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, 1997
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
a. Independent Auditors' Report
(Barrington Parc Apartments)
Historical Statement of Income
and Direct Operating Expenses
(Barrington Parc Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(Barrington Parc Apartments)
b. Independent Auditors' Report
(St. Regis (formerly Sterling Arbor)
Apartments)
Historical Statement of Income
and Direct Operating Expenses
(St. Regis (formerly Sterling Arbor)
Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(St. Regis (former Sterling Arbor)
Apartments)
c. Independent Auditors' Report
(Remington Place (formerly Sterling Place)
Apartments)
Historical Statement of Income
and Direct Operating Expenses
(Remington Place (formerly Sterling Place)
Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(Remington Place (former Sterling Place)
Apartments)
d. Pro Forma Statement of Operations for the Nine Months ended
September 30, 1997 (unaudited)
Pro Forma Balance Sheet as of September 30,
1997 (unaudited)
Pro Forma Statement of Operations
for the year ended December 31, 1996
(unaudited)
e. Exhibit
23.1 Consent of Independent Auditors
(Barrington Parc Apartments)
23.2 Consent of Independent Auditors
(St. Regis (formerly Sterling Arbor)
Apartments)
23.3 Consent of Independent Auditors
(Remington Place (formerly Sterling
Place) Apartments)
The Company hereby amends Items 7.a., 7.b. ,7.c., 7.d. and 7.e. of its
Current Report on Form 8-K dated October 31, 1997 as follows:
ITEM 7.a.
[L.P. MARTIN & COMPANY LETTERHEAD]
4132 INNSLAKE DRIVE
GLEN ALLEN, VA 23060
PHONE: (804) 346-2626
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 Barrington Parc Apartments located in Norcross, Georgia for the
twelve month period ended September 30, 1997. This statement is the
responsibility of the management of Barrington Parc 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 2 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 Barrington Parc Apartments
(as defined above) for the twelve month period ended September 30, 1997, in
conformity with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
December 22, 1997
BARRINGTON PARC 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, 1997
INCOME
Rental and Other Income $1,245,041
----------
DIRECT OPERATING EXPENSES
Administrative and Other 129,568
Insurance 19,304
Repairs and Maintenance 176,294
Taxes, Property 95,010
Utilities 82,340
-----------
TOTAL DIRECT OPERATING EXPENSES 502,516
----------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 742,525
==========
See accompanying notes to the financial statement.
BARRINGTON PARC APARTMENTS
NOTES 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, 1997
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Barrington Parc Apartments is a 188 unit garden and townhouse style apartment
complex located on 18.03 acres in Norcross, Georgia. The assets comprising the
property were owned by an entity unaffiliated with Cornerstone Realty Income
Trust, Inc. during the financial statement period. Cornerstone Realty Income
Trust, Inc. subsequently purchased the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. 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, management
fees and entity expenses.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management of make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repair and Maintenance - Repairs and maintenance costs are expensed as incurred,
while significant improvements, renovations and replacements are capitalized.
Advertising - Advertising costs are expensed in the period incurred.
ITEM 7.b.
[L.P. MARTIN & COMPANY LETTERHEAD]
4132 INNSLAKE DRIVE
GLEN ALLEN, VA 23060
PHONE: (804) 346-2626
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 Sterling Arbor Apartments located in Raleigh, North Carolina for
the twelve month period ended September 30, 1997. This statement is the
responsibility of the management of Sterling Arbor 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 2 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 Sterling Arbor Apartments
(as defined above) for the twelve month period ended September 30, 1997, in
conformity with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
November 21, 1997
STERLING ARBOR APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
INCOME
Rental and Other Income $1,320,544
----------
DIRECT OPERATING EXPENSES
Administrative and Other 135,987
Insurance 8,031
Repairs and Maintenance 176,768
Taxes, Property 69,003
Utilities 40,229
-------
TOTAL DIRECT OPERATING EXPENSES 430,018
-------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $890,526
========
See accompanying notes to the financial statement.
STERLING ARBOR APARTMENTS
NOTES 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 SEPTEMBER 30, 1997
NOTE 1 - ORGANIZATION
Sterling Arbor Apartments is a 180 unit residential garden style apartment
complex located on 10.37 acres in Raleigh, North Carolina. The assets
comprising the property were owned by an entity unaffiliated with Cornerstone
Realty Income Trust, Inc. during the financial statement period. Cornerstone
Realty Income Trust, Inc. subsequently purchased the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. 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 and
management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvement, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
ITEM 7.c.
[L.P. MARTIN & COMPANY LETTERHEAD]
4132 INNSLAKE DRIVE
GLEN ALLEN, VA 23060
PHONE: (804) 346-2626
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 Sterling Place Apartments located in Raleigh, North Carolina for
the twelve month period ended September 30, 1997. This statement is the
responsibility of the management of Sterling Place 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 2 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 Sterling Place Apartments
(as defined above) for the twelve month period ended September 30, 1997, in
conformity with generally accepted accounting principles.
/s/ L.P. MARTIN & CO., P.C.
Richmond, Virginia
November 21, 1997
STERLING PLACE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
INCOME
Rental and Other Income $1,102,599
DIRECT OPERATING EXPENSES
Administrative and Other 102,018
Insurance 7,313
Repairs and Maintenance 175,569
Taxes, Property 65,293
Utilities 37,938
--------
TOTAL DIRECT OPERATING EXPENSES 388,131
--------
Operating income exclusive of items not
comparable to the proposed future operations
of the property $714,468
========
See accompanying notes to the financial statement.
STERLING PLACE APARTMENTS
NOTES 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, 1997
NOTE 1 - ORGANIZATION
Sterling Place Apartments is a 136 unit garden style apartment complex located
on 13.75 acres in Raleigh, North Carolina. The assets comprising the property
were owned by Sterling Apartments, LLC, an entity unaffiliated with Cornerstone
Realty Income Trust, Inc. during the financial statement period. Cornerstone
Realty Income Trust, Inc. subsequently purchased the property.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Expense Recognition - The accompanying statement of rental
operations has been prepared using the accrual method of accounting. 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 and
management fees.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Repairs and Maintenance - Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.
Advertising - Advertising costs are expensed in the period incurred.
ITEM 7.d.
Pro Forma Statement of Operations for the nine months ended September 30, 1997
(unaudited) The Unaudited Pro Forma Statement of Operations for the nine-month
period ended September 30, 1997 is presented as if 11 of the 13 Property
acquisitions during 1997 had occurred on January 1, 1997. The Unaudited Pro
Forma Statement of Operations assumes the Company qualifying as a REIT,
distributing at least 95% of its taxable income, and, therefore, incurred no
federal income tax liability for the period presented. In the opinion of
management, all adjustments necessary to reflect the effects of these
transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the period ended September 30, 1997 if the
acquisitions had occurred at the beginning of the period presented, nor does it
purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the respective historical financial
statements and notes thereto of the Company incorporated by reference into this
Prospectus.
<CAPTIONS>
Historical Westchase Paces Arbor
Statement of Pro Forma Pro Forma
Operations Adjustments Adjustments
-----------------------------------------------------------------
Date of Acquisitions - 1/15/97 3/1/97
Revenues from rental properties $50,231,191 $ 166,656 $128,993
Other Income $1,476,041
Rental expenses:
Utilities 4,473,112 12,070 3,888
Repairs and maintenance 5,219,198 25,811 19,399
Taxes and insurance 4,390,206 16,024 8,094
Property management 4,119,974 - -
Advertising 1,414,648 4,139 3,154
General and administrative 1,252,892 - -
Amortization and other depreciation 58,216 - -
Depreciation of rental property 10,791,653 - -
Other operating expenses 1,075,247 12,416 9,461
Management contract termination 413,752 - -
-----------------------------------------------------------
33,208,898 70,460 43,996
Income before interest income (expense) 18,498,334 96,196 84,997
Interest income 209,947 - -
Interest expense (4,840,391) - -
-----------------------------------------------------------
Net Income $13,867,890 $96,196 $84,997
Net income per share $0.44
=====
Wgt. avg. number of shares outstanding 31,672,928
===========
Paces Forest Ashley Run Carlyle
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
--------------------------------------------------------------
Date of Acquisitions 3/1/97 4/30/97 4/30/97
Revenues from rental properties $154,702 $916,820 $ 637,842
Other Income
Rental expenses:
Utilities 4,815 58,045 63,946
Repairs and maintenance 19,103 119,001 92,405
Taxes and insurance 9,108 69,240 46,970
Property management - - -
Advertising 3,298 17,373 12,343
General and administrative - - -
Amortization and other depreciation - - -
Depreciation of rental property - - -
Other operating expenses 9,894 52,118 37,029
Management contract termination - - -
-----------------------------------------------------------------
46,218 315,777 252,693
Income before interest income (expense) 108,484 601,043 385,149
Interest income - - -
Interest expense - - -
-----------------------------------------------------------------
Net Income $108,484 $601,043 $385,149
Net income per share
Wgt. avg. number of shares outstanding
Charleston Place Dunwoody Clarion
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
------------------------------------------------------------------
Date of Acquisitions 5/13/97 7/25/97 9/30/97
Revenues from rental properties 536,210 1,437,230 1,141,473
Other Income
Rental expenses:
Utilities 21,211 112,736 43,429
Repairs and maintenance 75,528 219,843 286,852
Taxes and insurance 34,987 144,766 59,664
Property management - - -
Advertising 18,267 29,839 28,075
General and administrative - - -
Amortization and other depreciation - - -
Depreciation of rental property - - -
Other operating expenses 54,801 89,517 84,226
Management contract termination - -
------------------------------------------------------------------
204,794 596,701 502,246
Income before interest income (expense) 331,416 840,529 639,227
Interest income - - -
Interest expense - - -
------------------------------------------------------------------
Net Income $331,416 $840,529 $639,227
Net income per share
St. Regis Remington Place Barrington Parc
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
------------------------------------------------------------------
Date of Acquisitions 10/31/97 10/31/97 10/31/97
Revenues from rental properties 990,408 826,949 933,781
Other Income
Rental expenses:
Utilities 30,172 28,454 61,755
Repairs and maintenance 132,576 131,677 132,221
Taxes and insurance 57,776 54,455 85,736
Property management - - -
Advertising 25,498 19,128 24,294
General and administrative - - -
Amortization and other depreciation - - -
Depreciation of rental property - - -
Other operating expenses 76,493 57,385 72,882
Management contract termination
------------------------------------------------------------------
322,515 291,099 376,888
Income before interest income (expense) 667,894 535,850 556,893
Interest income - - -
Interest expense - - -
-------------------------------------------------------------------
Net Income $667,894 $535,850 $556,893
Net income per share
Wgt. avg. number of shares outstanding
1997
Pro Forma Total
Adjustments Pro Forma
------------------- ---------------------
Date of Acquisitions -
Revenues from rental properties - $58,102,255
Other Income 1,476,041
Rental expenses:
Utilities - 4,913,633
Repairs and maintenance - 6,473,614
Taxes and insurance - 4,977,026
Property management - 4,119,974
Advertising - 1,600,056
General and administrative - 1,252,892
Amortization and other depreciation - 58,216
Depreciation of rental property 1,452,987 (A) 12,244,640
Other operating expenses - 1,631,469
Management contract termination - 413,752
------------------- ---------------------
1,452,987 37,685,272
Income before interest income (expense) (1,593,387) 21,893,024
Interest income - 209,947
Interest expense (2,265,592) (B) (7,105,983)
------------------- ---------------------
Net Income ($3,858,979) $14,996,989
Net income per share $0.44
===========
Wgt. avg. number of shares outstanding 2,722,059 (C) 34,394,987
================== ============
(A) Represents the depreciation expense of the properties acquired based on the
purchase price,excluding amounts allocated to land, of the properties for the
period of time not owned by the Company. The weighted average life of the
property depreciated was 27.5 years.
(B) Represents the interest expense for 8 of the 13 Properties for the period in
which the properties were not owned for the nine month period ended September
30, 1997, interest was computed based on interest rates under the Company's line
of credit in effect at the time of the respective acquisition.
(C) Represents additional common shares used to purchase Ashley Run, Carlyle,
Charleston Place and a portion of Dunwoody based upon purchase prices of
$18,000,000, $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
$15,200,000), respectively and common shares issued in April, 1997 with net
proceeds of $9.5875 per share to the Company.
Pro Forma Balance Sheet as of September 30, 1997 (unaudited) The Unaudited Pro
Forma Balance Sheet gives effect to the property acquisitions in October, 1997
as having occurred on September 30, 1997, using the Company's line of credit.
The Unaudited Pro Forma Balance Sheet is presented for comparative purposes only
and is not necessarily indicative of what the actual financial position of the
Company would have been at September 30, 1997, nor does it purport to represent
the future financial position of the Company. This Unaudited Pro Forma Balance
Sheet should be read in conjunction with, and is qualified in its entirety by,
the respective historical financial statements and notes thereto of the Company
incorporated by reference into this Prospectus.
Historical St. Regis Remington Place
Balance Pro Forma Pro Forma
Sheet Adjustments Adjustments
-------------------------------------------------------------------
ASSETS 10/31/97 10/31/97
Investment in Rental Property
Land $71,036,623 $ 2,156,000 1,422,000
Building 335,213,546 7,644,000 6,478,000
Property Improvements 41,001,548 -
Furniture 9,371,445 -
-------------------------------------------------------------
456,623,162 9,800,000 7,900,000
Less accumulated depreciation (23,166,762) - -
-------------------------------------------------------------
433,456,400 9,800,000 7,900,000
-
Cash and cash equivalents 4,449,850 - -
Prepaid expenses 360,794 - -
Other assets 7,025,480 - -
-------------------------------------------------------------
11,836,124 - -
-------------------------------------------------------------
$445,292,524 $9,800,000 $7,900,000
=============================================================
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Notes payable $123,290,147 9,800,000 7,900,000
Accounts payable 891,385 - -
Accrued expenses 3,190,719 - -
Rents received in advance 237,034 - -
Tenant security deposits 1,878,969 - -
-------------------------------------------------------------
129,488,254 9,800,000 7,900,000
Shareholders' equity
Common stock 346,306,618 - -
Deferred Compensation (38,503) - -
Distributions in excess of net income (30,463,845) - -
-------------------------------------------------------------
315,804,270 - -
------------------------------------------------------------
$445,292,524 $9,800,000 7,900,000
=============================================================
Barrington Parc
Pro Forma Total
Adjustments Pro Forma
------------------- ---------------
ASSETS 10/31/97
Investment in Rental Property
Land 1,570,000 $76,184,623
Building 6,280,000 355,615,546
Property Improvements - 41,001,548
Furniture - 9,371,445
----------------- ---------------
7,850,000 482,173,162
Less accumulated depreciation - (23,166,762)
----------------- ---------------
7,850,000 459,006,400
Cash and cash equivalents - 4,449,850
Prepaid expenses - 360,794
Other assets - 7,025,480
----------------- ---------------
- 11,836,124
----------------- ---------------
$7,850,000 $470,842,524
================= ===============
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Notes payable 7,850,000 $148,840,147
Accounts payable - 891,385
Accrued expenses - 3,190,719
Rents received in advance - 237,034
Tenant security deposits - 1,878,969
---------------- ---------------
7,850,000 155,038,254
Shareholders' equity
Common stock - 346,306,618
Deferred Compensation - (38,503)
Distributions in excess of net income - (30,463,845)
------------------- ---------------
- 315,804,270
------------------- ---------------
$7,850,000 $470,842,524
=================== ===============
Pro Forma Statement of Operations for the year ended December 31, 1996
(unaudited) The Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1996 is presented as if 20 of the 21 Property acquisitions during
1996 and 11 of the 13 Property acquisitions during 1997 had occurred on January
1, 1996. The Unaudited Pro Forma Statement of Operations assumes the Company
qualifying as a REIT, distributing at least 95% of its taxable income, and,
therefore, incurred no federal income tax liability for the period presented. In
the opinion of management, all adjustments necessary to reflect the effects of
these transactions have been made.
The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the year ended December 31, 1996 if the
acquisitions had occurred at the beginning of the period presented, nor does it
purport to be indicative of the results of operations in future periods. The
Unaudited Pro Forma Statement of Operations should be read in conjunction with,
and is qualified in its entirety by, the respective historical financial
statements and notes thereto of the Company incorporated by reference into this
Prospectus.
Historical
Statement of 1996 Pro Forma
Operations Acquisitions Adjustments
----------------------------------------------------------
Date of Acquisitions - -
Revenues from rental properties $40,352,955 $11,707,374 -
Rental expenses:
Utilities 3,870,541 816,694 -
Repairs and maintenance 4,203,180 1,883,845 -
Taxes and insurance 3,275,422 947,968 -
Property management fee 1,243,215 - 603,961 (A)
Property management 741,257 - -
Advertising 1,126,295 306,249 -
General and administrative 1,495,528 - 97,860 (B)
Amortization and other depreciation 47,133 - -
Depreciation of rental property 8,068,063 - 2,513,278 (C)
Other operating expenses 2,638,183 - -
Other 151,537 927,643 -
Management contract termination 16,526,012 - -
----------------------------------------------------------
43,386,366 4,882,399 3,215,099
Income before interest income (expense) (3,033,411) 6,824,975 (3,215,099)
Interest income 287,344 - -
Interest expense (1,423,782) - (2,991,838) (D)
----------------------------------------------------------
Net Income ($4,169,849) $6,824,975 ($6,206,937)
Net income per share ($0.21)
-----------
Wgt. avg. number of shares outstanding 20,210,432 4,693,325 (E)
=========== =============
Pro Forma Westchase Paces Arbor
Before 1997 Pro Forma Pro Forma
Acquisitions Adjustments Adjustments
-------------------------------------------------------------
Date of Acquisitions 1/15/97 3/1/97
Revenues from rental properties $52,060,329 $ 1,999,870 $773,960
Rental expenses:
Utilities 4,687,235 144,841 23,325
Repairs and maintenance 6,087,025 309,732 116,391
Taxes and insurance 4,223,390 192,289 48,563
Property management fee 1,847,176 - -
Property management 741,257 - -
Advertising 1,432,544 49,665 18,921
General and administrative 1,593,388 - -
Amortization and other depreciation 47,133 - -
Depreciation of rental property 10,581,341 - -
Other operating expenses 2,638,183 - -
Other 1,079,180 148,994 56,764
Management contract termination 16,526,012 - -
------------------------------------------------------------
51,483,864 845,521 263,964
Income before interest income (expense) 576,465 1,154,349 509,996
Interest income 287,344 - -
Interest expense (4,415,620) - -
------------------------------------------------------------
Net Income ($3,551,811) $1,154,349 $509,996
Net income per share ($0.14)
---------------------
Wgt. avg. number of shares outstanding 24,903,757
=====================
Paces Forest Ashley Run Carlyle
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
------------------------------------------------------------
Date of Acquisitions 3/1/97 4/30/97 4/30/97
Revenues from rental properties $928,214 $2,750,461 $ 1,913,527
Rental expenses:
Utilities 28,891 174,135 191,838
Repairs and maintenance 114,620 357,004 277,214
Taxes and insurance 54,649 207,720 140,909
Property management fee - - -
Property management - - -
Advertising 19,788 52,118 37,029
General and administrative - - -
Amortization and other depreciation - - -
Depreciation of rental property - - -
Other operating expenses - - -
Other 59,364 156,355 111,086
Management contract termination - - -
------------------------------------------------------------
277,312 947,332 758,076
Income before interest income (expense) 650,902 1,803,129 1,155,451
Interest income - - -
Interest expense - - -
------------------------------------------------------------
Net Income $650,902 $1,803,129 $1,155,451
Net income per share
Wgt. avg. number of shares outstanding
Charleston Place Dunwoody Clarion
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
--------------------------------------------------------------
Date of Acquisitions 5/13/97 7/25/97 9/30/97
Revenues from rental properties 1,429,893 2,463,823 1,521,964
Rental expenses:
Utilities 56,563 193,261 57,905
Repairs and maintenance 201,408 376,874 382,469
Taxes and insurance 93,299 248,171 79,552
Property management fee
Property management
Advertising 48,712 51,152 37,434
General and administrative
Amortization and other depreciation
Depreciation of rental property
Other operating expenses
Other 146,137 153,455 112,301
Management contract termination - -
----------------------------------------------------------
546,119 1,022,913 669,661
Income before interest income (expense) 883,774 1,440,910 852,303
Interest income - - -
Interest expense - - -
----------------------------------------------------------
Net Income $883,774 $1,440,910 $852,303
Net income per share
Wgt. avg. number of shares outstanding
St. Regis Remington Place Barrington Parc
Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments
------------------------------------------------------------------
Date of Acquisitions 10/31/97 10/31/97 10/31/97
Revenues from rental properties 1,320,544 1,102,599 1,245,041
Rental expenses:
Utilities 40,229 37,938 82,340
Repairs and maintenance 176,768 175,569 176,294
Taxes and insurance 77,034 72,606 114,314
Property management fee
Property management
Advertising 33,997 25,505 32,392
General and administrative
Amortization and other depreciation
Depreciation of rental property
Other operating expenses
Other 101,990 76,514 97,176
Management contract termination
--------------------------------------------------------------
430,018 388,132 502,516
Income before interest income (expense) 890,526 714,467 742,525
Interest income - - -
Interest expense - - -
--------------------------------------------------------------
Net Income $890,526 $714,467 $742,525
Net income per share
Wgt. avg. number of shares outstanding
Pro Forma Total
Adjustments Pro Forma
------------- ----------
Date of Acquisitions
Revenues from rental properties - $69,510,225
Rental expenses:
Utilities - 5,718,501
Repairs and maintenance - 8,751,368
Taxes and insurance - 5,552,496
Property management fee $630,803 (A) 2,477,979
Property management - 741,257
Advertising - 1,839,257
General and administrative - 1,593,388
Amortization and other depreciation - 47,133
Depreciation of rental property 3,203,343 (C) 13,784,684
Other operating expenses - 2,638,183
Other - 2,299,316
Management contract termination - 16,526,012
-------- ----------
3,834,146 61,969,574
Income before interest income (expense) (3,834,146) 7,540,651
Interest income - 287,344
Interest expense (4,514,726) (D) (8,930,346)
-------- ------------
Net Income ($8,348,872) ($1,102,351)
Net income per share ($0.04)
===========
Wgt. avg. number of shares outstanding 5,175,000 (F) 30,078,757
=========== ============
(A) Represents the property management fee of 5% of rental income and the
processing costs equal to $2.50 per apartment unit per month charged by the
external management company for the period of time not owned by the Company
until the management contract was terminated in September, 1996.
(B) Represents the advisory fee of .25% of accumulated capital contributions
under the "best efforts" offering for the period of time not owned by the
Company until the time the advisor contract was terminated in September, 1996.
(C) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, of the properties for the
period of time not owned by the Company. The weighted average life of the
property depreciated was 27.5 years.
(D) Represents the interest expense for the properties purchased with the
Company's unsecured line of credit or other unsecured financing. Total purchase
price of $68,586,918 for 1996 acquisitions (7 properties) and total purchase
price of $63,851,388 for 1997 acquisitions (8 properties) for the period in
which properties were not owned for the year ended December 31, 1996. Interest
was computed based on interest rates under the Company's line of credit in
effect at the time of the respective acquisition.
(E) Represents additional common shares used to purchase16 of the 21 properties
purchased during 1996 using the proceeds of the "best efforts" common stock
offering with net proceeds of $9.79 per share to the Company.
(F) Represents additional common shares used to purchase Ashley Run, Carlyle,
Charleston Place and a portion of Dunwoody based upon purchase prices of
$18,000,000, $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
$15,200,000), respectively and common shares issued in April, 1997 with net
proceeds of $9.5875 per share to the Company.
Pro Forma Statement of Operations for the year ended December 31, 1996
(unaudited)
The following schedule provides detail of 1996 acquisitions by property included
in the Pro Forma Statement of Operations for the year ended December 31, 1996.
Meadows West Eagle Ashley Park Arbor Trace Bridgetown
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustment Adjustments Adjustments Adjustments Adjustments
---------------------------------------------------------------------
Date of Acquisition 1/31/96 3/31/96 3/1/96 3/1/96 4/1/96
Property operations
Revenues from rental properties $ 90,006 $127,302 $284,403 $138,795 $186,114
Rental expenses:
Utilities 7,903 7,327 16,769 14,849 9,440
Repairs and maintenance 14,553 22,819 39,027 19,702 25,542
Taxes and insurance 5,273 9,776 27,496 10,819 14,262
Property management -- -- -- -- --
Advertising 1,484 3,066 3,213 3,215 5,455
General and administrative -- -- -- -- --
Amortization -- -- -- -- --
Depreciation of rental property -- -- -- -- --
Other 4,452 9,198 18,542 9,645 16,367
----------- ----------- ----------- ----------- -----------
33,665 52,186 105,047 58,230 71,066
----------- ----------- ----------- ----------- -----------
Income before interest income (expense) 56,341 75,116 179,356 80,565 115,048
Interest income -- -- -- -- --
Interest expense -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Income $ 56,341 $ 75,116 $179,356 $ 80,565 $115,048
----------- ----------- ----------- ----------- -----------
Trophy Chase Beacon Hill Summerwalk The Landing Meadowcreek
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments
--------------------------------------------------------------------
Date of Acquisition 4/1/96 5/1/96 5/1/96 5/1/96 5/31/96
Property operations
Revenues from rental properties $217,183 $684,622 $297,115 $418,247 $671,043
Rental expenses:
Utilities 21,899 48,373 23,038 30,473 32,330
Repairs and maintenance 39,180 68,173 59,973 68,918 90,083
Taxes and insurance 13,830 58,443 15,663 38,620 50,931
Property management -- -- -- -- --
Advertising 5,819 12,974 7,559 10,041 12,198
General and administrative -- -- -- -- --
Amortization -- -- -- -- --
Depreciation of rental property -- -- -- -- --
Other 17,458 38,922 22,676 30,122 36,593
----------- ----------- ----------- ----------- -----------
98,186 226,885 128,909 178,174 222,135
----------- ----------- ----------- ----------- -----------
Income before interest income (expense) 118,997 457,737 168,206 240,073 448,908
Interest income -- -- -- -- --
Interest expense -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Income $118,997 $457,737 $168,206 $240,073 $448,908
----------- ----------- ----------- ----------- -----------
Trolley Savannah Paces Glen Signature Hampton Glen
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments
-----------------------------------------------------------------
Date of Acquisition 6/26/96 7/1/96 7/19/96 8/1/96 8/1/96
Property operations
Revenues from rental properties $345,237 $1,038,285 $628,639 $509,713 $970,246
Rental expenses: --
Utilities 62,247 102,411 39,060 25,951 56,883
Repairs and maintenance 97,819 221,613 92,090 122,995 130,430
Taxes and insurance 41,086 49,192 46,834 47,162 62,436
Property management -- -- -- -- --
Advertising 10,293 23,992 14,827 9,500 24,998
General and administrative -- -- -- -- --
Amortization -- -- -- -- --
Depreciation of rental property -- -- -- -- --
Other 30,878 71,976 44,481 28,499 74,993
----------- ----------- ----------- ----------- -----------
242,323 469,184 237,292 234,107 349,740
----------- ----------- ----------- ----------- -----------
Income before interest income (expense) 102,914 569,101 391,347 275,606 620,506
Interest income -- -- -- -- --
Interest expense -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Income $102,914 $569,101 $391,347 $275,606 $620,506
----------- ----------- ----------- ----------- -----------
Heatherwood Parkside Greenbrier Deerfield Trolley West
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Adjustments Adjustments Adjustments Adjustments Adjustments
----------------------------------------------------------------------------
Date of Acquisition 9/1/96 9/30/96 10/1/96 11/20/96 12/1/96
Property operations
Revenues from rental properties $ 1,077,164 $ 653,152 $ 1,250,682 $ 1,489,997 $ 629,429
Rental expenses:
Utilities 45,391 34,669 70,957 62,040 104,684
Repairs and maintenance 155,415 94,280 205,550 190,567 125,116
Taxes and insurance 81,204 66,873 98,321 155,082 54,665
Property management -- -- -- -- --
Advertising 21,877 64,687 24,988 25,476 20,587
General and administrative -- -- -- -- --
Amortization -- -- -- -- --
Depreciation of rental property -- -- -- -- --
Other 65,629 194,059 74,964 76,430 61,759
----------- ----------- ----------- ----------- -----------
369,516 454,568 474,780 509,595 366,811
----------- ----------- ----------- ----------- -----------
Income before interest income (expense) 707,648 198,584 775,902 980,402 262,618
Interest income -- -- -- -- --
Interest expense -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Income $ 707,648 $ 198,584 $ 775,902 $ 980,402 $ 262,618
----------- ----------- ----------- ----------- -----------
1996
Acquisition
Adjustments
--------------
Date of Acquisition
Property operations
Revenues from rental properties $11,707,374
Rental expenses:
Utilities 816,694
Repairs and maintenance 1,883,845
Taxes and insurance 947,968
Property management --
Advertising 306,249
General and administrative --
Amortization --
Depreciation of rental property --
Other 927,643
----------
4,882,399
----------
Income before interest income (expense) 6,824,975
Interest income --
Interest expense --
----------
Net Income $ 6,824,975
----------
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: January 12, 1998 By:/s/ Stanley J. Olander, Jr.
---------------------------
Stanley J. Olander, Jr.
Chief Financial Officer
of Cornerstone Realty Income
Trust, Inc.
ITEM 7.e.
EXHIBIT INDEX
Cornerstone Realty Income Trust, Inc.
Form 8-K/A to Form 8-K dated October 31, 1997
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
(Barrington Parc Apartments)
23.2 Consent of Independent Auditors
(St. Regis (formerly Sterling Arbor)
Apartments)
23.3 Consent of Independent Auditors
(Remington Place (formerly Sterling Place)
Apartments)