REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and
Shareholders of Vinings Investment Properties Trust:
We have audited the accompanying statements of excess revenues over
specific operating expenses of Windrush Apartments for the years ended December
31, 1996, 1995 and 1994. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of excess revenues over
specific operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of excess revenues over specific operating expenses. 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.
As described in Note 2, these financial statements exclude certain expenses
that would not be comparable with those resulting from the operations of
Windrush Apartments after acquisition by the Trust. The accompanying statements
of excess revenues over specific operating expenses were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and are not intended to be a complete presentation of
Windrush Apartments' revenues and expenses.
In our opinion, the statements of excess revenues over specific operating
expenses present fairly, in all material respects, the excess of revenues over
specific operating expenses (exclusive of expenses described in Note 2) of
Windrush Apartments for the years ended December 31, 1996, 1995 and 1994 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 26, 1998
WINDRUSH APARTMENTS
STATEMENTS OF EXCESS REVENUES OVER
SPECIFIC OPERATING EXPENSES
For the Period
From
January 1, 1997 to Year Ended Year Ended Year Ended
September 30, 1997 December 31, December 31, December 31,
(Unaudited) 1996 1995 1994
REVENUES:
Rental revenues (Note 1) $ 1,048,969 $ 1,384,738 $ 1,332,856 $ 1,283,633
Other property revenues 38,818 45,640 48,372 42,736
---------------------------------------------------------------
Total property revenues 1,087,787 1,430,378 1,381,228 1,326,369
---------------------------------------------------------------
Specific Operating Expenses (Note2):
Property operating and maintenance 460,231 659,507 662,097 580,515
Interest expense 366,729 493,591 499,059 504,133
Mortgage insurance 24,048 32,713 33,092 33,443
---------------------------------------------------------------
Total specific operating expenses 851,008 1,185,811 1,194,248 1,118,091
---------------------------------------------------------------
Excess Revenues Over Specific Operating Expenses $ 236,779 $ 244,567 $ 186,980 $ 208,278
===============================================================
<FN>
See accompanying notes to financial statements
</FN>
WINDRUSH APARTMENTS
NOTES TO STATEMENTS OF EXCESS REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE PERIOD FROM JANUARY 1, 1997 TO
SEPTEMBER 30, 1997 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF REAL ESTATE PROPERTY ACQUIRED
--------------------------------------------
On December 19, 1997, Vinings Investment Properties Trust (the "Trust"),
through Vinings Communities, L.P., a Delaware limited partnership and
indirect subsidiary, acquired Windrush Apartments, a 202-unit apartment
community located in Atlanta, Georgia. Windrush was acquired from Windrush
Partners, Ltd. ("Windrush") at a purchase price of $7,555,000, consisting
of the issuance of 224,330 limited partnership units ("Units") in the
Trust's operating partnership and the assumption of an existing mortgage in
the amount of $6,464,897 and notes payable to Hallmark Group Real Estate
Services Corp. ("Hallmark"), the general partner of Windrush, and its
affiliates. Windrush, through Hallmark is an affiliate of the officers and
certain trustees of the Trust. The Units are convertible into shares of the
Trust on a one-for-one basis or, at the option of the Trust, redeemable for
cash. The occupancy rate of Windrush was approximately 95% as of December
19, 1997.
USE OF ESTIMATES
----------------
The preparation of the statements of excess revenues over specific
operating expenses in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
RENTAL REVENUES
---------------
Rents from leases are accounted for ratably over the term of each lease,
which is generally for a period of 12 months or less.
2. BASIS OF ACCOUNTING
The accompanying statements of excess revenues over specific operating
expenses have been prepared in accordance with the applicable rules and
regulations of the Securities and Exchange Commission for real estate
properties acquired. Accordingly, the statements exclude certain historical
expenses not comparable to the operations of Windrush Apartments after
acquisition by the Trust, such as depreciation and amortization.
3. RELATED PARTY TRANSACTIONS
In connection with the acquisition of Windrush Apartments, MFI Realty,
Inc., an affiliate of the officers and certain trustees of the Trust,
received an advisor's fee from Windrush totaling $75,550. Prior to the
acquisition, Windrush Apartments was managed by Vinings Properties, Inc.
("Vinings"), also an affiliate of the officers and certain trustees of the
Trust. Included in the specific operating expenses are management fees
totaling $63,443 for the period from January 1, 1997 to September 30, 1997
(unaudited) and $83,847, $80,582, and $77,962 for the years ended December
31, 1996, 1995 and 1994 respectively. In addition, Windrush reimbursed
Vinings for various expenditures including property payroll expenses,
computer and accounting expenses and miscellaneous office expenses.