financial Condition", and
elsewhere in this report.
PART I
ITEM 1 - BUSINESS
General Development of Business
- -------------------------------
Vinings Investment Properties Trust, a Massachusetts business trust (the
"Trust") (formerly known as Mellon Participating Mortgage Trust, Commercial
Properties Series 85/10), was organized on December 7, 1984 as a twenty year
finite-life real estate investment trust ("REIT"). Its original purpose was to
invest in participating, shared appreciation, convertible and fixed rate
mortgages and joint venture financing secured by office, industrial and retail
facilities located throughout the United States. The Declaration of Trust
provided, among other things, that the Trustees would use their best efforts to
terminate the Trust within approximately 10 years, provided, however, that the
Trustees would have the absolute discretion to determine in good faith such
termination date as would be in the best interests of the shareholders of the
Trust. As provided in the Declaration of Trust, the Trustees proceeded with the
orderly liquidation of assets and distribution of proceeds to the shareholders.
As of December 31, 1995 all of the assets to be liquidated had been sold except
the Hawthorne Note, as hereinafter defined, which was sold on January 3, 1996.
In connection with the liquidation, final distributions of $15.60 and $1.28
(adjusted for the Share Split, as hereinafter defined) were paid on February 2,
1996 and March 8, 1996, respectively. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash.
On December 21, 1995, the Trust entered into an Agreement Regarding Tender Offer
(the "Agreement Regarding Tender Offer") with A&P Investors, Inc. ("A&P"), an
unaffiliated third party. Pursuant to an Assignment and Amendment of Agreement
Regarding Tender Offer (the "Assignment and Amendment Agreement" and, together
with the Agreement Regarding Tender Offer, the "Tender Offer Agreement"), dated
as of January 16, 1996, by and between A&P, the Trust and Vinings Investment
Properties, Inc. (the "Purchaser"), a corporation formed by A&P for the purpose
of making the Tender Offer (as hereinafter defined), A&P assigned all of its
interest in the Tender Offer Agreement to the Purchaser.
Pursuant to the Tender Offer Agreement, on January 31, 1996, the Purchaser
commenced a cash tender offer (the "Tender Offer") for a minimum of a majority
and a maximum of 85% of the outstanding shares of beneficial interest of the
Trust, without par value (the "Shares"), at a price of $0.47 per Share ($3.76
adjusted for the Share Split, as hereinafter defined). The Tender Offer expired
in accordance with its terms at midnight on February 28, 1996. The Purchaser
accepted an aggregate of 6,337,279 Shares (792,159 Shares adjusted for the Share
Split, as hereinafter defined) validly tendered pursuant to the Tender Offer,
representing approximately 73.3% of the outstanding Shares.
The purpose of the Tender Offer was for the Purchaser to acquire control of the
Trust and to rebuild the Trust's assets by expanding into the multifamily
property markets. In connection with the consummation of the Tender Offer, all
of the trustees and officers of the Trust resigned and were replaced with
designees of the Purchaser. In addition, prior to the Tender Offer, the Trust
was an externally advised REIT for which it paid advisory fees to an unrelated
third party (the "Advisor"). Upon consummation of the Tender Offer, the
relationship with the Advisor was terminated and the Trust became
self-administered.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. The Trust is the
sole general partner and a 98% limited partner in the Operating Partnership.
Through its ownership of Vinings Holdings, Inc., a Delaware corporation and
wholly-owned subsidiary of the Trust, which is also a limited partner in the
Operating Partnership, the Trust was a 100% economic owner of the Operating
Partnership at December 31, 1996. (This structure is commonly referred to as an
umbrella partnership REIT or "UPREIT.")
On July 1, 1996, the Trust effected a 1-for-8 reverse share split (the "Share
Split") of its 8,645,000 outstanding Shares. Shareholders tendered their Shares
and received one Share for every eight Shares owned. The Trust has purchased and
continues to purchase any fractional Shares at a cost of $5.50 per share. As of
December 31, 1996, fractional Shares totaling 97 had been repurchased and
retired leaving 1,080,528 Shares outstanding.
At December 31, 1996, approximately ninety-four percent (94%) of the Trust's
total assets were invested in two real estate assets. They were (1) The Thicket
Apartments ("Thicket"), a 254-unit apartment complex located in Atlanta,
Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership,
of which the Operating Partnership is a 99% limited partner and Thicket
Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner and (2) Peachtree Business Center ("Peachtree"), an
approximately 75,000 square foot, single-story business park located in Atlanta,
Georgia, owned through its wholly-owned subsidiary, PBC Acquisition, Inc.
The Trust has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended, and intends to maintain its qualification as a REIT in the
future. As a REIT, the Trust will generally not be subject to federal income
taxation on that portion of its income that qualifies as REIT taxable income to
the extent that it distributes at least 95% of its taxable income to its
shareholders and satisfies certain other requirements.
The Trust's executive offices are located at 3111 Paces Mill Road, Suite A-200,
Atlanta, Georgia 30339, (770) 984-9500.
Financial Information About Industry Segments
- ---------------------------------------------
The Trust's operations and identifiable long-term assets have been attributed to
the real estate industry for the entirety of its existence. While investments
prior to the Tender Offer were primarily mortgage loans, the current assets of
the Trust are equity investments. Management plans to continue making equity
investments in the multifamily real estate markets.
Narrative Description of Business
- ---------------------------------
The primary objective of the Trust is to continue to expand into the multifamily
real estate markets through the acquisition of garden style apartment
communities which are leased to middle-income residents. The middle-income
resident is a more stable and broader based market, often referred to as "the
renter by necessity." Management believes that middle market properties provide
greater potential for appreciation through increased revenues and cash flows
than the more expensive high-end apartment communities which cater to the
"renter by choice."
Management believes that these investments will provide attractive sources of
income to the Trust which will not only provide cash available for future
distributions, but will increase the value of the Trust's real estate portfolio
as well.
In the past, the Trust has reviewed each real estate investment in the Trust's
portfolio on a quarterly basis. Management plans to continue this review as well
as to carefully review each acquisition to insure that the Trust makes sound
investments on behalf of its shareholders. In this regard, the Trust has
established an Acquisition Committee comprised of four members of the Board of
Trustees, one of which is also an officer. The Board has also established
certain investment criteria which must be met. The Acquisition Committee must
review and approve each potential acquisition before it is presented to the
Board for final approval.
Growth and Expansion Strategy
- -----------------------------
Management intends to implement its growth and expansion strategy by targeting
properties that have been under managed and under maintained, and purchase such
properties at a price which is below replacement cost. Through strategic value
added and return oriented capital improvements and intensive property
management, the Trust believes that cash flow, and in turn value, will be
increased.
The Trust currently anticipates that these acquisitions will include certain
properties within the existing multifamily property portfolios of entities
affiliated with management of the Trust which meet certain criteria, as well as
properties acquired from unaffiliated third parties. These properties may be
acquired either for cash, through debt financing, in exchange for Shares of the
Trust or Operating Partnership units or any combination thereof. In addition,
the Trust believes it can raise capital through private offerings for specific
acquisitions.
Operating Strategy
- ------------------
The Trust believes that conducting its business and operations through the
Operating Partnership will have certain strategic advantages over the Trust's
previous structure, which allowed only direct investment in the Trust's real
estate portfolio through the purchase of Shares of the Trust. In particular, the
Operating Partnership structure will provide the Trust with greater flexibility,
in certain circumstances, in facilitating future acquisitions by permitting the
issuance of partnership units on a tax advantaged basis to owners of real estate
properties who contribute such properties to the Operating Partnership. The
Trust believes that many potential sellers of multifamily properties would be
unwilling to sell their properties except in transactions that would defer
income tax. In addition, holders of partnership units will have the right, under
certain circumstances, to convert such units into Shares of the Trust, resulting
in long-term liquidity for such holders. The overall effect of this structure,
the Trust believes, will be an enhanced ability of the Trust to access the real
estate and capital markets.
Competition
- -----------
The Trust competes with a number of housing alternatives for its residents
including other multifamily communities and single family homes available for
rent as well as purchase. This competition could have an affect not only on the
properties' ability to lease units but also on the rents charged. The Trust also
competes with other investors for potential acquisitions, some of which may have
greater resources with which to purchase projects that the Trust may be
interested in acquiring.
Advisory and Property Management Services
- -----------------------------------------
Through February 28, 1996, the Trust's day-to-day operations were managed by the
Advisor. See Note 8 to the Trust's December 31, 1996, Consolidated Financial
Statements which provides additional information regarding the advisory
agreement. After the consummation of the Tender Offer, the Trust terminated the
services of the Advisor and became self-administered. The Trust has entered into
a management agreement with Vinings Properties, Inc. for property management
services for The Thicket Apartments for a fee equal to five percent of gross
revenues. Vinings Properties, Inc. is an affiliate of certain officers and
trustees of the Trust. In addition, as a commitment to the rebuilding of the
Trust, The Vinings Group, Inc., the parent corporation of Vinings Properties,
Inc., (collectively "Vinings") has provided numerous services to the Trust
relating to administration, acquisition, and capital and asset advisory services
at little or no cost to the Trust. The Trust does not anticipate that these
services will continue to be provided free of charge. However, while the Trust
is in its rebuilding stages, the officers and trustees are committed to
providing as many services as possible to promote the Trust's growth. The
Peachtree Business Center is managed by a third-party property management firm
not affiliated with management.
Employees
- ---------
At December 31, 1996, The Thicket Apartments had six employees who performed
on-site property management services for the community, and were paid with funds
generated from Thicket. The Trust paid a total of $15,000 to Vinings for
shareholder services performed exclusively for the Trust by one of its
employees. None of the officers of the Trust received compensation from the
Trust for their services.
Environmental Policy
- --------------------
Investments in real property create a potential for environmental liability on
the part of the Trust. Owners of real property may be held liable for all costs
and liabilities relating to hazardous substances present on or emanating from
their properties. Current management, as did the previous Advisor, assesses on
an as needed basis, measures that may need to be been taken to comply with
environmental laws and regulations. In the event that there is a potential of
environmental responsibility, the costs to comply with environmental laws and
regulations would be estimated at that time. At December 31, 1996, the Trust was
not aware of any potential environmental contamination relating to investments
in its portfolio.
Certain Factors Affecting Future Operating Results
- --------------------------------------------------
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the forward-looking statements. Certain factors that might cause such a
difference include the following: the inability of the Trust to identify
properties within existing multifamily property portfolios of entities
affiliated with management which will have a strategic fit with the Trust, the
inability of the Trust to identify unaffiliated properties for acquisition, the
less than satisfactory performance of any property which might be acquired by
the Trust, the inability to access the capital markets in order to fund the
Trust's present growth and expansion strategy, the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding southeastern states, and the local real estate conditions and
competition in Georgia and the surrounding southeastern states. There can be no
assurance that, as a result of the foregoing factors, the Trust's growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.
ITEM 2 - PROPERTIES
As of December 31, 1996, all of the Trust's investments were equity investments
in real estate. While the Trust still owns Peachtree, a single-story business
park, it intends to continue investing only in multifamily communities. The
Trust's two real estate investments are summarized below by property type:
Amount of Investment Occupancy
Investment Percentage at 12/31/96
---------- ---------- -----------
The Thicket Apartments $ 8,547,570 79% 97%
Peachtree Business Center 2,310,966 21% 91%
----------- -----
Totals $10,858,536 100%
=========== =====
The above investment amounts are net of accumulated depreciation. The Trust
incorporates herein by reference the description of owned real property on
Schedule III and the notes thereto. This schedule is made part of the Trust's
December 31, 1996 Consolidated Financial Statements.
ITEM 3 - LEGAL PROCEEDINGS
Neither the Trust, nor its properties are presently subject to any material
litigation or, to the Trust's knowledge, is any material litigation threatened
against the Trust or either of its properties, other than routine actions or
claims and administrative proceedings arising in the ordinary course of
business. Some of these claims are expected to be covered by insurance and all
of which collectively are not expected to have a material adverse effect on the
business, the financial condition, or the results of operations of the Trust.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of the Trust's shareholders during the
fourth quarter of the fiscal year ended December 31, 1996.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S SHARES OF BENEFICIAL INTEREST
Stock Quotation
- ---------------
The Trust's Shares are currently traded on the Nasdaq SmallCap Market under the
symbol "VIPIS".
The Trust was informed by the Nasdaq Stock Market, Inc. on February 28, 1996
that, as a result of the liquidating dividends and the purchase of Shares by the
Purchaser pursuant to the Tender Offer, the Shares no longer met all of the
requirements for continued inclusion on the Nasdaq National Market. The Trust
requested and was granted an extension of time in order to meet the initial
inclusion criteria for a transfer from the Nasdaq National Market to the Nasdaq
SmallCap Market.
Market Information
- ------------------
On July 1, 1996, the Trust effected a 1-for-8 reverse Share Split of its
8,645,000 outstanding Shares. Shareholders tendered their Shares and received
one Share for every eight Shares owned. The Trust has purchased and continues to
purchase any fractional Shares at a cost of $5.50 per share. As of December 31,
1996, fractional Shares totaling 97 had been repurchased and retired leaving
1,080,528 Shares outstanding. All Share prices and dividends have been restated
to reflect the Share Split. The high and low sales prices for each quarterly
period during fiscal 1996 and 1995, which reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions, are as follows:
---------------------- ---------------------
1996 1995
---------------------- ---------------------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
March 31 22 3 32 26
June 30 6 1/2 3 30 20
September 30 6 4 28 19
December 31 5 4 3/8 28 16
Dividends
- ---------
The Trust's dividend policy up to the consummation of the Tender Offer, was to
distribute all liquidating proceeds. These dividends were 100% return of capital
in fiscal 1996 and 1995 (as summarized below) which historically had an effect
on the Trust's Share price. The effect of dividend distributions reduced the
book value of the Trust, and therefore, reduced the market price for the Shares,
especially with regard to the final liquidating dividends paid in the first
quarter of 1996. On March 21, 1997, the closing sales price for the Trust's
Shares, as reported on the Nasdaq SmallCap Market, was $4.50.
The Trust paid quarterly cash distributions to shareholders sufficient to enable
the Trust to qualify as a REIT. For fiscal years 1996 and 1995, the Trust
declared cash distributions per share as reported for generally accepted
accounting principles (adjusted for the Share Split) as shown below. For a
discussion of the federal income tax consequences of these distributions, refer
to Note 9 of the Trust's December 31, 1996, Consolidated Financial Statements.
-------------------------------- --------------------------------
1996 1995
-------------------------------- --------------------------------
Payment Date Distributions Payment Date Distributions
February 2, 1996 $15.60 April 19, 1995 $ 5.20
March 8, 1996 1.28 August 17, 1995 0.64
October 27, 1995 5.60
December 31, 1995 0.80
------ ------
Total $16.88 Total $12.24
====== ======
Since the consummation of the Tender Offer, management has not issued its
dividend policy for the Trust, nor has it declared any dividends. In an effort
to rebuild the Trust's assets, all operating cash flow has been reserved for
future growth and expansion. However, as assets are acquired and operating cash
flow increases, the Trust intends to pay distributions to shareholders in
amounts at least sufficient to enable the Trust to qualify as a REIT.
Holders
- -------
The Trust had 755 holders of record of its Shares as of March 21, 1997.
ITEM 6 - SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information for the Trust and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as the Trust's December
31, 1996, Consolidated Financial Statements which are made part of this report.
All share and per share information have been restated to reflect the Share
Split.
For the year ended December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- --------------- ---------------
Revenues $ 1,796,917 $ 3,244,908 $ 4,159,170 $ 6,668,425 $ 7,731,951
Expenses 2,580,195 1,779,475 2,477,923 2,163,286 1,712,408
------------ ------------ ------------ ------------ -------------
Income (loss) before loss on
real estate investments (783,278) 1,465,433 1,681,247 4,505,139 6,019,543
Loss on real estate investments (26,800) (886,887) (816,307) (1,325,000) (16,507,006)
------------ ------------ ------------ ------------ -------------
Net income (loss) $ (810,078) $ 578,546 $ 864,940 $ 3,180,139 $(10,487,463)
============ ============ ============ ============ =============
Per share information:
Income (loss) before loss on
real estate investments $ (0.73) $ 1.36 $ 1.56 $ 4.17 $ 5.57
============ ============ ============ ============ =============
Net income (loss) $ (0.75) $ 0.54 $ 0.80 $ 2.94 $ (9.71)
============ ============ ============ ============ =============
Dividends declared and paid:
Ordinary income $ - $ - $ 0.08 $ 4.08 $ 2.16
Return of capital 16.88 12.24 24.64 - 2.40
------------ ------------ ------------ ------------ -------------
Total dividends declared paid $ 16.88 $ 12.24 $ 24.72 $ 4.08 $ 4.56
============ ============ ============ ============ =============
Total assets $11,519,469 $21,878,357 $34,348,242 $60,514,634 $ 61,570,899
============ ============ ============ ============ =============
Shareholders' equity $ 2,232,548 $21,284,112 $33,932,908 $59,781,018 $ 61,009,829
============ ============ ============ ============ =============
Weighted average shares outstanding 1,080,528 1,080,625 1,080,625 1,080,625 1,080,625
============ ============ ============ ============ =============
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
The Trust was organized on December 7, 1984 as a twenty year finite-life REIT
whose original purpose was to invest in participating, shared appreciation,
convertible and fixed rate mortgages and joint venture financing secured by
office, industrial and retail facilities located throughout the United States.
The Declaration of Trust provided, among other things, that the Trustees would
use their best efforts to terminate the Trust within approximately 10 years. The
Trustees proceeded with the orderly liquidation of assets and the distribution
of proceeds to the shareholders. As of December 31, 1995, all of the assets to
be liquidated had been sold except the Hawthorne Note, as hereinafter defined,
which was sold on January 3, 1996. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash.
On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser")
commenced a cash tender offer (the "Tender Offer") for a minimum of a majority
and a maximum of 85% of the outstanding shares of beneficial interest of the
Trust (the "Shares"). The Tender Offer expired in accordance with its terms at
midnight on February 28, 1996, and the Purchaser accepted approximately 73.3% of
the outstanding Shares. In connection with the consummation of the Tender Offer,
all of the trustees and officers of the Trust ("Prior Management") resigned and
were replaced with designees of the Purchaser ("Management"). In addition, the
Trust was an externally advised REIT for which it paid advisory fees to an
unrelated third party (the "Advisor"). Upon consummation of the Tender Offer,
the relationship with the Advisor was terminated and the Trust became
self-administered.
The purpose of the Tender Offer was for Management to acquire control of the
Trust and to rebuild the Trust's assets by expanding into the multifamily real
estate markets through the acquisition of garden style apartment communities
which are leased to middle-income residents. Management believes that these
investments will provide attractive sources of income to the Trust which will
not only increase net income and provide cash available for future
distributions, but will increase the value of the Trust's real estate portfolio
as well.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership") was organized. The Trust is the sole general partner and a 98%
limited partner in the Operating Partnership. Through its ownership of Vinings
Holdings, Inc., a wholly-owned subsidiary of the Trust, which is also a limited
partner in the Operating Partnership, the Trust was a 100% economic owner of the
Operating Partnership at December 31, 1996 (this structure is commonly referred
to as an umbrella partnership REIT or "UPREIT").
Management believes that conducting its business and operations through the
Operating Partnership will have certain strategic advantages over the Trust's
previous structure, which allowed investment in the Trust only through the
purchase of Shares of the Trust. In particular, the Operating Partnership
structure will provide the Trust with greater flexibility, in certain
circumstances, in facilitating future acquisitions by permitting the issuance of
partnership units on a tax advantaged basis to owners of real estate properties
who contribute such properties to the Operating Partnership. The overall effect
of this structure, the Trust believes, will be an enhanced ability of the Trust
to access the real estate and capital markets. On July 1, 1996, the Trust
effected a 1-for-8 reverse share split (the "Share Split") of its 8,645,000
outstanding Shares. Shareholders tendered their Shares and received one Share
for every eight Shares owned. The Trust has purchased and continues to purchase
any fractional Shares at a cost of $5.50 per share. As of December 31, 1996,
fractional Shares totaling 97 had been repurchased and retired leaving 1,080,528
Shares outstanding.
As a result of the Tender Offer, much of Management's efforts during 1996 were
focused on the Trust's organizational structure and preparing the Trust
strategically for future acquisitions. The Thicket Apartments (the "Thicket"), a
254-unit apartment community in Atlanta, Georgia, was acquired on June 28, 1996
as the Trust's only acquisition for the year. At December 31, 1996, the Trust's
two real estate assets were Thicket and Peachtree, which were 97% and 91% leased
respectively.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements of the Trust and the notes thereto.
Results of Operations
- ---------------------
Because it was the original intent of the Trust to terminate after approximately
ten years, the net income, as well as the asset value, of the Trust has
decreased over the last several years. Revenues have steadily decreased from
fiscal years ended December 31, 1994 to 1995 to 1996. Operating expenses,
however, increased substantially in 1996 due to a number of non-recurring costs
associated with the Tender Offer and the structural reorganization of the Trust.
This resulted in a net loss for 1996.
All of the gains (losses) on real estate investments since 1994 were the result
of Prior Management's liquidation of the Trust's investments.
As a result of the liquidation of assets, change in management, and the
redirection of the Trust's business objectives, substantially all of the income
producing assets held in fiscal years 1995 and 1994, are no longer held by the
Trust, with the exception of Peachtree. With the acquisition of Thicket, the
Trust obtained a mortgage note payable and a line of credit, and incurred
interest expense and amortization of deferred financing costs for the first time
in 1996.
Comparison of Operating Results of 1996 to Operating Results of 1995
- --------------------------------------------------------------------
Total revenues decreased $1,447,991, or 45%, from $3,244,908 to $1,796,917 as a
result of the Trust's liquidation of investments.
Rental and Other property revenues increased $952,029, or 159%, from $600,454 to
$1,552,483 as a result of the acquisition of Thicket on June 28, 1996. Revenues
from Peachtree remained fairly constant.
There was no Partnership income during 1996, as compared to $1,730,508 in 1995,
due to the sale of the interest in the Mellon\Pier I Properties Limited
Partnership I (the "Pier I Interest") on December 29, 1995.
Interest income decreased by $798,842, or 90%, from $891,499 to $92,657. One of
the Trust's major sources of revenues prior to 1996 was its investment in
mortgage loan receivables. Interest earned on these investments generated the
Trust's interest income in 1995. In 1996, interest income was generated from
cash investments primarily in the first two months of the year, prior to the
payment of liquidating dividends.
Property operating and maintenance expense increased $295,882, or 102%, from
$290,548 to $586,430, also as a result of the acquisition of Thicket.
Depreciation and amortization decreased $116,903, or 32%, from $361,013 to
$244,110. There was no depreciation generated from the Pier I Interest in 1996,
as compared to $277,601 in 1995. The Thicket generated depreciation of $162,965
for the six months held in 1996. Depreciation and amortization on Peachtree
increased slightly.
The Trust incurred a mortgage note payable and established a line of credit
during 1996, both associated with the acquisition of Thicket. (See Note 6 to the
Trust's December 31, 1996 Consolidated Financial Statements). In connection with
these liabilities, the Trust incurred financing costs, which are being amortized
over the lives of the obligations, and interest expense associated with the
notes. These amounts totaled $19,502 and $408,719, respectively.
General and administrative expense increased $221,627, or 29%, from $766,346 to
$987,973. The majority of the increased expense relates to costs associated with
the Tender Offer and the structural reorganization of the Trust. In addition,
the 1996 expense includes $180,987 of non-recurring directors' and officers'
insurance obtained for the sole benefit of Prior Management, as well as the
Trust's continuing directors' and officers' insurance coverage.
Investment advisor's fees decreased $28,107, or 8%, from $361,568 to $333,461.
All of the advisor's fees were incurred during January and February, 1996 as the
services of the Advisor were terminated at the consummation of the Tender Offer.
The loss on real estate investment of $26,800 represents commissions and fees on
the sale of the Harwthorne Note, as hereinafter defined, on January 3, 1996. The
Trust established a valuation allowance of $895,000 at December 31, 1995 to
reflect the note's net realizable value.
The Trust incurred a net loss of $810,078 for 1996 as compared to net income of
$578,546 for 1995, representing a decrease of $1,388,624. This decrease was the
direct result of the Trust's liquidation of its assets and the consummation of
the subsequent Tender Offer.
Comparison of Operating Results of 1995 to Operating Results of 1994
- --------------------------------------------------------------------
Total revenues decreased by $914,262, or 22%, from $4,159,170 to $3,244,908.
This decrease resulted primarily from lost revenue due to the sale of mortgage
loans ($726,647, or 17%), and the vacancy and subsequent sale of the Hawthorne
Research and Development Complex ("Hawthorne") ($140,000, or 3%). Income from
the Pier I Interest and rental income from Peachtree remained fairly constant.
Total operating expenses decreased by $698,448, or 28%, from $2,477,923 to
$1,779,475. This was primarily due to a reduction in the operating expenses
associated with the ownership of Hawthorne and a mortgage note secured by the
Hall Street Industrial Complex ("Hall Street") ($579,667, or 23%) which were
sold in 1995 and 1994, respectively. Investment advisor fees decreased due to
the declining asset value of the Trust upon which the fees were based. Other
expenses remained fairly constant.
The net realized loss of $886,887 resulted from the sales and adjusted fair
value allowances of Hawthorne, the Pier I Interest, two mortgage notes secured
by Arbutus and Pacesetter Shopping Centers ("Arbutus and Pacesetter"), and the
write-down of the Hawthorne Note, as hereinafter defined. (See Note 4 to the
Trust's December 31, 1996 Consolidated Financial Statements.)
Hawthorne was sold on March 30, 1995 for $5,095,000 of which $3,500,000 was paid
at closing. A note for the balance of $1,595,000 (the "Hawthorne Note") was
received by the Trust. The Trust realized a net gain on this sale of $152,825.
On January 3, 1996, the Hawthorne Note was sold for $700,000. As of December 31,
1995, an allowance to reduce the note receivable to fair market value of
$895,000 was recognized on the Hawthorne Note.
The Arbutus and Pacesetter mortgages were sold on August 2, 1995 for $6,515,000.
These sales resulted in a total loss of $1,845,035, comprised of a $1,647,000
write-down to reflect the realizable values, and selling, legal and advisory
expenses of $198,035.
The Pier I Interest was sold on December 29, 1995 for total sales proceeds of
$15,788,680. After legal and advisory fees of $189,648, the Trust recorded a
gain of $1,700,323.
The net income of $578,546 for 1995 was a decrease of $286,394, or 33%, from the
1994 net income of $864,940.
Liquidity and Capital Resources
- -------------------------------
Because Prior Management was liquidating the assets of the Trust, net cash used
in operating activities for fiscal year ended December 31, 1996 was $704,965 as
compared to net cash provided by operating activities of $1,820,321 for fiscal
year ended December 31, 1995. This is the direct result of decreased revenues
and increased expenses due to the Tender Offer as described in "Comparison of
Operating Results of 1996 to Operating Results of 1995."
Cash flows from investing activities changed dramatically from fiscal year ended
December 31, 1995 to fiscal year ended December 31, 1996. Cash provided by
investing activities of $27,321,390 for 1995 was comprised of proceeds from the
sale of Hawthorne, the Arbutus and Pacesetter mortgage loans, the Pier I
Interest, and principal due on a purchase money note received at the sale of
Hall Street. (See Notes 4 and 5 to the Trust's December 31, 1996 Consolidated
Financial Statements.) As a result of the Tender offer, Management has
implemented a growth and expansion strategy. Net cash used in investing
activities of $8,067,197 for fiscal year ended December 31, 1996 was the result
of the Trust's purchase of Thicket in June, 1996. This was offset slightly by
net proceeds of $673,200 from the sale of the Hawthorne Note in January 1996
(the final asset to be liquidated by Prior Management).
Cash flows used in financing activities were comprised of (1) distributions to
shareholders, and (2) debt incurred. Distributions to shareholders increased
$5,013,608, or 38%, from $13,227,342 during 1995, to $18,240,950 during 1996.
Increased distributions were the result of final liquidating dividends paid to
shareholders. During 1996, the Trust received net proceeds of $7,392,000 from a
mortgage note payable, in addition to $1,568,104 in proceeds from a secured line
of credit, all of which were used in the acquisition of Thicket.
Management believes that many of the costs associated with the liquidation of
Trust assets and the subsequent Tender Offer and organizational restructuring
that were incurred during 1996, will not continue into 1997. The cash held by
the Trust at December 31, 1996, plus the cash flow from Thicket and Peachtree,
is expected to provide sources of liquidity to allow the Trust to meet all
current operating obligations. It is anticipated that the line of credit, which
is due in 1997, will be renewed or refinanced. In addition, Management intends
to seek new capital sources, both public and private, as well as explore
financing alternatives, so as to allow the Trust to expand and grow its income
producing investments. (See "Growth and Expansion Strategy and Operating
Strategy".)
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the forward-looking statements. Certain factors that might cause such a
difference include the following: the inability of the Trust to identify
properties within existing multifamily property portfolios of entities
affiliated with management which will have a strategic fit with the Trust, the
inability of the Trust to identify unaffiliated properties for acquisition, the
less than satisfactory performance of any property which might be acquired by
the Trust, the inability to access the capital markets in order to fund the
Trust's present growth and expansion strategy, the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding southeastern states, and the local real estate conditions and
competition in Georgia and the surrounding southeastern states. There can be no
assurance that, as a result of the foregoing factors, the Trust's growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data are listed under
Item 14(a) and filed as part of this report on the pages indicated.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The information required by this Item 9 was previously reported in a Current
Report on Form 8-K filed with the Securities and Exchange Commission on January
14, 1997.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 10 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 11 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information concerning Ownership of Certain Beneficial Owners and Management
required by Item 12 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference. Except as described in ITEM 1 BUSINESS, there
are no arrangements known to the registrant which may, at a subsequent date,
result in a change in control of the registrant.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning Certain Relationships and Related Transactions
required by Item 13 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND
REPORTS ON FORM 8-K
14(a) (1) and (2) Index to Consolidated Financial Statements and Schedule Page
Schedule
Report of Independent Public Accountants--As of December 31, 1996
and for the year then ended 22
Report of Independent Auditors--As of December 31, 1995 and 1994 23
and for each of the two years then ended
Consolidated Balance Sheets--As of December 31, 1996 and 1995 24
Consolidated Statements of Operations--For the years ended
December 31, 1996, 1995 and 1994. 25
Consolidated Statements of Shareholders' Equity--For the years ended
December 31, 1996, 1995 and 1994 26
Consolidated Statements of Cash Flows--For the years ended
December 31, 1996, 1995 and 1994 27
Notes to Consolidated Financial Statements--For the years ended
December 31, 1996, 1995 and 1994 28
Consolidated Financial Statement Schedule 38
14(a) (3) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 --- Second Amended and Restated Declaration of Trust of the Trust (incorporated by
reference to Exhibit 3.1 to the Trust's Registration Statement on Form S-11, No.
2-94776).
3.2 --- Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2
to the Trust's Registration Statement on Form S-11, No. 2-94776).
3.3 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
10.1 --- Agreement of Purchase and Sale for The Thicket Apartments, dated March 27, 1996,
between The Patrician Mortgage Company and A&P Investors, Inc. (incorporated by
reference to Exhibit 99.1 to the Trust's Current Report on Form 8-K, filed July 2,
1996).
10.2 --- Amendment to Agreement of Purchase and Sale for The Thicket Apartments, dated June
25, 1996, between The Patrician Mortgage Company and A&P Investors, Inc. (filed
herewith).
10.3 --- Assignment of Agreement for Purchase and Sale for The Thicket Apartments, dated June
25, 1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
10.4 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees
of the Trust (incorporated by reference to Exhibit 10.1 to the Trust's Current
Report on Form 8-K/A, filed September 11, 1996).
10.5 --- Deed to Secure Debt and Security Agreement by and between Thicket Apartments, L.P.,
as mortgagor, and Univest Mortgage Capital, LLC, as mortgagee, dated June 27, 1996
(incorporated by reference to Exhibit 10.2 to the Trust's Current Report on Form
8-K/A, filed September 11, 1996).
10.6 --- Promissory note from Thicket Apartments, L.P. to Univest Mortgage Capital, LLC,
dated June 27, 1996 (incorporated by reference to Exhibit 10.3 to the Trust's
Current Report on Form 8-K/A, filed September 11, 1996).
10.7 --- Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed
herewith).
10.8 --- Management Contract dated June 25, 1996 between Thicket Apartments, L.P. and Vinings
Properties, Inc. (filed herewith).
10.9 --- Management Contract dated July 6, 1990 between PBC Acquisition, Inc. and Carter &
Associates Enterprises, Inc. (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).
14(b) Reports on Form 8-K
-------------------------
No reports on Form 8-K have been filed by the Trust during the last
quarter of the year ended December 31, 1996.
14(c) Index to Exhibits
--------------
See Item 14(a)(3) above.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
Vinings Investment Properties Trust
By: /s/ Peter D. Anzo
---------------------
Peter D. Anzo
President and Chief
Executive Officer
Dated: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- -----
/s/ Peter D. Anzo Chief Executive Officer, March 28, 1997
- ------------------------- President and Trustee
Peter D. Anzo
/s/ Stephanie A. Reed Vice President, Treasurer, March 28, 1997
- ------------------------- Secretary and Trustee
Stephanie A. Reed
/s/ Martin H. Petersen Trustee March 28, 1997
- -------------------------
Martin H. Petersen
/s/ Gilbert H. Watts, Jr. Trustee March 28, 1997
- -------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt Trustee March 28, 1997
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch Trustee March 28, 1997
- -------------------------
Henry Hirsch
/s/ Thomas B. Bender Trustee March 28, 1997
- -------------------------
Thomas B. Bender
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheet of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1996 and the related consolidated statements of operations, shareholders' equity
and cash flows for the year then ended. These consolidated financial statements
and the schedule referred to below are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vinings Investment
Properties Trust and subsidiaries as of December 31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 7, 1997
REPORT OF INDEPENDENT AUDITORS
To the Board of Shareholders of
Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheets of Vinings
Investment Properties Trust and Subsidiaries (formerly known as Mellon
Participating Mortgage Trust, Commercial Properties Series 85/10) (the "Trust")
as of December 31, 1995 and 1994 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the two
years in the period ended December 31, 1995. Our audits also included the
financial statement schedules listed in the index as Item 14 (a) (2). These
financial statements and schedules are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules 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
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Trust as of December 31, 1995 and 1994 and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Also, it is our opinion, that the related financial statement schedules above,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 23, 1996
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------------
1996 1995
------------- -------------
ASSETS
Real estate assets:
Land $ 1,470,500 $ 400,000
Buildings and improvements 9,218,263 2,332,057
Furniture, fixtures & equipment 783,691 -
Less: accumulated depreciation (613,918) (374,524)
------------- ------------
Net real estate assets 10,858,536 2,357,533
Real estate investments:
Mortgage loans receivable, net of valuation
allowance of $895,000 at December 31, 1995 - 700,000
Cash and cash equivalents 171,736 18,470,031
Cash escrows 192,611 -
Receivables and other assets 86,002 346,057
Deferred financing costs, less accumulated amortization
of $19,502 at December 31, 1996 204,925 -
Deferred leasing costs, less accumulated amortization of
$28,470 and $23,754 at December 31, 1996 and 1995,
respectively 5,659 4,736
------------- ------------
Total Assets $ 11,519,469 $21,878,357
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage note payable $ 7,371,676 $ -
Line of credit 1,568,104 -
Accounts payable and accrued liabilities 347,141 301,358
Due to affiliate - 292,887
------------- ------------
Total Liabilities 9,286,921 594,245
------------- ------------
Contingencies (Note 11)
Shareholders' Equity:
Shares of beneficial interest,
without par value, unlimited shares
authorized, 1,080,528 and 1,080,625
shares issued and outstanding at
December 31, 1996 and 1995, respectively 18,731,763 36,973,249
Cumulative earnings 37,879,314 38,689,392
Cumulative distributions (54,378,529) (54,378,529)
------------- ------------
Total Shareholders' Equity 2,232,548 21,284,112
------------- ------------
Total Liabilities and Shareholders' Equity $ 11,519,469 $ 21,878,357
============= ============
The accompanying notes are an integral part of these Balance Sheets.
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
REVENUES
Rental revenues $ 1,482,419 $ 576,216 $ 693,864
Other property revenues 70,064 24,238 27,490
Income from partnership -- 1,730,508 1,727,519
Interest income 92,657 891,499 1,594,398
Other income 151,777 22,447 115,899
----------- ----------- -----------
1,796,917 3,244,908 4,159,170
----------- ----------- -----------
EXPENSES
Property operating and maintenance 586,430 290,548 917,981
Depreciation and amortization 244,110 361,013 397,076
Amortization of deferred financing costs 19,502 -- --
Interest expense 408,719 -- --
General and administrative 987,973 766,346 749,584
Investment advisor's fees 333,461 361,568 413,282
----------- ----------- -----------
2,580,195 1,779,475 2,477,923
----------- ----------- -----------
Income (loss) before gain (loss) on real estate investments (783,278) 1,465,433 1,681,247
----------- ----------- -----------
GAIN (LOSS) ON REAL ESTATE INVESTMENTS
Gain (loss) on real estate investments (26,800) 1,655,113 1,033,333
Allowance to reduce real estate investments
to fair market value -- (2,542,000) (1,849,640)
----------- ----------- -----------
(26,800) (886,887) (816,307)
----------- ----------- -----------
Net income (loss) $ (810,078) $ 578,546 $ 864,940
=========== =========== ===========
EARNINGS PER SHARE
Income (loss) before loss on real estate investments $ (0.73) $ 1.36 $ 1.56
Loss on real estate investments (0.02) (0.82) (0.76)
----------- ----------- -----------
Net income (loss) $ (0.75) $ 0.54 $ 0.80
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,080,528 1,080,625 1,080,625
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years
ended December 31, 1994, 1995 and 1996
Shares of Total
beneficial Cummulative Cummulative shareholders'
interest earnings distributions equity
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1993 $ 76,913,641 $ 37,245,906 $(54,378,529) $ 59,781,018
Net Income -- 864,940 -- 864,940
Distributions to shareholders
($24.72 per share of which $24.64
represented a return of capital
for federal income tax purposes) (26,713,050) -- -- (26,713,050)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1994 50,200,591 38,110,846 (54,378,529) 33,932,908
Net Income -- 578,546 -- 578,546
Distributions to shareholders
($12.24 per share return of capital
for federal income tax purposes) (13,227,342) -- -- (13,227,342)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1995 36,973,249 38,689,392 (54,378,529) 21,284,112
Net Loss -- (810,078) -- (810,078)
Retirement of Shares (536) -- -- (536)
Distributions to shareholders
($16.88 per share return of capital
for federal income tax purposes) (18,240,950) -- (18,240,950)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1996 $ 18,731,763 $ 37,879,314 $(54,378,529) $ 2,232,548
============ ============ ============= =============
The accompanying notes are an integral part of these financial statements
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (810,078) $ 578,546 $ 864,940
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 244,110 409,450 439,957
Amortization of deferred financing costs 19,502 -- --
Loan discount amortization -- (101,800) --
Estimated allowance to reduce mortgage
receivable to fair value -- 2,542,000 388,000
Estimated allowance to reduce real
estate to fair value -- -- 1,461,640
(Gain) loss on real estate investments 26,800 (1,655,113) (1,033,333)
Changes in assets and liabilities:
Cash escrows (192,611) -- --
Receivables and other assets 260,055 3,768 150,394
Capitalized leasing costs (5,639) -- (6,953)
Accounts payable, accrued liabilities and due to affiliate (247,104) 43,470 (202,383)
------------ ------------ ------------
Total adjustments 105,113 1,241,775 1,197,322
------------ ------------ ------------
Net cash used in operating activities (704,965) 1,820,321 2,062,262
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of The Thicket Apartments (8,660,900) -- --
The Thicket capital expenditures (49,635) -- --
Peachtree capital expenditures (29,862) (16,751) (6,682)
Principal payments on notes receivable -- 2,000,000 32,400
Sales proceeds from real estate investments 673,200 25,338,141 19,156,693
------------ ------------ ------------
Net cash provided by (used in) investing activities (8,067,197) 27,321,390 19,182,411
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from mortgage note payable 7,392,000 -- --
Net proceeds from line of credit 1,568,104 -- --
Deferred financing costs (224,427) -- --
Principal repayments on mortgage payable (20,324) -- --
Purchase of retired shares (536) -- --
Distributions to shareholders (18,240,950) (13,227,342) (26,713,050)
------------ ------------ ------------
Net cash used in financing activities (9,526,133) (13,227,342) (26,713,050)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,298,295) 15,914,369 (5,468,377)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,470,031 2,555,662 8,024,039
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 171,736 $ 18,470,031 $ 2,555,662
============ ============ ============
<FN>
SUPPLEMENTAL DISCLOSURE OF CASH AND NONCASH INVESTING AND FINANCING ACTIVITIES:
The Trust paid interest of $353,032 during 1996. In addition, the Hawthorne
Research and Development Facility was sold on March 30, 1995 for $5,095,000. The
Trust received a note for $1,595,000 with a below market interest rate. See Note
4.
The accompanying notes are an integral part of these financial statements.
</FN>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - FORMATION AND ORGANIZATION
Vinings Investment Properties Trust (the "Trust") was organized on
December 7, 1984 under the laws of the Commonwealth of Massachusetts as
a twenty-year finite-life real estate investment trust ("REIT") under
the Internal Revenue Code of 1986. The Trust was originally organized
for the purpose of making real estate investments consisting primarily
of mortgage loans and was to liquidate at the end of approximately ten
years in accordance with its Declaration of Trust, provided, however,
that the Trustees would have the absolute discretion to determine in
good faith such termination date as would be in the best interests of
the shareholders. On January 3, 1996, the final asset to be liquidated
was sold and final dividends were declared.
On January 31, 1996, Vinings Investment Properties, Inc. ("the
Purchaser") commenced a tender offer for a minimum of a majority and a
maximum of 85% of the issued and outstanding shares of beneficial
interest without par value of the Trust (the "Shares"), at a purchase
price of $0.47 per share ($3.76 per share adjusted for the Share Split,
as hereinafter defined) (the "Tender Offer"). The Tender Offer expired
in accordance with its terms on February 28, 1996, and, in connection
therewith, the Purchaser accepted an aggregate of 6,337,279 Shares
(792,159 Shares adjusted for the Share Split, as hereinafter defined),
representing approximately 73.3% of the outstanding Shares, for a total
acquisition price of $2,978,521. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash. The
purpose of the Tender Offer was for the Purchaser to acquire control of
the Trust and to rebuild the Trust's assets by expanding into the
multifamily property markets. In connection with the consummation of
the Tender Offer, all of the Trustees and officers of the Trust
resigned and were replaced with designees of the Purchaser.
Until the consummation of the Tender Offer, the Trust was an externally
advised REIT for which it paid advisory fees to an unrelated third
party (the "Advisor"). Upon consummation of the Tender Offer, the
relationship with the Advisor was terminated and the Trust became
self-administered.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. The Trust
is the sole general partner and a 98% limited partner in the Operating
Partnership. Through its ownership of Vinings Holdings, Inc., a
Delaware corporation and wholly-owned subsidiary of the Trust, which is
also a limited partner in the Operating Partnership, the Trust was a
100% economic owner of the Operating Partnership at December 31, 1996.
(This structure is commonly referred to as an umbrella partnership REIT
or "UPREIT.")
The Trust currently owns The Thicket Apartments ("Thicket"), a 254-unit
apartment complex located in Atlanta, Georgia, through Thicket
Apartments, L.P., a Delaware limited partnership, of which the
Operating Partnership is a 99% limited partner and Thicket Holdings,
Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner. The Trust also owns the Peachtree Business
Center ("Peachtree"), an approximately 75,000 square foot, single-story
business park located in Atlanta, Georgia, through its wholly-owned
subsidiary, PBC Acquisition, Inc. At December 31, 1996, Thicket and
Peachtree were 97% and 91% leased, respectively.
On July 1, 1996, the Trust effected a 1-for-8 reverse share split (the
"Share Split") of its 8,645,000 outstanding Shares. Shareholders
tendered their Shares and received one Share for every eight Shares
owned. The Trust has purchased and continues to purchase any fractional
Shares at a cost of $5.50 per share. As of December 31, 1996,
fractional Shares totaling 97 had been repurchased and retired leaving
1,080,528 Shares outstanding. All share and per share data included in
the accompanying financial statements and notes thereto have been
restated to reflect the Share Split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying consolidated financial statements of Vinings
Investment Properties Trust include the consolidated accounts of
Vinings Investment Properties Trust and its subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. The term "Trust" hereinafter refers to Vinings
Investment Properties Trust and its subsidiaries, including the
Operating Partnership.
Income Taxes
------------
The Trust has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Trust will
generally not be subject to federal income taxation on that portion of
its income that qualifies as REIT taxable income to the extent the REIT
distributes at least 95% of its taxable income to its shareholders and
satisfies certain other requirements. Accordingly, no provision for
federal income taxes has been included in the accompanying consolidated
financial statements.
Cash and Cash Equivalents
-------------------------
The Trust considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As of
December 31, 1995, cash and cash equivalents included $2,407,118 of
short-term investments in U.S. Treasury bills.
Cash Escrows
------------
Cash escrows consist of real estate tax, insurance, replacement reserve
and repair escrows held by the mortgagee. These funds are restricted
accounts and released solely for the purpose for which they were
established.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities, the 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.
Mortgage Loan Receivables
-------------------------
Mortgage loan receivables are stated at the lower of cost or net
realizable value.
Real Estate Assets
------------------
Real estate assets are stated at depreciated cost. Ordinary repairs and
maintenance are expensed as incurred. Major improvements and
replacements are capitalized and depreciated over their estimated
useful lives when they extend the useful life, increase capacity or
improve efficiency of the related asset. Depreciation is computed on a
straight-line basis over the useful lives of the real estate assets
(buildings and improvements, 5-40 years; furniture, fixtures and
equipment, 5 years; and tenant improvements, generally over the life of
the related lease.)
During 1995, the Trust adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), which, among
other things, requires impairment losses to be recorded on long-lived
assets to be held or used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS 121
also addresses the accounting for long-lived assets that are expected
to be disposed of. The adoption of SFAS 121 did not have a material
affect on the accompanying consolidated financial statements. In
management's opinion, there has been no impairment of the Trust's real
estate assets as of December 31, 1996.
Revenue Recognition
-------------------
All leases are classified as operating leases and rental income is
recognized when earned which materially approximates revenue
recognition on a straight-line basis.
Deferred Financing Costs and Amortization
-----------------------------------------
Deferred financing costs include fees and costs incurred to obtain
financing and are capitalized and amortized over the term of the
related debt.
Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share is computed based on the weighted average
number of shares outstanding during the period. All references in the
accompanying financial statements and notes to the financial statements
to the weighted average number of shares outstanding and to earnings
(loss) per share have been restated to reflect the Share Split.
Reclassification
----------------
Certain 1995 and 1994 financial statement amounts have been
reclassified to conform with the current year presentation.
NOTE 3 - REAL ESTATE ASSETS
The Thicket Apartments
----------------------
On June 28, 1996, the Trust acquired The Thicket Apartments for a
purchase price of $8,650,000. The acquisition was financed by a
mortgage loan on the property in the amount of $7,392,000 and
borrowings from the Trust's line of credit.
Peachtree Business Center
-------------------------
The Trust acquired Peachtree through a deed-in-lieu of foreclosure on
April 12, 1990. Peachtree was recorded at $1,700,000, its fair market
value, which was less than the book value of the Trust's mortgage
investment at the date of foreclosure. Subsequent to the acquisition,
approximately $1,062,000 of improvements have been capitalized.
NOTE 4 - REAL ESTATE INVESTMENTS
Hall Street Note
----------------
On October 4, 1994, the Trust sold The Hall Street Industrial Complex
which it had previously acquired through foreclosure for an amount
equal to its carrying value of $4,000,000. The buyer paid $2,000,000 in
cash and executed an interest-only $2,000,000 note payable (the "Hall
Street Note"), at an interest rate of prime plus 2% per annum, maturing
on April 30, 1995. On February 22, 1995, the borrower prepaid the
outstanding balance of the Hall Street Note with accrued interest.
Arbutus and Pacesetter Notes
----------------------------
On August 2, 1995, the Trust sold participating mortgage loans secured
by the Arbutus and Pacesetter Shopping Centers ("Arbutus and
Pacesetter") for $3,615,000 and $2,900,000, respectively. These sales
resulted in a total loss of $1,845,035, comprised of a $1,647,000
write-down to reflect the realizable value, and selling, legal and
advisory expenses of $198,035.
Hawthorne Note
--------------
The Trust acquired the Hawthorne Research and Development Complex
("Hawthorne") in 1992 through foreclosure of its mortgage note. The
Trust's investment in the property was written down from 1992 through
1994 to $4,605,702 to reflect its anticipated net realizable value. On
March 30, 1995, the Trust sold Hawthorne for $5,095,000 of which
$3,500,000 was paid at closing. The balance of $1,595,000 (the
"Hawthorne Note") was payable pursuant to a non-recourse purchase money
note and was subordinate to first mortgage liens totaling $10,360,000.
In connection with the sale of Hawthorne, the Trust reported a gain of
$152,825.
In connection with the liquidation of assets, the Trust entered into an
agreement with the first mortgage lien holder to sell the Hawthorne
Note for $700,000. At December 31, 1995, the Trust established a
valuation allowance of $895,000 to reflect its net realizable value of
$700,000. On January 3, 1996, the Trust closed on the sale of the
Hawthorne Note and recorded commissions and fees for a loss on the sale
of $26,800.
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Trust held partnership interests totaling 35.5% in the Mellon/Pier
I Properties Limited Partnership I (the "Pier I Partnership"). The Pier
I Partnership was formed to acquire land and buildings which were
leased to affiliates of the Pier I Partnership's managing general
partner, Pier I, and operated as Pier I Imports retail stores.
On December 29, 1995, the Trust sold its partnership interests to Pier
I. Total sales proceeds to the Trust were $15,788,680, which after
legal and advisory fees of $189,648, resulted in a gain of $1,700,323.
NOTE 6 - NOTES PAYABLE
Mortgage Note Payable
---------------------
At December 31, 1996, the Trust had a 9.04% mortgage note payable in
the original principal amount of $7,392,000, which is secured by
Thicket and which matures on July 1, 2003. Principal and interest are
payable in monthly installments of $59,691. At December 31, 1996, the
outstanding principal balance was $7,371,676. Scheduled maturites of
the mortgage note payable as of December 31, 1996, are as follows:
1997 $ 52,007
1998 56,909
1999 62,272
2000 68,140
2001 74,562
Thereafter 7,057,786
----------
Total $7,371,676
==========
Line of Credit
--------------
The Trust obtained a one year line of credit in the amount of
$2,000,000 which bears interest at the bank's base rate which
approximates prime. At December 31, 1996, the interest rate was 8.25%.
Interest is payable monthly with the entire principal balance due on
June 28, 1997. The line of credit is secured by Peachtree. At December
31, 1996, the outstanding balance of the line of credit was
$1,568,104.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1996, the Trust entered into a management agreement with
Vinings Properties, Inc. for property management services for Thicket
for a fee equal to five percent of gross revenues plus a fee for data
processing. Vinings Properties, Inc. is an affiliate of certain
officers and trustees of the Trust. A total of $44,459 in management
fees and $7,620 in data processing fees were incurred by the Trust
during 1996.
In addition, as a commitment to the rebuilding of the Trust, The
Vinings Group, Inc., the parent corporation of Vinings Properties,
Inc. (collectively "Vinings"), has provided numerous services to the
Trust relating to administration, acquisition, and capital and asset
advisory services at little or no cost to the Trust. The Trust does
not anticipate that these services will continue to be provided free
of charge, and certain costs paid on the Trust's behalf have been
reimbursed to Vinings. However, while the Trust is in its initial
growth stages, the officers and trustees are committed to providing as
many services as possible to promote the growth of the Trust. A total
of $15,000 was paid to Vinings for shareholder services provided for
the sole benefit of the Trust by one of Vinings' employees during
1996. The officers did not receive compensation from the Trust for
their services.
In connection with the acquisition of Thicket, a broker's commission of
$150,000 was paid by the seller of the property to MFI Realty, Inc., a
wholly-owned subsidiary of The Vinings Group, Inc.
In addition, the Trust has entered into an agreement dated February 28,
1997 with Northshore Communications, Inc., a company affiliated with
one of the Trustees, for the design and production of the Trust's 1996
annual report for a total of $20,500. This cost is substantially less
than the Trust's cost for its annual report for the previous year.
NOTE 8 - ADVISORY AGREEMENT
Prior to the consummation of the Tender Offer, the Trust had engaged
the Advisor to provide investment advisory services and act as the
administrator of Trust operations. The agreement with the Advisor,
which was terminated upon consummation of the Tender Offer, provided
for the payment of administrative, asset management and other servicing
fees to the Advisor for services rendered in administering the Trust's
operations. The Advisor earned administrative, asset management,
special services, and mortgage servicing fees aggregating $333,461,
$290,684 and $254,502 for the years ended December 31, 1996, 1995, and
1994, respectively. The Trust also amortized deferred loan acquisition
fees of $70,884 and $158,780 for the years ended December 31, 1995 and
1994, respectively, which are recorded as investment advisor's fees in
the accompanying financial statements.
NOTE 9 - DISTRIBUTIONS
Distributions declared and distributed for the years ended December 31,
1996, 1995, and 1994 aggregated $18,240,950, $13,227,342, and
$26,713,050, respectively, or $16.88, $12.24, and $24.72 per share.
For federal income tax purposes, all distributions received by
shareholders for the years ended December 31, 1996 and 1995 represented
a return of capital. As the Trust's last 1994 distribution of $0.80 was
made on December 31, 1994, and received by shareholders in 1995,
dividends received by shareholders for federal income tax purposes were
$13.04 and $23.92 per share for 1995 and 1994, respectively. For
federal income tax purposes, of the distributions received for the year
ended December 31, 1994, $23.84 per share represented a return of
capital, while the taxable ordinary income portion was $0.08 per share.
NOTE 10 - LEASING ACTIVITY
The following is a schedule of future minimum rents due under operating
leases that have initial or remaining noncancellable lease terms in
excess of one year as of December 31, 1996, at Peachtree:
1997 $ 506,378
1998 475,471
1999 425,832
2000 350,214
2001 318,864
Thereafter 132,860
----------
Total $2,209,619
==========
One tenant generated 54% of Peachtree's revenues for the fiscal year
ended December 31, 1996. The same tenant accounts for 78% of the future
minimum lease payments. While this tenant's lease does not expire until
May 31, 2002, it contains a 90-day cancellation clause which management
is currently negotiating to extend to one year.
NOTE 11 - CONTINGENCIES
The Trust is, from time to time, subject to various claims that arise
in the ordinary course of business. These matters are generally covered
by insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such
matters would not have a material adverse effect on the financial
position or results of operations of the Trust.
NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to
the Trust as of December 31, 1996 and 1995, the Trust estimates that
the carrying value of cash and cash equivalents, mortgage note
receivables, the mortgage note payable, the line of credit, and other
liabilities approximate their fair values when compared to instruments
of similar type, terms and maturity.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1996
and 1995. Although management is not aware of any factors that would
significantly affect its estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial
statements since December 31, 1996.
NOTE 13 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Unaudited summarized quarterly results of operations for the years
ended December 31, 1996 and 1995 are as follows:
- --------------------------- ---------- --------- ---------- ---------
1996 First Second Third Fourth
- --------------------------- ---------- --------- ---------- ---------
Total revenues $ 393,473 $ 169,281 $ 613,310 $ 620,853
========= ========= ========== =========
Loss before loss on real estate
investments $(380,871) $(127,349) $ (76,093) $(198,965)
Loss on real estate investments
(26,800) -- -- --
--------- --------- ---------- ---------
Net loss $(407,671) $(127,349) $ (76,093) $(198,965)
========= ========= ========== =========
Per share:
Loss before loss on real estate
investments $ (.36) $ (.12) $ (.07) $ (.18)
Loss on real estate investments
(.02) -- -- --
--------- --------- ---------- ----------
Net loss $ (.38) $ (.12) $ (.07) $ (.18)
========== ========== ========== ==========
Dividends declared and paid $ 16.88 $ -- $ -- $ --
=========== ========== ========== ==========
- ---------------------------- --------- ------------ ---------- --------
1995 First Second Third Fourth
- ---------------------------- --------- ------------ ---------- --------
Total revenues $ 908,308 $ 906,296 $ 699,013 $731,291
========= ============ ========= ========
Income before gain (loss) on
real estate investments $ 570,162 $ 465,391 $ 256,190 $173,690
Gain (loss) on real estate
investments 169,448 (1,663,623) (150,300) 757,588
--------- ------------ --------- --------
Net income (loss) $ 739,610 $(1,198,232) $ 105,890 $931,278
========= ============ ========= ========
Per share:
Income before gain (loss) on
real estate investments $ 0.53 $ 0.43 $ 0.24 $ 0.16
Gain (loss) on real estate
investments 0.15 (1.54) (0.14) 0.70
--------- ------------ --------- --------
Net income (loss) $ 0.68 $(1.11) $ 0.10 $ 0.86
========= ============ ========= ========
Dividends declared and paid $ 5.20 $ 0.64 $ 5.60 $ 0.80
========= ============ ========= ========
VININGS INVESTMENT PROPERTIES TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Gross amounts at which
Initial Cost to Trust carried at close of period
---------------------- ---------------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Improvements Land Improvements Total
- --------------------------------------------------------------------------------------------------------------------------
Peachtree Business Center $ 1,568,104 $ 400,000 $1,300,000 $1,061,919 $ 400,000 $ 2,361,919 $ 2,761,919
The Thicket Apartments 7,371,676 1,070,500 7,590,400 49,635 1,070,500 7,640,035 8,710,535
----------------------------------------------------------------------------------------------
Totals $ 8,939,780 $1,470,500 $8,890,400 $1,111,554 $1,470,500 $10,001,954 $11,472,454
==============================================================================================
Life on which Date of
Accumulated Depreciation Date Original
Description Depreciation is Computed Acquired Construction
- -------------------------------------------------------------------------------------------
Peachtree Business Center $ 450,953 5-40 Years April 1990 1984
The Thicket Apartments 162,965 5-40 Years June 1996 1989
-----------
$ 613,918
===========
The accompanying notes are an integral part of this schedule.
VININGS INVESTMENT PROPERTIES TRUST
NOTES TO SCHEDULE III
December 31, 1996
(A) The Peachtree investment was acquired through a deed in-lieu of
foreclosure of an original mortgage note investment. In June 1996, the
Trust obtained a $2,000,000 line of credit which is secured by
Peachtree. At December 31, 1996, $1,568,104 was outstanding on the
line.
(B) The Thicket Apartments was acquired on June 28, 1996 for a
purchase price of $8,650,000. It was financed by a mortgage loan in
the original amount of $7,392,000 and borrowings from the Trust's line
of credit, which is secured by Peachtree.
(C) Gross capitalized costs of real estate assets are summarized as follows
------------------ ---------------- -------------------
1996 1995 1994
------------------ ---------------- -------------------
Balance at beginning of period $ 2,732,057 $7,445,666 $12,900,624
Additions during period:
Acquisition of Thicket 8,660,900 - -
Improvements 74,497 16,751 6,682
------------------ ---------------- -------------------
Total additions 8,740,397 16,751 6,682
------------------ ---------------- -------------------
Deductions during period:
Hall Street - - 4,000,000
Hawthorne - 4,730,360 -
Estimated valuation losses and
allowances to fair market value - - 1,461,640
------------------ ---------------- -------------------
Total deductions - 4,730,360 5,461,640
------------------ ---------------- -------------------
Balance at close of period $11,472,454 $ 2,732,057 $ 7,445,666
================== ================ ===================
(D) Accumulated depreciation on real estate assets is as follows:
--------------- ---------------- -------------
1996 1995 1994
--------------- ---------------- -------------
Balance at beginning of period $374,524 $ 424,332 $318,361
Additions during period:
Hawthorne Property - - 30,685
Peachtree Business Center 76,429 75,480 75,286
The Thicket Apartments 162,965 - -
--------------- ---------------- -------------
Total additions 239,394 75,480 105,971
--------------- ---------------- -------------
Deductions during period:
Retirements/sales - (125,288) -
--------------- ---------------- -------------
Total deductions - (125,288)
-
--------------- ---------------- -------------
Balance at close of period $613,918 $ 374,524 $424,332
=============== ================ =============
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3.1 --- Second Amended and Restated Declaration of Trust of the Trust (incorporated by reference
to Exhibit 3.1 to the Trust's Registration Statement on Form S-11, No. 2-94776).
3.2 --- Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to
the Trust's Registration Statement on Form S-11, No. 2-94776).
3.3 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
10.1 --- Agreement of Purchase and Sale for The Thicket Apartments, dated March 27, 1996, between
The Patrician Mortgage Company and A&P Investors, Inc. (incorporated by reference to
Exhibit 99.1 to the Trust's Current Report on Form 8-K, filed July 2, 1996).
10.2 --- Amendment to Agreement of Purchase and Sale for The Thicket Apartments, dated June 25,
1996, between The Patrician Mortgage Company and A&P Investors, Inc. (filed herewith).
10.3 --- Assignment of Agreement for Purchase and Sale for The Thicket Apartments, dated June 25,
1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
10.4 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust (incorporated by reference to Exhibit 10.1 to the Trust's Current Report on
Form 8-K/A, filed September 11, 1996).
10.5 --- Deed to Secure Debt and Security Agreement by and between Thicket Apartments, L.P., as
mortgagor, and Univest Mortgage Capital, LLC, as mortgagee, dated June 27, 1996
(incorporated by reference to Exhibit 10.2 to the Trust's Current Report on Form 8-K/A,
filed September 11, 1996).
10.6 --- Promissory note from Thicket Apartments, L.P. to Univest Mortgage Capital, LLC, dated
June 27, 1996 (incorporated by reference to Exhibit 10.3 to the Trust's Current Report
on Form 8-K/A, filed September 11, 1996).
10.7 --- Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith).
10.8 --- Management Contract dated June 25, 1996 between Thicket Apartments, L.P. and Vinings
Properties, Inc. (filed herewith).
10.9 --- Management Contract dated July 6, 1990 between PBC Acquisition, Inc. and Carter &
Associates Enterprises, Inc. (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).