Item 2. Acquisition or Disposition of Assets
PARK VILLAGE APARTMENTS
Bedford, Texas
On July 1, 1998, Apple REIT Limited Partnership (together with its
parent companies, Apple Residential Income Trust, Inc., Apple General, Inc. and
Apple Limited, Inc., the "Company") purchased the Park Village Apartments
located at 0000 X. Xxx Xxxxxx Xxxxx, xx Xxxxxxx, Xxxxx (the "Property").
The Property comprises 238 apartment units. The purchase price for the
Property was $7,000,000. The seller was Park Village Investment Partnership, a
Texas limited partnership which was not affiliated with the Company, Apple
Residential Advisors, Inc. (the "Advisor") or their affiliates. The purchase
price was paid entirely in cash using proceeds from the sale of Shares of the
Company. Title to the Property was conveyed to the Company by limited warranty
deed.
LOCATION. The Property is located on X. Xxx Xxxxxx Drive off of Central
Drive just north of Airport Freeway (Highway 183) in Bedford, Texas. The
Property is located within the greater Dallas/Fort Worth metropolitan
statistical area, or as it is called locally, "The Metroplex."
The following information is based in part upon information provided by
the Dallas Chamber of Commerce. The Dallas/Fort Worth Metroplex is in the
north-central part of Texas and is composed of nine counties. The 1996
population of The Metroplex was approximately 4,400,000. The Dallas metropolitan
area is the second largest in the state, behind Houston.
The economy of the Dallas/Fort Worth area is complex and diversified.
Key economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, X.X.
Xxxxxx, NationsBank and Xxxxxx Aircraft Company.
The Metroplex is also an established transportation center for the
nation. The Dallas/Fort Worth International Airport occupies approximately
17,600 acres of land between the two cities. It is the second largest commercial
airport in the United States in terms of land area, and is the second busiest
airport in the world, with more than 2,500 daily arrivals and departures.
The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.
The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.
The immediate neighborhood surrounding the Property consists of other
multi-family and single-family housing and commercial and retail development.
The Property is proximate to businesses, restaurants, schools and churches and
is readily accessible from Interstates 121, 360 and 183. The Property is an
approximately 10-minute drive from Dallas/Fort Worth International Airport and
an approximately 20-minute drive from either downtown Dallas or Fort Worth.
DESCRIPTION OF THE PROPERTY. The Property consists of 238 garden-style
apartment units in 23 two story buildings on approximately ten acres of land.
The Property was constructed in 1983.
The Property offers six different unit types. The unit mix and rents
being charged new tenants as of June 1998 are as follows:
APPROXIMATE INTERIOR
QUANTITY TYPE SQUARE FOOTAGE MONTHLY RENTAL
-------- ---- -------------- --------------
48 One Bedroom/One Bath 456 $390
64 One Bedroom/One Bath 521 420
62 One Bedroom/One Bath 669 495
32 One Bedroom/One Bath/Den 841 580
16 Two Bedroom/Two Bath 920 625
16 Two Bedroom/Two Bath 983 670
The apartments provide a total of approximately 154,070 square feet of
net rentable area.
The Company believes that the Property has generally been well
maintained and is in good condition. However, the Company has budgeted
approximately $238,000 for repairs and
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improvements to the Property to include clubhouse renovations, exterior
painting, sign replacement and interior upgrades.
The following information is provided by the seller. Physical occupancy
at the Property averaged approximately 95% in 1993, 97% in 1994, 97% in 1995,
96% in 1996 and 96% in 1997. Leases at the Property are generally for terms of
one year or less. Average rental rates for the past five years have generally
increased. As an example, a two-bedroom, two-bathroom apartment (983 square
feet) rented for $560 in 1993, $560 in 1994, $580 in 1995, $605 in 1996 and $630
in 1997. The average effective annual rental per square foot at the Property for
1993, 1994, 1995, 1996 and 1997 was $7.58, $7.58, $7.85, $8.14, and $8.53,
respectively.
The Property has an outdoor swimming pool, hot tub and two laundry
facilities. The Property also has a clubhouse with a leasing office. There is
ample paved parking for tenants.
The buildings are wood frame construction with a combination of brick
veneer, stucco and wood siding on concrete slab foundations. Roofs are pitched
composition.
Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has smoke detectors, a
cable television hook-up and individually controlled heating and
air-conditioning unit. Each kitchen has a refrigerator/freezer, electric range
and oven, dishwasher, and garbage disposal. All units except the smallest
one-bedroom units have washer/dryer connections and a wood-burning fireplace.
The owner of the Property pays for cold water, sewer charges, gas (for hot
water) and trash removal. The tenants pay for their electricity service, which
includes cooking, lighting, heating and air-conditioning.
There are at least seven apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy at nearby competing properties averaged
approximately 94% on July 1, 1998.
As of July 1, 1998, the Property was approximately 97% occupied. The
tenants are primarily a mix of white-collar and blue-collar workers and retired
persons.
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The following table sets forth the 1997 real estate tax information on
the Property:
JURISDICTION ASSESSED VALUE RATE TAX
------------ -------------- ---- ---
County of Tarrant ................................. $5,392,450 $ .264836 $14,281.15
City of Bedford ................................... 5,392,450 0.369000 19,898.14
T C Hospital ...................................... 5,392,450 0.234070 12,622.11
X X Xx. College ................................... 5,392,450 0.057690 3,110.90
H-E-B I.S.D. ..................................... 5,392,450 1.606257 86,616.61
----------
Total ........................................ $136,528.91
The basis of the depreciable residential real property portion of the
Property (currently estimated at about $6,165,062 will be depreciated over 27.5
years on a straight-line basis. The basis of the personal property portion will
be depreciated in accordance with the modified accelerated cost recovery system
of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to be
spent by the Company on repairs and improvements will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.
The Advisor and the Company believe that the property is and will
continue to be adequately covered by property and liability insurance.
MATERIAL FACTORS CONSIDERED IN ASSESSING THE PROPERTY. The factors
considered by the Advisor and the Company to be relevant in evaluating the
Property for acquisition by the Company included the following:
1. The Dallas/Fort Worth area generally and the specific area in which
the Property is located were perceived as being characterized by a diverse,
stable and steadily growing economy. Accordingly, it was believed that such
economy and its anticipated growth and development would support stable
occupancy rates and reasonable increases in rents at the Property.
2. Based upon an engineering report and its own inspections, the
Advisor believes that the Property has been well maintained and is generally in
good condition, although the Advisor believes that the planned repairs and
improvements will allow an increase in rents at the Property.
3. The Property has an advantageous location - convenient to the
Dallas/Fort Worth International Airport and downtown Dallas and Fort Worth - and
is located in a rapidly-growing area proximate to centers of employment and
retail development.
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ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of
services rendered to the Company in connection with the selection and
acquisition of the Property, the Company paid Cornerstone Realty Income Trust,
Inc. a property acquisition fee equal to 2% of the purchase price of the
property, or $140,000. Cornerstone Realty Income Trust, Inc. will serve as
property manager for the Property and for its services will be paid by the
Company a monthly management fee equal to 5% of the gross revenues of the
Property plus reimbursement of certain expenses.
The Company is not aware of any material adverse factors relating to
the Property not set forth in this report that would cause the financial
information contained in this report not to be necessarily indicative of future
operating results.
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