12
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 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): October 30, 2003
Berkshire Income Realty, Inc.
(Exact Name of Registrant as Specified in its Charter)
Maryland 001-31659 32-0024337
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 523-7722
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Berkshire Income Realty, Inc. (the "Company") hereby amends it Current Report on
Form 8-K dated October 30, 2003, filed with the Securities and Exchange
Commission on November 14, 2003, to amend Item 7 to include required financial
statements, pro forma financial information and certain exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
At the time of filing of the Form 8-K disclosing the acquisition of St.
Marin/Karrington Apartments by the Company, the financial statements of the
acquired entity were not available. The Company indicated that it would file the
necessary financial information within sixty days after the initial filing date.
(a) Financial Statements under Rules 3-14 of Regulation S-X:
1. Report of Independent Auditors
2. Statements of Revenue and Certain Expenses of St.
Marin/Karrington Apartments for the nine months ended
September 30, 2003 and 2002 (unaudited), and the year ended
December 31, 2002.
3. Notes to the Financial Statements of St. Marin/Karrington
Apartments.
(b) Pro Forma Financial Information under Article 11 of Regulation S-X:
1. Unaudited Pro Forma Consolidated Balance Sheet of Berkshire Income
Realty, Inc. at September 30, 2003.
2. Unaudited Pro Forma Consolidated Statements of Operations of
Berkshire Income Realty, Inc. for the nine months ended September
30, 2003 and the year ended December 31, 2002.
3. Notes to the Unaudited Pro Forma Consolidated Financial Statements
of Berkshire Income Realty, Inc.
(c) Exhibits
EXHIBIT NO.
*10.1 Agreement of Purchase and Sale, dated October 16, 2003 by and
between WHCO Real Estate Limited Partnership and Berkshire Income
Realty - OP, L.P.
*10.2 Assignment and Assumption to Agreement of Purchase and Sale,
dated October 29, 2003 by and between WHCO Real
Estate Limited Partnership and Berkshire Income Realty - OP, L.P.
*10.3 First Amendment to Agreement of Purchase and Sale, dated October
20, 2003 by and between WHCO Real Estate Limited Partnership and
St. Marin/Karrington Limited Partnership
*10.4 Second Amendment to Agreement of Purchase and Sale, dated October
30, 2003 by and between WHCO Real Estate Limited Partnership and
St. Marin/Karrington Limited Partnership
*10.5 Agreement of Purchase and Sale, dated October 16, 2003 by and
between WHCO II Real Estate Limited Partnership and Berkshire
Income Realty - OP, L.P.
*10.6 Assignment and Assumption to Agreement of Purchase and Sale,
dated October 29, 2003 by and between WHCO II Real Estate Limited
Partnership and Berkshire Income Realty - OP, L.P.
*Previously filed as an exhibit to the Company's Current Report on
Form 8-K, filed with the Securities and Exchange Commission on
November 14, 2003.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Berkshire Income Realty, Inc.
/s/ David C. Quade
Date: January 13, 2004 Name: David C. Quade
Title: President and Chief Financial
Officer
Report of Independent Auditors
To the Board of Directors and Stockholders of Berkshire Income Realty, Inc.:
We have audited the accompanying Statement of Revenue and Certain Expenses of
the St. Marin/Karrington Apartments (the "Property") for the year ended December
31, 2002. This financial statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this financial
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 examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statement. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying financial statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in the Form 8-K/A of Berkshire Income Realty, Inc.) as described in
Note 1 and is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses described in Note 1 of
the Property for the year ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 5, 2004
ST. MARIN/KARRINGTON APARTMENTS
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(in thousands)
Nine Months Ended Year Ended
September 30,
-----------------------------
2003 2002 December 31,
Unaudited Unaudited 2002
-------------- ------------- ---------------
REVENUE:
Rental $ 4,370 $ 4,372 $ 5,848
Other 207 156 216
-------------- ------------- ---------------
Total revenue 4,577 4,528 6,064
-------------- ------------- ---------------
CERTAIN EXPENSES:
Operating 818 702 936
Repairs and Maintenance 237 273 367
General and administrative 244 228 312
Real estate taxes 1,033 1,016 1,250
-------------- ------------- ---------------
Total certain expenses 2,332 2,219 2,865
-------------- ------------- ---------------
REVENUE IN EXCESS OF CERTAIN
EXPENSES $ 2,245 $ 2,309 $ 3,199
============== ============= ===============
The accompanying notes are an integral part of these
financial statements.
ST. MARIN/KARRINGTON LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(in thousands)
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying Statement of Revenues and Certain Expenses include the
operations (see "Basis of Presentation" below) of St. Marin Apartments and
Karrington Apartments, two residential multifamily properties formerly owned and
managed by a third party not related to the Berkshire Income Realty, Inc. (the
"Company").
On October 30, 2003, the Company, through its subsidiary, Berkshire Income
Realty, O.P., L.P., acquired the St. Marin Apartments, a 350 unit multifamily
apartment community and the Karrington Apartments, a 250 unit multifamily
apartment community, for $26,125 and $20,000, respectively.
The contiguous properties, located in Coppell, Texas, will be operated by the
Company as one under one name St. Marin/Karrington Apartments (the "Property").
Basis of Presentation
The accompanying financial statements has been prepared on the accrual basis of
accounting.
The accompanying financial statements are not representative of the actual
operations of the Property for the periods presented. As required by the
Securities and Exchange Commission, Regulation S-X Rule 3-14, certain expenses,
which may not be comparable to the expenses that are expected to be incurred by
the Company in future operations, have been excluded. Expenses excluded relate
to property management and asset management fees, ownership fees, interest,
depreciation and amortization expense. The Company is not aware of any material
factors relating to the Property that would cause the reported financial
information not to be indicative of future operating results.
Real Estate
Expenditures for repairs and maintenance items are expensed as incurred. Costs
related to the acquisition and improvement of property and related equipment are
capitalized.
Revenue Recognition
The Property leases its residential property units under short-term operating
leases. Lease terms generally are less than one year in duration. Rental revenue
is recognized as earned.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") 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.
Interim Unaudited Financial Statements
The accompanying interim statements of revenue and certain expenses for the
periods from January 1, 2003 and 2002 through September 30, 2003 and 2002 are
unaudited and together with the statements of revenues and certain expenses for
the year ended December 31, 2002 have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission described above. These
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for fair statements for the period. The results
of such periods are not necessarily indicative of the results for the full
years.
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for rental rates)
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On October 20, 2003, the audit committee of the board of directors of Berkshire
Income Realty, Inc. (the "Company") approved the acquisition by the Operating
Partnership of the St. Marin/Karrington Apartments from a third party. On
October 30, 2003, the operating partnership subsidiary of the Company, through
its newly formed and wholly owned subsidiary St. Marin/Karrington Limited
Partnership, purchased The St. Marin Apartments, a 350 unit multifamily
apartment community and The Karrington Apartments, a 250 unit multifamily
apartment community, which are contiguous properties located in Coppell, Texas,
from WHCO Real Estate Limited Partnership and WHCO II Real Estate Limited
Partnership, respectively. Both of the sellers were third parties. The purchase
prices of $26,125 and $20,000 for St. Marin and Karrington, respectively, were
paid in cash.
The Company paid the purchase price and related closing costs for each property
with available working capital. Subsequent to the purchase, the Company obtained
a mortgage in the amount of $32,500. The mortgage note has a 9 year term at
4.90% fixed interest rate.
The Company is operating the two properties as one, under the name St.
Marin/Karrington Apartments.
The Properties' sources of revenue is primarily its tenant rental revenue. Other
revenue includes application, relet, pet, nonsufficient fund, laundry, late,
cable and damage fees. St. Marin and Karrington Apartments are located adjacent
from each other and were purchased to operate as one property by the Company.
Vacancies in first quarter 2002 were 13.2%, approximately double the vacancy
rate in 2001 for the market. There will be increased competition in the market
as 1,600 permits for new multi-family construction were issued during the first
quarter of 2003. The Company believes that the market is well positioned for
recovery in the near to mid term, and that managing the properties as one
multi-family apartment community will create additional positive results. St.
Marin and Karrington Apartments charge rents that are competitive in the area,
with rental rates for 1 bedroom to 3 bedrooms ranging from $738-$2,200 per
month. Physical occupancy for St. Marin/Karrington at September 30, 2003 was
92%.
The Company does not intend to spend a material amount on capital improvements.
Normal capital improvements such as those during rental turnovers (i.e. interior
painting) and capital improvements for the overall maintenance of the property
will be determined as those projects become necessary.
The Company, after reasonable inquiry, is not aware of any material factors
relating to St. Marin and Karrington other than those stated above that would
cause the reported financial information not to be indicative of future
operating results.
The following unaudited pro forma financial statements give effect to the
acquisition by the Company of St. Marin/Karrington. The unaudited pro forma
balance sheet as of September 30, 2003 presents the financial position of the
Company as if the acquisition of St. Marin/Karrington, which occurred subsequent
to September 30, 2003, had occurred on September 30, 2003. The unaudited pro
forma statements of operations for the nine months ended September 30, 2003 and
the year ended December 31, 2002 reflect the results of operations of St.
Marin/Karrington as if the acquisition of St. Marin/Karrington had been
completed as of January 1, 2002.
The following unaudited pro forma financial statements also give effect to
certain additional significant events that have occurred during the period,
including the consumation of the offer to exchange the Company's 9% Series A
Cumulative Preferred Shares for interests in the following six mortgage funds:
Krupp Government Income Trust, Krupp Government Income Trust II, Krupp Insured
Mortgage Limited Partnersip, Krupp Insured Plus Limited Partnership, Krupp
Insured Plus II Limited Partnership, Krupp Insured Plus III Limited Partnership
(collectively, the "Mortgage Funds") and the acquisition of McNab KC3 Limited
Partnership ("McNab").
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for rental rates)
These unaudited pro forma financial statements do not represent the Company's
financial condition or results of operations for any future date or period.
Actual future results could be materially different from these pro forma
results. These unaudited pro forma financial statements should be read in
conjunction with the audited financial statements of the Company and the related
management's discussion and analysis of financial condition and results of
operations included in our Form 10-K for the year ended December 31, 2002, as
well as the unaudited financial statements and the related management's
discussion and analysis or financial condition and results of operations
included in the Quarterly Reports on Form 10-Q for the quarter ended September
30, 2003. In addition, in conjunction with these unaudited pro forma financial
statements, you should read the financial statements on St. Marin/Karrington,
contained elsewhere in this Form 8-K/A.
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2003
(unaudited, in thousands, except share and per share data)
St. Marin /
Berkshire Karrington
Income Acquisition
Realty, Inc. Note (a) Proforma
------------- ------------ ----------
ASSETS
Multifamily apartment communities,
net of accumulated
depreciation of $100,166 $ 99,896 $ 45,333 $ 145,229
Cash and cash equivalents 41,819 (14,243)(b) 27,576
Cash restricted for tenant security
deposits 855 - 855
Replacement reserve escrow 250 - 250
Prepaid expenses and other assets 3,601 201 3,802
Investment in Mortgage Funds 40,197 - 40,197
Deferred expenses, net of accumulated
amortization of $281 1,262 11 1,273
Acquired in-place leases - 1,273 1,273
------------- ------------ ----------
Total assets $ 187,880 $ 32,575 $ 220,455
============= ============ ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Mortgage notes payable $ 131,901 $ 32,500 (b) $ 164,401
Due to affiliates 1,456 - 1,456
Dividend and distributions payable 1,338 - 1,338
Accrued expenses and other
liabilities 3,317 42 3,359
Tenant security deposits 940 33 973
------------- ------------ ----------
Total liabilities 138,952 32,575 171,527
Minority interest - - -
Commitments and Contingencies - - -
Stockholders' equity:
Series A 9% Cumulative Redeemable
Preferred Stock, no par value, $25
stated value, 5,000,000 shares
authorized, 2,978,110 shares
issued and outstanding at September
30, 2003 70,212 - 70,212
Class A common stock, $.01 par,
5,000,000 shares authorized; 0 shares
issued and outstanding at
September 30, 2003 - - -
Excess stock, $.01 par value, 15,000,000
shares authorized, 0 shares issued and
outstanding at September 30, 2003 12 - 12
Accumulated Deficit (21,296) - (21,296)
------------- -------------- ----------
Total stockholders' equity 48,928 - 48,928
------------- -------------- ----------
Total liabilities and
stockholders' equity $187,880 $ 32,575 $ 220,455
============= ============== ==========
The accompanying notes are an integral
part of these financial statements.
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2003
(unaudited, in thousands, except share and per share data)
St. Marin /
Berkshire Mortgage Karrington
Income Funds Acquisition
Realty, Inc. Note (d) Note (f) Proforma
------------- ---------- ----------- --------
Revenue:
Rental $ 20,598 $ - $ 4,370 $24,968
Interest 78 - - 78
Utility reimbursement 340 - - 340
Other 925 - 207 1,132
------------- ---------- ----------- --------
Total revenue 21,941 - 4,577 26,518
------------- ---------- ----------- --------
Expenses:
Operating 5,184 - 818 6,002
Maintenance 1,784 - 237 2,021
Real estate taxes 1,819 - 1,033 2,852
General and administrative 1,149 - 244 1,393
Organizational costs 213 - - 213
Management fees 1,573 - 321(g) 1,894
Depreciation 5,454 - 1,516(h) 6,970
Interest 5,580 - 1,194(i) 6,774
Loss on extinguishment of debt 339 - - 339
------------- ---------- ----------- --------
Total expenses 23,095 - 5,363 28,458
Loss before minority
interest in properties, equity
in income of Mortgage Funds and
minority common interest in
Operating Partnership (1,154) - (786) (1,940)
Minority interest in properties (125) - - (125)
Equity in income of Mortgage
Funds 4,883 1,916 - 6,799
------------- ---------- ----------- --------
Income (loss) before minority
common interest in Operating
Partnership $ 3,604 $ 1,916 $ (786) $ 4,734
Minority common interest in
Operating Partnership (488) - - (488)
---------- ---------- ----------- --------
Net income (loss) $ 3,116 $ 1,916 $ (786) $ 4,246
========== ========== =========== ========
Preferred dividend (3,276) (1,749)(i) - (5,025)
---------- ---------- ----------- --------
Net income (loss) available to
common shareholders $ (160) 167 $ (786) $ (779)
========== ========== =========== ========
Earnings per common share, basic $ (0.19) $ (.61)
========== ========
Weighted average number of common
shares outstanding 837,207 1,283,313
========== =========
`
The accompanying notes are an integral
part of these financial statements.
BERKSHIRE INCOME REALTY, INC.
(FORMERLY BERKSHIRE INCOME REALTY PREDECESSOR GROUP)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2002
(in thousands, except share and per share data)
Berkshire St. Marin /
Income Mortgage Karrington
Predecessor Funds McNab Acquisition
Group Note (d) Note (c) Note (f) Proforma
------------ ----------- --------- ----------- ----------
Revenue:
Rental $ 23,699 $ - $ 2,649 $ 4,575(c) $ 32,196
Interest 370 - 5 - 375
Utility reimbursements 511 - 29 - 540
Other 903 - 194 216 1,313
---------- ----------- --------- ----------- ----------
Total revenue 25,483 - 2,877 4,791 34,424
---------- ----------- --------- ----------- ----------
Expenses:
Operating 5,717 - 602 936 7,255
Maintenance 1,883 - 203 367 2,453
Real estate taxes 1,771 - 443 1,250 3,464
General and
administrative 661 450 (k) 65 312 1,488
Management fees 1,703 - 86 427(g) 2,216
Depreciation 5,284 - 594 2,021(h) 7,899
Interest 4,988 - 1,459 1,593(i) 9,313
Participating note
interest - - 175 - 175
---------- ----------- --------- ----------- ----------
Total expenses 22,007 450 3,627 6,906 34,263
Income (loss) before
minority interest
in properties, equity
in income of Mortgage
Funds and minority
common interest in
Operating Partnership 3,476 (450) (750) (2,115) 161
Minority interest in
properties (1,520) - - - (1,520)
Equity in income of
Mortgage Funds - 8,836 - - 8,836
---------- ----------- --------- ----------- ----------
Income (loss) before
minority common interest
in Operating Partnership 1,956 8,386 (750) (2,115) 7,477
Minority common interest
in Operating Partnership - - - - -
---------- ----------- --------- ----------- ----------
Net income (loss) $ 1,956 $ 8,386 $ (750) $(2,115) $ 7,477
========== =========== ========= =========== ==========
Preferred Dividend - (6,700)(i) - - (6,700)
--------- ----------- --------- ----------- ----------
Net income (loss)
available to
common shareholders $ 1,956 $ 1,686 $ (750) $(2,115) $ 777
========== =========== ========= =========== ==========
Earnings per common share,
basic $ 0.61
==========
Weighted average number of
common shares outstanding 1,283,313
==========
The accompanying notes are an integral
part of these financial statements.
BERKSHIRE INCOME REALTY, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
The following pro forma adjustments summarize the adjustments made to the
September 30, 2003 Berkshire Income Realty Inc. balance sheet:
(a) The assets of St. Marin/Karrington have been reflected as if the
acquisition of St. Marin/Karrington had occurred on September 30,
2003.
Purchase accounting was applied for the acquisition of the St.
Marin/Karrington property consistent with provisions of Statement of
Financial Accounting Standards No. 141, Business Combinations. In
accordance with FAS 141, the fair value of the real state acquired is
allocated to the acquired tangible assets, consisting of land,
building and personal property, and identified intangible assets and
liabilities, including the value of in-place leases, based in each
case on their fair values.
The Company purchased the net assets of St. Marin/Karrington totaling
$46,743, including closing costs and acquisition fees. The Company
also assumed liabilities relating to normal operations, such as
security deposits and other miscellaneous accrued expenses.
The net purchase price was allocated as follows:
Fixed assets $ 45,333
In-place leases 1,273
Prepaid expenses 201
Deferred expenses 11
Liabilities assumed (75)
--------
Total $ 46,743
========
(b) Berkshire Income Realty, Inc. purchased St. Marin/Karrington for a
total purchase price including closing costs and acquisition fees of
$46,763, and subsequently obtained a mortgage note in the amount of
$32,500, resulting in a proforma net cash adjustment of $(14,243) at
September 30, 2003.
The following pro forma adjustments summarize the adjustments made to the
Statements of Operations of Berkshire Income Realty, Inc and the Berkshire
Income Realty Predecessor Group for the nine months ended September 30, 2003 and
the year ended December 31, 2002, respectively:
(c) Reflects the amortizaton of in-place leases, calculated as follows:
December 31,
2002
-----------
Rental revenue per audited statement of
revenue and certain expenses $ 5,848
Amortization of in-place leases (1,273)
-----------
Proforma rental revenue $ 4,575
===========
(d) Reflects the equity interest in the net income of the Mortgage Funds
earned for the period indicated as if the Interests of each Mortgage
Fund tendered their Interests at January 1, 2002. The historical net
income for each Mortgage Fund for the nine months ended September 30,
2003 and year ended December 31, 2002 are as follows:
Equity in income
Interest in the Mortgage Fund net income of Mortgage Funds
Mortgage for the nine months at September 30,
Mortgage Fund Fund ended September 30, 2003 2003
------------- --------------- ---------------------- -------------------
GIT 30.76% $ 5,437 $ 1,672
GIT II 28.81% 8,013 2,309
KIM 27.81% 1,680 467
KIP 29.66% 767 228
KIP II 25.00% 251 63
KIP III 28.63% 954 273
-------------------
Subtotal 5,012
Accretion 1,787
-------------------
Proforma amount 6,799
Previously recognized 4,883
-------------------
Net proforma adjustment $ 1,916
===================
BERKSHIRE INCOME REALTY, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS, continued
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
(d) continued
Equity in income
Interest in the Net income for the of Mortgage Funds
Mortgage year ended at December 31,
Mortgage Fund Fund December 31, 2002 2003
------------- --------------- ---------------------- -------------------
GIT 30.76% $ 7,782 $ 2,394
GIT II 28.81% 14,037 4,044
KIM 27.81% 2,106 586
KIP 29.66% 1,934 574
KIP II 25.00% 1,570 393
KIP III 28.63% 2,954 845
-------------------
Proforma amount 8,836
Previously recognized -
-------------------
Net proforma adjustment $ 8,836
===================
(e) The operations of McNab have been reflected as if the acquisition of
McNab had been completed as of January 1, 2002.
(f) The operations of St. Marin/Karrington have been reflected as if the
acquisition of St. Marin/Karrington had been completed as of January
1, 2002.
(g) Reflects an increase in management fees based on the asset and
property management fee agreements entered into with an affiliate,
calculated as follows:
Nine Months ended Year ended
Asset management fee September 30, 2003 December 31, 2002
----------------------- ------------------ -------------------
Multifamily apartments $ 46,125
.4%
Total fee ------------------ -------------------
$ 138* $ 185
------------------ -------------------
Property management fee
-----------------------
Revenues $ 4,577 $ 6,064
4% 4%
------------------ -------------------
Total asset management fee 183 242
------------------ -------------------
Total management fees $ 321 $ 427
================== ===================
*Annual fee adjusted for the nine month period ended September 30, 2003.
(h) The depreciation expense adjustment is to reflect as if the
acquisition of St. Marin/Karrington had been completed as of January
1, 2002. Depreciation is computed on the straight line basis over the
estimated useful lives of the assets, as follows:
Rental property 27.5 years
Improvements 5 to 20 years
Appliances, carpeting and equipment 3 to 8 years
(i) Reflects the charge to interest expense relating to amortization of
in-place leases and interest as if the acquisition and financing of
the St. Marin/Karrington and the related mortgage note payable
occurred at the beginning of the period, as follows:
Mortgage Note $ 32,500
Interest Rate 4.90%
---------
Annual interest for the year ended December 31, 2002 $ 1,593
=========
Interest expense for the nine months ended September
30, 2003** $ 1,194
=========
**Interest expense is annual expense adjusted for the appropriate time period.
BERKSHIRE INCOME REALTY, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS, continued
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
(j) Reflects a preferred dividend on the Preferred Shares, calculated as
follows:
Nine months Year
ended ended
September 30, December 31,
2003 2002
------------- ------------
Preferred Stock $ 74,453 $ 74,453
9% dividend rate 9% 9%
------------- ------------
Proforma Preferred dividend 5,025 6,700
Preferred dividend previously recognized 3,276 -
------------ ------------
Net proforma adjustment $ 1,749 $ 6,700
============= ============
(k) Reflects an increase of $450 in general and administrative expenses as
a result of being a public company for the year ended December 31,
2002.