-----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, OuK2cBqLvYSZNj179jBAIopAdEIc2rgjqMLNridpKcAy+dilsLFYsNSwXOvsNZun +FizpyjpDTiij6zSzv9TAg== 0000950134-97-006333.txt : 19970820 0000950134-97-006333.hdr.sgml : 19970820 ACCESSION NUMBER: 0000950134-97-006333 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970718 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970819 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: 97666535 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 July 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 July 18, 1997, the Trust purchased the Durham Centre, an office building in Durham, North Carolina, for $20.5 million (8.2% of the Trust's assets at December 31, 1996). The seller of the property was DCV Limited Partnership, a North Carolina limited partnership. The property was constructed in 1988 and consists of 207,171 square feet which were 95% occupied at the date of acquisition. The Trust paid $5.7 million in cash and obtained new mortgage financing for the remaining $14.8 million of the purchase price. This purchase combined with other property purchases the Trust has made in 1997 exceed 10% of the Trust's assets at December 31, 1996. In addition to the income producing property described above, on August 1, 1997, the Trust purchased the McKinney 140 land in McKinney, Texas, for $2.6 million. The seller of the property was Samuel Rosenzweig, Trustee. The property consists of 140 acres of undeveloped land. The Trust paid $898,000 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 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 July 1997, the Trust purchased the Durham Centre, a 207,171 square foot office building in Durham, North Carolina, for $20.5 million. The Trust paid $5.7 million in cash and obtained new mortgage financing for the remaining $14.8 million of the purchase price. The mortgage bears interest at 9.8% per annum, requires monthly payments of principal and interest of $132,407 and matures in July 2000. The purchase price of this property is 8.2% of the Trust's assets at December 31, 1996. Although not a significant acquisition in itself, when aggregated with the other acquisitions completed by the Trust in 1997 as described below, such acquisitions constitute a significant acquisition. In addition to the income producing property described above, in August 1997, the Trust purchased the McKinney 140 land, 140 acres of undeveloped land in McKinney, Texas, for $2.6 million. The Trust paid $898,000 in cash and obtained new mortgage financing for the remaining $1.7 million of the purchase price. The mortgage bears interest at 9.5% per annum, requires monthly payments of interest only and matures in April 2000. In addition to the July and August acquisitions discussed above, prior to June 30, 1997, the Trust had purchased two apartment complexes, two commercial properties and three parcels of undeveloped land. The 2 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) properties, located in Texas, Washington, D.C. and Florida, were purchased for a total of $32.4 million in separate transactions from unaffiliated sellers and represent approximately 13% of the Trust's assets at December 31, 1996. The Trust paid a total of $8.2 million in cash and financed the remainder of the purchase prices. The mortgages bear interest at rates ranging from 8.0% to 9.5% and mature from 1999 to 2009. The Trust has previously provided audited statements of operations for the two apartment complexes and two commercial properties acquired prior to June 30, 1997, totaling $25.2 million or 10.1% of the Trust's assets at December 31, 1996. See the Trust's Current Report on Form 8-K, dated June 24, 1997. 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 Actual Centre Pro forma(1) ---------- ---------- ------------ (dollars in thousands) Assets ------ 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 21,015 251,545 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) 481 Other assets .................................................... 16,663 (4,157) 12,506 ---------- ---------- ---------- $ 275,436 $ 14,500 $ 289,936 ========== ========== ========== Liabilities and Shareholders' Equity - ------------------------------------ Liabilities Notes and interest payable ...................................... $ 179,832 $ 14,500 $ 194,332 Other liabilities ............................................... 7,473 -- 7,473 ---------- ---------- ---------- 187,305 14,500 201,805 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 $ 289,936 ========== ========== ==========
- -------------- (1) The balance sheet affect of all other 1997 income producing property purchases and dispositions 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 McKinney Complexes Properties Land 140 Land Durham Dispositions Actual (1)(2) (1)(3) (1)(4) (1) Centre(1) (1) Pro forma ---------- --------- --------- --------- --------- --------- ----------- ---------- (dollars in thousands, except per share) Income Rents ........................... $ 26,205 $ 463 $ 916 $ -- $ -- $ 1,820 $ (1,214) $ 28,190 Interest ........................ 466 -- -- -- -- -- -- 466 ---------- --------- --------- --------- --------- --------- --------- ---------- 26,671 463 916 -- -- 1,820 (1,214) 28,656 Expenses Property operations ............. 15,131 207 344 -- -- 634 (785) 15,531 Interest ........................ 7,895 137 252 173 81 724 (386) 8,876 Depreciation .................... 2,977 47 89 -- -- 210 (176) 3,149 Advisory fee to affiliate ....... 1,004 -- -- -- -- -- -- 1,004 Net income fee .................. 386 -- -- -- -- -- -- 386 General and administrative ...... 1,402 -- -- -- -- -- -- 1,402 ---------- --------- --------- --------- --------- --------- --------- ---------- 28,795 393 685 173 81 1,568 (1,347) 30,348 ---------- --------- --------- --------- --------- --------- --------- ---------- Income (loss) from operations ...... (2,124) 70 231 (173) (81) 252 133 (1,692) Equity in income of partnerships ... 73 -- -- -- -- -- -- 73 Gain on sale of real estate ........ 6,810 -- -- -- -- -- -- 6,810 ---------- --------- --------- --------- --------- --------- --------- ---------- Net income (loss) .................. $ 4,759 $ 70 $ 231 $ (173) $ (81) $ 252 $ 133 $ 5,191 ========== ========= ========= ========= ========= ========= ========= ========== Earnings per share Net income ..................... $ 1.18 $ 1.29 ========== ========== Shares of beneficial interest outstanding .................... 4,026,099 4,026,099 ========== ==========
- -------------- (1) Assumes acquisition or disposition 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 and Bay Plaza Office Center whose results of operations are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 1997. (4) Includes the Stacy Road, Watters Road and Opubco land which are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 1997. 5 6 CONTINENTAL MORTGAGE AND EQUITY TRUST PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
Apartment Commercial McKinney Complexes Properties Land 140 Land Durham Dispositions Actual (1)(2) (1)(3) (1)(4) (1) Centre(1) (1) Pro forma ---------- --------- --------- --------- --------- --------- ----------- ---------- (dollars in thousands, except per share) Income Rents ........................... $ 44,244 $ 1,871 $ 3,354 $ -- $ -- $ 3,640 $ (1,654) $ 51,455 Interest ........................ 1,119 -- -- -- -- -- -- 1,119 ---------- -------- -------- -------- -------- -------- -------- ---------- 45,363 1,871 3,354 -- -- 3,640 (1,654) 52,574 Expenses Property operations ............. 26,738 1,000 1,257 -- -- 1,268 (1,045) 29,218 Interest ........................ 12,773 552 878 597 161 1,444 (708) 15,536 Depreciation .................... 4,819 184 363 -- -- 420 (233) 5,553 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 2,498 597 161 3,132 (1,986) 53,776 ---------- -------- -------- -------- -------- -------- -------- ---------- Income (loss) from operations ...... (2,436) 135 856 (597) (161) 508 332 (1,202) 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 .............. 7,914 135 856 (597) (161) 508 7,142 15,958 Extraordinary gain ................. 812 -- -- -- -- -- -- 812 ---------- -------- -------- -------- -------- -------- -------- ---------- Net income (loss) .................. $ 8,726 $ 135 $ 856 $ (597) $ (161) $ 508 $ 7,142 $ 16,770 ========== ======== ======== ======== ======== ======== ======== ========== Earnings per share Income before extraordinary gain .......................... $ 1.89 $ 3.80 Extraordinary gain .............. .19 .19 ---------- ---------- Net income (loss) ............... $ 2.08 $ 3.99 ========== ========== Shares of beneficial interest outstanding ..................... 4,199,147 4,199,147 ========== ==========
- -------------- (1) Assumes acquisition or disposition 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 and Bay Plaza Office Center whose results of operations are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 1997. (4) Includes the Stacy Road, Watters Road and Opubco land which are separately presented in the Trust's Current Report on Form 8-K, dated June 24, 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, 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: August 19, 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 July 18, 1997
Exhibit Page Number Description Number - ------ ----------- ------ 99.4 Durham Centre, Audited Statement of Revenue 9 and Direct Operating Expenses for the year ended December 31, 1996.
EX-99.4 2 AUDITED STATEMENT OF REVENUE & DIRECT OPERATING EX 1 EXHIBIT 99.4 DURHAM CENTRE STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES YEAR ENDED DECEMBER 31, 1996 1 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 Durham Centre 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 Durham Centre for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Farmer, Fuqua, Hunt & Munselle, P.C. Dallas, Texas August 14, 1997 2 3 DURHAM CENTRE STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES Year Ended December 31, 1996 REVENUES Net rental revenues and common area maintenance charges $3,576,320 Other revenues 63,333 ---------- Total revenues 3,639,653 DIRECT OPERATING EXPENSES Repairs and maintenance 513,055 Utilities 384,561 Property taxes 330,000 Insurance 23,646 Salaries 16,380 ---------- Total direct operating expenses 1,267,642 ---------- REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $2,372,011 ==========
The accompanying notes are an integral part of this statement. 3 4 DURHAM CENTRE NOTES TO STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES December 31, 1996 NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Durham Centre is a 205,467 square foot office building located in Durham, North Carolina. During 1996, the property was owned by DCV Limited Partnership. 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: Parking income $63,000 Miscellaneous 333 ------- $63,333 =======
NOTE 4: SUBSEQUENT EVENT The property was sold to Continental Mortgage and Equity Trust, a California business trust, on July 18, 1997. 4 -----END PRIVACY-ENHANCED MESSAGE-----