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: 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
Index
Item 2. Acquisition or Disposition of Assets
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 Statement of Operations for
the Year ended December 31, 1997
(unaudited)
Pro Forma Statement of Operations for
the Three Months Ended March 31, 1998
(unaudited)
Pro Forma Balance Sheet as of March 31, 1998
(unaudited)
c. Exhibits
10.1 Purchase Contract for The Timbers Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.
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Item 2. Acquisition or Disposition of Assets
THE TIMBERS APARTMENTS
Raleigh, North Carolina
On June 4, 1998, CRIT-NC, LLC (together with its parent, Cornerstone Realty
Income Trust, Inc., the "Company") purchased The Timbers Apartments, a 176-unit
apartment complex having an address of 5900 Timbercreek Lane, Raleigh (Wake
County), North Carolina (the "Property").
The seller, Raleigh Timbers Associates, Limited, was unaffiliated with the
Company. The purchase price was $8,100,000, which the Company paid entirely from
cash on hand. Title to the Property was conveyed to the Company by limited
warranty deed.
Location. The Property is located on Timbercreek Lane just off Highway 70,
a major four-lane, east-west connector, in the northwest section of Raleigh, at
the intersection of Millbrook Road and Pleasant Valley Road.
The following information is based in part on information provided by the
Raleigh Chamber of Commerce. The Raleigh/Durham Metropolitan Statistical Area is
also known as the Research Triangle, and contains the cities of Raleigh, Durham
and Chapel Hill. It is the second largest metropolitan area in North Carolina,
after the Charlotte metropolitan area.
Raleigh is the capital of North Carolina and is the fastest growing major
city in North Carolina. The population of the city was approximately 150,000 in
1980 and estimated to be approximately 208,000 in 1993.
Research Triangle Park is the largest planned research and development
industrial park in the United States. It was founded in 1958 as a cooperative
effort among Duke University, the University of North Carolina and North
Carolina State University. The Park comprises approximately 6,800 acres and
contains over 14 million square feet of industrial space. Among the Park's
approximately 60 research-oriented firms are IBM, Glaxo and Northern Telecom.
Raleigh's economy generally is a blend of industry, education and
government. The city's employment stability, strategic location, favorable labor
climate, pro-business attitude and pool of educated workers have helped the area
attract many major businesses and industries. Major industries in the area
include electronics, electrical equipment and machinery, metal working and food
processing.
The Research Triangle is home to Duke University, the University of North
Carolina at Chapel Hill and North Carolina State University.
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The immediate area surrounding the Property consists of other multi-family
housing, commercial and retail development and single-family housing. The
Property is close to the Townridge Shopping Center, the Pleasant Valley
Promenade Shopping Center and the Crabtree Valley Mall. There are numerous
restaurants, schools and churches nearby. The Property is convenient to
Raleigh's major employment centers, including the Research Triangle, Cary Towne
Center and the downtown central business district. The Property is an
approximately 15-minute drive from the Raleigh/Durham International Airport.
Description of the Property. The Property consists of 176 garden-style
apartments located in 12 two-story buildings on approximately 17 acres of land.
The Property was constructed in 1983.
The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company has budgeted
approximately $220,000 for repairs and improvements, including clubhouse
renovations, painting and repairs to the retaining walls.
The Property offers many different unit types. The unit mix and rents being
charged new tenants as of June 1998 are as follows:
Approximate Interior Monthly
Quantity Type Square Footage Rental
40 One bedroom, one bathroom 617 $530
(window seat)
20 One bedroom, one bathroom 617 545
(bay window, up)
20 One bedroom, one bathroom 617 550
(bay window, fireplace, up)
4 One bedroom, one bathroom 766 640
(window seat, fireplace, deluxe)
4 One bedroom, one bathroom 766 650
(bay window, fireplace, deluxe, up)
20 Two bedrooms, two bathrooms 847 665
(bay window, up)
4 Two bedrooms, two bathrooms 847 670
(window seat)
36 Two bedrooms, two bathrooms 847 675
(window seat, w/d connections)
20 Two bedrooms, two bathrooms 847 685
(bay window, fireplace, w/d connections, up)
4 Two bedrooms, two bathrooms 984 755
(window seat, fireplace, w/d connections, deluxe)
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4 Two bedrooms, two bathrooms 984 765
(bay window, fireplace, w/d connections, deluxe, up)
The apartments provide a combined total of approximately 131,000 square
feet of net rentable area.
Leases at the Property are for terms of one year or less. Average rental
rates for the past five years have generally increased. As an example, a
two-bedroom, two-bathroom apartment unit (847 square feet) rented for $435 in
1993, $485 in 1994, $535 in 1995, $555 in 1996, and $605 in 1997. The average
effective annual rental per square foot at the Property for 1993, 1994, 1995,
1996 and 1997 was $6.45, $7.19, $7.94, $8.23 and $8.97, respectively.
The buildings are wood frame construction on concrete slabs. The exteriors
are brick veneer and cedar shake siding and the roofs are pitched and covered
with composition shingles.
The Property has an outdoor swimming pool with a fountain and water
volleyball, a lighted tennis court, and a laundry room. There is also a
clubhouse that includes a kitchen, entertainment area and a leasing/management
office. There is ample paved parking.
Apartment units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and baths. Each apartment unit has a cable television
hook-up and individually controlled heating and air conditioning unit. Each unit
type is available with a window seat, bay window and a fireplace, and certain
two-bedroom units are available with washer/dryer connections. All of the
downstairs units (88 units) include window seats and all of the upstairs units
(88 units) include bay windows. There are 56 units that have a fireplace and 64
units that have washer/dryer connections. All of the units have walk-in closets,
a pantry, a linen closet, mini and vertical blinds, a deck or patio and outside
storage. Each kitchen is equipped with a refrigerator/freezer, electric range
and oven, dishwasher and garbage disposal. The owner of the Property supplies
cold water, sewer service and trash removal. The tenants pay for their
electricity usage, which includes heat, air conditioning, cooking, hot water and
lights.
There are at least six apartment properties in the area that compete with
the Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Company estimates that occupancy in nearby competing projects averaged
approximately 94% on May 31, 1998.
According to information provided by the seller, physical occupancy at the
Property averaged approximately 95% in 1993, 96% in 1994, 95% in 1995, 93% in
1996 and 94% in 1997. On May 28, 1998, the Property was 93% occupied. The
tenants are a mix of white-collar and blue-collar workers, students and retired
persons.
The 1997 real estate taxes applicable to the Property were calculated as
assessed value of $5,067,990 multiplied by a tax rate of $1.1675, for total real
estate taxes of $59,168.78. Wake County also imposed a recycling fee of $16.50
per apartment unit, for a total of $2,904. The
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basis of the depreciable residential real property portion of the Property
(currently estimated at about $ 6,161,027) 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 a modified accelerated cost recovery system of
the Internal Revenue Code of 1986, as amended.
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 Raleigh, 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. In particular, the Company believes that the
presence of Research Triangle Park and three major universities in the area, and
associated businesses and activities, will have a positive impact on the area
for the indefinite future.
2. The Company already owns several other apartment complexes in Raleigh
and believes that it is knowledgeable and experienced regarding the Raleigh
apartment rental market.
3. Based upon an engineering report and its own inspections, the Company
believes that the Property is in very good condition.
4. The Property is conveniently proximate to major employers and shopping.
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 indicative of future operating results.
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ITEM 7.a.*
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* To be filed by amendment. It is impracticable to include herein the required
financial statements for the Property. 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.
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ITEM 7.b.*
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* 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: June 17, 1998 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, Inc.
Form 8-K dated June 4, 1998
Exhibit Number Exhibit
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10.1 Purchase Contract for
The Timbers Apartments
23.1 Consent of Independent Auditors*
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* To be filed by amendment.