UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): July 7, 2014
REVEN HOUSING REIT, INC.
(Exact Name of Registrant as Specified in
Its Charter)
Maryland |
|
000-54165 |
|
84-1306078 |
(State or Other Jurisdiction of Incorporation) |
|
(Commission File Number) |
|
(I.R.S. Employer Identification Number) |
7911 Herschel Avenue, Suite 201
La Jolla, CA 92037 |
(Address of principal executive offices) |
(858) 459-4000 |
(Registrant’s telephone number, including area code) |
Not applicable |
(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 obligations of the registrant under any of the following provisions.
| o | Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14d-2(b) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c) |
Explanatory Note
We previously filed a Form 8-K on July 8, 2014, reporting our
acquisition of 46 single family homes located in the Jacksonville, Florida, metropolitan area. We are filing this Form 8-K/A, Amendment
No. 1, to provide the financial information required by Item 9.01.
Item 9.01 Financial Statements and Exhibits.
(a)
Financial Statements of Real Estate Acquired.
(b)
Pro Forma Financial Information.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
BALANCE SHEET AND
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS
July 7, 2014
Reven
Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
TABLE OF CONTENTS
Page
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Member
Reven Housing Florida, LLC
(A wholly-owned subsidiary of Reven Housing REIT, Inc.)
We
have audited the accompanying balance sheet and the related notes of Reven Housing Florida, LLC (the “Company”), a
wholly-owned subsidiary of Reven Housing REIT, Inc. (the “Registrant”), as of July 7, 2014. Reven Housing Florida,
LLC’s management is responsible for the financial statement. Our responsibility is to express an opinion on the financial
statement based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audit included 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 Company’s
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, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In
our opinion, the financial statement referred to above presents fairly, in all material respects, the financial position of Reven
Housing Florida, LLC as of July 7, 2014, in conformity with accounting principles generally accepted in the United States of America.
San Diego, California |
/s/ PKF |
August 14, 2014 |
PKF |
|
Certified Public Accountants |
|
A Professional Corporation |
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
Balance Sheet
July 7, 2014
ASSETS |
|
Funds held in escrow | |
$ | 280,652 | |
Funds held by property managers | |
| 31,412 | |
Land | |
| 470,000 | |
Residential homes | |
| 2,681,254 | |
| |
| | |
Total assets | |
$ | 3,463,318 | |
| |
| | |
LIABILITIES AND MEMBER'S EQUITY |
| |
| | |
Liabilities: | |
| | |
Accounts payable | |
$ | 24,108 | |
Accrued property taxes | |
| 30,809 | |
Security deposits | |
| 31,412 | |
| |
| | |
Total liabilities | |
| 86,329 | |
| |
| | |
Commitment (Note 6) | |
| | |
| |
| | |
Member's equity | |
| 3,376,989 | |
| |
| | |
Total liabilities and member's equity | |
$ | 3,463,318 | |
See Notes to the Balance Sheet.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
NOTES TO THE BALANCE SHEET
July 7, 2014
NOTE 1 – ORGANIZATION
Reven Housing Florida, LLC (the “Company”)
is a Delaware single member limited liability company that engages in the acquisition and ownership of residential real estate
properties throughout the state of Florida. The Company was formed on June 25, 2014 as a single member limited liability company.
On July 7, 2014, Reven Housing Florida, LLC, a wholly-owned subsidiary of Reven Housing REIT, Inc. (the “Registrant”),
completed the acquisition of 46 residential homes (the “Homes”), pursuant to a Purchase and Sale Agreement (“PSA”),
dated May 5, 2014 with 7 different sellers. The acquired properties are part of a portfolio of 49 single family homes. The remaining
3 homes will be purchased from funds currently held by the escrow agent once leases are completed. The homes are primarily three
bedroom, one and a half bath homes with an average size of 1,322 square feet and are located in the Jacksonville, Florida metropolitan
area. Total consideration for the acquisition of the 46 homes was approximately $3,134,000, including closing costs, which has
been funded primarily by cash contributed from the Registrant. An additional $82,265 was funded
to escrow to be utilized by the seller for required repairs.
These escrow funds will be released to the seller and added to the acquisition costs as the repairs are completed.
NOTE 2 – BASIS OF ACCOUNTING
The accompanying balance sheet is presented
in conformity with accounting principles generally accepted in the United States of America ("GAAP") and in accordance
with the applicable rules and regulations of the Securities and Exchange Commission for real estate properties acquired.
An audited balance sheet is being presented
as of the acquisition date, July 7, 2014. A statement of operations outlining the operations for the homes acquired is not presented
because management was unable to obtain results of operations for the individual properties from the various sellers.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Property Acquisitions
The Company accounts for its acquisitions
of real estate in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
805, Accounting for Business Combinations, Goodwill, and Other Intangible Assets, which requires the purchase price of acquired
properties be allocated to the acquired tangible assets and liabilities, consisting of land, building, and identified intangible
assets, consisting of the value of above-market and below-market leases, the value of in-place leases, unamortized lease origination
costs and security deposits, based in each case on their fair values and ASC 970, Real Estate Project Costs, which requires
that pre-acquisition costs relating to the acquisition of property incurred before the property is acquired and are otherwise capitalizable
should be capitalized.
The Company allocates the purchase price
to tangible assets of an acquired property (which includes land and building) based on the estimated fair values of those tangible
assets, assuming the property was vacant. Fair value for land and building is based on the purchase price for these properties.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
NOTES TO THE BALANCE SHEET
July 7, 2014
NOTE 3 – SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Property Acquisitions (Continued)
The Company also considers information
obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the
fair values of the tangible and intangible assets and liabilities acquired.
The total value allocable to intangible
assets acquired, which consists of unamortized lease origination costs and in-place leases (including an above-market or below-market
component of an acquired in-place lease), are allocated based on management’s evaluation of the specific characteristics
of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered
by management in allocating these values include the nature and extent of the existing business relationships with the tenant,
growth prospects for developing new business with the tenant, the remaining term of the lease and the tenant’s credit quality,
among other factors. As of July 7, 2014, management has determined that no value is required to be allocated to intangible assets,
as the values are insignificant.
Residential Homes, net
Residential homes purchased by the Company
are recorded at cost. The Homes are depreciated over the estimated useful lives using the straight-line method for financial reporting
purposes. The estimated useful life for the residential homes is estimated to be 27.5 years.
Security Deposits
Security deposits represent amounts deposited
by tenants at the inception of the lease. These amounts have been allocated from the purchase price of the Homes based on the signed
lease agreements.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the balance sheet date. Actual results could differ from those estimates.
NOTE 4 – PURCHASE PRICE ALLOCATION
In accordance with ASC 805, the Company
allocated the purchase price of the individual properties based on estimated values in accordance with the due diligence and the
specific agreed upon contract values. Additional closing costs have been allocated proportionally based on these values. The allocation
of costs between land and improvements have been estimated based on approximate fair market and tax assessed values. Based on these
estimates, the Company has allocated approximately $470,000 of the total acquisition costs to land values and $2,664,349 to the
value of the homes and improvements.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
NOTES TO THE BALANCE SHEET
July 7, 2014
NOTE 4 – PURCHASE PRICE ALLOCATION
(Continued)
The 46 Homes purchased were all leased
to tenants upon acquisition. Of these leases, 37 are for terms of one year from lease execution and 9 are subject to month to month
leases.
NOTE 5 – FUNDS HELD IN ESCROW
Per the PSA, the Company agreed to fund
an escrow account for the purchase price of three properties which will be acquired from the applicable seller once acceptable
lease agreements have been executed with tenants, and the properties are occupied. Amounts held in escrow for these deferred purchases
totaled $198,387.
Additionally, $82,265 of the Company’s
purchase funds were placed in escrow to be utilized for repairs to be made to the properties. These funds will be released to the
sellers, upon completion of the repairs.
NOTE 6 – MEMBER’S EQUITY
The Company received capital contributions
from the Registrant approximating $3,377,000.
NOTE 7 – COMMITMENT
The Company has entered into a property
management agreement with Suncoast Property Management, LLC in which the Company will pay eight percent of gross rental receipts.
Suncoast Property Management, LLC managed the properties previously and is a related entity to several of the selling entities.
NOTE 8 – SUBSEQUENT EVENTS
Management has evaluated subsequent events,
as defined by FASB ASC 855, Subsequent Events, through the date that the balance sheet was available to be issued on August
14, 2014.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
PRO FORMA STATEMENT OF OPERATIONS (Unaudited)
For the Year Ending December 31, 2014
On July 7, 2014, Reven Housing Florida,
LLC, a wholly-owned subsidiary of Reven Housing REIT, Inc. (the “Registrant”), completed the acquisition of 46 residential
homes (the “Homes”), pursuant to a Purchase and Sale Agreement (“PSA”), dated May 5, 2014 with 7 different
sellers. Total consideration for the acquisition of the 46 homes was approximately $3,134,000, including closing costs, which
was paid in cash. An additional $82,265 was funded to escrow to be utilized by the seller for
required repairs. These escrow funds will be released to the seller and added to the acquisition costs as the repairs are completed.
The homes are primarily three bedroom,
one and a half bath homes with an average size of 1,322 square feet and are located in the Jacksonville, Florida metropolitan area.
The Homes were all leased to tenants upon acquisition. Of these leases, 37 are for terms of one year from lease execution and 9
are subject to month to month leases.
Reven Housing Florida, LLC is a Delaware
single member limited liability company that engages in the acquisition and ownership of residential real estate properties throughout
the state of Florida.
The following unaudited pro forma statement
of operations for the year ending December 31, 2014 has been prepared to give effect to the acquisition of the Homes as if the
acquisition occurred on January 1, 2014. The following unaudited pro forma financial information is provided for informational
purposes only. The unaudited pro forma financial information does not purport to project the future financial position or operating
results of the Company. The pro forma financial statement contains the assumptions described below.
Reven Housing Florida, LLC
(A wholly owned subsidiary of Reven Housing
REIT, Inc.)
PRO FORMA STATEMENT OF OPERATIONS (Unaudited)
For the Year Ending December 31, 2014
Revenues: | |
| | | |
|
Rental income | |
$ | 493,526 | | |
{a} |
Less: Vacancy and credit losses | |
| (49,352 | ) | |
{b} |
| |
| | | |
|
Net revenues | |
| 444,174 | | |
|
| |
| | | |
|
Operating Expenses: | |
| | | |
|
Repairs and maintenance | |
| 39,482 | | |
{c} |
Property and liability insurance | |
| 29,900 | | |
{d} |
Property management fees | |
| 35,534 | | |
{e} |
Property taxes | |
| 50,662 | | |
{f} |
Leasing and turnover costs | |
| 26,639 | | |
{g} |
HOA and other | |
| 4,935 | | |
|
| |
| | | |
|
Total operating expenses | |
| 187,152 | | |
|
| |
| | | |
|
Net operating income | |
| 257,022 | | |
|
| |
| | | |
|
Depreciation expense | |
| 97,500 | | |
{h} |
| |
| | | |
|
Net operating income after depreciation | |
$ | 159,522 | | |
|
Assumptions:
{a} Rental income consists primarily
of base rent. Base rent is recognized on a straight-line basis beginning on the pro forma acquisition date of January 1, 2014.
{b} Vacancy and credit loss is estimated
based on the national average of vacancy percentage of rental homes multiplied by management’s estimated length of vacancy.
{c} Repairs and maintenance expense
is estimated based on 8% of gross rental income
{d} Property and liability insurance
expense is based on actual premiums paid per home which was approximately $650 per property.
{e} Property management fees are calculated
based on an 8% property management fee per the property management agreement.
{f} Property tax expense is based on
property tax assessments for the 2013 tax year.
{g}
Leasing and turnover costs include estimated leasing commissions and move out repairs
based on
approximately 33% of the homes being released during the year.
{h} Depreciation expense is calculated
using the straight-line method based on the purchase price allocated to each Residential home over an estimated 27.5 year life.
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.
|
REVEN HOUSING REIT,
INC. |
|
|
|
|
Dated: August 19, 2014 |
/s/ Chad M. Carpenter |
|
Name: Chad M. Carpenter |
|
Title: Chief Executive Officer |
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