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: June 4, 1998
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 1-12875 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
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Independent Auditors' Report
(The Timbers Apartments)
Historical Statement of Income
and Direct Operating Expenses
(The Timbers Apartments)
Note to Historical Statement of Income
and Direct Operating Expenses
(The Timbers Apartments)
b. Pro Forma Balance Sheet as of March 31, 1998 (unaudited)
Pro Forma Statement of Operations
for the quarter ended March 31, 1998
(unaudited)
Pro Forma Statement of Operations
for the year ended December 31, 1997
(unaudited)
c. Exhibit
23.1 Consent of Independent Auditors
(The Timbers Apartments)
The Company hereby amends Items 7.a, 7.b and 7.c, of its Current
Report on Form 8-K dated June 4, 1998 as follows:
ITEM 7.a.
[L.P. MARTIN & COMPANY LETTERHEAD]
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
(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 The Timbers Apartments located in Raleigh, North Carolina for the
twelve month period ended April 30, 1998. This statement is the responsibility
of the management of The Timbers 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 The Timbers Apartments (as
defined above) for the twelve month period ended April 30, 1998, in conformity
with generally accepted accounting principles.
/s/ L.P. MARTIN & CO PC
Richmond, Virginia
June 25, 1998
THE TIMBERS 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 APRIL 30, 1998
INCOME
Rental and Other Income $1,186,485
DIRECT OPERATING EXPENSES
Administrative and Other 177,379
Insurance 13,987
Repairs and Maintenance 184,194
Taxes, Property 62,073
Utilities 46,114
TOTAL DIRECT OPERATING EXPENSES 483,747
Operating income exclusive of items not
comparable to the proposed future operations
of the property $ 702,738
See accompanying notes to the financial statement.
THE TIMBERS 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 APRIL 30, 1998
NOTE 1 - ORGANIZATION
The Timbers Apartments is a 176 unit garden style apartment complex located on
approximately 17.00 acres in Raleigh, North Carolina. The assets comprising the
property were owned by Raleigh Timbers Associates Limited Partnership, an entity
unaffiliated with Cornerstone Realty Income Trust, Inc., during the financial
statement period. Cornerstone Realty Income Trust, Inc. purchased the property
on June 4, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
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, entity expenses and
management fees.
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.
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.b.
Pro Forma Consolidated Balance Sheet as of March 31, 1998 (unaudited)
The Unaudited Pro Forma Consolidated Balance Sheet is presented as if the
Company had owned the property included in the table below as of March 31, 1998,
using proceeds from a public offering completed in May 1998.
The Unaudited Pro Forma Consolidated 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 March 31, 1998, nor does it purport
to represent the future financial position of the Company. This Unaudited Pro
Forma Consolidated Balance Sheet should be read in conjunction with, and is
qualified in its entirety by, the Company's respective historical financial
statements and notes thereto.
Historical The Timbers
Balance Pro Forma Total
Sheet Adjustments Pro Forma
-------------------------------------
Date of acquisition 6/4/98
ASSETS
Investment in rental property
Land 80,954,947 1,944,000 82,898,947
Building and improvements 430,675,170 6,156,000 436,831,170
Furniture and fixtures 8,924,547 - 8,924,547
-------------------------------------
520,554,664 8,100,000 528,654,664
Less accumulated depreciation (32,170,014) - (32,170,014)
-------------------------------------
488,384,650 8,100,000 496,484,650
Cash and cash equivalents 3,761,706 - 3,761,706
Prepaid expenses 773,109 - 773,109
Other assets 9,002,693 - 9,002,693
-------------------------------------
13,537,508 - 13,537,508
-------------------------------------
501,922,158 8,100,000 510,022,158
=====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable 180,116,147 - 180,116,147
Accounts payable 2,180,939 - 2,180,939
Accrued expenses 3,092,794 - 3,092,794
Rents received in advance 220,920 - 220,920
Tenant security deposits 1,887,367 - 1,887,367
-------------------------------------
187,498,167 - 187,498,167
Shareholders' equity
Common stock 351,868,663 8,100,000 359,968,663
Deferred compensation (57,477) - (57,477)
Distributions greater than
net income (37,387,195) - (37,387,195)
-------------------------------------
314,423,991 8,100,000 322,523,991
-------------------------------------
501,922,158 8,100,000 510,022,158
=====================================
Pro Forma Consolidated Statement of Operations for the three months ended March
31, 1998 (unaudited)
The Unaudited Consolidated Pro Forma Statement of Operations for the three month
period ended March 31, 1998 is presented as if the 4 Property acquisitions made
during 1998 had occurred on January 1, 1998. The Unaudited Pro Forma
Consolidated 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 Consolidated 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 March 31, 1998 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 Consolidated Statement of Operations should be read in
conjunction with, and is qualified in its entirety by, the Company's respective
historical financial statements and notes thereto.
Stone Pinnacle Hampton
Historical Point Ridge Pointe The Timbers
Statement of Pro Forma Pro Forma Pro Forma Pro Forma
Operations Adjustments Adjustments Adjustments Adjustments
-----------------------------------------------------------------------
Date of Acquisitions - 1/15/98 3/31/98 3/31/98 6/4/98
Rental and other income $20,962,469 $ 56,094 $214,941 $495,061 296,621
Rental expenses:
Propety and maintenance 5,499,525 15,821 73,178 157,479 101,922
Taxes and insurance 1,523,849 4,154 15,411 54,874 19,015
Property management 512,319 - - - -
General and administrative 356,339 - - - -
Amortization and other depreciation 16,138 - - - -
Depreciation of rental property 4,683,384 - - - -
Other 406,959 - - - -
-----------------------------------------------------------------------
12,998,513 19,975 88,589 212,353 120,937
Income before interest income (expense) 7,963,956 36,119 126,352 282,708 175,684
Interest income 93,010 - - - -
Interest expense (2,820,918) - - - -
-----------------------------------------------------------------------
Net Income $5,236,048 $36,119 $126,352 $282,708 $175,684
=============
Net income per share - Basic $0.15
=============
Wgt. avg. number of shares outstanding 35,752,760
=============
1998
Pro Forma Total
Adjustments Pro Forma
----------- ---------------
Date of Acquisitions -
Rental and other income - $22,025,186
Rental expenses:
Propety and maintenance - 5,847,925
Taxes and insurance - 1,617,303
Property management - 512,319
General and administrative - 356,339
Amortization and other depreciation - 16,138
Depreciation of rental property 203,620 (A) 4,887,004
Other - 406,959
----------- ---------------
203,620 13,643,987
Income before interest income (expense) (203,620) 8,381,199
Interest income - 93,010
Interest expense (409,092)(B) (3,230,010)
----------- ---------------
Net Income ($612,712) $5,244,199
===============
Net income per share - Basic $0.15
===============
Wgt. avg. number of shares outstanding 185,950 (C) 35,938,710
=========== ===============
(A) Represents the depreciation expense of the properties acquired based on the
purchase price,excluding amounts allocated to land, 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 the 3 properties purchased using the
line of credit for the period in which the properties were not owned for the
three month period ended March 31, 1998, 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 Timbers based upon the
purchase price of $8,100,000 and common shares issued in May 1997 with net
proceeds per share of $10.89 to the Company.
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited)
The Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997 is presented as if 11 of the 13 Property acquisitions during
1997 and the 4 Property acquisitions during 1998 had occurred on January 1,
1997. The Unaudited Pro Forma Consolidated 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 Consolidated 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, 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 Consolidated Statement of Operations should be read in
conjunction with, and is qualified in its entirety by, the Company's respective
historical financial statements and notes thereto.
Historical Pro Forma Stone Point
Statement of 1997 Pro Forma Before 1998 Pro Forma
Operations Acquisitions Adjustments Acquisitions Adjustments
------------------------------------------ ----------------------------
Date of Acquisitions - - 1/15/98
Revenues from rental properties $71,970,624 $8,176,747 - $80,147,371 $ 1,346,251
Rental expenses:
Property and maintenance 19,494,692 2,524,622 - 22,019,314 379,698
Taxes and insurance 6,075,991 608,815 - 6,684,806 99,704
Property management 1,769,272 - - 1,769,272 -
General and administrative 1,351,667 - - 1,351,667 -
Amortization and other depreciation 56,075 - - 56,075 -
Depreciation of rental property 15,163,593 1,514,811 (A) 16,678,404 -
Other 1,200,669 - - 1,200,669
Management contract termination 402,907 - - 402,907 -
------------------------------------------ ----------------------------
45,514,866 3,133,437 1,514,811 50,163,114 479,402
Income before interest income (expense) 26,455,758 5,043,310 (1,514,811) 29,984,257 866,849
Interest income 331,114 - - 331,114 -
Interest expense (7,561,319) - (2,411,653) (B) (9,972,972) -
------------------------------------------ ----------------------------
Net Income $19,225,553 $5,043,310 ($3,926,464) $20,342,399 $866,849
=============
Net income per share $0.59 $0.59
===== =====
Wgt. avg. number of shares outstanding 32,617,823 2,041,544 (C) 34,659,367
============= ========== =============
Edgewood Hampton
Knoll Pointe The Timbers
Pro Forma Pro Forma Pro Forma Pro Forma Total
Adjustments Adjustments Adjustments Adjustments Pro Forma
----------------------------------------------------------- --------------
Date of Acquisitions 3/31/98 3/31/98 6/4/98 -
Revenues from rental properties $859,763 $1,980,245 $ 1,186,485 - $85,520,115
Rental expenses:
Property and maintenance 292,713 629,914 407,687 - 23,729,326
Taxes and insurance 61,642 219,495 76,060 - 7,141,707
Property management - - - - 1,769,272
General and administrative - - - - 1,351,667
Amortization and other depreciation - - - - 56,075
Depreciation of rental property - - $ 1,073,145 (A) 17,751,549
Other - - - - 1,200,669
Management contract termination - - - - 402,907
----------------------------------------------------------- --------------
354,355 849,409 483,747 1,073,145 53,403,172
Income before interest income (expense) 505,408 1,130,836 702,738 (1,073,145) 32,116,943
Interest income - - - - 331,114
Interest expense - - - (2,186,843)(B) (12,159,815)
----------------------------------------------------------- --------------
Net Income $505,408 $1,130,836 $702,738 ($3,259,988) $20,288,242
==============
Net income per share $0.57
=====
Wgt. avg. number of shares outstanding 743,802 (C) 35,403,169
==============
(A) Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, 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 the properties purchased with the
Company's unsecured line of credit or other unsecured financing. Total purchase
price of $63,851,388 for 1997 acquisitions (8 properties) and total purchase
price of $35,756,150 for 1998 acquisitions (3 properties) for the period in
which properties were not owned for the year ended December 31, 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
Dunwoody was $15,200,000), respectively and common shares issued in April, 1997
with net proceeds of $9.5875 per share to the Company, and purchase of Timbers
using the proceeds of a public offering issuing shares with net proceeds of
$10.89 per share.
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1997 (unaudited)
The following schedule provides detail of 1997 acquisitions by property included
in the Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1997.
Charleston Dunwoody
Westchase Paces Arbor Paces Forest Ashley Run Carlyle Club Place Springs
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma on
Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments Adjustmentsents
----------------------------------- ---------------------------------------------------
Date of Acquisition 1/15/97 3/1/97 3/1/97 4/30/97 4/30/97 5/13/97 7/25/97
Property operations
Revenues from rental properties $166,656 $128,993 $154,702 $916,820 $637,842 $536,210 $1,437,230
Rental expenses:
Property management 54,436 35,902 37,110 246,537 205,723 169,807 451,935
Taxes and insurance 16,024 8,094 9,108 69,240 46,970 34,987 144,766
General and administrative - - - - - - -
Amortization - - - - - - -
Depreciation of rental property - - - - - - -
Other - - - - - - -
------------------------------------------------------------------------------------
70,460 43,996 46,218 315,777 252,693 204,794 596,701
Income before interest income (expense) 96,196 84,997 108,484 601,043 385,149 331,416 840,529
Interest income - - - - - - -
Interest expense - - - - - - -
------------------------------------------------------------------------------------
Net Income $96,196 $84,997 $108,484 $601,043 $385,149 $331,416 $840,529
====================================================================================
Clarion Remington
Crossing St. Regis Place Stone Brooke 1997
Pro Forma Pro Forma Pro Forma Pro Forma Acquisition
Adjustments Adjustments Adjustments Adjustments Adjustments
------------------------------------------------ -----------
Date of Acquisition 9/30/97 10/31/97 10/31/97 10/31/97
Property operations
Revenues from rental properties $1,141,473 $1,100,453 $918,833 $1,037,535 $8,176,747
Rental expenses: -
Property management 442,582 294,153 262,938 323,499 2,524,622
Taxes and insurance 59,664 64,195 60,505 95,262 608,815
General and administrative - - - - -
Amortization - - - - -
Depreciation of rental
property - - - - -
Other - - - - -
--------------------------------------------------------
502,246 358,348 323,443 418,761 3,133,437
Income before interest income (expense)639,227 742,105 595,390 618,774 5,043,310
Interest income - - - - -
Interest expense - - - - -
--------------------------------------------------------
Net Income 639,227 $742,105 $595,390 $618,774 $5,043,310
========================================================
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: August 13, 1998 By:/s/ Stanley J. Olander, Jr.
---------------------------------
Stanley J. Olander, Jr.
Chief Financial Officer
of Cornerstone Realty Income
Trust, Inc.
ITEM 7.c.
EXHIBIT INDEX
Cornerstone Realty Income Trust, Inc.
Form 8-K/A to Form 8-K dated June 4, 1998
Exhibit Number Exhibit Page Number
23.1 Consent of Independent Auditors
(The Timbers Apartments)