-----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, VVQcVUbODMzf7rr9MLFfizajYI/p5Y+WwyRXX6hRrU2le6xDN0f4Bt3KVD5elixr LB8MtBV52F5JTGjUxR+kpg== 0000950134-97-009476.txt : 19971223 0000950134-97-009476.hdr.sgml : 19971223 ACCESSION NUMBER: 0000950134-97-009476 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971016 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971222 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: 97742091 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 October 16, 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 October 16, 1997, Continental Mortgage and Equity Trust (the "Trust") purchased the Westgrove Air Plaza, a combination aircraft hangar and office building in Addison, Texas, for $2.4 million (.9% of the Trust's assets at December 31, 1996). The seller of the property was First National Bank and Trust Company of McAlester. The property was constructed in 1982 and consists of 78,326 square feet which were 57% occupied at the date of acquisition. The Trust paid $1.2 million in cash with the seller providing purchase money financing for the remaining $1.2 million of the purchase price. On October 31, 1997, the Trust purchased Cypresstree Apartments, an apartment complex in Houston, Texas, for $3.2 million (1.3% of the Trust's assets at December 31, 1996). The seller of the property was Allantee Holdings, Inc. The property was constructed in 1980 and consists of 168 units which were 77% occupied at the date of acquisition. The Trust paid $550,000 in cash and the seller provided purchase money financing for the remaining $2.6 million of the purchase price. The purchase of these properties, 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 nine months ended September 30, 1997. A pro forma balance sheet as of September 30, 1997 is also presented. A summary of the pro forma transactions follows: In October 1997, the Trust purchased Westgrove Air Plaza, a 78,326 square foot combination aircraft hangar and office building in Addison, Texas, for $2.4 million. The Trust paid $1.2 million in cash with the seller providing purchase money financing for the remaining $1.2 million of the purchase price. The mortgage bears interest at a variable rate, currently 10.5% per annum, requires monthly payments of interest only and matures in April 1998. On October 31, 1997, the Trust purchased Cypresstree Apartments, a 168 unit apartment complex in Houston, Texas, for $3.2 million. The Trust paid $550,000 in cash and the seller provided purchase money financing for the remaining $2.6 million of the purchase price. The purchase money financing bears interest at 10.0% per annum, requires monthly payments of interest only of $21,667 and matures in December 1998. The aggregate purchase prices of these properties are 2.2% of the Trust's assets at December 31, 1996. Although not a significant acquisition in themselves, when aggregated with the other purchases completed by the Trust in 1997 as described below, such purchases constitute a significant acquisition. 2 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) In addition to the purchases discussed above, the Trust has purchased three apartment complexes, three commercial properties and four parcels of undeveloped land in 1997. The properties, located in California, North Carolina, Texas, Washington, D.C. and Florida, were purchased for a total of $59.8 million in separate transactions from unaffiliated sellers and represent approximately 24% of the Trust's assets at December 31, 1996. The Trust paid a total of $15.9 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 three apartment complexes and three commercial properties acquired during 1997, totaling $50.0 million or 19.0% of the Trust's assets at December 31, 1996. See the Trust's Current Reports on Form 8-K, dated June 24, 1997, July 18, 1997 and August 18, 1997. In addition to the purchases described above, during 1997 the Trust has sold three office buildings. In connection with the sales, the Trust received net cash proceeds totaling $18.7 million, after the payoff of $17.3 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 $8.2 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 SEPTEMBER 30, 1997
Westgrove Cypresstree Assets Actual Air Plaza Apartments Pro forma(1) -------- -------- -------- -------- Notes and interest receivable Performing..................................................... $ 4,457 $ -- $ -- $ 4,457 Nonperforming, nonaccruing..................................... 1,626 -- -- 1,626 -------- -------- -------- -------- 6,083 -- -- 6,083 Less - allowance for estimated losses............................. (1,481) -- -- (1,481) -------- -------- -------- -------- 4,602 -- -- 4,602 Foreclosed real estate held for sale, net of accumulated depreciation................................................... 5,738 -- -- 5,738 Real estate held for sale, net of accumulated depreciation........ 8,982 -- -- 8,982 Real estate held for investment, net of accumulated depreciation 247,182 2,505 3,305 252,992 Investments in marketable equity securities of affiliates, at market...................................................... 12,202 -- -- 12,202 Investments in partnerships....................................... 2,084 -- -- 2,084 Cash and cash equivalents......................................... 918 (1,317) (705) (1,104) Other assets...................................................... 14,890 -- -- 14,890 -------- -------- -------- -------- $296,598 $ 1,188 $ 2,600 $300,386 ======== ======== ======== ======== Liabilities and Shareholders' Equity Liabilities Notes and interest payable........................................................... $199,245 $ 1,188 $ 2,600 $203,033 Other liabilities................................................. 10,192 -- -- 10,192 -------- -------- -------- -------- 209,437 1,188 2,600 213,225 ======== ======== ======== ======== 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....... (188,963) -- -- (188,963) Net unrealizable gains on marketable equity securities............ 10,897 -- -- 10,897 -------- -------- -------- -------- 87,161 -- -- 87,161 -------- -------- -------- -------- $296,598 $ 1,188 $ 2,600 $300,386 ======== ======== ======== ========
(1) The balance sheet effect of all other 1997 property purchases and sales are included in the September 30, 1997 actual balances presented. 4 5 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997
Apartment Commercial Actual Complexes(1)(2) Properties(1)(3) Land (1)(4) -------- --------------- ---------------- ----------- (dollars in thousands, except per share) Income Rents.......................... $40,630 $ 892 $ 2,736 $ -- Interest....................... 729 -- -- -- ------- ------------- ---------------- ----------- 41,359 892 2,736 -- Expenses Property operations............ 23,576 569 978 -- Interest....................... 12,245 365 976 254 Depreciation .................. 4,563 106 299 -- Advisory fee to affiliate...... 1,552 -- -- -- Net income fee................. 287 -- -- -- General and administrative..... 2,219 -- -- -- ------- ------------- ---------------- ----------- 44,442 1,040 2,253 254 ------- ------------- ---------------- ----------- Income (loss) from operations..... (3,083) (148) 483 (254) Equity in income of partnerships.. 56 -- -- -- Gain on sale of real estate....... 6,565 -- -- -- ------- ------------- ---------------- ----------- Net income (loss)................. $ 3,538 $ (148) $ 483 $ (254) ======= ============= ================ =========== Earnings per share Net income..................... $ .88 ======= Shares of beneficial interest outstanding.................... 4,026,061 =========
Westgrove Cypresstree Air Plaza Apartments Sales(1) Pro forma --------- ----------- -------- -------- (dollars in thousands, except per share) Income Rents.......................... $ 241 $ 533 $ (1,396) $43,636 Interest....................... -- -- -- 729 --------- ----------- -------- ------- 241 533 (1,396) 44,365 Expenses Property operations ........... 269 428 (799) 25,021 Interest....................... 94 195 (441) 13,688 Depreciation................... 38 50 (300) 4,756 Advisory fee to affiliate...... -- -- -- 1,552 Net income fee................. -- -- -- 287 General and administrative..... -- -- -- 2,219 --------- ----------- -------- ------- 401 673 (1,540) 47,523 --------- ----------- -------- ------- Income (loss) from operations..... (160) (140) 144 (3,158) Equity in income of partnerships.. -- -- -- 56 Gain on sale of real estate....... -- -- -- 6,565 --------- ----------- -------- ------- Net income (loss)................. $ (160) $ (140) $ 144 $ 3,463 ========= =========== ========= ======= Earnings per share Net income..................... $ .86 ======= Shares of beneficial interest outstanding.................... 4,026,061 =========
(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, Trails at Windfern Apartments and Eagle Rock Apartments whose results of operations are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and August 18, 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 Actual Complexes(1)(2) Properties(1)(3) Land (1)(4) ----------- --------------- ---------------- ----------- (dollars in thousands, except per share) Income Rents.......................... $ 44,244 $ 2,514 $ 6,994 $ - Interest....................... 1,119 - - - ----------- --------------- --------------- ----------- 45,363 2,514 6,994 - Expenses Property operations............ 26,738 1,544 2,525 - Interest....................... 12,773 895 2,322 758 Depreciation................... 4,819 273 783 - Advisory fee to affiliate...... 1,091 - - - Incentive and net income fees.. 1,049 - - - General and administrative..... 2,213 - - - Provision for losses........... (884) - - - ----------- --------------- --------------- ----------- 47,799 2,712 5,630 758 ----------- --------------- --------------- ----------- Income (loss) from operations.... (2,436) (198) 1,364 (758) Equity in income of partnerships. 228 - - - Gain on sale of real estate and marketable equity securities... 10,122 - - - ----------- --------------- --------------- ----------- Income (loss) before extraordinary gain............. 7,914 (198) 1,364 (758) Extraordinary gain............... 812 - - - ----------- --------------- --------------- ----------- Net income (loss)................ $ 8,726 $ (198) $ 1,364 $ (758) =========== =============== =============== =========== Earnings per share Income before extraordinary gain......................... $ 1.89 Extraordinary gain............. .19 ---------- Net income (loss).............. $ 2.08 ========== Shares of beneficial interest outstanding.................... 4,199,147 ==========
Westgrove Cypresstree Air Plaza Apartments Sales(1) Pro forma ---------- ------------ -------------- -------------- (dollars in thousands, except per share) Income Rents.......................... $ 321 $ 711 $ (1,986) $ 52,798 Interest....................... - - - 1,119 ---------- ------------ -------------- -------------- 321 711 (1,986) 53,917 Expenses Property operations............ 358 570 (1,059) 30,676 Interest....................... 125 260 (801) 16,332 Depreciation................... 51 66 (277) 5,715 Advisory fee to affiliate...... - - - 1,091 Incentive and net income fees.. - - - 1,049 General and administrative..... - - - 2,213 Provision for losses........... - - - (884) ---------- ------------ -------------- -------------- 534 896 (2,137) 56,192 ---------- ------------ -------------- -------------- Income (loss) from operations.... (213) (185) 151 (2,275) Equity in income of partnerships. - - - 228 Gain on sale of real estate and marketable equity securities... - - 6,565 16,687 ---------- ------------ -------------- -------------- Income (loss) before extraordinary gain............. (213) (185) 6,716 14,640 Extraordinary gain............... - - 812 ---------- ------------ -------------- -------------- Net income (loss)................ $ (213) $ (185) $ 6,716 $ 15,452 ========== ============ ============== ============== Earnings per share Income before extraordinary gain......................... $ 3.49 Extraordinary gain............. .19 -------------- Net income (loss).............. $ 3.68 ============== Shares of beneficial interest outstanding.................... 4,199,147 ==============
(1) Assumes purchase or sale by the Trust on January 1, 1996. (2) Includes the Lost Timbers Apartments, Trails at Windfern Apartments and Eagle Rock Apartments whose results of operations are separately presented in the Trust's Current Reports on Form 8-K, dated June 24, 1997 and August 18, 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, (incorporated by reference to Exhibit 99.5 to Registrant's Current Report on Form 8-K, dated August 18, 1997). 99.6 Westgrove Air Plaza, Audited Statement of Revenues and Direct Operating Expenses for the year ended May 31, 1997, filed herewith. 7 8 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: December 22, 1997 By: /s/ Thomas A. Holland ------------------------- ------------------------- Thomas A. Holland Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 8 9 CONTINENTAL MORTGAGE AND EQUITY TRUST EXHIBIT TO ITS CURRENT REPORT ON FORM 8-K Dated October 16, 1997 Exhibit Page Number Description Number - ------- ----------- ------ 99.6 Westgrove Air Plaza, Audited Statement of 10 Revenue and Direct Operating Expenses for the year ended February 28, 1997. 9 EX-99.6 2 AUDITED STATEMENT OF REVENUE -WESTGROVE AIR PLAZA 1 EXHIBIT 99.6 WESTGROVE AIR PLAZA STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED MAY 31, 1997 10 2 Independent Auditors' Report To the Board of Trustees Continental Mortgage & Equity Trust We have audited the accompanying statement of revenues and direct operating expenses of Westgrove Air Plaza for the year ended May 31, 1997. 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 & 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 Westgrove Air Plaza for the year ended May 31, 1997, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas December 12, 1997 11 3 WESTGROVE AIR PLAZA STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended May 31, 1997 REVENUES Net rental revenues $ 320,449 Other revenues 737 ---------- Total revenues 321,186 DIRECT OPERATING EXPENSES Utilities 114,873 Repairs and maintenance 90,265 Ground rent 85,404 Property taxes 44,760 Insurance 13,027 Salaries and benefits 9,795 ---------- Total direct operating expenses 358,124 ---------- DIRECT OPERATING EXPENSES IN EXCESS OF REVENUES $ (36,938) ==========
The accompanying notes are an integral part of this statement. 12 4 WESTGROVE AIR PLAZA NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES May 31, 1997 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Westgrove Air Plaza is an 83,832 square foot office building with three airplane hangars, located in Addison, Texas. During the period ended May 31, 1997, the property was owned by First National Bank and Trust Co. of McAlester (Oklahoma). The accompanying financial statement does not include a provision for depreciation and amortization, bad debt expense, interest expense 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: LEASE COMMITMENT Westgrove Air Plaza rents land under two ground leases classified as operating leases, both of which expire in February, 2022. Future minimum lease payments under the leases are approximately as follows:
Year ended May 31, ----------------- 1998 $ 54,000 1999 54,000 2000 54,000 2001 54,000 2002 54,000 Thereafter 1,074,000 ------------- $ 1,344,000 =============
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage & Equity Trust, a California trust, on October 16, 1997. 13 -----END PRIVACY-ENHANCED MESSAGE-----