Attached files
| file | filename |
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| EX-23.1 - EXHIBIT 23.1 - Reven Housing REIT, Inc. | v409813_ex23-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
(Amendment No. 2)
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, 2013
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.
| ¨ | 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)) |
Explanatory Note
On October 31, 2013, Reven Housing REIT, Inc. (“Company”), through Reven Housing Texas, LLC, its wholly-owned subsidiary (“Buyer”), closed on the acquisition of 150 single family homes located in the Houston, Texas metropolitan area, pursuant to that certain Single Family Homes Real Estate Purchase and Sale Agreement dated October 4, 2013 (the “Houston 150 Agreement”) between Buyer and Red Door Housing, LLC, a Texas limited liability company (“Red Door”), and WFI Funding, Inc., a Texas corporation (together with Red Door, the “Houston 150 Sellers”). The Houston 150 Sellers are not affiliated with the Company.
On November 5, 2013, the Company filed a Current Report on Form 8-K (the “Initial Report”) with regard to the acquisition of the Houston 150 Homes. On January 6, 2014, the Company filed a Current Report on Form 8-K/A (the “Amendment No. 1) for the sole purpose of filing the financial statements and pro forma financial information with respect to the Houston 150 Homes required by Item 9.01 of Form 8-K. This Amendment No. 2 is being filed in order to provide in the correct format the financial statements and pro forma financial information with respect to the Houston 150 Homes required by Item 9.01 of Form 8-K, and should be read in conjunction with the Initial Report and replaces the information provided previously in the Amendment No. 1.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Real Estate Property Acquired. The following financial statements are submitted with this Current Report on Form 8-K/A and are filed herewith:
Houston 150 Homes
Report of Independent Auditors
Statements of Revenues Over Certain Operating Expenses for the nine months ended September 30, 2013 (unaudited) and the year ended December 31, 2012
Notes to Statements of Revenues Over Certain Operating Expenses
(b) Unaudited Pro Forma Financial Information. The following financial information is submitted with this Current Report on Form 8-K/A and is filed herewith:
Reven Housing REIT, Inc.
Unaudited Pro Forma Condensed Balance Sheet as of September 30, 2013
Notes to Unaudited Pro Forma Condensed Balance Sheet as of September 30, 2013
Unaudited Pro Forma Statement of Operations for the Nine Months Ended September 30, 2013
Notes to Unaudited Pro Forma Statement of Operations for the Nine Months Ended September 30, 2013
Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2012
Notes to Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2012
(d) Exhibits
23.1 Consent of Squar, Milner, Peterson, Miranda & Williamson, LLP
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Reven Housing REIT, Inc.
We have audited the accompanying statement of revenues over certain operating expenses of Houston 150 Homes for the year ended December 31, 2012, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the statement of revenues over certain operating expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenues over certain operating expenses that is free of material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the statement of revenues over certain operating expenses 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 statement of revenues over certain operating expenses is free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues over certain operating expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues over certain operating expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the statement of revenues over certain operating expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues over certain operating expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues over certain operating expenses referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 2 of Houston 150 Homes for the year ended December 31, 2012, in accordance with accounting principles generally accepted in the United States of America.
Other Matters
As described in Note 2, the statement of revenues over certain operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K/A), and is not intended to be a complete presentation of the revenues and expenses of Houston 150 Homes. Our opinion is not modified with respect to this matter.
/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP
Newport Beach, California
May 7, 2015
HOUSTON 150 HOMES
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
| Nine | Year | |||||||
| Months Ended | Ended | |||||||
| September 30, | December 31, | |||||||
| 2013 | 2012 | |||||||
| (unaudited) | ||||||||
| Rental income, net | $ | 1,475,931 | $ | 915,953 | ||||
| Operating expenses: | ||||||||
| Property operating and maintenance | 93,210 | 60,308 | ||||||
| Real estate taxes | 196,783 | 137,953 | ||||||
| Total operating expenses | 289,993 | 198,261 | ||||||
| Revenues over certain operating expenses | $ | 1,185,938 | $ | 717,692 | ||||
See accompanying notes to the statements of revenues over certain operating expenses.
HOUSTON 150 HOMES
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
For the Nine Months ended September 30, 2013 (unaudited)
and the Year Ended December 31, 2012
1. DESCRIPTION OF REAL ESTATE PROPERTY
On October 31, 2013, Reven Housing REIT, Inc. (the “Company”), through a wholly-owned subsidiary, closed on the acquisition of 150 single family homes located in the Houston, Texas metropolitan area, pursuant to that certain Single Family Homes Real Estate Purchase and Sale Agreement (the “Agreement”) dated October 4, 2013, with Red Door Housing, LLC, a Texas limited liability company (“Red Door”), and WFI Funding, Inc., a Texas corporation (together with Red Door, the “Sellers”). The Houston 150 Sellers are not affiliated with the Company.
The contract purchase price for the 150 acquired properties was $11,691,832, exclusive of closing costs. The Company funded 100% of the purchase with cash, including the cash proceeds of a share issuance on October 29, 2013. The majority of the 150 homes purchased had not been leased during the entire periods covered by the audited and unaudited statements provided, as many of these homes were vacant, owner occupied or were in the process of being refurbished prior to the acquisition by Reven Housing REIT.
Reven Housing REIT is a Maryland corporation formed to invest in and manage a diverse portfolio of single family homes located throughout the United States.
2. BASIS OF PRESENTATION
The accompanying audited statement of revenues over certain operating expenses for the year ended December 31, 2012 has been prepared to comply with the rules and regulations of the Securities and Exchange Commission (“SEC”).
Houston 150 Homes is not a legal entity and the accompanying statements of revenues over certain operating expenses are not representative of the actual operations for the periods presented, as certain revenues and expenses have been excluded on the basis that they may not be comparable to the revenues and expenses Reven Housing REIT expects to incur in the future operations of Houston 150 Homes. Excluded items include interest, depreciation and amortization, and general and administrative costs not directly comparable to the future operations of Houston 150 Homes.
The accompanying unaudited statement of revenues over certain operating expenses for the nine months ended September 30, 2013 has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board Accounting Standards Codification and the rules and regulations of the SEC, including the instructions to Form 8-K and Article 3-14 of Regulation S-X. Accordingly, the unaudited statement of revenues over certain operating expenses does not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the statement of revenues over certain operating expenses for the unaudited interim period presented includes all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such period.
An audited statement of revenues over certain operating expenses for the year ended December 31, 2012 is being presented for the most recent fiscal year available instead of the two most recent years based on the following factors: (i) Houston 150 Homes was acquired from an unaffiliated party and (ii) based on due diligence of Houston 150 Homes by Reven Housing REIT, management is not aware of any material factors relating to Houston 150 Homes that would cause this financial information not to be indicative of future operating results.
HOUSTON 150 HOMES
NOTES TO STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
For the Nine Months ended September 30, 2013 (unaudited)
and the Year Ended December 31, 2012
3. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Houston 150 Homes leases single family homes under operating leases generally with terms of one year or less. Rental revenue, net of concessions, is recognized on a straight-line basis over the terms of the leases.
Use of Estimates
The preparation of financial statements, as described in Note 2 and in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.
4. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, Houston 150 Homes may become party to legal proceedings that arise in the ordinary course of its business. The Company is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on its financial condition or results of operations for the periods presented.
5. SUBSEQUENT EVENTS
Reven Housing REIT evaluates subsequent events up until the date the statements of revenues over certain operating expenses are issued. The accompanying statements of revenues over certain operating expenses were issued on May 7, 2015.
REVEN HOUSING REIT, INC.
SUMMARY OF UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements and accompanying notes should be read in conjunction with the consolidated balance sheets of Reven Housing REIT, Inc. (“Reven Housing REIT” or the “Company”) as of December 31, 2012 and September 30, 2013 (unaudited), the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the year ended December 31, 2012 and for the nine months ended September 30, 2013 (unaudited), and the notes thereto. The consolidated financial statements of the Company as of and for the year ended December 31, 2012 and the consolidated financial statements as of and for the nine months ended September 30, 2013 (unaudited) have been included in the Company’s prior filings with the SEC. In addition, this unaudited pro forma information should be read in conjunction with the statements of revenues over certain operating expenses and the notes thereto of Houston 150 Homes, which are included herein.
The following unaudited pro forma balance sheet as of September 30, 2013 has been prepared to give effect to the acquisition of Houston 150 Homes as if the acquisition occurred on September 30, 2014.
The following unaudited pro forma statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have been prepared to give effect to the acquisition of Houston 150 Homes acquired as if this acquisition occurred on January 1, 2012.
On November 5, 2014, the Company effected a 1-for-20 reverse stock split of the issued common stock. All applicable share data, per share amounts and related information in the following pro forma information have been adjusted retroactively to give effect to the 1-for-20 reverse stock split.
These unaudited pro forma financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of Houston 150 Homes been consummated as of the dates indicated. In addition, the pro forma balance sheet includes pro forma preliminary estimates of the fair value of the assets and liabilities acquired in connection with the acquisition.
REVEN HOUSING REIT, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
As of September 30, 2013
| Reven Housing | Pro Forma Adjustments | |||||||||||||||
| Net Proceeds on | ||||||||||||||||
| REIT, Inc. Historical (a) | Issuance of Shares (b) | Houston 150 Acquisition (c) | Pro Forma Total | |||||||||||||
| ASSETS | ||||||||||||||||
| Investment in real estate, net | $ | 592,838 | $ | - | $ | 11,592,532 | (d) | $ | 12,185,370 | |||||||
| Cash | 10,106,114 | 2,236,750 | (11,670,025 | ) | 672,839 | |||||||||||
| Rents and other receivables | 10,465 | - | - | 10,465 | ||||||||||||
| Lease origination costs, net | - | - | 99,300 | (d) | 99,300 | |||||||||||
| Total Assets | $ | 10,709,417 | $ | 2,236,750 | $ | 21,807 | $ | 12,967,974 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 54,906 | $ | - | $ | 146,317 | $ | 201,223 | ||||||||
| Security deposits | 6,600 | - | 155,455 | 162,055 | ||||||||||||
| Total Liabilities | 61,506 | - | 301,772 | 363,278 | ||||||||||||
| Stockholders' Equity | ||||||||||||||||
| Common stock | 3,393 | 575 | - | 3,968 | ||||||||||||
| Additional paid-in capital | 12,145,023 | 2,236,175 | - | 14,381,198 | ||||||||||||
| Accumulated deficit | (1,500,505 | ) | - | (279,965 | ) | (1,780,470 | ) | |||||||||
| Total Stockholders' Equity | 10,647,911 | 2,236,750 | (279,965 | ) | 12,604,696 | |||||||||||
| Total Liabilities and Stockholders' Equity | $ | 10,709,417 | $ | 2,236,750 | $ | 21,807 | $ | 12,967,974 | ||||||||
See accompanying notes to unaudited pro forma balance sheet.
REVEN HOUSING REIT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
as of September 30, 2013
| a) | Historical financial information was derived from Reven Housing REIT’s quarterly report on Form 10-Q as of September 30, 2013. |
| b) | Represents the net proceeds received from the issuance of 575,000 shares of Reven Housing REIT on October 29, 2013 in connection with a private placement. These proceeds were used in funding the acquisition of Houston 150 Homes. |
| c) | Represents the acquisition of Houston 150 Homes. The purchase price of Houston 150 Homes was $11,691,832 plus closing and acquisition costs of $279,965. The purchase price was funded entirely by cash held by Reven Housing REIT. |
| d) | Reven Housing REIT recorded the cost of tangible assets and identifiable intangibles (consisting of tenant origination and absorption costs) acquired in a business combination based on their estimated fair values. |
REVEN HOUSING REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013
| Reven Housing | Pro Forma | |||||||||||
| REIT | Adjustments | Pro Forma | ||||||||||
| Historical (a) | Houston 150 | Total | ||||||||||
| Rental income, net | $ | 55,817 | $ | 1,475,931 | (b) | $ | 1,531,748 | |||||
| Operating expenses: | ||||||||||||
| Rental expenses | 25,718 | 289,993 | (c) | 419,026 | ||||||||
| 103,315 | (d) | |||||||||||
| General and administrative | 121,599 | - | 121,599 | |||||||||
| Legal and accounting | 114,411 | - | 114,411 | |||||||||
| Interest expense | 77,382 | - | 77,382 | |||||||||
| Amortization of discount on notes payable | 563,253 | - | 563,253 | |||||||||
| Depreciation and amortization | 12,600 | 350,200 | (e) | 362,800 | ||||||||
| Total operating expenses | 914,963 | 743,508 | 1,658,471 | |||||||||
| Net (loss) income | $ | (859,146 | ) | $ | 732,423 | $ | (126,723 | ) | ||||
| Net loss per share, basic and diluted | $ | (1.86 | ) | $ | (0.12 | ) | ||||||
| Weighted average number of common shares outstanding | 461,097 | 575,000 | (f) | 1,036,097 | ||||||||
See accompanying notes to unaudited pro forma statement of operations
REVEN HOUSING REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013
| a) | Historical financial information was derived from Reven Housing REIT’s quarterly report on Form 10-Q for the nine months ended September 30, 2013. |
| b) | Represents net rental income from tenants (not reflected in the historical statement of operations of Reven Housing REIT) for the nine months ended September 30, 2013, based on historical operations of the previous owner. |
| c) | Represents operating expenses (not reflected in the historical statement of operations of Reven Housing REIT) for the nine months ended September 30, 2013, based on historical operations of the previous owner. |
| d) | Represents property management costs based on 7% of rental income (not reflected in the historical statement of operations of Reven Housing REIT) for the nine months ended September 30, 2013, based on management's estimates of what would have been incurred had the homes been acquired on January 1, 2012. |
| e) | Represents adjustments to depreciation and amortization expense (not reflected in the historical statement of operations of Reven Housing REIT) for the nine months ended September 30, 2013. Depreciation expense is calculated using the straight-line method over the estimated useful life of 27.5 years for the buildings. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease. |
| f) | Represents the issuance of 575,000 shares of Reven Housing REIT in connection with a private placement as if it occurred on January 1, 2012. These proceeds were used in funding the acquisition of Houston 150 Homes. |
REVEN HOUSING REIT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012
| Reven Housing | Pro Forma | |||||||||||
| REIT | Adjustments | Pro Forma | ||||||||||
| Historical (a) | Houston 150 | Total | ||||||||||
| Rental income, net | $ | 6,750 | $ | 915,953 | (b) | $ | 922,703 | |||||
| Operating expenses: | ||||||||||||
| Rental expenses | 1,006 | 198,261 | (c) | 263,384 | ||||||||
| 64,117 | (d) | |||||||||||
| General and administrative | 131,927 | - | 131,927 | |||||||||
| Legal and accounting | 396,797 | - | 396,797 | |||||||||
| Real estate acquisition costs | - | 279,965 | (e) | 279,965 | ||||||||
| Interest expense | 69,788 | - | 69,788 | |||||||||
| Depreciation and amortization | 1,400 | 433,800 | (f) | 435,200 | ||||||||
| Total operating expenses | 600,918 | 976,143 | 1,577,061 | |||||||||
| Net loss | $ | (594,168 | ) | $ | (60,190 | ) | $ | (654,358 | ) | |||
| Net loss per share, basic and diluted | $ | (1.30 | ) | $ | (0.63 | ) | ||||||
| Weighted average number of common shares outstanding | 458,524 | 575,000 | (g) | 1,033,524 | ||||||||
See accompanying notes to unaudited pro forma statement of operations
REVEN HOUSING REIT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012
| a) | Historical financial information was derived from Reven Housing REIT’s annual report on Form 10-K for the year ended December 31, 2012. |
| b) | Represents net rental income from tenants (not reflected in the historical statement of operations of Reven Housing REIT) for the year ended December 31, 2012, based on historical operations of the previous owner. |
| c) | Represents operating expenses (not reflected in the historical statement of operations of Reven Housing REIT) for the year ended December 31, 2012, based on historical operations of the previous owner. |
| d) | Represents property management costs based on 7% of rental income (not reflected in the historical statement of operations of Reven Housing REIT) for the year ended December 31, 2012, based on management's estimates of what would have been incurred had the asset been acquired on January 1, 2012. |
| e) | Represents acquisition and closing costs relating to the purchase of the real estate as if it had occurred on January 1, 2012. |
| f) | Represents adjustments to depreciation and amortization expense (not reflected in the historical statement of operations of Reven Housing REIT) for the year ended December 31, 2012 as if the acquisition had occurred on January 1, 2012. Depreciation expense is calculated using the straight-line method over the estimated useful life of 27.5 years for the buildings. Amortization expense on lease intangible costs is recognized using the straight-line method over the life of the lease. |
| g) | Represents the issuance of 575,000 shares of Reven Housing REIT in connection with a private placement as if it occurred on January 1, 2012. These proceeds were used in funding the acquisition of Houston 150 Homes. |
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: May 7, 2015 | /s/ Thad L. Meyer |
| Thad L. Meyer, | |
| Chief Financial Officer |