-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KkZINFwxzXNCVGdWJi+emVFcXLW0+WPetQ7fF9A5KjpcdNMA3Pf28SwrEwOPJfJz ttuOMr0wwD3r4c1lY5BHJw== 0000950134-97-007351.txt : 19971015 0000950134-97-007351.hdr.sgml : 19971015 ACCESSION NUMBER: 0000950134-97-007351 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970818 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL MORTGAGE & EQUITY TRUST CENTRAL INDEX KEY: 0000319416 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942738844 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-10503 FILM NUMBER: 97694867 BUSINESS ADDRESS: STREET 1: 10670 N CENTRAL EXPWY STE 300 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2146924700 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED CAPITAL SPECIAL TRUST DATE OF NAME CHANGE: 19901122 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 August 18, 1997 ------------------------------------------------ Date of Report (Date of Earliest Event Reported) CONTINENTAL MORTGAGE AND EQUITY TRUST ------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) California 0-10503 94-2738844 - -------------------------------------------------------------------------------- (State of Incorporation) (Commission (IRS Employer File No.) Identification No.) 10670 North Central Expressway, Suite 300, Dallas, TX 75231 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (214) 692-4700 -------------- Not Applicable ------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) 1 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On August 18, 1997, Continental Mortgage and Equity Trust (the "Trust") purchased the Eagle Rock Apartments, an apartment complex in Los Angeles, California, for $4.4 million (1.7% of the Trust's assets at December 31, 1996). The seller of the property was Eagle Rock Corporation, a California corporation. The property was constructed in 1984 and consists of 99 units which were 97% occupied at the date of acquisition. The Trust paid $1.1 million in cash with the seller providing purchase money financing for the remaining $3.3 million of the purchase price. The purchase of this property, when aggregated with other property purchases the Trust has made in 1997 exceed 10% of the Trust's assets at December 31, 1996. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Pro forma financial information: Pro forma statements of operations are presented for the year ended December 31, 1996 and the six months ended June 30, 1997. A pro forma balance sheet as of June 30, 1997 is also presented. A summary of the pro forma transactions follows: In August 1997, the Trust purchased Eagle Rock Apartments, a 99 unit apartment complex in Los Angeles, California, for $4.4 million. The Trust paid $1.1 million in cash with the seller providing purchase money financing for the remaining $3.3 million of the purchase price. The mortgage bears interest at 10.5% per annum, requires monthly payments of interest only and matures in February 1998. The purchase price of this property is 1.7% of the Trust's assets at December 31, 1996. Although not a significant acquisition in itself, when aggregated with the other purchases completed by the Trust in 1997 as described below, such purchases constitute a significant acquisition. In addition to the Eagle Rock purchase discussed above, the Trust has purchased two apartment complexes, three commercial properties and four parcels of undeveloped land in 1997. The properties, located in North Carolina, Texas, Washington, D.C. and Florida, were purchased for a total of $52.9 million in separate transactions from unaffiliated sellers and represent approximately 21% of the Trust's assets at December 31, 1996. The Trust paid a total of $14.8 million in cash and financed the remainder of the purchase prices. The mortgages bear interest at rates ranging from 8.0% to 10.5% per annum and mature from 1998 to 2009. The Trust has previously provided audited statements of operations for the two other apartment complexes and three commercial properties acquired during 1997, totaling $45.6 million or 18.2% of the Trust's assets at December 31, 1996. See the Trust's Current Report on Form 8-K, dated July 18, 1997. 2 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) In addition to the purchases described above, during 1997 the Trust has sold two office buildings. In connection with the sales, the Trust received net cash proceeds totaling $14.0 million, after the payoff of $11.5 million in existing mortgage debt and the payment of various closing costs associated with the sales. The Trust recognized a total gain on these sales of $6.8 million. The pro forma statements of operations present the Trust's operations as if the purchase and sale transactions described above had occurred at the beginning of each of the periods presented. [THIS SPACE INTENTIONALLY LEFT BLANK.] 3 4 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1997
Durham Eagle Rock Assets Actual Centre(1) Apartments Pro forma(2) ---------- ---------- ---------- ---------- Notes and interest receivable Performing ..................................................... $ 4,041 $ -- $ -- $ 4,041 Nonperforming, nonaccruing ..................................... 3,521 -- -- 3,521 ---------- ---------- ---------- ---------- 7,562 -- -- 7,562 Less - allowance for estimated losses .......................... (1,481) -- -- (1,481) ---------- ---------- ---------- ---------- 6,081 -- -- 6,081 Foreclosed real estate held for sale, net of accumulated depreciation ................................................... 5,738 -- -- 5,738 Real estate held for investment, net of accumulated depreciation ................................................... 230,530 21,015 4,445 255,990 Investments in marketable equity securities of affiliates, at market ...................................................... 11,429 -- -- 11,429 Investments in partnerships .................................... 2,156 -- -- 2,156 Cash and cash equivalents ...................................... 2,839 (2,358) (1,182) (701) Other assets ................................................... 16,663 (4,157) -- 12,506 ---------- ---------- ---------- ---------- $ 275,436 $ 14,500 $ 3,263 $ 293,199 ========== ========== ========== ========== Liabilities and Shareholders' Equity Liabilities Notes and interest payable ..................................... $ 179,832 $ 14,500 $ 3,263 $ 197,595 Other liabilities .............................................. 7,473 -- -- 7,473 ---------- ---------- ---------- ---------- 187,305 14,500 3,263 205,068 Commitments and contingencies Shareholders' equity Shares of Beneficial Interest, no par value; authorized shares, unlimited; issued and outstanding 4,025,985 shares ..... 8,068 -- -- 8,068 Paid-in capital ................................................ 257,159 -- -- 257,159 Accumulated distributions in excess of accumulated earnings .... (187,219) -- -- (187,219) Net unrealizable gains on marketable equity securities ......... 10,123 -- -- 10,123 ---------- ---------- ---------- ---------- 88,131 -- -- 88,131 ---------- ---------- ---------- ---------- $ 275,436 $ 14,500 $ 3,263 $ 293,199 ========== ========== ========== ==========
(1) The property was purchased on July 18, 1997 and has previously been included in the Trust's current report on Form 8-K, dated July 18, 1997. (2) The balance sheet affect of all other 1997 income producing property purchases and sales are included in the June 30, 1997 actual balances presented. 4 5 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997
Apartment Commercial Eagle Rock Actual Complexes(1)(2) Properties(1)(3) Land (1)(4) Apartments Sales(1) Pro forma --------- -------------- ------------- -------- ---------- --------- --------- (dollars in thousands, except per share) Income Rents .......................... $ 26,205 $ 463 $ 2,736 $ -- $ 321 $ (1,214) $ 28,511 Interest ....................... 466 -- -- -- -- -- 466 --------- ------------ ------------ --------- ---------- --------- --------- 26,671 463 2,736 -- 321 (1,214) 28,977 Expenses Property operations ............ 15,131 207 978 -- 272 (785) 15,803 Interest ....................... 7,895 137 976 254 171 (386) 9,047 Depreciation ................... 2,977 47 299 -- 44 (176) 3,191 Advisory fee to affiliate ...... 1,004 -- -- -- -- -- 1,004 Net income fee ................. 386 -- -- -- -- -- 386 General and administrative ..... 1,402 -- -- -- -- -- 1,402 --------- ------------ ------------ --------- ---------- --------- --------- 28,795 391 2,253 254 487 (1,347) 30,833 --------- ------------ ------------ --------- ---------- --------- --------- Income (loss) from operations .. (2,124) 72 483 (254) (166) 133 (1,856) Equity in income of partnerships 73 -- -- -- -- -- 73 Gain on sale of real estate .... 6,810 -- -- -- -- -- 6,810 --------- ------------ ------------ --------- ---------- --------- --------- Net income (loss) .............. $ 4,759 $ 72 $ 483 $ (254) $ (166) $ 133 $ 5,027 ========= ============ ============ ========= ========== ========= ========= Earnings per share Net income ..................... $ 1.18 $ 1.25 ========= ========= Shares of beneficial interest outstanding. 4,026,099 4,026,099 ========= =========
(1) Assumes purchase or sale by the Trust on January 1, 1997. Pro forma amounts for other property acquisitions are from January 1 through respective dates of acquisition. Results subsequent to the date of acquisition are included in the Actual" column. (2) Includes the Lost Timbers Apartments and Trails at Windfern Apartments whose results of operations are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 1997. (3) Includes the Jefferson Office Building, Bay Plaza Office Center and Durham Centre Office Building whose results of operations are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and July 18, 1997. (4) Includes the Stacy Road, Watters Road, Opubco and McKinney 140 land which are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and July 18, 1997. 5 6 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
Apartment Commercial Complexes Properties Land Eagle Rock Actual (1)(2) (1)(3) (1)(4) Apartments Sales(1) Pro forma --------- ----------- ----------- --------- --------- --------- --------- (dollars in thousands, except per share) Income Rents ................................... $ 44,244 $ 1,871 $ 6,994 $ -- $ 643 $ (1,654) $ 52,098 Interest ................................ 1,119 -- -- -- -- -- 1,119 --------- ----------- ----------- --------- --------- --------- --------- 45,363 1,871 6,994 -- 643 (1,654) Expenses Property operations ..................... 26,738 1,000 2,525 -- 544 (1,045) 29,762 Interest ................................ 12,773 552 2,322 758 343 (708) 16,040 Depreciation ............................ 4,819 184 783 -- 89 (233) 5,642 Advisory fee to affiliate ............... 1,091 -- -- -- -- -- 1,091 Incentive and net income fees ........... 1,049 -- -- -- -- -- 1,049 General and administrative .............. 2,213 -- -- -- -- -- 2,213 Provision for losses .................... (884) -- -- -- -- -- (884) --------- ----------- ----------- --------- --------- --------- --------- 47,799 1,736 5,630 758 976 (1,986) 54,913 --------- ----------- ----------- --------- --------- --------- --------- Income (loss) from operations ........... (2,436) 135 1,364 (758) (333) 332 (1,696) Equity in income of partnerships ........ 228 -- -- -- -- -- 228 Gain on sale of real estate and marketable equity securities ............ 10,122 -- -- -- -- 6,810 16,932 --------- ----------- ----------- --------- --------- --------- --------- Income (loss) before extraordinary gain . 7,914 135 1,364 (758) (333) 7,142 (1,696) Extraordinary gain ...................... 812 -- -- -- -- -- 812 --------- ----------- ----------- --------- --------- --------- --------- Net income (loss) ....................... $ 8,726 $ 135 $ 1,364 $ (758) $ (333) $ 7,142 $ 16,276 ========= =========== =========== ========= ========= ========= ========= Earnings per share Income before extraordinary gain ........ $ 1.89 $ 3.68 Extraordinary gain ...................... .19 .19 --------- --------- Net income (loss) ....................... $ 2.08 $ 3.87 ========= ========= Shares of beneficial interest outstanding ........................... 4,199,147 4,199,147 ========= =========
(1) Assumes purchase or sale by the Trust on January 1, 1996. (2) Includes the Lost Timbers Apartments and Trails at Windfern Apartments whose results of operations are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 1997. (3) Includes the Jefferson Office Building, Bay Plaza Office Center and Durham Centre Office Building whose results of operations are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and July 18, 1997. (4) Includes the Stacy Road, Watters Road, Opubco and McKinney 140 land which are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and July 18, 1997. 6 7 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Financial statements of properties acquired:
Exhibit Number Description - ------- --------------------------------------------------------------------------------------------------------------- 99.0 Lost Timbers Apartments, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996 (incorporated by reference to Exhibit No. 99.0 to the Registrant's Current Report on Form 8- K, dated June 24, 1997). 99.1 Jefferson Building, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996 (incorporated by reference to Exhibit No. 99.1 to the Registrant's Current Report on Form 8-K, dated June 24, 1997). 99.2 Trails at Windfern Apartments, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996 (incorporated by reference to Exhibit No. 99.2 to the Registrant's Current Report on Form 8- K, dated June 24, 1997). 99.3 Bay Plaza Office Center, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996 (incorporated by reference to Exhibit No. 99.3 to the Registrant's Current Report on Form 8- K, dated June 24, 1997). 99.4 Durham Centre, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996 (incorporated by reference to Exhibit No. 99.4 to the Registrant's Current Report on Form 8-K, dated July 18, 1997). 99.5 Eagle Rock Apartments, Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996, filed herewith.
----------------------------------- SIGNATURE 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 hereto duly authorized. CONTINENTAL MORTGAGE AND EQUITY TRUST Date: October 14, 1997 By: /s/ Thomas A. Holland ------------------------- ------------------------------ Thomas A. Holland Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 7 8 CONTINENTAL MORTGAGE AND EQUITY TRUST EXHIBIT TO ITS CURRENT REPORT ON FORM 8-K Dated August 18, 1997
Exhibit Page Number Description Number - ------- -------------------------------------------- ------ 99.5 Eagle Rock Apartments, Audited Statement of 9 Revenue and Direct Operating Expenses for the year ended December 31, 1996.
8 EX-99.5 2 AUDITED STATEMENT-REVENUE & DIRECT OPERATING EXP. 1 EXHIBIT 99.5 EAGLE ROCK APARTMENTS STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 9 2 Independent Auditors' Report To the Board of Trustees Continental Mortgage and Equity Trust We have audited the accompanying statement of revenues and direct operating expenses of Eagle Rock Apartments for the year ended December 31, 1996. This statement of revenues and direct operating expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on this statement of revenues and direct operating expenses 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 of revenues and direct operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and direct operating expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of revenues and direct operating expenses presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying financial statement is prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K of Continental Mortgage and Equity Trust) and, as described in Note 1, is not intended to be a complete presentation of the results of operations. In our opinion, the statement of revenues and direct operating expenses referred to above presents fairly, in all material respects, the revenues and direct operating expenses of Eagle Rock Apartments for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas September 4, 1997 10 3 EAGLE ROCK APARTMENTS STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996 REVENUES Net rental revenues $ 625,976 Other revenues 16,990 --------------- Total revenues 642,966 DIRECT OPERATING EXPENSES Repairs and maintenance 261,493 Utilities 115,082 Salaries 89,532 Property taxes 59,750 Insurance 17,867 --------------- Total direct operating expenses 543,724 --------------- REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 99,242 ===============
The accompanying notes are an integral part of this statement. 11 4 EAGLE ROCK APARTMENTS NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION The Eagle Rock Apartments is a 99-unit apartment complex located in Los Angeles, California. During 1996, the property was owned by Eagle Rock Corporation. The accompanying financial statement does not include a provision for depreciation and amortization, bad debt expense, interest expense, significant non-recurring repairs expense and related insurance reimbursements or income taxes. Accordingly, this statement is not intended to be a complete presentation of the results of operations. NOTE 2: ACCOUNTING 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. NOTE 3: OTHER REVENUES Other revenues consist of the following: Damage fees, late charges and application fees $ 8,662 Laundry and vending income 6,610 Miscellaneous 1,718 ------- $ 16,990 =======
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on August 18, 1997. 12 -----END PRIVACY-ENHANCED MESSAGE-----