-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WiMnO3xga/PvWEi1gmiKJV0E2hNz+w3Ss6qcjuDgcqg0uv+tBKOoWkHsVcYYRF8V l0YksqQIRMtSECkNuibctw== 0000950134-94-001387.txt : 19941117 0000950134-94-001387.hdr.sgml : 19941117 ACCESSION NUMBER: 0000950134-94-001387 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941101 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSCONTINENTAL REALTY INVESTORS INC CENTRAL INDEX KEY: 0000733590 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 946565852 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09240 FILM NUMBER: 94560047 BUSINESS ADDRESS: STREET 1: 10670 N CENTRAL EXPRWY STE 300 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 2146924700 MAIL ADDRESS: STREET 1: 10670 N CENTRAL EXPRWY STREET 2: SUITE 300 CITY: DALLAS STATE: TX ZIP: 75231 FORMER COMPANY: FORMER CONFORMED NAME: JOHNSTOWN CONSOLIDATED REALTY TRUST /CA/ DATE OF NAME CHANGE: 19890815 FORMER COMPANY: FORMER CONFORMED NAME: JOHNSTOWN CONSOLIDATED REALTY TRUST DATE OF NAME CHANGE: 19861005 8-K 1 FORM 8-K FOR THE PERIOD ENDED 11/1/94. 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 November 1, 1994 ----------------------------------------------- Date of Report (Date of Earliest Event Reported) TRANSCONTINENTAL REALTY INVESTORS, INC. ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Nevada 0-13291 94-6565852 - - - -------------------------------------------------------------------------------- (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 November 1, 1994, Transcontinental Realty Investors, Inc. ("the Company") purchased the Summerfield Apartments, a 224 unit apartment complex in Orlando, Florida for $5.6 million, exclusive of commissions and closing costs. The Company paid $800,000 in cash and assumed a first mortgage in the amount of $4.8 million. The mortgage bears interest at a variable rate and requires monthly payments of principal and interest of $43,240. The mortgage matures in March 2024. The $5.6 million purchase price of the Summerfield Apartments is approximately 3.0% of the Company's consolidated assets at December 31, 1993. Although not a significant acquisition in itself, when aggregated with the other acquisitions completed by the Company in 1994, as described below, such acquisitions constitute a significant acquisition. In addition to the Summerfield Apartments acquisition discussed above, the Company has purchased three industrial properties and two office buildings in 1994. The three industrial properties and one of the office buildings are located in Virginia, and the other office building is located in Dallas, Texas. The properties were purchased for a total of $21.7 million and represent approximately 9.4% of the Company's consolidated assets at December 31, 1993. The Company paid a total of $3.7 million in cash and financed the remainder of the purchase prices. The mortgages secured by the properties bear interest at rates ranging from 6.0% to 10.0% per annum and mature in 1999 and 2006. Two of these acquisitions occurred prior to September 30, 1994 and are accordingly reflected in the September 30, 1994 "actual balance sheet" of the Company, as presented. In 1994, the Company has also sold one apartment complex, one office building, its general partnership interest in two partnerships and its limited partner interest in one partnership. In connection with the sales, the Company received cash totaling $1.6 million and provided an additional $100,000 in purchase money financing. These sales all occurred prior to September 30, 1994 and are accordingly reflected in the Company's "actual balance sheet" as of September 30, 1994, as presented. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Pro forma financial information: Pro forma statements of operations are presented for the year ended December 31, 1993 and the nine months ended September 30, 1994. The pro forma statements of operations present the Company's operations as if the transactions described above had occurred at the beginning of each of the periods presented. A pro forma balance sheet as of September 30, 1994 is also presented. The pro forma balance sheet presents the purchase transactions, described above, as if they had occurred on September 30, 1994. 2 3 TRANSCONTINENTAL REALTY INVESTORS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1994
Other Property Actual Summerfield(1) Acquisitions(2) Proforma --------------- -------------- --------------- -------------- (dollars in thousands) Assets ------ Notes and interest receivable Performing.................. $ 16,641 $ - $ - $ 16,641 Nonperforming, nonaccruing.. 593 - - 593 --------------- -------------- -------------- -------------- 17,234 - - 17,234 Real estate held for sale, net of depreciation............. 8,137 - - 8,137 Less - allowance for estimated losses............ (960) - - (960) --------------- -------------- -------------- -------------- 24,411 - - 24,411 Real estate held for invest- ment, net of accumulated depreciation................ 183,217 5,582 9,600 198,399 Investment in partnerships.... 11,094 - - 11,094 Cash and cash equivalents..... 4,816 (771) (2,038) 2,007 Other assets.................. 6,194 - (136) 6,058 --------------- -------------- -------------- -------------- $ 229,732 $ 4,811 $ 7,426 $ 241,969 =============== ============== ============== ============== Liabilities and Stockholders' Equity - - - ------------------------------------ Liabilities Notes and interest payable.... $ 124,082 $ 4,811 $ 7,391 $ 136,284 Other liabilities............. 10,813 - 35 10,848 --------------- -------------- -------------- -------------- 134,895 4,811 7,426 147,132 Commitments and contingencies Stockholders' equity Common stock $.01 par value, authorized, 10,000,000 shares; issued and out- standing, 2,674,850 shares.. 27 - - 27 Paid-in capital............... 219,049 - - 219,049 Accumulated distributions in excess of accumulated earnings.................... (124,239) - - (124,239) --------------- -------------- -------------- -------------- 94,837 - - 94,837 --------------- -------------- -------------- -------------- $ 229,732 $ 4,811 $ 7,426 $ 241,969 =============== ============== ============== ==============
__________________________ (1) Assumes the November 1, 1994 acquisition of the property by the Company occurred on September 30, 1994. (2) Assumes that the October and November 1994 property acquisitions of the Company occurred on September 30, 1994. 3 4 TRANSCONTINENTAL REALTY INVESTORS, INC. PRO FORMA STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1994
Other Property and Property Partnership Actual Summerfield(1) Acquisitions(1) Sales (2) Pro forma ----------- -------------- -------------- ------------ --------- (dollars in thousands, except per share) Income Rentals................................ $ 26,376 $ 876 $ 2,778 $ (1,062) $ 28,968 Interest............................... 1,160 - - - 1,160 Equity in (losses) of investees........ (77) - - (6) (83) ----------- ---------- -------- --------- --------- 27,459 876 2,778 (1,068) 30,045 Expenses Property operations.................... 20,317 440 1,598 (506) 21,849 Interest............................... 7.711 357 1,038 (356) 8,750 Depreciation........................... 4,472 145 334 (175) 4,776 Advisory fee to affiliate.............. 1,280 - - - 1,280 General and administrative............. 1,280 - - - 1,280 ----------- ---------- -------- --------- --------- 35,060 942 2,970 (1,037) 37,935 (loss) before gain on sale of partnership interests, gain on sale of real estate and extraordinary gain..... (7,601) (66) (192) (31) (7,890) Gain on sale of partnership interests.... 2,514 - - - 2,514 Gain on sale of real estate.............. 2,513 - - - 2,153 Extraordinary gain....................... 1,189 - - - 1,189 ----------- ---------- -------- --------- --------- Net (loss)............................... $ (1,745) $ (66) $ (192) $ (31) $ (2,034) =========== ========== ======== ========= ========= Earnings per share (Loss) before gain on sale of partner- ship interests, gain on sale of real estate and extraordinary gain........ $ (2.84) $ (2.95) Gain on sale of partnership interests.. .94 .94 Gain on sale of real estate............ .80 .80 Extraordinary gain..................... .44 .44 ----------- --------- Net (loss)............................. $ (.66) $ (.77) =========== ========= Weighted average Common shares used in computing earnings per share........... 2,674,850 2,674,850 =========== =========
____________________________ (1) Assumes acquisition by the Company on January 1, 1994. (2) Assumes sale by the Company on January 1, 1994. 4 5 TRANSCONTINENTAL REALTY INVESTORS, INC. PRO FORMA STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993
Property Other and Summerfield Property Partnership Actual Acquisition(1) Acquisitions(1) Sales (2) Pro forma ---------- -------------- --------------- ----------- ---------- (dollars in thousands, except per share) Income Rentals.............................. $ 30,373 $ 1,075 $ 2,814 $ (1,911) $ 32,351 Interest............................. 1,869 - - - 1,869 Equity in (losses) of investees...... (262) - - 490 228 --------- --------- ------- ---------- --------- 31,980 1,075 2,814 (1,421) 34,448 Expenses Property operations.................. 23,659 666 1,847 (1,315) 24,857 Interest............................. 8,662 472 1,354 (596) 9,892 Depreciation......................... 5,435 167 541 (229) 5,914 Advisory fee to affiliate............ 1,548 - - - 1,548 General and administrative........... 1,991 - - - 1,991 Provision for losses................. 873 - - - 873 --------- --------- ------- ---------- --------- 42,168 1,305 3,742 (2,140) 45,075 Income (loss) before gain on sale of real estate and extraordinary gain... (10,188) (230) (928) 719 (10,627) Gain on sale of real estate............ 24 - - - 24 Extraordinary gain..................... 1,594 - - - 1,594 --------- --------- ------- ---------- --------- Net income (loss)...................... $ (8,570) $ (230) $ (928) $ 719 $ (9,009) ========= ========= ======= ========== ========= Earnings per share Income before gain on sale of real estate and extraordinary gain...... $ (3.79) $ (3.95) Gain on sale of real estate.......... .01 .01 Extraordinary gain................... .59 .59 --------- --------- Net income........................... $(3.19) $ (3.35) --------- ========= Weighted average shares of Common shares used in computing earnings per share............................ 2,688,888 2,688,888 ========= =========
____________________________ (1) Assumes acquisition by the Company on January 1, 1993. (2) Assumes sale by the Company on January 1, 1993. 5 6 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Financial statements of property acquired:
Exhibit Number Description - - - ------- ---------------------------------------------------------- 99.0 Audited Financial Statements of Summerfield Apartments for the year ended December 31, 1993.
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. TRANSCONTINENTAL REALTY INVESTORS, INC. Date: November 14, 1994 By: /s/ Thomas A. Holland Thomas A. Holland Senior Vice President and Chief Accounting Officer 6 7 TRANSCONTINENTAL REALTY INVESTORS, INC. EXHIBITS TO CURRENT REPORT ON FORM 8-K Dated November 1, 1994
Exhibit Page Number Description Number - - - ------- ----------------------------------------- ------ 99.0 Audited Financial Statements of 8 Summerfield Apartments for the year ended December 31, 1993.
7 EX-99.0 2 AUDITED FINANCIAL STATEMENTS OF SUMMERFILD APTS 1 EXHIBIT 99.0 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 TABLE OF CONTENTS DECEMBER 31, 1993 INDEPENDENT AUDITOR'S REPORT ........................................... 1 FINANCIAL STATEMENTS: Balance Sheet, December 31, 1993 ..................................... 2-3 Statement of Profit and Loss (HUD Form No. 92410) for the year ended December 31, 1993 ............................... 4-5 Statement of Changes in Project Equity for the year ended December 31, 1993 ............................................ 6 Statement of Cash Flows for the year ended December 31, 1993 .................................................. 7 Notes to Financial Statements ........................................ 8-10 2 INDEPENDENT AUDITOR'S REPORT To the Partners Griffin Orlando, A Limited Partnership Minneapolis, Minnesota We have audited the accompanying balance sheet of SUMMERFIELD APARTMENTS OF GRIFFIN ORLANDO, A LIMITED PARTNERSHIP (HUD Project Number 067-10561) as of December 31, 1993, and the related statements of profit and loss, changes in Project equity and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SUMMERFIELD APARTMENTS as of December 31, 1993, and the results of its operations and its changes in Project equity and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit for the year ended December 31, 1993, was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supporting information included in the report (shown on pages 10 to 13) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of SUMMERFIELD APARTMENTS. Such information has been subjected to the audit procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. The accompanying financial statements and supplementary information have been prepared assuming that the entity will continue as a going concern. Because of operating losses and negative current ratio, conditions raise substantial doubt about the ability of SUMMERFIELD APARTMENTS to continue as a going concern. The financial statements and supplementary information do not include any adjustments that might result from the outcome of this uncertainty. /s/ LARSON, ALLEN, WEISHAIR & CO. LARSON, ALLEN, WEISHAIR & CO. Saint Paul, Minnesota February 22, 1994 1 3 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 BALANCE SHEET AS OF DECEMBER 31, 1993 ASSETS CURRENT ASSETS 1110 Petty cash $ 4,000 1120 Cash in bank 4,931 1130 Tenant accounts receivable 2,851 ---------- Total current assets 11,782 ---------- DEPOSITS HELD IN TRUST - FUNDED 1191 Tenant security deposits (contra) 36,377 ---------- RESTRICTED DEPOSITS AND FUNDED RESERVES 1310 Mortgage escrow deposits (Schedule II) 35,803 1320 Reserve for replacements (Schedule IV) 89,436 ---------- Total deposits 125,239 ---------- FIXED ASSETS 1410 Land 420,000 1420 Buildings 6,289,619 1460 Furnishings 502,799 ---------- Total fixed assets 7,212,418 Less accumulated depreciation 1,905,922 ---------- Net Fixed Assets 5,306,496 ---------- Total Assets $5,479,894 ==========
See Accompanying Notes to Financial Statements -2- 4 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 BALANCE SHEET AS OF DECEMBER 31, 1993 LIABILITIES CURRENT LIABILITIES 2110 Accounts payable $ 99,683 2120 Accrued wages payable 6,814 2130 Accrued interest payable 43,409 2190 Miscellaneous current liabilities 475 2320 Mortgage payable - current portion 24,814 ---------- Total current liabilities 175,195 ---------- DEPOSIT AND PREPAYMENT LIABILITIES 2191 Tenant security deposits (contra) 35,108 2210 Prepaid rent 2,824 ---------- Total Deposit and Prepayment Liabilities 37,932 ---------- LONG-TERM LIABILITIES 2320 Mortgage payable 4,831,282 Less: Current portion 24,814 ---------- Total long-term liabilities 4,806,468 ---------- Total Liabilities 5,019,595 ---------- PROJECT EQUITY 3130 Project equity 460,299 ---------- Total Liabilities and Project Equity $5,479,894 ==========
See Accompanying Notes to Financial Statements -3- 5 Statement of Profit and Loss U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner OMB Approval No. 2502-0052 (Exp. 8/31/93)
For Month: Period Project Number Project Name Beginning 1-1-93 Ending 12-31-93 067-10561 Summerfield Apartments - - - --------------------------------- -------------- ---------------------- Part I Description of Account Acct. No RENTAL INCOME - 5100 Apartments or member carrying charges (Coops) 5120 $1,271,752 Furniture and equipment 5130 $ 4,327 TOTAL RENT REVENUE Potential at 100% Occupancy $1,276,079 VACANCIES - 5200 Apartments 5220 $ (219,964) Miscellaneous (specify) rent credit 5290 $ (18,172) TOTAL VACANCIES $ (238,136) NET RENTAL REVENUE Rent revenue less vacancies $1,037,943 FINANCIAL REVENUE - 5400 Interest income - project operations 5410 $ 731 Interest income from investment - reserve for replacement 5440 $ 3,151 TOTAL FINANCIAL REVENUE $ 3,882 OTHER REVENUE - 5900 Laundry and vending 5910 $ 28,183 Other revenue (specify) Clubhouse fees 5990 $ 523 & Redecorating Bad debt recovery 5991 $ 4,494 TOTAL OTHER REVENUE $ 33,200 TOTAL REVENUE $1,075,025 ADMINISTRATIVE EXPENSES - 6200/6300 Advertising 6210 $ 15,051 Other renting expense 6250 $ 1,331 Office salaries 6310 $ 58,205 Office supplies 6311 $ 11,312 Management fee 6320 $ 61,981 Legal Expense 6340 $ 1,881 Auditing expense 6350 $ 2,125 Bookkeeping fees/accounting services 6351 $ 4,194 Telephone and answering service 6360 $ 5,712 Bad debts 6370 $ 19,257 Miscellaneous administrative expenses (specify) Membership dues 6390 $ 218 TOTAL ADMINISTRATIVE EXPENSES $ 181,267 UTILITIES EXPENSE - 6400 Electricity 6450 $ 36,732 Water 6451 $ 16,168 Gas 6452 $ 3,140 TOTAL UTILITIES EXPENSE $ 56,040 OPERATING AND MAINTENANCE EXPENSES - 6500 Janitor and cleaning payroll 6510 $ 8,122 Janitor and cleaning supplies 6515 $ 11,762 Janitor and cleaning contract 6517 $ 10,080 Exterminating payroll/contract 6519 $ 2,650 Grounds payroll 6535 $ 18,951 Grounds supplies 6536 $ 1,064 Grounds/contract 6537 $ 13,176 Repairs payroll 6540 $ 50,084 Repairs material 6541 $ 78,966 Heating/cooling repairs and maintenance 6546 $ 3,256 Swimming pool maintenance/contract 6547 $ 5,912 Decorating supplies 6561 $ 1,795 Vehicle & maintenance equipment operation & repairs 6570 $ 4,577 Misc. operating & maintenance expenses 6590 $ 2,280 TOTAL OPERATING & MAINTENANCE EXPENSES $ 212,675
See Accompanying Notes to Financial Statements -4- 6 Statement of Profit and Loss U.S. Department of Housing and Urban Development Office of Housing Federal Housing Commissioner OMB Approval No. 2502-0052 (Exp. 8/31/93)
For Month: Period Project Number Project Name Beginning 1-1-93 Ending 12-31-93 067-10561 Summerfield Apartments - - - --------------------------------- -------------- ---------------------- Acct. No. TAXES AND INSURANCE - 6700 Real estate taxes 6710 $ 105,534 Payroll taxes (FICA) 6711 $ 11,779 Miscellaneous taxes, licenses and permits 6719 $ 1,376 Property and liability insurance (hazard) 6720 $ 44,709 Health insurance & other employee benefits 6723 $ 21,576 TOTAL TAXES AND INSURANCE $ 184,974 FINANCIAL EXPENSES - 6800 Interest on mortgage payable 6820 $ 471,864 Mortgage insurance premium/service charge 6850 $ 19,352 Miscellaneous financial expenses 6890 $ 1,494 TOTAL FINANCIAL EXPENSES $ 492,710 TOTAL COST OF OPERATIONS BEFORE DEPRECIATION $1,127,666 Profit (loss) before depreciation $ (52,641) Depreciation (total) - 6600 (specify) 6600 $ 167,039 Operating profit or (loss) $ (219,680) NET PROFIT OR (LOSS) $ (219,680)
Part II 1. Total principal payments required under the 3. Replacement of painting reserve releases which mortgage even if payments under a Workout are included as expense items on this profit Agreement are less or more than those and loss statement. $44,362 required under the mortgage. $22,407 2. Replacement reserve deposits required by the 4. Project improvement reserve releases under Regulatory Agreement or amendments thereto, the Flexible Subsidy Program that are included even if payments may be temporarily suspended as expense items on this profit and loss or waived. $26,260 statement. $ N/A
See Accompanying Notes to Financial Statements -5- 7 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 STATEMENT OF CHANGES IN PROJECT EQUITY FOR THE YEAR ENDED DECEMBER 31, 1993 Project equity, January 1, 1993 $ 529,854 Partnership contribution to Project 150,125 Net loss (219,680) --------- Project equity, December 31, 1993 $ 460,299 =========
See Accompanying Notes to Financial Statements -6- 8 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from tenants $1,049,325 Cash paid to suppliers and employees (604,409) Interest received 3,882 Interest paid (473,810) ---------- NET CASH USED BY OPERATING ACTIVITIES (25,012) ---------- CASH FLOWS USED BY INVESTING ACTIVITIES: Purchase of property (98,848) ---------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Contribution by partnership to Project 150,125 Principal payments of mortgage note payable (22,407) ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 127,718 ---------- INCREASE IN CASH 3,858 CASH, BEGINNING OF YEAR 5,073 ---------- CASH, END OF YEAR $ 8,931 ========== RECONCILIATION OF NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Net loss $ (219,680) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 167,039 Decrease (increase) in: Tenant security deposits 1,769 Mortgage escrow deposits 73,676 Other assets (1,876) Replacement reserves 14,951 Increase (decrease) in: Security deposits 3,543 Accounts payable and due to affiliates 49,647 Accrued interest and other expenses (114,081) ---------- NET CASH USED BY OPERATING ACTIVITIES $ (25,012) ==========
See Accompanying Notes to Financial Statements -7- 9 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 1. Summary of Significant Accounting Policies Description of Summerfield Apartments - Summerfield Apartments (the "Project") is a 224 unit apartment complex located in Orlando, Florida owned and operated by Griffin Orlando, A Limited Partnership (the "Partnership"). The Partnership contributed $2,554,802 for the purchase of the Project on March 14, 1984. Basis of Presentation - The accompanying financial statements and supplemental schedules are presented in the format prescribed by the U.S. Department of Housing and Urban Development ("HUD"). Property and Depreciation - Property is stated at cost and is depreciated using the straight-line method over its estimated useful life (buildings, 40 years; furnishings and equipment, 5 years). For tax purposes, the Partnership depreciates the buildings over 15, 18, 19 and 27.5 years using the Accelerated Cost Recovery System and the Modified Accelerated Cost Recovery System. Income Taxes - The financial statements of the Project do not include a provision for income taxes as the income and losses of the Project are allocated to the individual partners of the Partnership for inclusion in their tax returns. Rental Revenues - Rental revenue is recognized in the period earned. 2. Organization Griffin Orlando, A Limited Partnership was formed by the general partner, GO Associates, a Minnesota general partnership, to acquire existing, income-producing real properties for rental purposes. GO Associates is not required to make any capital contributions to the Partnership. The Limited Partnership Agreement and Certificate of Limited Partnership (Partnership Agreement) contain certain provisions, among others, described as follows: -- The management and general responsibility of operating the Partnership business shall be vested exclusively in the general partner. -- Profits, losses and cash flow distributions, other than from the sale of the Partnership properties, are allocated 95% to the limited partners and 5% to the general partner. -- Net proceeds from refinancing or from the sale of property other than upon liquidation, less any necessary liability reserves or debt payments, will be distributed in the following order subject to the general partner receiving at least 1% of the distributions: -8- 10 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 -- First to the limited partners to the extent that prior distributions are less than the original capital contributions plus 10% per annum (as defined in the Partnership Agreement); -- Second, any unpaid real estate commissions due to the general partner on the resale of the Partnership properties; -- Third, any remaining balance, 75% to the limited partners and 25% to the general partner. -- The Partnership will terminate on December 31, 2014 or earlier upon the sale of substantially all of the properties or the occurrence of certain other events as stated in the Partnership Agreement. 3. Mortgages The mortgage note payable bears interest at 10.25% and is payable through March 2024. The mortgage note is secured by the property. Approximate annual maturities of the mortgage note through 1998 are as follows: 1994 $ 24,814 1995 $ 27,481 1996 $ 30,434 1997 $ 33,704 1998 $ 37,326
4. Related Party Transactions The partners of GO Associates, the general partner of the Partnership, are also owners, directors, and officers of Griffin Companies, a Minnesota Corporation. The following is a summary of fees incurred in 1993 relating to Griffin Companies: Management fees $61,981 Major improvement supervisory fees $ 5,976
-9- 11 SUMMERFIELD APARTMENTS PROJECT NO. 067-10561 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1993 5. Contingencies - Going Concern As shown in the accompanying form HUD-92410 statement of profit and loss, the project incurred a net loss of $219,680 during the year ended December 31, 1993, and as of that date, the project's current liabilities exceeded its current assets by $163,413. These factors create an uncertainty about the project's ability to continue as a going concern. The ability of the project to continue as a going concern is dependent on improved tenant occupancy and improved operations of the project. The financial statements do not include any adjustments that might be necessary if the project is unable to continue as a going concern. -10- -----END PRIVACY-ENHANCED MESSAGE-----