SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 16, 2000
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
INDEX
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Item 2. Acquisition or Disposition of Assets
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
a. Independent Auditors' Report (The Enclave at
The Meadows Apartments)*
Historical Statement of Income and Direct
Operating Expenses (The Enclave at The
Meadows Apartments)*
Note to Historical Statement of Income and
Direct Operating Expenses (The Enclave at
The Meadows Apartments)*
Independent Auditors' Report (Greystone
Crossing Apartments)*
Historical Statement of Income and Direct
Operating Expenses (Greystone Crossing
Apartments)*
Note to Historical Statement of Income and
Direct Operating Expenses (Greystone
Crossing Apartments)*
b. Pro Forma Statement of Operations for the
Twelve Months ended December 31, 1997
(unaudited)*
Pro Forma Statement of Operations for the
Three Months ended March 31, 2000
(unaudited)*
Pro Forma Balance Sheet as of
March 31, 2000 (unaudited)*
c. Exhibits
10.1 Purchase Contract, as amended, for
The Enclave at The Meadows Apartments
10.2 Purchase Contract, as amended, for
Greystone Crossing Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
- -----------------------
* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
THE ENCLAVE AT THE MEADOWS APARTMENTS
Asheville, North Carolina
On March 16, 2000, Cornerstone Realty Income Trust, Inc. (together with
its direct and indirect subsidiaries, the "Company") purchased The Enclave at
the Meadows Apartments, a 168-unit apartment complex having an address of 99
Ascension Drive, Asheville, North Carolina (the "Property"). The Company
purchased the Property from a seller (Meridia/New Leicester, LLC, a South
Carolina limited liability company) which was not affiliated with the Company.
The purchase price was $8,786,000, which was financed as a "Section 1031
Tax-Free Exchange" using a portion of the proceeds from the Company's sale of
properties that occurred on March 8, 2000.
Location. The following information is based in part upon information
provided by the Asheville Chamber of Commerce.
The Property is located in North Carolina, in the City of Asheville and
Buncombe County, which collectively have a population of approximately 250,000.
Asheville is located approximately 115 miles from Charlotte, North Carolina, and
65 miles from Greenville, South Carolina.
The City of Asheville and Buncombe County are represented by a number
of nationally recognized companies and organizations in the health care,
education and manufacturing sectors. Some of the major employers in the area
include Champion International (a manufacturer of paper and paperboard), GE
Lighting Systems, Westinghouse Electric and ITT Automotive. In addition,
Memorial Mission Hospital and St. Joseph Hospital are major area employers.
The major highways serving the area are Interstates 40, 26 and 240. The
Asheville Regional Airport is centrally located within the metropolitan area and
is approximately 20 miles from the Property. Also, Asheville is home to the
University of North Carolina at Asheville, with an enrollment of approximately
3,200 students.
The Property is located on Ascension Drive, just off Leicester Highway
in west Asheville (Buncombe County), North Carolina. The Property is located
adjacent to The Meadows, which is also owned by the Company. The immediate area
surrounding the Property consists of other multi-family and single-family
housing and commercial and retail development. The Property is convenient to
major shopping areas, and is readily accessible from Interstates 40 and 240. The
downtown area and the Asheville airport are also easily accessible from the
Property.
Description of the Property. The Property consists of 168 garden-style
apartment units in seven three-story buildings on approximately 17.3 acres of
land. Construction on the property was completed in 1999.
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The Property offers three unit types. The unit mix and rents currently
being charged new tenants as of April, 2000 are as follows:
Approximately Interior Square Monthly
Quantity Type Footage Rental
-------- ---- ------- ------
60 One bedroom, one bathroom 816 $595
96 Two bedrooms, two bathrooms 1,075 700
12 Three bedrooms, two bathrooms 1,292 825
The apartments provide a combined total of approximately 168,000 square
feet of net rentable area.
The Property has an outdoor swimming pool, a fitness center, a
clubhouse, a laundry facility, a car wash area and outdoor grills. There are
approximately 320 parking spaces, including 10 spaces that are
handicapped-designed.
Leases at the Property are for terms of one year or less. Since the
property is newly-constructed and newly-leased, there is no rental history.
The buildings are wood-frame construction on concrete slab. Exteriors
are vinyl siding with pitched roofs covered with asphalt shingles.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchens and baths. Each apartment unit has a cable
television hook-up and an individually-controlled heating and air conditioning
unit. Each apartment unit also has mini-blinds, a ceiling fan in the living
room, large walk-in closets and a patio or balcony. Each kitchen has a
refrigerator/freezer, electric range and oven, dishwasher and garbage disposal.
Selected apartment units have a fireplace, vaulted ceilings and washer/dryer
connections. The owner of the Property supplies cold water, sewer services and
trash removal. The tenants pay for their electric services, which includes
cooking, heating, air conditioning, hot water and lights.
There are at least 10 apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects averaged
approximately 93% at April 10, 2000.
The residents of the Property are a mix of white-collar and blue-collar
workers, students and retired persons. On March 16, 2000, the Property was 88%
occupied.
4
The 2000 tax assessment for the Property is not yet available. However,
the 1999 real estate tax rate applicable to the Property was $1.15 per $100 of
assessed value, and the real estate taxes for 1999 were calculated to be
$104,759. The assessed value was $9,109,500. The basis of the depreciable
residential real property portion of the Property (currently estimated at about
$8,439,486) will be depreciated over 27.5 years on a straight-line basis. The
basis of the personal property portion will be depreciated in accordance with
the modified accelerated cost recovery system of the Code. Amounts to be spent
by the Company on repairs and improvements will be treated for tax purposes as
permitted by the Code based on the nature of the expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition by the Company included the following:
1. The Company believes that the Asheville, North Carolina area will
enjoy continued economic development and steady population increase, and that
such development and increase will support stable occupancy rates and reasonable
increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Company believes that the Property is generally in sound condition.
3. The Property is conveniently located and proximate to major
employers and shopping.
4. The Company is familiar with the Asheville, North Carolina rental
market. The Company owns other apartment complexes in the area, including
particularly The Meadows, which is located adjacent to the Property. The Company
believes that the location may offer the Company operational efficiencies and
competitive advantages.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
5
GREYSTONE CROSSING APARTMENTS
Charlotte, North Carolina
On May 10, 2000, the Company purchased the Greystone Crossing
Apartments (the "Property"), consisting of 408 apartments units located at 9610
Stoney Glen Drive, Charlotte, North Carolina.
The sellers, Greystone Crossing Apartments, LLC, and GCA-II, LLC, were
unaffiliated with the Company. The purchase price was $26,800,000, which was
financed as a "Section 1031 Tax-Free Exchange" using a portion of the proceeds
of the Company's sale of properties that occurred on March 8, 2000. The Company
paid $20,800,000 at closing, and the balance of $6,000,000 was paid into escrow.
The escrow is to be released to the sellers when certain "punch list"
construction items have been completed and Phase II of the Property has achieved
85% occupancy. The escrowed funds are in an interest-bearing account, and the
interest accrues to the benefit of the Company.
Location. The following information is based in part upon information
provided by the Charlotte Chamber of Commerce.
Based in part upon its fast rate of growth and a diversified economy,
Charlotte has in recent years come to national attention as an attractive
location for business and residential growth. According to the August 1995, Site
Selection magazine, Charlotte"s corporate popularity ranked second nationally
only to Dallas during the period between 1990 and 1994, being the site of 474
significant new and expanded facilities.
Charlotte has developed into a major financial, distribution and
transportation center, with a metropolitan population of approximately 1.3
million and a population of approximately 5.6 million within a 100-mile radius.
Charlotte"s growth is also attributable to its favorable year-round climate, a
moderate cost of living, excellent quality of life, educated work force,
pro-business political climate, extensive transportation network, and strategic
geographic location.
According to the Charlotte Chamber of Commerce, during the first six
months of 1995, approximately 530 firms announced new or expanded businesses
which were expected to provide approximately 6,200 new jobs in the area.
Charlotte is home to major offices of more than 225 of the Fortune 500
industrial firms and approximately 300 of the Fortune 500 service firms.
Charlotte is the recently-announced location for the world headquarters of
Sea-Land, the nation's largest container shipping company.
Charlotte is the leading financial center of the Southeast, serving as
corporate headquarters to NationsBank and First Union. The growth of Charlotte"s
banking and financial communities has had a positive effect on the growth of its
supporting industries, such as insurance, accounting, legal services, and real
estate. Another recent aspect of Charlotte's development is as the location of
professional basketball and football franchises known as the Charlotte Hornets
and the Carolina Panthers, respectively. Also, the newly-constructed NationsBank
Corporate Center includes a 2,000-seat performing arts center.
6
The city of Charlotte is located near the border of North Carolina and
South Carolina within Mecklenburg County. It is located at the intersection of
Interstates 77 and 85, the major north/south and east/west thoroughfares in the
region, which provide convenient access to all other regional areas.
The Property is located in Mecklenburg County, in the southwestern
portion of the Charlotte metropolitan area. The immediate neighborhood
surrounding the Property consists of other multi-family and single-family
housing, and commercial and retail development. The southwest Charlotte market
is home to Charlotte's largest industrial employment center and the second
largest office submarket. The Property is convenient to major shopping areas and
is readily accessible from Interstate 85 and the 485 Beltway. The Property is
approximately 10 miles from downtown Charlotte and approximately 15 miles from
the Charlotte airport.
Description of the Property. The Property was built in two phases.
Phase I was completed in 1998 and Phase II is being completed in 2000. Phase I
consists of 300 garden-style apartment units in 15 three-story buildings on
approximately 19 acres of land. Phase II consists of 108 garden-style apartment
units in five three-story buildings on approximately 8.5 acres of land.
The unit mix and rents currently being charged new tenants in Phase I
are as follows.
Approximate Interior
Quantity Type Square Footage Monthly Rental
-------- ---- -------------- --------------
60 One bedroom, one bathroom 695 $585
60 One bedroom, one bathroom 744 620
60 Two bedrooms, two bathrooms 883 720
60 Two bedrooms, two bathrooms 1,108 800
60 Three bedrooms, two bathrooms 1,356 890
The units in Phase I provide a combined total of approximately 287,000
square feet of net rentable area. There are approximately 600 paved parking
spaces, including 30 spaces for disabled tenants.
7
The unit mix and rents currently being charged new tenants in Phase II
are as follows:
Approximate Interior
Quantity Type Square Footage Monthly Rental
-------- ---- -------------- --------------
48 One bedroom, one bathroom 730 $620
36 Two bedrooms, two bathrooms 937 745
12 Two bedrooms, two bathrooms 1,140 825
12 Three bedrooms, two bathrooms 1,448 928
The units in Phase II provide for a combined total of approximately
100,000 square feet of net rentable area. There are approximately 216 paved
parking spaces, including 10 spaces for disabled tenants.
The Property has two outdoor swimming pools, a pool cabana, fitness
center, clubhouse, laundry facility, sauna and steam rooms, a volleyball court
and a children's playground.
As indicated above, Phase I was completed in 1998 and Phase II is now
being completed. The Company has not currently budgeted any amounts for planned
improvements, exclusive of the $6 million escrowed under the Real Estate
Purchase Contract for the completion of "punch list" construction items on Phase
II.
Leases at the Property are for terms of 15 months or less. Rental rates
in Phase I have generally increased since initial occupancy. As an example, a
two-bedroom, two-bathroom (883 square feet) apartment rented for $685 in 1998,
$700 in 1999 and $720 in 2000.
The buildings are wood-frame construction on concrete slabs with
pitched roofs covered with asphalt shingles. The exteriors are vinyl siding.
All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
apartment unit includes miniblinds, optional alarm system, exterior storage,
patio or balcony and washer/dryer connections. Each kitchen is equipped with a
refrigerator/freezer, electric range and oven, built-in microwave, dishwasher
and garbage disposal. Select apartment units include a fireplace and vaulted
ceilings. The owner of the Property supplies cold water, sewer service and trash
removal. The tenants are responsible for electricity, which includes heating,
air conditioning, hot water, cooking and lights.
There are at least seven apartment properties in the area that compete
with the Property. The other properties that will compete with the Property
offer similar amenities and generally have rents that are lower than those of
the Property. Based on a recent telephone survey, the Company estimates that
occupancy in nearby competing projects now averages approximately 94%.
8
According to information provided by the sellers, physical occupancy at
Phase I averaged approximately 90% during 1999. On April 24, 2000, Phase I
physical occupancy was approximately 96% and Phase II physical occupancy (which
is still undergoing lease-up) was approximately 35%. The average age of the
tenants is approximately 27 years and the majority of the tenants are
professionals.
The following table sets forth estimated 2000 real estate tax
information for the Property.
Phase I
Jurisdiction Assessed Value Tax Rate Tax
------------ -------------- -------- ---
Mecklenburg County $14,065,420 $ 0.0073 $102,681
Town of Mint Hill 14,065,420 0.00235 33,054
TOTAL TAX: $ 135,735
=========
Phase II
Jurisdiction Assessed Value Tax Rate Tax
------------ -------------- -------- ---
Mecklenburg County $551,400 $0.0073 $4,025
Town of Mint Hill 551,400 0.00235 1,296
TOTAL TAX: $5,321
======
The basis of the depreciable residential real property portion of the
Property (currently estimated at about 25,471,666) will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Code. Amounts to be spent by the Company on repairs and improvements will
be treated for tax purposes as permitted by the Code based on the nature of the
expenditures.
The Company believes that the Property is and will continue to be
adequately covered by property and liability insurance.
Material Factors Considered in Assessing the Property. The factors
considered by the Company to be relevant in evaluating the Property for
acquisition included the following:
1. The Company believes that the Charlotte, North Carolina area will
experience continued strong economic development and steady population increase,
and that such development and increase will support stable occupancy rates and
reasonable increases in rents at the Property.
2. The Property is newly constructed and is in excellent physical
condition with superior amenities. Management believes that these factors will
permit the Property to compete very effectively for tenants.
3. The Property is conveniently located and proximate to major
employers and shopping.
4. The Company is very familiar with the Charlotte rental market. The
Company already owns other apartment complexes in the Charlotte area, which may
provide certain economies and efficiency in operation.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report (including amendments hereto) not to be
necessarily indicative of future operating results.
9
ITEM 7.a.*
* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Properties. The required financial statements will
be filed as an amendment to this report as soon as possible, but in no event
more than 60 days after the date of filing of this report.
10
ITEM 7.b.*
* To be filed by amendment. It is impracticable to include herein the required
pro forma financial information. The required pro forma financial information
will be filed as an amendment to this report as soon as possible, but in no
event more than 60 days after the date of filing of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
Date: May 24, 2000 By:/s/ Stanley J. Olander, Jr.
---------------------------
Stanley J. Olander, Jr.,
Chief Financial Officer of
Cornerstone Realty Income Trust, Inc.
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EXHIBIT INDEX
Cornerstone Realty Income Trust
Form 8-K dated March 16, 2000
Exhibit Number Exhibit
- -------------- -------
10.1 Purchase Contract, as amended, for
The Enclave at The Meadows
Apartments
10.2 Purchase Contract, as amended, for
Greystone Crossing Apartments
23.1 Consent of Independent Auditors*
23.2 Consent of Independent Auditors*
* To be filed by amendment.
13