SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 31, 1996
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 0-23954 54-1589139
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
306 East Main Street
Richmond, Virginia 23219
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(804) 643-1761
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 8-K
Index
Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(Greenbrier Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Greenbrier Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Greenbrier Apartments)
b. Independent Auditors' Report
(Deerfield Apartments)
Historical Statement of Income and
Direct Operating Expenses
(Deerfield Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (Deerfield Apartments)
c. Independent Auditors' Report
(Franklin Towers Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Franklin Towers Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Franklin Towers Apartments)*
d. Independent Auditors' Report
(The Arbors at Windsor Lake Apartments)
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* To be filed by amendment.
Historical Statement of Income and
Direct Operating Expenses
(The Arbors at Windsor Lake Apartments)
Note to Historical Statement of
Income and Direct Operating
Expenses (The Arbors at Windsor Lake Apartments)
e. Independent Auditors' Report
(Westchase Apartments)*
Historical Statement of Income and
Direct Operating Expenses
(Westchase Apartments)*
Note to Historical Statement of
Income and Direct Operating
Expenses (Westchase Apartments)*
f. Pro Forma Statement of Operations for
the Nine Months ended September 30, 1996
(unaudited)*
Pro Forma Balance Sheet as of
September 30, 1996 (unaudited)*
Pro Forma Statement of Operations
for the Year ended December 31, 1995
(unaudited)*
g. Exhibits
10.1 Purchase Contract for Greenbrier Apartments
10.2 Purchase Contract for Deerfield Apartments
10.3 Purchase Contract for Franklin Towers Apartments
10.4 Purchase Contract for The Arbors at Windsor
Lake Apartments
10.5 Purchase Contract for Westchase Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
23.3 Consent of Independent Auditors*
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* To be filed by amendment.
23.4 Consent of Independent Auditors*
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* To be filed by amendment.
Item 2. Acquisition or Disposition of Assets
GREENBRIER APARTMENTS
Fredericksburg, Virginia
On October 31, 1996, effective October 1, 1996, Cornerstone Realty
Income Trust, Inc. (the "Company") purchased the Greenbrier Apartments, a
258-unit apartment complex having an address of One Greenbrier Drive,
Fredericksburg, Virginia (the "Property").
The seller was unaffiliated with the Company. The purchase price was
$11,099,525. At closing, the entire purchase price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Fredericksburg Chamber of Commerce.
Fredericksburg is located in central Virginia, about halfway between
Richmond, Virginia and Washington, D.C. The City of Fredericksburg, together
with the surrounding Counties of Stafford and Spotsylvania, form a distinct area
of economic development and activity. Interstate 95 runs through the area and
connects Richmond and Washington.
The combined population of the City of Fredericksburg and Stafford and
Spotsylvania Counties was approximately 138,000 in 1990.
The military has a strong presence and plays a key economic role in the
area. The Quantico Marine Corps Reservation occupies approximately 32,000 acres
within the northern portion of Stafford County. Fort A.P. Hill, comprising
approximately 76,000 acres, is a major U.S. Army base in Caroline County, just
outside Spotsylvania County. Dahlgren Navy Base in nearby King George County
employs approximately 3,400 workers.
A significant number of residents in the Fredericksburg area commute to
jobs in Northern Virginia and the District of Columbia using the convenient
access of Interstate 95.
The Property is near the center of the City of Fredericksburg, near the
intersection of Route 3 and Route 1. The Property is near Mary Washington
College and just west of the downtown area. Route 1 and Route 3 provide
convenient access for both north/south and east/west travel. The location of the
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Property in relation to these highways provides convenient access to primary
employment centers in Fredericksburg as well as employment centers in Northern
Virginia and the District of Columbia.
Description of the Property. The Property consists of 258 garden-style
apartments located in 22 three-story buildings on approximately 17.5 acres of
land. The Property was built in two phases. Phase I, consisting of 186 apartment
units, was completed in 1990, and the second phase of 72 apartment units was
completed in 1990.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $258,000 for repairs and improvements including upgrading of Phase
I interiors, clubhouse renovation and parking lot repair in Phase I.
The Property offers many different unit types. The unit mix and rents
currently being charged new tenants as of January, 1997 are as follows:
Quantity Type Approximate Monthly Rental
Interior
Square Footage
10 efficiency 432 $430
12 one 657 510
bedroom/one
bath
64 one 739 530
bedroom/one
bath (large)
15 one 782 545
bedroom/one
bath w/den
17 two 837 570
bedrooms/one
bath
18 two 927 585
bedrooms/one
bath (large)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
35 two 894 590
bedrooms/1.5
baths
15 two 1007 615
bedrooms/1.5
baths w/den
27 two 927 670
bedrooms/two
baths
27 two 927 670
bedrooms/two
baths
9 three 1159 775
bedrooms/two
baths
9 three 1159 800
bedrooms/two
baths
The apartments provide a combined total of approximately 219,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally remained the same. As an
example, a two bedroom, one and one-half bath apartment rented for $540 in 1992,
$540 in 1993, $540 in 1994, $540 in 1995, and $550 in 1996. The average
effective annual rental per square foot at the Property for 1992, 1993, 1994,
1995 and 1996 was $8.24, $8.24, $8.24, $8.24 and $8.38 , respectively.
The buildings are comprised of brick and wood siding on concrete slab
foundations with pitched roofs covered with composition shingles over plywood
decking. The 186 apartment units in Phase I, completed in 1970, have, according
to the seller, received substantial capital improvements since 1988 costing
approximately $550,000. The improvements included new roofs and new
refrigerators. Additional renovations made on an as-needed basis included new
tile, new counter tops, new hot water heaters and new heating and air
conditioning units.
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The Property is wall-landscaped and includes an outdoor swimming pool
with deck, grills, laundry facilities in each building, and a clubhouse with a
fitness center and leasing office. There is paved parking for approximately 440
vehicles.
Generally, apartment units have wall-to-wall carpeting in the living
areas and vinyl floors in the kitchen and baths. Some apartment units in Phase I
are available with hardwood floors. Each apartment unit has draperies or
miniblinds and cable television hook-ups. Each kitchen is equipped with a
refrigerator/freezer, range and oven, dishwasher and garbage disposal. The owner
of the Property supplies cold water, sewer service and trash removal. The
tenants pay for gas and electric service, which includes air conditioning,
heating, hot water and lights. Gas is used for heat and hot water in all
apartment units and also for cooking in the Phase I apartment units.
There are at least six apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 93%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 93% in 1992, 94% in 1993, 97% in 1994, and
97% in 1995. Based in part on information provided by the seller, the Company
believes that physical occupancy at the Property averaged 95% in 1996. On
January 1, 1997, the Property was 93% occupied. The tenants are a mix of
white-collar and blue-collar workers, students and retired persons.
The 1996 real estate tax rate applicable to the Property was
approximately $1.160 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $108,848.60. The assessed value was $9,383,500. The
basis of the depreciable residential real property portion of the Property
(currently estimated at about $8,510,100) will be depreciated over 27.5 years on
a straight line basis. The basis of the personal property portion will be
depreciated in accordance with the modified accelerated cost recovery system of
the Code. Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
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Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Fredericksburg, Virginia area will
experience continued strong economic development and steady population increase,
owing in part to its favorable location on Interstate 95, approximately midway
between Richmond and Washington, D.C., and that such development and increase
will support stable occupancy rates and reasonable increases in rents at the
Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area employers
and shopping.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
DEERFIELD APARTMENTS
Durham, North Carolina
On November 20, 1996, effective the same date, the Company purchased
the Deerfield Apartments, a 204-unit apartment complex having an address of 910
Constitution Drive, Durham, North Carolina ("Property").
The seller was unaffiliated with the Company. The purchase price was
$10,675,000. At closing, the entire purchase price was borrowed on the Company's
unsecured line of credit. The Company expects to repay such borrowed amount with
the proceeds from the sale of Shares. Title to the Property was conveyed to the
Company by limited warranty deed.
Location. The following information is based in part on information
provided by the Durham Chamber of Commerce.
Durham is located in the north central portion of North Carolina,
approximately midway between Atlanta and New York. The Blue Ridge Mountains are
approximately 150 miles to the west and the Atlantic Ocean is approximately 150
miles to the east. In
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1992, Durham had a population of approximately 144,000 and Durham County had a
population of approximately 189,000.
Durham is the home to Duke University and the Duke Medical Center. Duke
University, as well as Research Triangle Park, North Carolina Central University
and Raleigh/Durham International Airport, are all within a 15-minute drive of
the Property. Education and research are principal economic activities in the
area, and there is also some industry.
The Property is located in a well-established area of Durham and the
area is characterized by various retail centers, restaurants and other
businesses. The neighborhood surrounding the Property also contains other
multi-family housing, single-family housing, schools and churches. The Property
has easy access to Interstate 85, which provides convenient access to downtown
Durham and the airport. The Property borders Duke Forest, a preserved area owned
and maintained by Duke University and used for research. Duke Forest offers
walking, jogging and biking trails.
Description of the Property. The Property consists of 204 garden-style
apartments located in 11 two- and three-story buildings on approximately 15
acres of land. The Property was constructed in 1984 and 1985.
The Company believes that the Property has been generally well
maintained and is generally in good condition. However, the Company has budgeted
approximately $406,000 for repairs and improvements, including major parking lot
repair, clubhouse renovation, reconditioning of tennis courts and apartment
interior upgrade.
The Property offers a very wide range of unit types. The unit mix and
rents being charged new tenants as of January, 1997 are as follows:
Quantity Type Approximate Monthly Rental
Interior
Square Footage
22 one 730 $630-$650
bedroom/one
bath, basic
(1st floor)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
10 one 730 650-670
bedroom/one
bath (1st
floor)
22 one 730 680-700
bedroom/one
bath (2nd
floor)
12 one 730 695-715
bedroom/one
bath (3rd
Floor)
10 one 730 700-720
bedroom/one
bath (2nd
floor top)
10 single 810 750-770
master/pent-
house
19 two 970 740-765
bedroom/two
bath, basic
(1st floor)
5 two 970 750-775
bedroom/two
bath (1st
floor)
7 two 970 760-785
bedroom/two
bath (1st
floor)
1 two 970 770-795
bedroom/two
bath (1st
floor)
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Quantity Type Approximate Monthly Rental
Interior
Square Footage
20 two 970 790-815
bedroom/two
bath (2nd
floor)
2 two 970 800-825
bedroom/two
bath (2nd
floor)
14 two 970 815-840
bedroom/two
bath (3rd
floor)
5 two 970 820-845
bedroom/two
bath (2nd
floor top)
8 two 970 825-850
bedroom/two
bath(3rd
floor)
5 two 970 830-855
bedroom/two
bath(2nd floor
top)
8 twin master, 1066 815-845
basic (1st
floor)
4 twin master, 1066 825-855
FP (1st floor)
8 twin master, 1066 850-880
(2nd floor)
6 twin master, 1066 875-905
(top floor)
6 twin master, 1066 885-915
(top floor)
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The apartments provide a combined total of approximately 181,000 square
feet of net rentable area.
The leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two bedroom, two bath apartment rented for $640 in 1992, $675 in 1993, $730 in
1994, $775 in 1995, and $795 in 1996. The average effective annual rental per
square foot at the Property for 1992, 1993, 1994, 1995, and 1996 was $8.31,
$8.76, $9.48, $10.06 and $10.32, respectively.
The buildings are wood frame construction on concrete slabs. The
buildings have pitched roofs covered with asphalt shingles over plywood decking.
Exteriors are vinyl siding.
The Property has an outdoor swimming pool, two lighted tennis courts, a
hot tub and whirlpool, a picnic/grill area, an on-site laundry facility, a
clubhouse with a rental office and lounge, and access to trails through Duke
Forest. There is paved parking for approximately 408 vehicles.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
apartment unit also features washer/dryer connections, mini-blinds, ceiling
fans, an outside storage cabinet, a private screened porch and, in select
apartment units, a wood-burning fireplace. Each kitchen has a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
Tenants pay for their electricity usage, which includes heat, air conditioning,
cooking, hot water and lights.
There are at least five apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 90%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 98% in 1992, 99% in 1993, 99% in 1994, and
99% in 1995. Based in part on information provided by the seller, physical
occupancy at the Property averaged approximately 91% in 1996. On January 1,
1997, the Property was 88% occupied. The tenants are a mix of white-
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collar workers, students and retired persons. A majority of the current
residents are graduate students at Duke University.
The 1996 real estate tax rate applicable to the Property was
approximately $1.6397 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $133,676. The assessed value was $8,562,000. The
basis of the depreciable residential real property portion of the Property
(currently estimated at about $8,259,600) will be depreciated over 27.5 years on
a straight line basis. The basis of the personal property portion will be
depreciated in accordance with the modified accelerated cost recovery system of
the Code. Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Durham, North Carolina area will
experience continued strong economic development and steady population increase,
owing in part to the presence of Duke University, Research Triangle Park and
other educational and research resources, and that such development and increase
will support stable occupancy rates and reasonable increases in rents at the
Property.
2. The Property is conveniently located and proximate to major
employers and shopping.
3. The Company is very familiar with the Durham rental market. The
Company already owns other apartment complexes in the Durham area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
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FRANKLIN TOWERS APARTMENTS
Richmond, Virginia
On December 31, 1996, effective December 1, 1996, the Company purchased
the Franklin Towers Apartments, a 128-unit high-rise apartment building having
an address of 311 West Franklin Street, Richmond, Virginia ("Property"). The
Property is located across the street from the Trolley Square Apartments owned
by the Company. The Company has renamed the Property the "Trolley Square West
Apartments" and intends to operate the Property together with the original
Trolley Square Apartments as a single apartment complex.
The seller was unaffiliated with the Company. The purchase price for
the Property was $4,242,575. At closing, the entire purchase price was borrowed
under the Company's unsecured line of credit. The Company expects to repay such
borrowed amount with proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Richmond Chamber of Commerce.
The current population of Richmond is approximately 202,000 and the
current population of the Metropolitan Statistical Area including the City of
Richmond is approximately 930,000. Richmond is located centrally within the
Commonwealth of Virginia, approximately midway between Washington, D.C. and
Raleigh, North Carolina.
The greater Richmond area is served by the Richmond International
Airport, and is situated at the intersection of Interstates 95 and 64. In
addition to being the capital of Virginia, Richmond is also home to numerous
Fortune 500 companies. Some of the larger employers in the area are Phillip
Morris, state government, Ethyl Corporation, DuPont, and NationsBank. In
addition, the area is the site of a number of institutions of higher education,
including Virginia Commonwealth University, the Medical College of Virginia, the
University of Richmond, and Virginia State University.
The Property is located in downtown Richmond, Virginia. The immediate
area consists of other multi-family housing, commercial development and retail
development. The Property is in close proximity to Virginia Commonwealth
University, and is near to the two established commercial areas known as
Carytown and Shockoe Slip.
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The Property is close to Virginia's 23-acre Biotechnology Research
Park, which is under development. The Park is being sponsored and master-leased
by Virginia Commonwealth University to provide a common site for public and
private medical-oriented biotechnology research and development facilities.
Phase I, consisting of approximately 100,000 square feet, was recently completed
and is fully leased. The second and third phases are under construction and are
expected to be completed shortly. The facility, which is adjacent to the Medical
College of Virginia campus of Virginia Commonwealth University, is expected to
impact the demand for rental housing in the area. The Property is just a few
blocks from the School of Engineering for Virginia Commonwealth University,
which is currently under construction and expected to begin conducting classes
in the fall of 1997.
The Property is only a few blocks from the Richmond Downtown
Expressway, which provides ready access to Interstates 95 and 64. The Richmond
International Airport is approximately 15 minutes from the Property.
Description of the Property. The Property consists of 128 apartment
units in a single 12-story apartment building in the central business district.
The Property was built in 1963 and 1964.
The Company believes that the Property is generally in good condition.
However, the Company has budgeted approximately $192,000 for various repairs and
improvements, including carpet replacement, replacement of appliances and
countertops and renovation of common areas.
The Property offers five unit types. The unit mix and rents currently
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
64 junior 420 $420
executive
20 one bedroom 630 530
front
20 one bedroom 620 495
side
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
22 one bedroom 635 515
rear
2 penthouse 1100 760
The apartments provide a combined total of approximately 68,000 square
feet of net rentable area. There is also approximately 5,000 square feet of
leasable office area.
Leases at the Property are generally for terms of one year or less. The
average rental rates for the past five years have generally increased gradually.
As an example, a penthouse apartment rented for $462 in 1992, $472 in 1993, $472
in 1994, $492 in 1995, and $567 in 1996. The average effective annual rental per
square foot at the Property for 1992, 1993, 1994, 1995, and 1996 was $8.66,
$8.85, $8.85, $9.22 and $10.63, respectively.
The Property has an outdoor swimming pool and roof deck, 24- hour
security, a conference room, laundry facilities and a laundry/dry cleaning
service. The Property has two parking lots with 108 parking spaces which
currently lease for between $30 and $40 per month.
The building is brick veneer over steel frame with concrete floor
decks. The roof is flat with modified bitumen rubber sheathing. The windows are
single steel frames. The Property's heating and air conditioning system was
completely replaced approximately three years ago.
All apartment units have wall-to-wall carpeting or parquet flooring in
the living area and tile floors in the bath. Each apartment unit has a cable
television hook-up and an individually controlled heating and air conditioning
unit. Each kitchen has a refrigerator/freezer, gas range and oven and garbage
disposal. The two penthouse units also have a dishwasher. The owner of the
Property provides all utilities other than phone and cable service.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property. Based on a recent telephone survey,
Cornerstone Management Group, Inc. estimates that occupancy in nearby competing
projects now averages approximately 95%.
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According to information provided by the seller, physical occupancy at
the Property averaged approximately 95% in 1992, 96% in 1993, 96% in 1994, 95%
in 1995, and 95% in 1996. On January 1, 1997, the Property was 93% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons. Many of the current tenants have resided at the Property for many
years, and detailed information on them and their status is not available.
The 1996 real estate tax rate applicable to the Property was
approximately $1.475 per $100 of assessed value, and the real estate taxes for
1996 were calculated to be $44,368. The assessed value was $3,008,000. The
parking lot has an assessed value of $218,000 and the 1996 taxes were $3,215.
The basis of the depreciable residential real property portion of the Property
(currently estimated at about $2,368,000) will be depreciated over 27.5 years on
a straight line basis. The basis of the personal property portion will be
depreciated in accordance with the modified accelerated cost recovery system of
the Code. Amounts to be spent by the Company on repairs and improvements will be
treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to the relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Richmond, Virginia area will enjoy
continued steady economic development and steady population increase, due to a
diversified economy, and that such development and increase will support stable
occupancy rates and reasonable increases in rents at the Property.
2. The Company believes that operating the Property in conjunction with
the Trolley Square Apartments located across the street and previously acquired
by the Company will provide operating efficiencies.
3. The Property is conveniently located and proximate to major
employers and shopping, as well as the downtown Richmond area.
4. The Company is particularly familiar with the Richmond market since
the Company's principal offices are in Richmond.
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The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
THE ARBORS AT WINDSOR LAKE APARTMENTS
Columbia, South Carolina
On January 14, 1997, effective January 1, 1997, Cornerstone Realty
Income Trust, Inc. ("Company") purchased The Arbors at Windsor Lake Apartments,
a 228-unit apartment complex having an address of 8720 Windsor Lake Boulevard,
Columbia, South Carolina ("Property").
The Seller was unaffiliated with the Company. The purchase price was
$10,875,000. At closing, the entire purchases price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Columbia Chamber of Commerce.
Columbia is the capital of South Carolina and the greater metropolitan
area has a population of approximately 500,000 people. The largest employers in
the area included federal, state and local governments, various financial
services firms and the Army's Fort Jackson.
Columbia is also the site of the University of South Carolina and
various other smaller colleges. As a result of the reputation of the engineering
program at the University of South Carolina, the city has recently become home
to new businesses in various technical areas. Also, the medical school and
teaching hospital at the University make Columbia the state's leader in the
health care industry.
The Property is in the northeast portion of the city and is located in
an established residential area. The neighborhood also includes other
multi-family developments and commercial and retail developments.
The Property is near Interstate 77 and Interstate 20, which provide
convenient access to all locations in the greater Columbia area. Downtown
Columbia is an approximately 15-minute drive from the Property. The Property is
approximately one mile from Fort Jackson.
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Description of the Property. The Property consists of 228 garden-style
apartments located in 11 buildings on approximately 14.5 acres of land. The
buildings are a combination of two and three stories, and the Property was
constructed in 1991.
The Company believes the Property has generally been well maintained
and is generally in good condition. However, the Company has budgeted
approximately $50,000 for repairs and improvements including landscaping, carpet
replacement and clubhouse renovations.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
12 1 bedroom/1 bath 750 $510
56 1 bedroom/1 bath 750 530
(front)
22 2 bedrooms/2 baths 964 615
88 2 bedrooms/2 baths 964 630
(front)
10 3 bedrooms/2 baths 1184 725
40 3 bedrooms/2 baths 1184 740
(front)
The apartments provide a combined total of approximately 216,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example a three bedroom, two bath apartment rented for $710 in 1992, $710 in
1993, $725 in 1994, $725 in 1995, and $735 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.55, $7.55, $7.71, $7.71, and $7.81, respectively.
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The buildings are wood frame construction on concrete slabs with a
combination of brick veneer and vinyl siding. Roofs are sloped fiberglass
shingles on plywood.
The Property features an outdoor swimming pool and hot tub, two lighted
tennis courts, a fitness center, a car wash area and vacuum, a playground, 20
covered garages with electronic door openers, 40 extra storage units, a dry
cleaning service and a resident executive center. The Property also has a
clubhouse with a leasing office.
Apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each unit has a cable television hook-up
and an individually controlled heating and air conditioning unit. Each kitchen
has a refrigerator/freezer, electric range and oven, a dishwasher and a garbage
disposal. Each unit also has a full-sized washer/dryer and some units have
vaulted ceilings, lighted ceiling fans, mini blinds and large walk-in closets.
There are natural gas fire places in 187 apartments units. The owner of the
Property pays for cold water and sewer service. The tenants pay for their
electricity and gas service, which includes heating, air conditioning, cooking,
hot water and lights.
There are at least four apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects now averages
approximately 92%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 85% in 1992, 88% in 1993, 90% in 1994, 94%
in 1995 and 94% in 1996. On January 1, 1997, the Property was 78% occupied. The
tenants are a mix of white-collar workers, military personnel and students.
Approximately 30% of the current residents are employed at Fort Jackson.
The 1996 real estate taxes applicable to the Property were calculated
as assessed value times 6% times 0.3019, and the real estate taxes for 1996 were
calculated to be $120,083. The assessed value was $6,629,300. The basis of the
depreciable residential real property portion of the Property (currently
estimated at about $6,050,100) will be depreciated over 27.5 years on a straight
line basis. The basis of the personal property portion will be depreciated in
accordance with the modified accelerated cost recovery system of the Code.
Amounts to be spent by the Company on repairs and improvements will be
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treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
Before acquisition by the Company, the Property had been in bankruptcy
for over one year. During that period it had been managed by three separate
management companies. The Company believes that inefficient management resulted
in a downturn in occupancy and rental income at the Property during such period.
The Company does not believe that any factors which led to the Property being
placed into bankruptcy will apply to the Company's ownership and operation of
the Property.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Columbia, South Carolina area will
experience continued strong economic development and steady population increase,
owing in part to its status as the capital of the state and the presence of the
University of South Carolina, and that such development and increase will
support stable occupancy rates and reasonable increases in rents at the
Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area employers
and shopping.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
WESTCHASE APARTMENTS
Charleston, South Carolina
On January 15, 1997, effective the same date, Cornerstone Realty Income
Trust, Inc. (the "Company") purchased the Westchase Apartments, a 352-unit
apartment complex having an address of One Westchase Drive, Charleston, South
Carolina (the "Property").
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The Seller was unaffiliated with the Company. The purchase price was
$11,000,000. At closing, the entire purchase price was borrowed under the
Company's unsecured line of credit. The Company expects to repay such borrowed
amount with the proceeds from the sale of additional Shares. Title to the
Property was conveyed to the Company by limited warranty deed.
Location. The following information is based in part upon information
provided by the Charleston Chamber of Commerce.
The Charleston Metropolitan Statistical Area ("MSA") is comprised of
Charleston, Berkeley and Dorchester Counties. The approximate population of the
MSA is 570,000. Charleston County has approximately 330,000 residents,
approximately 85,000 of which are in the city limits.
The principal economic factors in the region are distribution and port
facilities, the tourist industry, the medical community and the military.
The Port of Charleston is the leading container cargo port in the
southeast and on the entire east coast ranks second only to the combined ports
of New York and New Jersey. BMW and NUCOR are two recent examples of companies
that rely on the Port of Charleston.
Tourism is a major factor in the area, with approximately five million
visitors annually. Tourist attractions include the historic district of
Charleston, beaches, golf courses, and restaurants. It is estimated that the
total economic impact of the tourist industry in the region is $1.5 billion
annually, accounting for approximately 34,000 jobs and approximately 14% of the
total work force.
Charleston is the home to the Medical University of South Carolina,
which accounts for approximately 7,500 jobs. A total of approximately 16,000
persons are employed in the region's, 10 hospitals.
The United States Navy employs approximately 7,800 people in the region
in installations such as Charleston Naval Weapons Station, Naval Hospital and
Naval Command, Control and Ocean Surveillance Center in Service Engineering,
East Coast Division. In addition, the Charleston Air Force Base employs over
5,400 people. From 1989 to 1996, Naval employment in the region dropped from 21%
to 3% of total jobs. However, the region experienced a concurrent increase in
jobs in other sectors.
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The overall unemployment rate in the region is currently approximately
5%.
The Property is located in the West Ashley region of Charleston. The
immediate area consists of other multi-family housing, commercial and retail
development and single-family housing. The Property is located near major
shopping centers, schools and churches and is accessible from Interstate 26. The
Property is within a 10-minute drive of the airport and approximately a
15-minute from downtown Charleston. Charleston's largest mall, the Citadel Mall,
is located less than two miles from the Property and has four major anchor
stores and approximately one million square feet of space. The Roper Hospital is
located within one-half mile of the Property and the St. Francis Xavier Hospital
is expected to relocate less than one-half mile from the Property.
Description of the Property. The Property consists of 352 garden-style
apartments located in 23 two-story buildings on approximately 30 acres of land.
The Property was constructed in 1985.
The Company believes that the Property has generally been well
maintained and is generally in good condition. However, the Company has budgeted
approximately $352,000 for repairs and improvements including siding replacement
and repair, painting, carpet replacement, roof replacement and clubhouse
renovations.
The Property offers many different unit types. The unit mix and rents
being charged new tenants as of January, 1997 are as follows:
Approximate
Interior
Quantity Type Square Footage Monthly Rental
11 Efficiency 407 $425
11 Efficiency LGLRUP 432 425
20 1/1 BWUP 505 445
2 1/1 BWUPSLOC 505 445
20 1/1 WS 505 440
2 1/1 WSSLOC 505 440
20 1/1 BWUP 617 460
2 1/1 BWUPSLOC 617 465
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Approximate
Interior
Quantity Type Square Footage Monthly Rental
25 1/1 BWFPUP 617 475
7 1/1 BWFPUP 617 480
1 1/1 BWFPSLOCUP 617 480
52 1/1 WS 617 455
3 1/1 WSSLOC 617 455
36 2/2 BWWDUP 847 580
8 2/2 BWWDUPSLOC 847 580
36 2/2 BWWDFPUP 847 585
8 2/2 BWWDFPUPSLOC 847 585
72 2/2 WS 847 565
16 2/2 WSSLOC 847 565
LGLR -- Large Living Room WS -- Window Seat
UP -- Upper Level FP -- Fireplace
BW -- Bay Window WD -- Washer/Dryer Connections
SLOC -- Special Location
The apartments provide a combined total of approximately 248,000 square
feet of net rental area.
Leases at the Property are for terms of one year or less. Average
rental rates for the past five years have both increased and decreased. As an
example a two bedroom, two bath apartment rented for $470 in 1992, $475 in 1993,
$440 in 1994, $480 in 1995, and $495 in 1996. The average effective annual
rental per square foot at the Property for 1992, 1993, 1994, 1995 and 1996 was
$7.28, $7.36, $6.82, $7.44, and $7.67, respectively.
The buildings are wood frame construction on concrete slabs. The
buildings have pitched composition shingled roofs. Exteriors are a combination
of brick and horizontal wood siding.
The Property has an outdoor swimming pool with sun deck, whirlpool,
lighted tennis court, sand volleyball court, basketball court, car wash area
with vacuum, three laundry facilities and a scenic lake with fountains. The
Property also includes a clubhouse with a clubroom, entertainment bar,
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conversation area and leasing office. There is paved parking for approximately
616 vehicles.
Apartments units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths, as well as cable television hook-ups and
individually controlled heating and air conditioning units. Each unit has a
kitchen passthrough/breakfast bar, pantry, walk-in closets, a linen closet and
mini blinds. Some units also include a bay window with window seats, a wood
burning fire place and washer/dryer connections. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, dish washer and garbage disposal.
The owner of the Property supplies cold water, sewer service and trash removal.
The tenants pay for their electricity usage, which includes heat, air
conditioning, cooking, hot water and lights.
There are at least six apartment properties in the area which compete
with the Property. All offer similar amenities and generally have rents that are
higher when compared with those of the Property. Based on a recent telephone
survey, the Company estimates that occupancy in nearby competing projects now
averages approximately 94%.
According to information provided by the seller, physical occupancy at
the Property averaged approximately 97% in 1992, 93% in 1993, 95% in 1994, 95%
in 1995 and 95% in 1996. On January 1, 1997, the Property was 97% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons. Most of the tenants are under the age of 35 and approximately half are
believed to be single.
The 1996 real estate taxes applicable to the Property were calculated
as assessed value times 6% times 0.3219, plus a solid waste tax of $56 per
apartment unit. The real estate taxes for 1996 were calculated to be $178,384.
The assessed value was $9,236,000. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $7,581,000) will
be depreciated over 27.5 years on a straight line basis. The basis of the
personal property portion will be depreciated in accordance with the modified
accelerated cost recovery system of the Code.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating
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the Property for acquisition by the Company included the following:
1. The Company believes that the Charleston, South Carolina area will
experience continued strong economic development and steady population increase,
owing to a strong, diversified economy characterized by at least four major
employment factors (port facilities, tourism, medical facilities and the
military), and that such development and increase will support stable occupancy
rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is in good condition.
3. The Property is conveniently located and proximate to area employers
and shopping.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
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[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Greenbrier Apartments located in Fredericksburg,
Virginia for the twelve month period ended September 30, 1996. This
statement is the responsibility of the management of Greenbrier Apartments.
Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Greenbrier
Apartments (as defined above) for the twelve month period ended September 30,
1996, in conformity with generally accepted accounting principles.
/s/ L. P. Martin & Co., P.C.
Richmond, Virginia
December 20, 1996
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GREENBRIER APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1996
INCOME
Rental and Other Income $1,667,576
DIRECT OPERATING EXPENSES
Administrative and Other 133,270
Insurance 19,111
Repairs and Maintenance 274,066
Taxes, Property 111,983
Utilities 94,609
----------
TOTAL DIRECT OPERATING EXPENSES 633,039
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $1,034,537
==========
See accompanying note to the financial statement.
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GREENBRIER APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Greenbrier Apartments is a 258 unit garden style apartment complex located on
17.47 acres in Fredericksburg, Virginia. Living space totals 219,460 square
feet.
The assets comprising the property were owned by Greenbrier Apartment
Associates of Fredericksburg, L.P. during the financial statement period.
Cornerstone Realty Income Trust, Inc. subsequently purchased the property.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable
to those resulting from the proposed future operations of the property.
Excluded expenses are mortgage interest, property depreciation, amortization,
legal fees, accounting fees and management fees.
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[L.P. MARTIN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia
We have audited the accompanying statement of income and direct
operating expenses exclusive of items not comparable to the proposed future
operations of the property Deerfield Apartments located in Durham, North
Carolina for the twelve month period ended October 31, 1996. This statement
is the responsibility of the management of Deerfield Apartments. Our
responsibility is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the statement. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Cornerstone Realty Income Trust, Inc.) and excludes
material expenses, described in Note 1 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.
In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Deerfield
Apartments (as defined above) for the twelve month period ended October 31,
1996, in conformity with generally accepted accounting principles.
/s/ L. P. Martin & Co., P.C.
Richmond, Virginia
January 3, 1997
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DEERFIELD APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED OCTOBER 31, 1996
INCOME
Rental and Other Income $1,625,451
DIRECT OPERATING EXPENSES
Administrative and Other 111,170
Insurance 35,379
Repairs and Maintenance 207,891
Taxes, Property 133,801
Utilities 67,680
----------
TOTAL DIRECT OPERATING EXPENSES 555,921
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $1,069,530
==========
See accompanying note to the financial statement.
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DEERFIELD APARTMENTS
NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED OCTOBER 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Deerfield Apartments is a 204 unit residential garden style apartment complex
located on approximately 15 acres in Durham, North Carolina. Living space
totals 181,112 square feet. A majority of the tenants are students at Duke
University.
During the financial statement period, the assets comprising the property were
owned by Durham Associates, a nonaffiliated partnership. Cornerstone Realty
Income Trust, Inc. purchased the property in November 1996.
In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable
to those resulting from the proposed future operations of the property.
Excluded expenses are mortgage interest, property depreciation, professional
fees and management fees.
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ITEM 7.c.*
- -------------------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.e.*
- --------------------------------
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. The required financial statements will be
filed as an amendment to this report as soon as possible, but in no event more
than 60 days after the date of filing of this report.
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ITEM 7.f.*
- --------------------------------
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: January 28, 1997 By: /s/ STANLEY J. OLANDER, JR.
___________________________
Stanley J. Olander, Jr.,
Chief Financial Officer
of Cornerstone Realty
Income Trust, Inc.
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EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated October 31, 1996
Exhibit Number Exhibit Page Number
- -------------- ------- -----------
10.1 Purchase Contract for
Greenbrier Apartments
10.2 Purchase Contract for Deerfield
Apartments
10.3 Purchase Contract for Franklin
Towers Apartments
10.4 Purchase Contract for The Arbors at Windsor
Lake Apartments
10.5 Purchase Contract for Westchase Apartments
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
23.3 Consent of Independent Auditors*
23.4 Consent of Independent Auditors*
* To be filed by amendment.
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