-----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, Oi0/BtHNZeV6E/ydpg+vMoGXBl6/iLh8IjKdwAyHX4T2Eb+JGIxj92IFKw6Kg4Iy MQnM+NoBcKQV7WAZ7gjkSA== 0000950134-97-005207.txt : 19970710 0000950134-97-005207.hdr.sgml : 19970710 ACCESSION NUMBER: 0000950134-97-005207 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970624 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970709 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: 1934 Act SEC FILE NUMBER: 000-10503 FILM NUMBER: 97637955 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 DATED JUNE 24, 1997 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 June 24, 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 January 17, 1997, Continental Mortgage and Equity Trust (the "Trust") purchased the Lost Timbers Apartments (also known as the Timbers Apartments) in Houston, Texas for $3.5 million (1.4% of the Trust's assets at December 31, 1996). The seller of the property was Lost Timbers Apartments, Ltd. The property was constructed in 1975 and consists of 180 units which were 92% occupied at the date of acquisition. The Trust paid $800,000 in cash and assumed the existing mortgage of $2.7 million. On February 28, 1997, the Trust purchased the Jefferson Office Building in Washington, DC for $13.2 million (5.3% of the Trust's assets at December 31, 1996). The seller of the property was Orange Nassau Property Services, a Delaware corporation. The property was constructed in 1963 and consists of 71,877 square feet which were 99% occupied at the date of acquisition. The Trust paid $4.1 million in cash and obtained new mortgage financing for the remaining $9.1 million of the purchase price. On May 27, 1997, the Trust purchased the Trails at Windfern Apartments in Houston, Texas for $4.2 million (1.7% of the Trust's assets at December 31, 1996). The seller of the property was Mid National Holdings, Inc., a Texas corporation. The property was constructed in 1975 and consists of 240 units which were 92% occupied at the date of acquisition. The Trust paid $769,000 in cash, assumed the existing mortgage of $3.2 million and the seller provided purchase money financing of an additional $150,000. On June 24, 1997, the Trust purchased the Bay Plaza Office Center in Tampa, Florida for $4.3 million (1.7 % of the Trust's assets at December 31, 1996). The seller of the property was Bay Plaza I Partners, a Florida general partnership. The property was constructed in 1974 and consists of 75,780 square feet which were 94% occupied at the date of acquisition. The Trust paid $1.2 million in cash, assumed the existing mortgage of $2.1 million and the seller provided purchase money financing of an additional $1.0 million. These purchases of income producing properties, when combined, exceed 10% of the Trust's assets at December 31, 1996. In addition to the income producing properties described above, on February 18, 1997, the Trust purchased the Watters Road land in Collin County, Texas for $1.7 million. The seller of the property was Sammy Rosenzweig, Trustee. The property consists of 103 acres of undeveloped land. The Trust paid $1.7 million in cash. On April 7, 1997, the Trust purchased the OPUBCO land in Collin County, Texas for $3.0 million. The seller of the property was Gaylord Properties, L.P. The property consists of 156 acres of undeveloped land. In conjunction with the purchase, the Trust obtained mortgage financing secured by the land and by two other parcels of land in the amount of $4.2 million. The Trust received net cash of $1.2 million. On June 16, 1997, the Trust purchased the Stacy Road land in Allen, Texas for $2.5 million. The seller of the property was Samuel 2 3 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Rosenzweig, Trustee. The property consists of 163 acres of undeveloped land. The Trust paid $800,000 in cash and obtained new mortgage financing for the remaining $1.7 million of the purchase price. 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 three months ended March 31, 1997. A pro forma balance sheet as of March 31, 1997 is also presented. A summary of the pro forma transactions follows: In January 1997, the Trust purchased the Lost Timbers Apartments (also known as the Timbers Apartments), a 180 unit apartment complex in Houston, Texas, for $3.5 million. The Trust paid $800,000 in cash and assumed the existing mortgage of $2.7 million. The mortgage bears interest at a variable rate, currently 9.29% per annum, adjusted semi-annually, requires monthly payments of principal and interest of $22,704, also adjusted semi-annually and matures in June 1999. In February 1997, the Trust purchased the Jefferson Building, a 71,877 square foot office building in Washington, D.C., for $13.2 million. The Trust paid $4.1 million in cash and obtained new mortgage financing of $9.1 million. The mortgage bears interest at 8.0% per annum, requires monthly payments of principal and interest of $70,000 and matures in March 1999. In May 1997, the Trust purchased the Trails at Windfern Apartments, a 240 unit apartment complex in Houston, Texas, for $4.2 million. The Trust paid $769,000 in cash, assumed the existing mortgage of $3.2 million and the seller provided additional purchase money financing of $150,000. The $3.2 million mortgage bears interest at a variable rate, currently 9.0% per annum, adjusted annually, requires monthly payments of principal and interest of $26,674 and matures in January 1999. The $150,000 purchase money note bears interest at 8.0% per annum, requires monthly payments of interest only and matures in May 2000. In June 1997, the Trust purchased the Bay Plaza Office Center, a 75,780 square foot office building in Tampa, Florida, for $4.3 million. The Trust paid $1.2 million cash, assumed the existing mortgage of $2.1 million and the seller provided purchase money financing of an additional $1.0 million. The $2.1 million first mortgage bears interest at 8.3% per annum, requires monthly payments of principal and interest of $23,354 and matures in June 2009. The $1.0 million second mortgage bears interest at 8.3% per annum, requires monthly payments of $9,731 and matures in June 2002. 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 proceeds totaling $14.0 million, after the payoff of $11.5 3 4 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) million in existing mortgage debt and the payment of various closing costs associated with the sales. The Trust recognized a total gain on these dispositions of $6.9 million. The pro forma statements of operations present the Trust's operations as if the transactions described above had occurred at the beginning of each of the periods presented. [This space intentionally left blank.] 4 5 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 1997
OPUBCO Trails at and Windfern Bay Plaza Stacy Road Property Actual(1) Apartments Office Center Land Dispositions Pro forma -------- ---------- ------------- ---- ------------ --------- (dollars in thousands) Assets Notes and interest receivable Performing .................... $ 6,239 $ -- $ -- $ -- $ -- $ 6,239 Nonperforming, nonaccruing .... 2,008 -- -- -- -- 2,008 -------- ------ ------ ------ ------- -------- 8,247 -- -- -- -- 8,247 Less - allowance for estimated losses ........................ (1,481) -- -- -- -- (1,481) -------- ------ ------ ------ ------- -------- 6,766 -- -- -- -- 6,766 Foreclosed real estate held for sale, net of accumulated depreciation .................. 5,738 -- -- -- -- 5,738 Real estate under contract for sale, net of accumulated depreciation .................. 8,102 -- -- -- (8,102) -- Real estate held for investment, net of accumulated depreciation 224,766 4,150 4,275 5,498 (9,050) 229,639 Investments in marketable equity securities of affiliates, at market ..................... 14,697 -- -- -- -- 14,697 Investments in partnerships ...... 2,215 -- -- -- -- 2,215 Cash and cash equivalents ........ 764 (769) (1,150) 311 12,402 11,558 Other assets ..................... 11,518 -- -- -- -- 11,518 -------- ------ ------ ------ ------- -------- $274,566 $3,381 $3,125 $5,809 $(4,750) $282,131 ======== ====== ====== ====== ======= ========
(1) The balance sheet affect of all other 1997 property purchases and dispositions are included in the March 31, 1997 actual balances presented. 5 6 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 1997
OPUBCO and Trails at Stacy Windfern Bay Plaza Road Property Actual(1) Apartments Office Center Land Dispositions Pro forma --------- ---------- ------------- ---- ------------ --------- (dollars in thousands) Liabilities and Shareholders' Equity - ------------------------------------ Liabilities Notes and interest payable ....... $175,557 $ 3,381 $3,125 $5,809 $(11,625) $176,247 Other liabilities ................ 12,242 -- -- -- -- 12,242 -------- -------- ------ ------ -------- -------- 187,799 3,381 3,125 5,809 (11,625) 188,489 Commitments and contingencies Shareholders' equity Shares of Beneficial Interest, no par value; authorized shares, unlimited; issued and outstanding 4,026,044 shares .. 8,068 -- -- -- -- 8,068 Paid-in capital .................. 257,159 -- -- -- -- 257,159 Accumulated distributions in excess of accumulated earnings (191,852) -- -- -- 6,875 (184,977) Net unrealizable gains on marketable equity securities .. 13,392 -- -- -- -- 13,392 -------- -------- ------ ------ -------- -------- 86,767 -- -- -- 6,875 93,642 -------- -------- ------ ------ -------- -------- $274,566 $ 3,381 $3,125 $5,809 $(4,750) $282,131 ======== ======== ====== ====== ======= ========
(1) The balance sheet affect of all other 1997 property purchases and dispositions are included in the March 31, 1997 actual balances presented. 6 7 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997
Stacy Road, Bay Watters Lost Jefferson Plaza Road and Trails at Timbers Office Office OPUBCO Windfern Property Actual Apartments(1) Building(1) Center(1) Land (1) Apartments Dispositions(1) Pro forma ---------- ------------- ----------- --------- -------- ---------- --------------- ---------- (dollars in thousands, except per share) Income ............... Rents ............. $ 13,069 $37 $381 $268 $ -- $255 $ (901) $ 13,109 Interest .......... 272 -- -- -- -- -- -- 272 ---------- --- ---- ---- ----- ---- ------ ---------- 13,341 37 381 268 -- 255 (901) 13,381 Expenses Property operations 7,705 5 142 101 -- 121 (460) 7,614 Interest .......... 3,532 11 121 66 140 76 (223) 3,723 Depreciation ...... 1,520 3 46 21 -- 27 (145) 1,472 Advisory fee to affiliate ...... 444 -- -- -- -- -- -- 444 General and administrative . 585 -- -- -- -- -- -- 585 ---------- --- ---- ---- --- ---- ------ ---------- 13,786 19 309 188 140 224 (828) 13,838 ---------- --- ---- ---- ----- ---- ------ ---------- Income (loss) from operations ........ (445) 18 72 80 (140) 31 (73) (457) Equity in income of partnerships ...... 47 -- -- -- -- -- -- 47 Gain on sale of real estate ............ -- -- -- -- -- -- 6,875 6,875 ---------- --- ---- ---- ----- ---- ------ ---------- Net income (loss) .... $ (398) $18 $ 72 $ 80 $(140) $ 31 $6,802 $ 6,465 ========== === ==== ==== ===== ==== ====== ========== Earnings per share Net (loss) ......... $ (.10) $ 1.61 ========== ========== Shares of beneficial interest outstanding 4,026,197 4,026,197 ========== ==========
(1) Assumes acquisition or disposition by the Trust on January 1, 1996. Pro forma amounts for other property acquisitions are from January 1 through the date of acquisition only. Results subsequent to the date of acquisition are included in the "Actual" column. 7 8 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
Stacy Road, Bay Watters Lost Jefferson Plaza Road and Trails at Timbers Office Office OPUBCO Windfern Property Actual Apartments(1) Building(1) Center(1) Land(1) Apartments Dispositions(1) Pro forma ------ ------------ ---------- -------- ------ ---------- -------------- --------- (dollars in thousands, except per share) Income .................. Rents ................ $ 44,244 $850 $2,283 $1,071 $ -- $1,021 $(1,654) $ 47,815 Interest ............. 1,119 -- -- -- -- -- -- 1,119 ---------- ---- ------ ------ ----- ------ ------- ---------- 45,363 850 2,283 1,071 -- 1,021 (1,654) 48,934 Expenses Property operations .. 26,738 484 853 404 -- 516 (1,045) 27,950 Interest ............. 12,773 250 728 150 559 302 (708) 14,054 Depreciation ......... 4,819 74 277 86 -- 110 (233) 5,133 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) ---------- ---- ------ ------ ----- ------ ------- ---------- 47,799 808 1,858 640 559 928 (1,986) 50,606 ---------- ---- ------ ------ ----- ------ ------- ---------- Income (loss) from operations ........... (2,436) 42 425 431 (559) 93 332 (1,672) Equity in income of partnerships ......... 228 -- -- -- -- -- -- 228 Gain on sale of real estate and marketable equity securities .... 10,122 -- -- -- -- -- 6,875 16,997 ---------- ---- ------ ------ ----- ------ ------- ---------- Income (loss) before extraordinary gain ... 7,914 42 425 431 (559) 93 7,207 15,553 Extraordinary gain ...... 812 -- -- -- -- -- -- 812 ---------- ---- ------ ------ ----- ------ ------- ---------- Net income (loss) ....... $ 8,726 $ 42 $ 425 $ 431 $(559) $ 93 $ 7,207 $ 16,365 ========== ==== ====== ====== ===== ====== ======= ========== Earnings per share Income before extraordinary gain $ 1.89 $ 3.71 Extraordinary gain ... .19 .19 ---------- ---------- Net income (loss) .... $ 2.08 $ 3.90 ========== ========== Shares of beneficial interest outstanding . 4,199,147 4,199,147 ========== ==========
(1) Assumes acquisition or disposition by the Trust on January 1, 1996. 8 9 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. 99.1 Jefferson Building Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996. 99.2 Trails at Windfern Apartments Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996. 99.3 Bay Plaza Office Center Audited Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996.
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: July 9, 1997 By: /s/ Thomas A. Holland --------------------------------- ---------------------------------- Thomas A. Holland Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 9 10 CONTINENTAL MORTGAGE AND EQUITY TRUST EXHIBIT TO ITS CURRENT REPORT ON FORM 8-K Dated June 24, 1997
Exhibit Page Number Description Number - ------- ---------------------------------------------- ------ 99.0 Lost Timbers Apartments Audited Statement of 11 Revenues and Direct Operating Expenses for the year ended December 31, 1996. 99.1 Jefferson Office Building Audited Statement 15 of Revenues and Direct Operating Expenses for the year ended December 31, 1996. 99.2 Trails at Windfern Apartments Audited 19 Statement of Revenues and Direct Operating Expenses for the year ended December 31, 1996. 99.3 Bay Plaza Office Center Audited Statement of 23 of Revenues and Direct Operating Expenses for the year ended December 31, 1996.
10 EX-99 2 LOST TIMBERS APT. AUDITED STATEMENT OF REVENUES 1 EXHIBIT 99.0 THE TIMBERS STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 11 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 The Timbers 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 The Timbers for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas April 8, 1997 12 3 THE TIMBERS STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES Net rental revenues $ 812,811 Other revenues 37,042 ------------ Total revenues 849,853 OPERATING EXPENSES Repairs and maintenance 138,839 Salaries and benefits 137,898 Property taxes 101,829 Utilities 75,597 Insurance 29,791 ------------ Total direct operating expenses 483,954 ------------ REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 365,899 ============
The accompanying notes are an integral part of this statement. 13 4 THE TIMBERS NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES DECEMBER 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION The Timbers is a 180-unit apartment complex, located in Houston, Texas. During 1996, the property was owned by Lost Timbers Limited Partnership 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: OTHER REVENUES Other revenues consist of the following; NSF/Late fees $ 22,513 Forfeited deposits 8,982 Application fees 4,425 Miscellaneous 1,122 ----------- $ 37,042 ===========
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on January 17, 1997. 14 EX-99.1 3 JEFFERSON OFFICE BLDG. AUDITED STMT OF REVENUES 1 EXHIBIT 99.1 THE JEFFERSON BUILDING STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 15 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 The Jefferson Building 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 The Jefferson Building for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas July 7, 1997 16 3 THE JEFFERSON BUILDING STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996
REVENUES Net rental revenues $2,158,067 Other revenues 124,951 --------- Total revenues 2,283,018 DIRECT OPERATING EXPENSES Repairs and maintenance 294,406 Property taxes 249,428 Utilities 185,527 Salaries and benefits 107,087 Insurance 16,267 --------- Total direct operating expenses 852,715 --------- REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $1,430,303 =========
The accompanying notes are an integral part of this statement. 17 4 THE JEFFERSON BUILDING NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION The Jefferson Building is a 71,876 square foot office complex located in Washington, D.C. During 1996, the property was owned by Orange Nassau Property Services. 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: OTHER REVENUES Other revenues consist of the following: Common area maintenance charges $ 106,830 Lease termination fees 10,000 Valet parking income 7,800 Miscellaneous 321 -------- $ 124,951 ========
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on February 28, 1997. 18 EX-99.2 4 TRAILS AT WINDFERN APT. AUDITED STMT OF REVENUES 1 EXHIBIT 99.2 THE TRAILS OF WINDFERN STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 19 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 The Trails of Windfern 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 The Trails of Windfern for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas May 23, 1997 20 3 THE TRAILS OF WINDFERN STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996 REVENUES Net rental revenues $ 973,198 Other revenues 48,513 ------------ Total revenues 1,021,711 OPERATING EXPENSES Utilities 158,175 Salaries and benefits 141,003 Property taxes 110,970 Repairs and maintenance 77,696 Insurance 28,583 ------------ Total direct operating expenses 516,427 ------------ REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 505,284 ============
The accompanying notes are an integral part of this statement. 21 4 THE TRAILS OF WINDFERN NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION The Trails of Windfern is a 240-unit apartment complex located in Houston, Texas. During 1996, the property was owned by Mid National Holdings, Inc. 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: OTHER REVENUES Other revenues consists of the following: Late fees and forfeited security deposits $ 46,372 Laundry commissions 2,141 -------- $ 48,513 ========
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on May 27, 1997. 22 EX-99.3 5 BAY PLAZA OFFICE CTR. AUDITED STMT. OF REVENUES 1 EXHIBIT 99.3 BAY PLAZA OFFICE BUILDING STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 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 Bay Plaza Office Building 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 Bay Plaza Office Building for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas May 29, 1997 24 3 BAY PLAZA OFFICE BUILDING STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996 REVENUES Net rental revenues $ 999,848 Other revenues 71,064 ---------- Total revenues 1,070,912 OPERATING EXPENSES Repairs and maintenance 146,001 Utilities 132,575 Property taxes 76,448 Salaries and benefits 35,124 Insurance 13,866 ---------- Total direct operating expenses 404,014 ---------- REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 666,898 ==========
The accompanying notes are an integral part of this statement. 25 4 BAY PLAZA OFFICE BUILDING NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Bay Plaza Office Building is a 75,780 square foot office building located in Tampa, Florida. During 1996, the property was owned by Bay Plaza I Partners. 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: OTHER REVENUES Other revenues consists of the following: Utility reimbursements $ 70,098 Miscellaneous 966 -------- $ 71,064 ========
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on June 24, 1997. 26 -----END PRIVACY-ENHANCED MESSAGE-----