UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDEMENT NO. 2
To
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 18, 2001
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 001-12875 54-1589139
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
306 East Main Street, Richmond, VA 23219
(Address of principal executive offices) (Zip Code)
(804) 643-1761
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
Cornerstone Realty Income Trust, Inc. (which is referred to below as
Cornerstone or as the "Company") hereby amends its current report filed on
April 26, 2001 pursuant to Item 7 of Form 8-K in connection with the Company's
Dividend Reinvestment and Share Purchase Plan.
Pro Forma Consolidated Statements of Operations (unaudited) for the
three months ended March 31, 2001 and year ended December 31, 2000
Notes to Pro Forma Consolidated Statement of Operations (unaudited)
Pro Forma Balance Sheet as of March 31, 2001 (unaudited)
Notes to Pro Forma Balance Sheet as of March 31, 2001 (unaudited)
Cornerstone Realty Income Trust, Inc.
Pro Forma Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, 2001 and Year Ended December 31, 2000
In April 2001, Cornerstone completed a tender offer for 12,472,723 of the
12,626,834 Series A Convertible Preferred Share outstanding. The Pro Forma
Consolidated Statement of Operations (unaudited) for the three months ended
March 31, 2001 and for the year ended December 31, 2000 are presented as if the
exchange of 12,472,723 Series A Convertible Preferred Shares and assumed
financing was completed at the beginning of each period presented. Under Option
1, 742,168 preferred shares were each exchanged for two common shares and under
Option 2, 11,730,555 preferred shares were each exchanged for one common share
and $12.25 in cash. The market price of the common shares was $10.84 per share.
The Pro Forma Consolidated Statement of Operations (unaudited) assumes
Cornerstone qualifies as a real estate investment trust, distributes at least
95% of its taxable income, and, therefore incurs no federal income tax liability
for the periods presented. In the opinion of management, all adjustments
necessary to reflect the effects of these transactions have been made.
The Pro Forma Consolidated Statement of Operations (unaudited) is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of Cornerstone would have been for the periods presented if the
transactions described above had occurred at the beginning of the periods
presented, nor does it purport to be indicative of the results of operations in
future periods. The Pro Forma Consolidated Statement of Operations (unaudited)
should be read in conjunction with, and is qualified in its entirety by, the
Cornerstone's respective historical financial statements and notes thereto.
For the three months ended March 31, 2001
Preferred Stock (a)
Historical Conversion Total
Statement of Pro Forma Consolidated
(Amounts in thousands, except per share data) Operations Adjustments Pro Forma
--------------------------------------- -----------------
Rental income $ 35,949 $ - $ 35,949
Rental expenses:
Property and maintenance 8,492 - 8,492
Taxes and insurance 4,192 - 4,192
Property management 624 - 624
General and administrative 524 - 524
Other depreciation 6 - 6
Depreciation of rental property 9,245 - 9,245
Other 13 - 13
--------------------------------------- -----------------
Total expenses 23,096 - 23,096
Income before interest income (expense) 12,853 - 12,853
Interest income 76 (51) (a) 25
Interest expense (4,950) (2,977) (b)
348 (c) (7,579)
--------------------------------------- -----------------
Net income 7,979 (2,680) 5,299
Distributions to preferred shareholders (7,467) 7,387 (d) (80)
Excess consideration paid over book value for
preferred stock redemption - 27,492 (e)
(27,492) (e) -
--------------------------------------- -----------------
Net income available to common shareholders $ 512 $ 4,707 $ 5,219
======================================= =================
Earnings per common share - basic and diluted 0.01 - 0.11
Weighted average number of common
shares outstanding 34,463 13,215 (f) 47,678
For the year ended December 31, 2000
Preferred Stock (a)
Historical Conversion Total
Statement of Pro Forma Consolidated
(Amounts in thousands, except per share data) Operations Adjustments Pro Forma
--------------------------------------- -----------------
Rental income $ 144,875 $ - $144,875
Rental expenses:
Property and maintenance 35,305 - 35,305
Taxes and insurance 16,436 - 16,436
Property management 2,685 - 2,685
General and administrative 1,749 - 1,749
Other depreciation 23 - 23
Depreciation of rental property 36,295 - 36,295
Other 42 - 42
--------------------------------------- -----------------
Total expenses 92,535 - 92,535
Income before interest income (expense) 52,340 - 52,340
Interest income 610 - 610
Interest expense (17,737) (12,437) (b)
1,770 (c) (28,404)
--------------------------------------- -----------------
Income before gains on sales of investments 35,213 (10,667) 24,546
Gains on sales of investments 22,930 - 22,930
--------------------------------------- -----------------
Net income 58,143 (10,667) 47,476
Distributions to preferred shareholders (30,305) 29,987 (d) (318)
Excess consideration paid over book value for
preferred stock redemption - 27,788 (e)
(27,788) (e) -
--------------------------------------- -----------------
Net income available to common shareholders $ 27,838 $ 19,320 $ 47,158
======================================= =================
Earnings per common share - basic and diluted $ 0.77 - $ 0.96
Weighted average number of common
shares outstanding 36,081 13,215 (f) 49,296
See accompanying notes.
Notes to Pro forma Consolidated Statement of Operations (unaudited) for the
three months ended March 31, 2001 and for the year ended December 31, 2000
(a) Represents the elimination of the interest income which resulted in the
investment of the excess proceeds of the March 2001 secured financing,
$75.5 million. This was done in advance to fund the cash portion of the
conversion transaction. Interest income is reduced as if the excess
proceeds were used in the conversion transaction on January 1, 2001 and not
invested at a rate of 4.5%.
(b) Represents the additional interest incurred to refect the cash borrowed to
effect the conversion transaction taking place at the beginning of the
periods presented. The Company funded the cash portion with $100 million on
its unsecured line of credit at a an interest rate of one month LIBOR plus
120 basis points (7.2%) and $75.5 million in secured financing at an
interest rate of 6.99%. Interest was calculated on $100 million of its
unsecured line of credit and $75.5 million of its secured financing.
(c) A portion of the proceeds from the Company's $75.5 million secured
financing was used to pay down the Company's unsecured line of credit
balance in the amount of $25.2 million. Interest expense is reduced as if
the pay down occurred at the beginning of the periods presented.
(c) Represents a reduction to interest expense which was incurred from the
March 2001 secured financing, $75.5 million. This is replaced with the
interest discussed in Note b above. In addition, a portion of the proceeds
from this secured financing was used to to pay down the Company's unsecured
line of credit balance in the amount of $25.2 million. Interest expense is
reduced as if the pay down occcured at the beginning of the periods
presented.
(d) Represents the elimination of the preferred dividends as 12,472,723
preferred shares were converted into common shares. After the conversion
transaction, 134,952 preferred shares remain outstanding.
(e) Represents excess consideration paid over book value for the preferred
shares, including $2.8 million of estimated transaction costs. This amount
is eliminated in the pro forma since it is nonrecurring and directly
attributable to the conversion transaction.
(f) Represents additional common shares to convert 12,472,723 preferred shares
for the three months ended March 31, 2001 and for the year ended December
31, 2000.
Pro Forma Consolidated Financial Statements (unaudited)
- --------------------------------------------------------------------------------
In April 2001, Cornerstone completed a tender offer for 12,472,723 of the
12,626,834 Series A Convertible Preferred Share outstanding. The Pro Forma
Consolidated Balance Sheet (unaudited) is prepared as if the tender offer was
completed and assumed financing occurred at the beginning of the period March
31, 2001. Under Option 1, 742,168 preferred shares were each exchanged for two
common shares and under Option 2, 11,730,555 preferred shares were each
exchanged for one common share and $12.25 in cash.
The Pro Forma Consolidated Balance Sheet unaudited is presented for comparative
purposes only and is not necessarily indicative of what the actual financial
position of Cornerstone would have been at March 31, 2001, nor does it purport
to represent the future financial position of Cornerstone. This Pro Forma
Consolidated Balance Sheet unaudited should be read in conjunction with, and is
qualified in its entirety by, Cornerstone's historical financial statements and
notes thereto.
- --------------------------------------------------------------------------------
Pro Forma Consolidated Balance Sheet as of March 31, 2001 (unaudited)
(In thousands)
Preferred Stock
Historical Conversion Total
Balance Pro Forma Consolidated
Sheet Adjustments Pro Forma
------------------------------------ ------------------
ASSETS
Investment in rental property
Land $ 127,485 - $ 127,485
Building and improvements 722,542 - 722,542
Furniture and fixtures 23,437 - 23,437
------------------------------------ ------------------
873,464 - 873,464
Less accumulated depreciation (100,800) - (100,800)
------------------------------------ ------------------
772,664 - 772,664
Cash and cash equivalents 49,748 $ 100,000 (c)
(143,699)(e)
(2,797)(d) 3,252
Prepaid expenses 1,819 - 1,819
Deferred financing costs, net 3,948 - 3,948
Other assets 11,531 - 11,531
------------------------------------ ------------------
67,046 (46,496) 20,550
------------------------------------ ------------------
$ 839,710 $ (46,496) $ 793,214
==================================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable-unsecured - $ 100,000 (c) $ 100,000
Notes payable-secured $ 320,758 - 320,758
Distributions payable 7,092 - 7,092
Accounts payable 610 - 610
Accrued expenses 3,195 - 3,195
Rents received in advance 251 - 251
Tenant security deposits 1,366 - 1,366
------------------------------------ ------------------
333,272 100,000 433,272
Shareholders' equity
Preferred stock 265,091 (262,254)(a) 2,837
Common stock (34,344 historical and
47,558,957 pro forma shares outstanding) 336,171 143,249 (a) 479,420
Deferred compensation (43) - (43)
Distributions greater than net income (94,781) (27,491)(b) (122,272)
------------------------------------ ------------------
506,438 (146,496) 359,942
------------------------------------ ------------------
$ 839,710 $ (46,496) $ 793,214
==================================== ==================
See accompanying notes.
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
(a) Represents the conversion of 12,472,723 of the 12,607,675 Series A
Convertible Preferred Shares outstanding on March 31, 2001. Under Option 2,
11,730,555 preferred shares were each exchanged for one common share and
$12.25 in cash and under Option 1, 742,168 preferred shares were each
exchanged for two common shares. The market price of the common share was
$10.84 per share.
(b) Represents the excess consideration paid over book value for the conversion
of the preferred shares, including an estimated $2.8 million of transaction
costs.
(c) Represents the $100 million unsecured financing used to fund the cash
portion of the conversion transaction.
(d) Represents the payment of $2.8 million in estimated transaction costs.
(e) Represents the cash payment made in exchange for each preferred shares
tendered.
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.
By: /s/ Glade M. Knight
---------------------------------------
Glade M. Knight, President
August 14, 2001