UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
Amendment #1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 31, 2005
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BNP RESIDENTIAL PROPERTIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Maryland 1-9496 56-1574675
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
301 S. College Street, Suite 3850
Charlotte, North Carolina 28202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (704) 944-0100
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
___ Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
___ Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
___ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
___ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Total number of pages: 35
BNP Residential Properties, Inc. hereby amends its Current Report on
Form 8-K dated March 31, 2005, and filed April 5, 2005, to provide required
financial statements and pro forma financial information.
Item 2.01 Completion of Acquisition of Assets
Acquisition of Shugart properties effective March 31, 2005
Effective March 31, 2005, BNP Residential Properties, Inc. completed
the acquisition of a portfolio of four apartment properties pursuant to exchange
agreements entered into in December 2004. We initially reported completion of
this acquisition in our Current Report on Form 8-K dated March 31, 2005 and
filed April 5, 2005. We had previously reported entry into these agreements in
our Current Report on Form 8-K dated December 7, 2004.
Each selling entity is an affiliate of Grover F. Shugart, Jr. and/or
Brian D. Shugart, and we refer to the apartment properties collectively as the
"Shugart properties." Prior to the acquisition, BNP provided third-party
management services for these properties.
The four apartment properties are as follows:
o Canterbury Apartments, located in Myrtle Beach, South Carolina - 630 apartment
units;
o Laurel Springs - Phase I Apartments, located in High Point, North Carolina -
240 apartment units;
o Laurel Springs - Phase II Apartments, located in High Point, North Carolina -
96 apartment units; and
o Salem Ridge Apartments, located in Winston-Salem, North Carolina - 120
apartment units.
We will operate Laurel Springs and Laurel Springs II Apartments as one
community.
We acquired the apartment properties for an aggregate contract price of
$51.8 million, including issuance of 689,947 units in our operating partnership
valued at $9.3 million and assumption of $42.8 million in debt. We also received
approximately $0.3 million in net operating assets, composed primarily of escrow
funds held by lenders.
The preliminary allocation of the purchase price includes the following
significant components (all amounts in thousands):
Value of
Contract Price of Operating
Property Real Estate Assets Debt Assumed Partnership Units
------------------------------------- ------------------- -------------------- -------------------
Canterbury Apartments $ 25,750 $ 22,992 $ 3,070
Laurel Springs Apartments 14,610 11,320 3,329
Laurel Springs II Apartments 7,090 5,850 1,209
Salem Ridge Apartments 4,360 2,610 1,706
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$ 51,810 $ 42,772 $ 9,314
=================== ==================== ===================
We issued 615,873 operating partnership units to the selling entities
on March 31, 2005, subject to final settlement amounts for net operating assets
in June 2005. We will issue the remaining 74,074 operating partnership units on
March 31, 2006.
We included these assets and liabilities in our consolidated balance
sheet included in our Current Report on Form 10-Q for the quarter ended March
31, 2005.
We have included statements of revenues and certain operating expenses
for these properties, for the year ended December 31, 2004, and for the period
January 1 through March 30, 2005, in this Current Report on Form 8-K/A,
Amendment #1.
2
Item 8.01 Other Events
Additional apartment property acquisitions subsequent to March 31, 2005
Subsequent to our acquisition of the Shugart properties, we acquired,
in two separate transactions, two apartment properties located in the
Charleston, South Carolina area:
o Waverly Place Apartments, located in North Charleston, South Carolina,
effective April 21, 2005 - 240 units; and
o Paces Watch Apartments, located in Mount Pleasant, South Carolina, effective
May 12, 2005 - 232 units.
Both of these transactions were cash purchases, which we funded
primarily through issuance of mortgage notes payable and draws on an existing
line of credit totaling $7.8 million, as follows (all amounts in thousands):
Contract Price of Mortgage Notes
Property Real Estate Assets Payable Issued
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Waverly Place Apartments $ 13,100 $ 10,160
Paces Watch Apartments 20,450 14,925
In conjunction with the issuance of these notes payable, we paid and
recorded deferred loan costs totaling $160,000.
We have included statements of revenue and certain operating expenses
for Paces Watch Apartments for the year ended December 31, 2004, and for the
three months ended March 31,2005, in this Current Report on Form 8-K/A,
Amendment #1.
Consolidation of limited partnerships effective January 2005
Effective January 26, 2005, we acquired Boddie Investment Company
("BIC") in exchange for shares of our common stock valued at $8.2 million. As a
result of this acquisition, in addition to other significant assets, we acquired
certain economic interests in three limited partnerships. We described this
acquisition in detail, along with detailed discussion of our accounting
treatment for each of the limited partnerships, in our Current Report on Form
10-Q for the quarterly period ended March 31, 2005.
As a result of the BIC acquisition, we include the accounts of the
Marina Shores Associates One Limited Partnership ("Marina Shores Partnership")
and The Villages of Chapel Hill Limited Partnership ("Villages Partnership") in
our consolidated financial statements effective January 26, 2005. Each of these
partnerships owns and operates an apartment property:
o Marina Shores Apartments, located in Virginia Beach, Virginia - 392 units - we
own a 50% general partner interest; and
o The Villages of Chapel Hill Apartments, located in Carrboro, North Carolina -
264 units - we own a 1% general partner interest.
We included the assets and liabilities of these partnerships and their
respective apartment properties in our consolidated balance sheet included in
our Current Report on Form 10-Q for the quarter ended March 31, 2005.
Significant components of these balances, as reflected in our consolidated
balance sheet as of March 31, 2005, were as follows (all amounts in thousands):
3
Real Estate
Investments, net Deed of Trust
Property of Depreciation Notes Payable
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Marina Shores Apartments $ 26,074 $ 33,850
The Villages of Chapel Hill Apartments 14,063 12,043
We have included statements of revenue and certain operating expenses
for these properties for the years ended December 31, 2004, 2003, and 2002, and
for the period January 1 through January 25, 2005, in this Current Report on
Form 8-K/A, Amendment #1.
Item 9.01 Financial Statements and Exhibits
(a) Financial statements of businesses acquired. The following financial
statements are included in this Amendment to Current Report on Form
8-K/A at the pages listed, and are filed herewith and incorporated
herein by reference:
Page
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7 Canterbury Apartments Statements of Revenue and Certain
Operating Expenses for the year ended December 31, 2004,
and for the period January 1 through March 30, 2005
(unaudited)
10 Laurel Springs Apartments Statements of Revenue and
Certain Operating Expenses for the year ended December
31, 2004, and for the period January 1 through March 30,
2005 (unaudited)
13 Laurel Springs II Apartments Statements of Revenue and
Certain Operating Expenses for the year ended December
31, 2004, and for the period January 1 through March 30,
2005 (unaudited)
16 Salem Ridge Apartments Statements of Revenue and Certain
Operating Expenses for the year ended December 31, 2004,
and for the period January 1 through March 30, 2005
(unaudited)
19 Paces Watch Apartments Statements of Revenue and Certain
Operating Expenses for the year ended December 31, 2004,
and for the three months ended March 31, 2005
(unaudited)
22 Marina Shores Apartments Statements of Revenue and
Certain Operating Expenses for the year ended December
31, 2004, 2003 and 2002, and for the period January 1
through January 25, 2005 (unaudited)
25 The Villages of Chapel Hill Apartments Statements of
Revenue and Certain Operating Expenses for the year
ended December 31, 2004, 2003 and 2002, and for the
period January 1 through January 25, 2005 (unaudited)
(b) Pro forma financial information The following pro forma financial
information is included in this Amendment to Current Report on Form
8-K/A at the pages listed, and is filed herewith and incorporated
herein by reference:
Page
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28 Introduction to Unaudited Pro Forma Financial Statements
4
29 BNP Residential Properties, Inc., Unaudited Pro Forma
Condensed Consolidated Balance Sheet as of
March 31, 2005
30 BNP Residential Properties, Inc., Unaudited Pro Forma
Condensed Consolidated Statement of Operations for the
three months ended March 31, 2005
31 BNP Residential Properties, Inc., Unaudited Pro Forma
Condensed Consolidated Statement of Operations for the
year ended December 31, 2004
32 BNP Residential Properties, Inc., Notes to Unaudited
Pro Forma Condensed Consolidated Financial Statements
(c) Exhibits.
No.
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23.1 Consent of Sharrard, McGee & Co., P.A.
23.2 Consent of Reznick Fedder & Silverman
23.3 Consent of Ernst & Young LLP
5
SIGNATURES
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 hereunto duly authorized.
BNP Residential Properties, Inc.
(Registrant)
June 10, 2005 /s/ Pamela B. Bruno
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Pamela B. Bruno
Vice President, Treasurer and
Chief Accounting Officer
6
Report of Independent Auditors
Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying statement of revenue and certain
operating expenses of Canterbury Apartments for the year ended December 31,
2004. This statement is the responsibility of Canterbury Apartments' management.
Our responsibility is to express an opinion on this statement based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis of designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Apartments' internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenue and certain operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Canterbury Apartments' revenues and expenses.
In our opinion, the statement of revenue and certain operating expenses
referred to above presents fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Canterbury Apartments for the
year ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Sharrard, McGee & Co., P.A.
Greensboro, North Carolina
May 18, 2005
7
Canterbury Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through Year ended
March 30, December 31,
2005 2004
--------------------- ---------------------
(Unaudited)
Rental income $ 1,092,615 $ 4,067,519
Certain operating expenses:
Property operations expense 336,622 1,312,711
Property insurance 59,973 254,341
Property taxes 58,209 211,215
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454,804 1,778,267
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Revenue in excess of certain operating expenses $ 637,811 $ 2,289,252
===================== =====================
See accompanying notes.
8
Canterbury Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2004 and
For the period January 1 through March 30, 2005 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Myrtle Beach, South Carolina.
Canterbury Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in March, 2005. The 630-unit
apartment property was built in 1997-1999.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Canterbury Apartments leased its residential apartments under operating leases
with monthly payments due in advance. The majority of the apartment leases were
for terms of one year or less. Rental and other revenues were recorded as
earned.
Advertising expense
Canterbury Apartments charged advertising costs to property operations expense
as incurred. Advertising expense included in property operations expense totaled
approximately $21,000 for the year ended December 31, 2004 and approximately
$4,000 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through March 30,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through March 30,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
2. Environmental matters
Canterbury Apartments has been subjected to Phase I environmental reviews. These
reviews did not reveal, nor is management aware of, any environmental liability
that management believes would have a material adverse effect on the
accompanying financial statements.
9
Report of Independent Auditors
Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying statement of revenue and certain
operating expenses of Laurel Springs Apartments for the year ended December 31,
2004. This statement is the responsibility of Laurel Springs Apartments'
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis of designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Apartments' internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenue and certain operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Laurel Springs Apartments' revenues and
expenses.
In our opinion, the statement of revenue and certain operating expenses
referred to above presents fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Laurel Springs Apartments for
the year ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Sharrard, McGee & Co., P.A.
Greensboro, North Carolina
May 18, 2005
10
Laurel Springs Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through Year ended
March 30, December 31,
2005 2004
--------------------- ---------------------
(Unaudited)
Rental income $433,253 $1,695,063
Certain operating expenses:
Property operations expense 141,213 459,308
Property insurance 6,310 25,131
Property taxes 33,045 123,009
--------------------- ---------------------
180,568 607,448
--------------------- ---------------------
Revenue in excess of certain operating expenses $252,685 $1,087,615
===================== =====================
See accompanying notes.
11
Laurel Springs Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2004 and
For the period January 1 through March 30, 2005 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in High Point, North Carolina.
Laurel Springs Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in March, 2005. The 240-unit
apartment property was built in 2002.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Laurel Springs Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.
Advertising expense
Laurel Springs Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $21,000 for the year ended December 31, 2004 and
approximately $5,000 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through March 30,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through March 30,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
2.Environmental matters
Laurel Springs Apartments has been subjected to Phase I environmental reviews.
These reviews did not reveal, nor is management aware of, any environmental
liability that management believes would have a material adverse effect on the
accompanying financial statements.
12
Report of Independent Auditors
Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying statement of revenue and certain
operating expenses of Laurel Springs, II Apartments for the year ended December
31, 2004. This statement is the responsibility of Laurel Springs, II Apartments'
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis of designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Apartments' internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenue and certain operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Laurel Springs, II Apartments' revenues and
expenses.
In our opinion, the statement of revenue and certain operating expenses
referred to above presents fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Laurel Springs, II Apartments
for the year ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Sharrard, McGee & Co., P.A.
Greensboro, North Carolina
May 18, 2005
13
Laurel Springs II Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through Year ended
March 30, December 31,
2005 2004
--------------------- ---------------------
(Unaudited)
Rental income $208,012 $448,375
Certain operating expenses:
Property operations expense 65,225 186,291
Property insurance 5,510 6,617
Property taxes 16,361 64,406
--------------------- ---------------------
87,096 257,314
--------------------- ---------------------
Revenue in excess of certain operating expenses $120,916 $ 191,061
===================== =====================
See accompanying notes.
14
Laurel Springs II Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2004 and
For the period January 1 through March 30, 2005 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in High Point, North Carolina.
Laurel Springs II Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in March, 2005. Laurel Springs II
Apartments is adjacent to and shares common areas and resident amenities with
Laurel Springs Apartments. Construction of the 96-unit apartment property was
completed in April 2004, and the property was in the initial lease-up stage
throughout most of 2004.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Laurel Springs II Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.
Advertising expense
Laurel Springs II Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $12,000 for the year ended December 31, 2004 and
approximately $2,600 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through March 30,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through March 30,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
2. Environmental matters
Laurel Springs II Apartments has been subjected to Phase I environmental
reviews. These reviews did not reveal, nor is management aware of, any
environmental liability that management believes would have a material adverse
effect on the accompanying financial statements.
15
Report of Independent Auditors
Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying statement of revenue and certain
operating expenses of Salem Ridge Apartments for the year ended December 31,
2004. This statement is the responsibility of Salem Ridge Apartments'
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis of designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Apartments' internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenue and certain operating expenses
was prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of Salem Ridge Apartments' revenues and expenses.
In our opinion, the statement of revenue and certain operating expenses
referred to above presents fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Salem Ridge Apartments for
the year ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Sharrard, McGee & Co., P.A.
Greensboro, North Carolina
May 18, 2005
16
Salem Ridge Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through Year ended
March 30, December 31,
2005 2004
--------------------- ---------------------
(Unaudited)
Rental income $ 187,948 $ 725,184
Certain operating expenses:
Property operations expense 78,226 307,132
Property insurance 2,227 8,573
Property taxes 12,379 50,769
--------------------- ---------------------
92,832 366,474
--------------------- ---------------------
Revenue in excess of certain operating expenses $ 95,116 $ 358,710
===================== =====================
See accompanying notes.
17
Salem Ridge Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2004 and
For the period January 1 through March 30, 2005 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Winston-Salem, North Carolina.
Salem Ridge Apartments is not a legal entity; it is an apartment property
acquired by BNP Residential Properties, Inc. in March, 2005. The 120-unit
apartment property was built in 1984.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Salem Ridge Apartments leased its residential apartments under operating leases
with monthly payments due in advance. The majority of the apartment leases were
for terms of one year or less. Rental and other revenues were recorded as
earned.
Advertising expense
Salem Ridge Apartments charged advertising costs to property operations expense
as incurred. Advertising expense included in property operations expense totaled
approximately $17,000 for the year ended December 31, 2004 and approximately
$3,500 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through March 30,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through March 30,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
2. Environmental matters
Management is not aware of any environmental liability that would have a
material adverse effect on the accompanying financial statements.
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying Statements of Revenue and Certain
Operating Expenses ("Statements") of Paces Watch Apartments (the "Community")
for the year ended December 31, 2004. These statements are the responsibility of
the management of BNP Residential Properties, Inc. Our responsibility is to
express an opinion on the Statements based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Account Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Statements. We believe that our audit provides a reasonable basis for our
opinion.
The accompany Statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K for BNP Residential Properties, Inc.) as described in Note
A. This presentation is not intended to be a complete presentation of the
Community's revenue and expenses.
In our opinion, the Statements referred to above present fairly, in all
material respects, the revenue and certain expenses described in Note A of the
Community for the year ended December 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Charlotte, North Carolina
June 8, 2005
19
Paces Watch Apartments
Statements of Revenue and Certain Operating Expenses
Three months
ended Year ended
March 31, December 31,
2005 2004
--------------------- ---------------------
(Unaudited)
Rental income $ 521,489 $ 2,027,565
Certain operating expenses:
Property operations expense 112,101 523,748
Property insurance 15,301 61,205
Property taxes 39,918 158,845
--------------------- ---------------------
167,320 743,798
--------------------- ---------------------
Revenue in excess of certain operating expenses $ 354,169 $ 1,283,767
===================== =====================
See accompanying notes.
20
Paces Watch Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the year ended December 31, 2004 and
For the three months ended March 31, 2005 (Unaudited)
A. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Charleston, South Carolina. Paces
Watch Apartments is not a legal entity; it is an apartment property acquired by
BNP Residential Properties, Inc. in May, 2005. The 232-unit apartment property
was built in 1987.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Paces Watch Apartments leased its residential apartments under operating leases
with monthly payments due in advance. The majority of the apartment leases were
for terms of one year or less. Rental and other revenues were recorded as
earned.
Advertising expense
Paces Watch Apartments charged advertising costs to property operations expense
as incurred. Advertising expense included in property operations expense totaled
approximately $22,000 for the year ended December 31, 2004 and approximately
$5,000 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Unaudited interim financial data
The financial statements for the three months ended March 31, 2005, include all
adjustments that are, in management's opinion, necessary for a fair presentation
of the revenues and certain operating expenses for this interim period.
Operating results for the three months ended March 31, 2005, are not necessarily
indicative of the results to be expected for the entire year ending December 31,
2005.
B. Environmental matters
Paces Watch Apartments has been subjected to Phase I environmental reviews.
These reviews did not reveal, nor is management aware of, any environmental
liability that management believes would have a material adverse effect on the
accompanying financial statements.
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying Statements of Revenue and Certain
Operating Expenses ("Statements") of Marina Shores Apartments (the "Community")
for the years ended December 31, 2004, 2003 and 2002. These statements are the
responsibility of the management of BNP Residential Properties, Inc. Our
responsibility is to express an opinion on the Statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Account Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Statements. We believe that our audits provide a reasonable basis for our
opinion.
The accompany Statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K for BNP Residential Properties, Inc.) as described in Note
A. This presentation is not intended to be a complete presentation of the
Community's revenue and expenses.
In our opinion, the Statements referred to above present fairly, in all
material respects, the revenue and certain expenses described in Note A of the
Community for the years ended December 31, 2004, 2003 and 2002, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Charlotte, North Carolina
June 8, 2005
22
Marina Shores Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through
January 25, Years ended December 31
2005 2004 2003 2002
-------------- --------------- -------------- ---------------
(Unaudited)
Rental income $ 413,763 $ 5,073,434 $ 4,784,902 $ 4,524,878
Certain operating expenses:
Property operations expense 79,597 1,033,714 959,324 908,024
Property insurance 12,026 136,992 131,206 90,783
Property taxes 32,711 440,278 386,142 357,855
-------------- --------------- -------------- ---------------
124,334 1,610,984 1,476,672 1,356,662
-------------- --------------- -------------- ---------------
Revenue in excess of
certain operating expenses $ 289,429 $ 3,462,450 $ 3,308,230 $ 3,168,216
============== =============== ============== ===============
See accompanying notes.
23
Marina Shores Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the years ended December 31, 2002, 2003, 2004 and
For the period January 1 through January 25, 2005 (Unaudited)
A. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Virginia Beach, Virginia. Marina
Shores Apartments is not a legal entity; it is an apartment property for which
BNP Residential Properties, Inc. acquired a 50% general partner interest in
January, 2005. The 392-unit apartment property was built in 1990.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
Marina Shores Apartments leased its residential apartments under operating
leases with monthly payments due in advance. The majority of the apartment
leases were for terms of one year or less. Rental and other revenues were
recorded as earned.
Advertising expense
Marina Shores Apartments charged advertising costs to property operations
expense as incurred. Advertising expense included in property operations expense
totaled approximately $25,000, $29,000, and $29,000 for the years ended December
31, 2002, 2003, and 2004 respectively and approximately $3,000 for the interim
period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through January 25,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through January 25,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
B. Environmental matters
Marina Shores Apartments has been subjected to Phase I environmental reviews.
These reviews did not reveal, nor is management aware of, any environmental
liability that management believes would have a material adverse effect on the
accompanying financial statements.
24
Report of Independent Auditors
Board of Directors and Stockholders
BNP Residential Properties, Inc.
We have audited the accompanying statements of revenue and certain operating
expenses of Villages of Chapel Hill Apartments for the years ended December 31,
2004, 2003, and 2002. These statements are the responsibility of Villages of
Chapel Hill Apartments' management. Our responsibility is to express an opinion
on these statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Apartments' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying statements of revenue and certain operating expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and are not intended
to be a complete presentation of Villages of Chapel Hill Apartments' revenues
and expenses.
In our opinion, the statements of revenue and certain operating expenses
referred to above present fairly, in all material respects, the revenue and
certain operating expenses described in Note 1 for Villages of Chapel Hill
Apartments for the years ended December 31, 2004, 2003, and 2002 in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Greenville, South Carolina
June 7, 2005
25
The Villages of Chapel Hill Apartments
Statements of Revenue and Certain Operating Expenses
January 1
through
January 25 Years ended December 31
2005 2004 2003 2002
--------------- --------------- ---------------- ---------------
(Unaudited)
Rental income $ 177,717 $ 1,990,073 $ 2,004,042 $ 2,026,412
Certain operating expenses:
Property operations expense 56,720 645,728 699,735 665,657
Property insurance 3,709 44,101 43,760 44,398
Property taxes 18,762 238,334 219,415 216,663
--------------- --------------- ---------------- ---------------
79,191 928,163 962,910 926,718
--------------- --------------- ---------------- ---------------
Revenue in excess of
certain operating expenses $ 98,526 $ 1,061,910 $ 1,041,132 $ 1,099,694
=============== =============== ================ ===============
See accompanying notes.
26
The Villages of Chapel Hill Apartments
Notes to Statements of Revenue and Certain Operating Expenses
For the years ended December 31, 2002, 2003, 2004 and
For the period January 1 through January 25, 2005 (Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
These statements of revenue and certain operating expenses reflect the
operations of an apartment property located in Carrboro, North Carolina. The
Villages of Chapel Hill Apartments is not a legal entity; it is an apartment
property for which BNP Residential Properties, Inc. acquired a 1% general
partner interest in January, 2005. The 264-unit apartment property was built in
1975.
We prepared these statements in accordance with Rule 3-14 of Regulation S-X.
Accordingly, these statements exclude items such as interest, depreciation and
amortization, and general and administrative expenses that are not comparable to
the anticipated future on-site operations of the apartment property.
Revenue recognition
The Villages of Chapel Hill Apartments leased its residential apartments under
operating leases with monthly payments due in advance. The majority of the
apartment leases were for terms of one year or less. Rental and other revenues
were recorded as earned.
Advertising expense
The Villages of Chapel Hill Apartments charged advertising costs to property
operations expense as incurred. Advertising expense included in property
operations expense totaled approximately $38,000, $34,000 and $26,000 for the
years ended December 31, 2002, 2003, and 2004 respectively and approximately
$2,000 for the interim period in 2005.
Use of estimates
We are required to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes in order to prepare
them in accordance with generally accepted accounting principles. Actual results
could differ from those amounts.
Interim financial data
The unaudited financial statements for the period January 1 through January 25,
2005, include all adjustments that are, in management's opinion, necessary for a
fair presentation of the revenues and certain operating expenses for this
interim period. Operating results for the period January 1 through January 25,
2005, are not necessarily indicative of the results to be expected for the
entire year ending December 31, 2005.
2. Environmental matters
The Villages of Chapel Hill Apartments has been subjected to Phase I
environmental reviews. These reviews did not reveal, nor is management aware of,
any environmental liability that management believes would have a material
adverse effect on the accompanying financial statements.
27
Introduction to Unaudited Pro Forma Financial Statements
You should read the following unaudited statements in conjunction with
our Annual Report on Form 10-K for the year ended December 31, 2004, and our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. We believe
the pro forma condensed consolidated financial information provides all
adjustments necessary to reflect the effects of:
o our acquisition of Canterbury Apartments, Laurel Springs Apartments,
Laurel Springs II Apartments, and Salem Ridge Apartments (which we refer to
collectively as the "Shugart properties") in March 2005;
o our acquisitions of Waverly Place Apartments in April 2005 and Paces
Watch Apartments in May 2005; and
o our inclusion of the accounts of Marina Shores Associates One Limited
Partnership ("Marina Shores Partnership") and The Villages of Chapel Hill
Limited Partnership (the "Villages Partnership") in our consolidated
financial statements effective late January 2005.
We have presented the unaudited pro forma condensed consolidated
balance sheet as of March 31, 2005, as if we had acquired Waverly Place and
Paces Watch Apartments as of March 31, 2005.
We have presented the unaudited pro forma condensed consolidated
statement of operations for the three months ended March 31, 2005, as if we had
acquired the Shugart properties, Waverly Place Apartments and Paces Watch
Apartments as of January 1, 2005, and as if we had consolidated the accounts of
Marina Shores Partnership and the Villages Partnership effective January 1,
2005.
We have presented the unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 2004, as if we had
acquired the Shugart properties, Waverly Place Apartments and Paces Watch
Apartments as of January 1, 2004, and as if we had consolidated the accounts of
Marina Shores Partnership and the Villages Partnership effective January 1,
2004.
No one has audited these pro forma condensed consolidated financial
statements. These pro forma statements include pro forma allocations of the
purchase prices for the Shugart Properties, Waverly Place and Paces Watch
Apartments based on preliminary estimates of the fair value of the assets and
liabilities acquired in connection with these acquisitions. These allocations
may be adjusted in the future upon finalization of these preliminary estimates.
These pro forma statements have been prepared for informational purposes only
and are not necessarily indicative of future results or of actual results that
would have been achieved if we had really acquired the properties as of the
dates described above.
28
BNP Residential Properties, Inc.
-------------------------------------------------------------------------------
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31 2005
(in thousands)
Pro Forma Adjustments
------------------------------------
Historical Waverly Place Paces Watch Pro Forma
------------------ ----------------- ------------------ -----------------
(A) (B) (B)
Assets
Real estate investments, net $ 450,979 $ 13,146 $ 20,492 $ 484,617
Cash and cash equivalents 2,583 (132) (899) 1,552
Other assets 7,513 152 160 7,825
Intangibles, net of amortization 3,805 66 90 3,961
------------------ ----------------- ------------------ -----------------
Total assets $ 464,880 $ 13,232 $ 19,843 $ 497,955
================== ================= ================== =================
Liabilities and Shareholders' Equity
Deed of trust and other notes payable $ 373,269 $ 13,160 $ 19,725 $ 406,154
Accounts payable and other current liabilities 5,006 41 56 5,103
Consideration due for acquisitions 1,000 - - 1,000
Deferred revenue and security deposits 1,940 31 62 2,033
------------------ ----------------- ------------------ -----------------
381,215 13,232 19,843 414,290
Minority interests 20,545 - - 20,545
Shareholders' equity 63,120 - - 63,120
------------------ ----------------- ------------------ -----------------
Total liabilities and shareholders' equity $ 464,880 $ 13,232 $ 19,843 $ 497,955
================== ================= ================== =================
See accompanying notes
29
BNP Residential Properties, Inc.
-------------------------------------------------------------------------------
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the three months ended March 31, 2005
(in thousands, except per share data)
Pro Forma Adjustments
------------------------------------------------------
Consolidated
Limited Shugart
Historical Partnerships Properties Waverly Place
------------------ ----------------- ------------------ -----------------
(A) (C) (C) (C)
Revenues
Apartment rental income $ 14,093 $ 591 $ 1,922 $ 431
Restaurant rental income 957 - - -
Management fee income 115 (31) (76) -
Interest and other income 225 (6) - -
------------------ ----------------- ------------------ -----------------
15,390 554 1,846 431
Expenses
Apartment operations 5,443 203 815 175
Apartment and corporate administration 1,558 - - -
Interest expense and penalties paid at debt refinance 5,090 199 553 169
Depreciation 3,522 174 320 71
Amortization and write-off of loan costs 267 5 3 2
Deficit distributions to minority partners 6,821 - - -
------------------ ----------------- ------------------ -----------------
22,701 581 1,691 417
------------------ ----------------- ------------------ -----------------
Income (loss) before minority interest (7,311) (27) 155 14
Minority interest in consolidated limited partnerships (62) (51) - -
Minority interest in operating partnership (1,292) - (274) -
------------------ ----------------- ------------------ -----------------
Net income (loss) $ (5,957) $ 24 $ 429 $ 14
================== ================= ================== =================
Per share data:
Net loss - basic $ (0.66)
Net loss - diluted (0.67)
Weighted average shares outstanding 8,983 121 - -
Weighted average operating partnership minority units
outstanding 1,870 - 609 -
Pro Forma Adjustments
---------------------
Paces Watch Pro Forma
------------------ ------------------
(C)
Revenues
Apartment rental income $ 521 $ 17,558
Restaurant rental income - 957
Management fee income - 8
Interest and other income - 219
------------------ ------------------
521 18,742
Expenses
Apartment operations 167 6,803
Apartment and corporate administration - 1,558
Interest expense and penalties paid at debt refinance 253 6,264
Depreciation 110 4,197
Amortization and write-off of loan costs 2 279
Deficit distributions to minority partners - 6,821
------------------ ------------------
532 25,922
------------------ ------------------
Income (loss) before minority interest (11) (7,180)
Minority interest in consolidated limited partnerships - (113)
Minority interest in operating partnership - (1,566)
------------------ ------------------
Net income (loss) $ (11) $ (5,501)
================== ==================
Per share data:
Net loss - basic $ (0.60)
Net loss - diluted (0.61)
Weighted average shares outstanding - 9,104
Weighted average operating partnership minority units
outstanding - 2,479
See accompanying notes
30
BNP Residential Properties, Inc.
-------------------------------------------------------------------------------
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2004
(in thousands, except per share data)
Pro Forma Adjustments
------------------------------------------------------
Consolidated
Limited Shugart
Historical Partnerships Properties Waverly Place
------------------ ----------------- ------------------ -----------------
(D) (E) (E) (E)
Revenues
Apartment rental income $ 45,808 $ 7,063 $ 6,936 $ 1,707
Restaurant rental income 3,830 - - -
Management fee income 761 (371) (283) -
Interest and other income 466 (71) - -
------------------ ----------------- ------------------ -----------------
50,865 6,621 6,653 1,707
Expenses
Apartment operations 18,563 2,539 3,008 765
Apartment and corporate administration 4,519 - - -
Interest expense and penalties paid at debt refinance 14,608 2,362 2,143 645
Depreciation 11,660 2,146 1,279 284
Amortization and write-off of loan costs 460 69 12 6
Deficit distributions to minority partners - 305 - -
------------------ ----------------- ------------------ -----------------
49,810 7,421 6,442 1,700
------------------ ----------------- ------------------ -----------------
Income (loss) before minority interest 1,055 (800) 211 7
Minority interest in consolidated limited partnerships - (82) - -
Minority interest in operating partnership 16 - (150) -
------------------ ----------------- ------------------ -----------------
Net income (loss) $ 1,039 $ (718) $ 361 $ 7
================== ================= ================== =================
Per share data:
Net income - basic $ 0.14
Net income - diluted 0.11
Weighted average shares outstanding 7,617 436 - -
Weighted average operating partnership minority units
outstanding 1,856 - 615 -
Pro Forma Adjustments
---------------------
Paces Watch Pro Forma
------------------ ------------------
(E)
Revenues
Apartment rental income $ 2,028 $ 63,542
Restaurant rental income - 3,830
Management fee income - 107
Interest and other income - 395
------------------ ------------------
2,028 67,874
Expenses
Apartment operations 744 25,619
Apartment and corporate administration - 4,519
Interest expense and penalties paid at debt refinance 962 20,720
Depreciation 440 15,809
Amortization and write-off of loan costs 9 556
Deficit distributions to minority partners - 305
------------------ ------------------
2,155 67,528
------------------ ------------------
Income (loss) before minority interest (127) 346
Minority interest in consolidated limited partnerships - (82)
Minority interest in operating partnership - (134)
------------------ ------------------
Net income (loss) $ (127) $ 562
================== ==================
Per share data:
Net income - basic $ 0.07
Net income - diluted 0.04
Weighted average shares outstanding - 8,053
Weighted average operating partnership minority units
outstanding - 2,471
See accompanying notes
31
BNP Residential Properties, Inc.
-------------------------------------------------------------------------------
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(A) Reflects our historical consolidated balance sheet and consolidated
statement of operations contained in our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005. These financial statements reflect the acquisition
of the Shugart properties effective March 31, 2005, and include the accounts of
the consolidated limited partnerships effective January 26, 2005.
(B) Represents the acquisitions of Waverly Place Apartments and Paces Watch
Apartments and related financing transactions, as if we had acquired these
properties as of March 31, 2005.
(C) Represents the pro forma revenues and expenses for the three months ended
March 31, 2005, as if we had acquired the Shugart properties, Waverly Place and
Paces Watch Apartments as of January 1, 2005, and as if we had included the
accounts of the consolidated limited partnerships effective January 1, 2005.
Depreciation expense is calculated using the straight-line method and a
composite 40-year life, applied to our preliminary allocation of purchase price
to depreciable real estate assets. Amortization of deferred loan costs is
calculated using the straight-line method over the lives of the related notes
payable.
(D) Reflects our historical consolidated statement of operations contained in
our Annual Report on Form 10-K for the year ended December 31, 2004.
(E) Represents the pro forma revenues and expenses for the year ended December
31, 2004, as if we had acquired the Shugart properties, Waverly Place and Paces
Watch Apartments as of January 1, 2004, and as if we had included the accounts
of the consolidated limited partnerships effective January 1, 2004. Depreciation
expense is calculated using the straight-line method and a composite 40-year
life, applied to our preliminary allocation of purchase price to depreciable
real estate assets. Amortization of deferred loan costs is calculated using the
straight-line method over the lives of the related notes payable.
32