SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Original 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/A
Index
Page No.
--------
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
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)
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 Twelve Months ended December 31, 1996
(unaudited)
Pro Forma Balance Sheet as of
December 31, 1996 (unaudited)
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The Company hereby amends and restates Item 7.c., 7.e. and 7.f. of its
Current Report on Form 8-K dated October 31, 1996 as follows:
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ITEM 7.c.
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[L.P. MARTIN & COMPANY]
[LETTERHEAD]
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
PHONE: (804)346-2626
FAX: (804)346-9311
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 Franklin Towers Apartments located in Richmond,
Virginia for the twelve month period ended December 31, 1996. This statement is
the responsibility of the management of Franklin Towers 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 Franklin Towers
Apartments (as defined above) for the twelve month period ended December 31,
1996, in conformity with generally accepted accounting principles.
Richmond, Virginia
March 7, 1997
/s/ L.P. MARTIN & CO., P.C.
FRANKLIN TOWERS APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
MONTHS ENDED DECEMBER 31, 1996
INCOME
- ------
Rental and Other Income $ 686,650
------------
DIRECT OPERATING EXPENSES
- -------------------------
Administrative and Other 89,831
Insurance 11,125
Repairs and Maintenance 136,490
Taxes, Property 48,510
Utilities 114,201
------------
TOTAL DIRECT OPERATING EXPENSES 400,157
------------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 286,493
============
See accompanying note to the financial statement.
FRANKLIN TOWERS 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 DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
- -----------------------------------------------
Franklin Towers Apartments is a 128 unit residential high rise apartment
building located in Richmond, Virginia. The building includes 68,050 square feet
of residential space and 5,000 square feet of commercial space.
During the financial statement period, the assets comprising the property were
owned by a non-affiliated Virginia partnership. Cornerstone Realty Income Trust,
Inc. purchased the property effective December 31, 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, legal and professional
fees.
ITEM 7.e.
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[L.P. MARTIN & COMPANY]
[LETTERHEAD]
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
PHONE: (804)346-2626
FAX: (804)346-9311
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 Westchase Apartments located in Charleston, South
Carolina for the twelve month period ended December 31, 1996. This statement is
the responsibility of the management of Westchase 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 Westchase
Apartments (as defined above) for the twelve month period ended December 31,
1996, in conformity with generally accepted accounting principles.
Richmond, Virginia
March 24, 1997
/s/ L.P. MARTIN & CO., P.C.
WESTCHASE 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 DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Westchase Apartments is a 352 unit residential garden style apartment complex
located on 29.96 acres in Charleston, South Carolina. Living space totals
248,391 square feet.
During the financial statement period, the assets comprising the property were
owned by Charleston Westchase Associates Limited Partnership, an entity
non-affiliated with Cornerstone Realty Income Trust, Inc. Cornerstone Realty
Income Trust, Inc. purchased the property in January, 1997.
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 and management fees.
WESTCHASE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED DECEMBER 31, 1996
INCOME
- ------
Rental and Other Income $1,999,870
------------------
DIRECT OPERATING EXPENSES
- -------------------------
Administrative and Other 198,659
Insurance 32,853
Repairs and Maintenance 309,732
Taxes, Property 159,436
Utilities 144,841
------------------
TOTAL DIRECT OPERATING EXPENSES 845,521
-------------------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $1,154,349
===================
See accompanying note to the financial statement.
ITEM 7.f.
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Unaudited Pro Forma Statement of Operations for the year ended December 31, 1996
The accompanying Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1996 assuming properties acquired by the Company occurred on
January 1, 1996 and is presented as if (a) the Company had qualified as a REIT,
distributed all of its taxable income and, therefore, incurred no federal income
tax expense during the period; and (b) the Company had used proceeds from its
best efforts offering to acquire the properties, for properties acquired before
the completion of the offering. Properties acquired after the completion of the
offering were assumed to be acquired using the Company's line of credit. The pro
forma information does not purport to represent what the Company's results of
operations would have been if such transactions, in fact, had occurred on
January 1, 1996, nor does it purport to represent the results of operations for
future periods.
The Unaudited Pro Forma Statement of Operations should be read in conjunction
with, and is qualified in its entirety by, the historical financial statements
and accompanying notes.
Historical Meadows West Eagle Ashley Park Arbor Trace Longmeadow
Statement of Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Operations Adjustments Adjustments Adjustments Adjustments Adjustments
------------------------------------------------------------------------------------
Date of Acquisitions - 1/31/96 3/1/96 3/1/96 3/1/96 4/1/96
Rental income $40,352,955 $90,006 $127,302 $284,403 $138,795 186,114
Rental expenses:
Utilities 3,870,541 7,903 7,327 16,769 14,849 9,440
Repairs and maintenance 4,203,180 14,553 22,819 39,027 19,702 25,542
Taxes and insurance 3,275,422 5,273 9,776 27,496 10,819 14,262
Property management fee 1,243,215 - - - - -
Property management 741,257 - - - - -
Advertising 1,126,295 1,484 3,066 3,213 3,215 5,455
General and administrative 1,495,528 - - - - -
Amortization and other depreciation 47,133 - - - - -
Depreciation of real estate 8,068,063 - - - - -
Other operating expenses 2,638,183 - - - - -
Other 151,537 4,452 9,198 18,542 9,645 16,367
Management contract termination 16,526,012 - - - - -
---------------------------------------------------------------------------------
43,386,366 33,665 52,186 105,047 58,230 71,066
Income (loss) before interest income (expense) (3,033,411) 56,341 75,116 179,356 80,565 115,048
Interest income 287,344 - - - - -
Interest expense (1,423,782) - - - - -
--------------------------------------------------------------------------------
Net income (loss) ($4,169,849) $56,341 $75,116 $179,356 $80,565 $115,048
Net income (loss) per share ($0.21)
----------
Weighted average number of shares outstanding 20,210,432
==========
Trophy Chase Beacon Hill Summerwalk Willow Creek Meadowcreek Lexington
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
----------------------------------------------------------------------------------
Date of Acquisitions 4/1/96 5/1/96 5/1/96 5/1/96 5/31/96 6/26/96
Rental income 217,183 684,622 297,115 418,247 671,043 345,237
Rental expenses:
Utilities 21,899 48,373 23,038 30,473 32,330 62,247
Repairs and maintenance 39,180 68,173 59,973 68,918 90,083 97,819
Taxes and insurance 13,830 58,443 15,663 38,620 50,931 41,086
Property management fee - - - - - -
Property management - - - - - -
Advertising 5,819 12,974 7,559 10,041 12,198 10,293
General and administrative - - - - - -
Amortization and other depreciation - - - - - -
Depreciation of real estate - - - - - -
Other operating expenses - - - - - -
Other 17,458 38,922 22,676 30,122 36,593 30,878
Management contract termination - - - - - -
-----------------------------------------------------------------------------------
98,186 226,885 128,909 178,174 222,135 242,323
Income (loss) before interest income (expense) 118,997 457,737 168,206 240,073 448,908 102,914
Interest income - - - - - -
Interest expense - - - - - -
-----------------------------------------------------------------------------------
Net income (loss) $118,997 $457,737 $168,206 $240,073 $448,908 $102,914
Net income (loss) per share
Weighted average number of shares outstanding
Oak Park Paces Glen Doctors Park Hampton Glen Sterling Chase Parkside
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
-----------------------------------------------------------------------------------
Date of Acquisitions 7/1/96 7/19/96 8/1/96 8/1/96 9/1/96 9/30/96
Rental income 1,038,285 628,639 509,713 970,246 1,077,164 653,152
Rental expenses:
Utilities 102,411 39,060 25,951 56,883 45,391 34,669
Repairs and maintenance 221,613 92,090 122,995 130,430 155,415 94,280
Taxes and insurance 49,192 46,834 47,162 62,436 81,204 66,873
Property management fee - - - - - -
Property management - - - - - -
Advertising 23,992 14,827 9,500 24,998 21,877 64,687
General and administrative - - - - - -
Amortization and other depreciation - - - - - -
Depreciation of real estate - - - - - -
Other operating expenses - - - - - -
Other 71,976 44,481 28,499 74,993 65,629 194,059
Management contract termination - - - - - -
-------------------------------------------------------------------------------
469,184 237,292 234,107 349,740 369,516 454,568
Income (loss) before interest income (expense) 569,101 391,347 275,606 620,506 707,648 198,584
Interest income - - - - - -
Interest expense - - - - - -
-------------------------------------------------------------------------------
Net income (loss) $569,101 $391,347 $275,606 $620,506 $707,648 $198,584
Net income (loss) per share
Weighted average number of shares outstanding
Greenbrier Deerfield Franklin Westchase 1996
Pro Forma Pro Forma Pro Forma Pro Forma Pro Form Total
Adjustments Adjustments Adjustments Adjustment Adjustments Pro Forma
----------------------------------------------------------------------------
Date of Acquisitions 10/1/96 11/20/96 12/1/96 1/15/97 - -
Rental income 1,250,682 1,489,997 629,429 1,999,870 - 54,060,191
Rental expenses:
Utilities 70,957 62,040 104,684 144,841 - 4,832,076
Repairs and maintenance 205,550 190,567 125,116 309,732 - 6,396,757
Taxes and insurance 98,321 155,082 54,665 192,289 - 4,415,679
Property management fee - - - - 679,725(A) 1,922,940
Property management - - - - - 741,257
Advertising 24,988 25,476 20,587 49,665 - 1,482,209
General and administrative - - - - 201,172(B) 1,696,700
Amortization and other depreciation - - - - - 47,133
Depreciation of real estate - - - - 2,841,278(C) 10,909,341
Other operating expenses - - - - - 2,638,183
Other 74,964 76,430 61,759 148,994 - 1,228,174
Management contract termination - - - - - 16,526,012
--------------------------------------------------------------------------------
474,780 509,595 366,811 845,521 3,722,175 52,836,460
Income (loss) before interest income (expense) 775,902 980,402 262,619 1,154,349 (3,722,175) 1,223,739
Interest income - - - - - 0
Interest expense - - - - (3,776,848)(D) (5,200,630)
----------------------------------------------------------------------------------
Net income (loss) $775,902 $980,402 $262,619 $1,154,349 ($7,499,023) ($3,976,891)
Net income (loss) per share ($0.16)
-------
Weighted average number of shares outstanding 24,208,799
------------
The pro forma statement of operations reflects adjustments for the actual rental
income and rental expenses of 19 of the Company's 20 1996 acquisitions for the
respective periods in 1996 prior to acquisition. Also, included in the pro forma
statement of operations is the actual 1996 income and rental expenses of the
Company's January 1997 acquisition of Westchase Apartments.
Pro forma adjustments are as follows:
(A) Property management expenses equal to 5% of rental income plus $2.50 per
apartment unit per month have been adjusted based on the on the Company's
contractual arrangements until such arrangements were terminated.
(B) Advisory fee expense equal to .25% of accumulated captial contributions has
been adjusted based on contractual arrangements until such time the
arrangement was terminated.
(C) Depreciation expense has been adjusted based on the Company's basis in
depreciable assets for the period not owned by the Company using a 27.5
year useful life
(D) Interest expense has been adjusted based on market rates at the time of
acquisition available to the Company for properties purchased after
completion after August 1, 1996 for the periods not owned by the Company.
Unaudited Pro Forma Balance Sheet as of December 31, 1996
The accompanying Unaudited Pro Forma Balance Sheet as of December 31, 1996 is
presented as if the Company had owned the following properties held on December
31, 1996. The Unaudited Pro Forma Balance Sheet does not purport to represent
what the Company's financial position would actually have been if the
transactions, in fact, had occurred on December 31, 1996. This Unaudited Pro
Forma Balance Sheet should be read in conjunction with, and is qualified in its
entirety by, the historical financial statements and accompanying notes.
Westchase
Pro Forma Total
Historical Adjustments Pro Forma
--------------------------------------------
ASSETS
Investment in rental property
Land $ 46,980,280 1,980,000 $ 48,960,280
Building 250,705,667 9,020,000 259,725,667
Property improvements 26,640,085 26,640,085
Furniture and fixtures 5,389,821 5,389,821
---------------------------------------------
329,715,853 11,000,000 340,715,853
Less accumulated depreciation (12,323,037) - (12,323,037)
---------------------------------------------
317,392,816 11,000,000 328,392,816
Cash and cash equivalents 3,182,651 - 3,182,651
Prepaid expenses 557,544 - 557,544
Other assets 1,737,563 - 1,737,563
---------------------------------------------
5,477,758 5,477,758
---------------------------------------------
$322,870,574 $11,000,000 $333,870,574
=============================================
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Notes payable $ 55,403,000 11,000,000 $ 66,403,000
Accounts payable-related party 7,297,093 - 7,297,093
Accounts payable 2,087,673 - 2,087,673
Accrued expenses 1,366,853 - 1,366,853
Rents received in advance 491,928 - 491,928
Tenant security deposits 1,654,322 - 1,654,322
--------------------------------------------
68,300,869 11,000,000 79,300,869
Shareholder' equity
Common stock 276,269,539 - 276,269,539
Deferred compensation (55,000) - (55,000)
Distributions greater than net income (21,644,834) - (21,644,834)
--------------------------------------------
254,569,705 - 254,569,705
--------------------------------------------
$322,870,574 $11,000,000 $333,870,574
=============================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 8-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: March 28, 1997 By: /s/ S. 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, Inc.
Form 8-K/A for Form 8-K dated October 31, 1996
Exhibit Number Exhibit Page Number
-------------- ------- -----------
23.3 Consent of Independent Auditors
23.4 Consent of Independent Auditors
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