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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-12252
EQUITY RESIDENTIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 36-3877868
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 474-1300
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, New York Stock Exchange
$0.01 Par Value (Name of Each Exchange
(Title of Class) on Which Registered)
Preferred Shares of Beneficial Interest, New York Stock Exchange
$0.01 Par Value (Name of Each Exchange
(Title of Class) on Which Registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting shares held by non-affiliates was
approximately $2.4 billion based upon the closing price on March 19, 1997 of
$47.50 using beneficial ownership of shares rules adopted pursuant to Section 13
of the Securities Exchange Act of 1934 to exclude voting shares owned by
Trustees and Officers, some of whom may not be held to be affiliates upon
judicial determination.
At March 20, 1997 51,769,001 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates by reference the Registrant's Current Report on Form 8-K
dated March 1, 1996 and filed on March 7, 1996.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form S-11 on May 21, 1993 (Registration No. 33-63158) and as amended
thereafter: Exhibit 2.1, 2.2, 3.1, 3.2, 10.1, 10.1A, 10.2, 10.4, 10.5, 10.6,
10.7, 10.8, 10.9, 10.11, 10.12, 10.14 and 10.15.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form S-11 on November 23, 1993 (Registration No. 33-72080) and as
amended thereafter: Exhibit 10.16, 10.16A, 10.17, and 10.17A.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form S-11 on June 17, 1994 (Registration No. 33-80420) and as amended
thereafter: Exhibit 10.10 and 10.14A.
Part IV incorporates by reference the following exhibits as filed with the
Operating Partnership's Form 10 on October 7, 1994 (Registration No. 0-24920)
and as amended thereafter: Exhibit 4.1, 4.2, 10.1B, 10.13, 10.18 and 10.19.
Part IV incorporates by reference the following exhibit as filed with the
Operating Partnership's Form 10-Q for the quarter ended September 30, 1995 on
November 9, 1995 and as amended thereafter: Exhibit 10.1C.
Part IV incorporates by reference the following exhibits as filed with the
Operating Partnership's Form 10-k on March 16, 1995 and as amended thereafter:
Exhibit 3.1A and 10.3.
Part IV incorporates by reference the following exhibit as filed with the
Company's Form 10-K for the year ended December 31, 1995 on March 18, 1996 and
as amended thereafter: Exhibit 4.3.
2
PART I
EQUITY RESIDENTIAL PROPERTIES TRUST
TABLE OF CONTENTS
PAGE
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PART I.
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 27
Item 4. Submission of Matters to a Vote of Security Holders 27
PART II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 28
Item 6. Selected Financial Data 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 31
Item 8. Financial Statements and Supplementary Data 40
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 40
PART III.
Item 10. Trustees and Executive Officers of the Registrant 41
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and Management 52
Item 13. Certain Relationships and Related Transactions 56
PART IV.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 60
3
PART I
Item 1. Business
General
Equity Residential Properties Trust (the "Company") is a self-administered
and self-managed equity real estate investment trust ("REIT"). The Company was
organized in March 1993 and commenced operations on August 18, 1993 upon
completion of its initial public offering (the "IPO") of 13,225,000 common
shares of beneficial interest, $0.01 par value per share ("Common Shares"). The
Company was formed to continue the multifamily property business objectives and
acquisition strategies of certain affiliated entities controlled by Mr. Samuel
Zell, Chairman of the Board of Trustees of the Company. These entities had been
engaged in the acquisition, ownership and operation of multifamily residential
properties since 1969.
The Company, through its subsidiaries, which include ERP Operating Limited
Partnership (the "Operating Partnership"), Equity Residential Properties
Management Limited Partnership and Equity Residential Properties Management
Limited Partnership II (collectively, the "Management Partnerships"), a series
of partnerships (the "Financing Partnerships") and limited liability companies
("LLCs") which beneficially own certain properties encumbered by mortgage
indebtedness, is the successor to the multifamily property business of Equity
Properties Management Corp. ("EPMC"), an entity controlled by Mr. Zell, and a
series of other entities which owned 69 of the multifamily properties
contributed at the time of the Company's IPO (the "Initial Properties").
As of December 31, 1996, the Company owned or had interests in 239
multifamily properties of which it controlled a portfolio of 218 multifamily
properties (individually, a "Property" and collectively, the "Properties")
containing 67,705 units, including 61 of the Initial Properties. The remaining
21 properties represent an investment in partnership interests and subordinated
mortgages collateralized by 21 properties (the "Additional Properties")
containing 3,896 units, which units are property managed by a third party
unaffiliated entity. The Company's Properties and the Additional Properties are
located throughout the United States in the following states: Arizona,
Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New Mexico, Nevada, North Carolina, Ohio, Oklahoma,
Oregon, South Carolina, Tennessee, Texas, Virginia and Washington. In addition,
Equity Residential Properties Management Corp. ("Management Corp.") and Equity
Residential Properties Management Corp. II ("Management Corp. II") also provide
residential property and asset management services to 40 properties containing
13,054 units owned by affiliated entities. The Company is, together with the
Operating Partnership, one of the largest publicly traded REITs based on the
aggregate market value of its outstanding Common Shares) and is the largest
publicly traded REIT owner of multifamily properties (based on the number of
apartment units owned and total revenues earned.).
Since the Company's IPO and through December 31, 1996, the Company, through
the Operating Partnership, has acquired direct or indirect interests in 160
properties (which included the debt collateralized by six Properties) containing
49,679 units in the aggregate for a total purchase price of approximately $2.4
billion, including the assumption of approximately $554.2 million of
4
PART I
mortgage indebtedness. The Company also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. Since the IPO, the Company has disposed of 11 of its
properties containing 3,699 units for a total sales price of approximately $93.3
million and the release of mortgage indebtedness in the amount of $20.5 million.
The Company's corporate headquarters and executive offices are located in
Chicago, Illinois. In addition, the Company has regional operations centers in
Chicago, Illinois; Dallas, Texas; Denver, Colorado; Seattle, Washington; Tampa,
Florida and Bethesda, Maryland and area offices in Atlanta, Georgia; Las Vegas,
Nevada; Phoenix, Arizona; Portland, Oregon; San Antonio and Houston, Texas;
Ypsilanti, Michigan; Raleigh, North Carolina; Ft. Lauderdale, Florida and
Irvine, California. The Company has 2,189 full-time employees (1,944 of which
are on site at the Properties). Each of the Company's Properties is directed by
an on-site manager, who supervises the on-site employees and is responsible for
the day-to-day operations of the Property. The manager is generally assisted by
a leasing administrator and/or property administrator. In addition, a
maintenance director at each Property supervises a maintenance staff whose
responsibilities include a variety of tasks, including responding to service
requests, preparing vacant apartments for the next resident and performing
preventive maintenance procedures year-round.
Business Objectives and Operating Strategies
The Company seeks to maximize both current income and long-term growth in
income, thereby increasing: (i) the value of the Properties; (ii) distributions
on a per Common Share basis; and (iii) shareholders' value.
The Company's strategies for accomplishing these objectives are:
. maintaining and increasing Property occupancy while increasing rental
rates;
. controlling expenses, providing regular preventive maintenance, making
periodic renovations and enhancing amenities;
. maintaining a ratio of consolidated debt-to-total market capitalization of
less than 50%; and
. pursuing acquisitions that: (i) are available at prices below estimated
replacement costs; (ii) have potential for rental rate and/or occupancy
increases; (iii) have attractive locations in their respective markets; and
(iv) provide anticipated total returns that will increase the Company's
distributions per Common Share and the Company's overall market value.
The Company is committed to tenant satisfaction by striving to anticipate
industry trends and implementing strategies and policies consistent with
providing quality tenant services. In addition, the Company continuously
surveys rental rates of competing properties and conducts satisfaction surveys
of residents to determine the factors they consider most important in choosing a
particular apartment unit.
5
PART I
Acquisition Strategies
The Company anticipates that future property acquisitions will be located
in the continental United States. Management will continue to use market
information to evaluate acquisition opportunities. The Company's market data
base allows it to review the primary economic indicators of the markets where
the Company currently manages Properties and where it expects to expand its
operations. Acquisitions may be financed from various sources of capital, which
may include undistributed funds from operations ("FFO"), issuance of additional
equity securities, sales of Properties and collateralized and uncollateralized
borrowings. In addition, the Company may acquire additional multifamily
properties in transactions that include the issuance of limited partnership
interests in the Operating Partnership ("OP Units") as consideration for the
acquired properties. Such transactions may, in certain circumstances, partially
defer the sellers' tax consequences.
When evaluating potential acquisitions, the Company will consider: (i) the
geographic area and type of community; (ii) the location, construction quality,
condition and design of the property; (iii) the current and projected cash flow
of the property and the ability to increase cash flow; (iv) the potential for
capital appreciation of the property; (v) the terms of resident leases,
including the potential for rent increases; (vi) the potential for economic
growth and the tax and regulatory environment of the community in which the
property is located; (vii) the occupancy and demand by residents for properties
of a similar type in the vicinity (the overall market and submarket); (viii) the
prospects for liquidity through sale, financing or refinancing of the property;
and (ix) competition from existing multifamily properties and the potential for
the construction of new multifamily properties in the area. The Company expects
to purchase multifamily properties with physical and market characteristics
similar to the Properties.
Disposition Strategies
Management will use market information to evaluate dispositions. Factors
the Company considers in deciding whether to dispose of its Properties include
the following: (i) the amount of increases in new construction; (ii) areas
where the economy is expected to decline substantially; and (iii) markets where
the Company does not intend to establish long-term concentrations. The Company
will reinvest the proceeds received from property dispositions to fund property
acquisitions. In addition, when feasible the Company will structure these
transactions as tax deferred exchanges.
Financing Strategies
The Company intends to maintain a ratio of consolidated debt-to-total
market capitalization of 50% or less. At December 31, 1996, the Company had a
ratio of approximately 31% based on the closing price of the Company's Common
Shares on the New York Stock Exchange and assuming conversion of all OP Units
plus the liquidation preference of non-voting preferred shares of beneficial
interest, $0.01 par value per share ("Preferred Shares").
6
PART I
Equity Offerings
- - ----------------
In January 1994, the Company completed a public offering of 5,750,000
Common Shares (the "Second Public Offering") at $29.00 per share and received
net proceeds of approximately $157.4 million in connection therewith.
In June 1994, the Company concluded a private placement of 1,569,270 Common
Shares to six accredited institutional investors (the "Private Equity Offering")
and received net proceeds of approximately $47 million in connection therewith.
The prices at which the Common Shares were sold ranged from $29.43 to $32.87.
In July 1994, the Company completed a public offering of 9,200,000 Common
Shares (the "Third Public Offering") at $31.25 per share and received net
proceeds of approximately $271.7 million in connection therewith.
In September 1994, the Company registered 5,000,000 Common Shares pursuant
to an equity shelf registration statement (the "Equity Shelf Registration") of
which 2,735,320 registered Common Shares were sold in separate transactions
completed in October 1994 (collectively, the "Shelf Offering"). The Company
received net proceeds of approximately $81 million in connection therewith. The
prices at which the Common Shares were sold ranged from $29.34 to $30.17.
In June 1995, the Company sold 6,120,000 of its 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $0.01 par value per share
(liquidation preference $25 per share) (the "Series A Preferred Shares"),
pursuant to a $250 million shelf registration (the "Preferred Shelf
Registration"), at $25 per share. The Company raised gross proceeds of $153
million from this offering (the "Series A Preferred Share Offering").
On September 11, 1995, the Company filed with the Securities and Exchange
Commission (the "SEC") a Form S-3 Registration Statement to register up to $500
million of Preferred Shares, Common Shares and depositary shares, pursuant to a
shelf offering (the "Second Shelf Registration").
In November 1995, the Company sold 5,000,000 depositary shares (the "Series
B Depositary Shares") pursuant to the Second Shelf Registration. Each Series B
Depositary Share represents a 1/10 fractional interest in a 9 1/8% Series B
Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par value
per share (the "Series B Preferred Shares"). The liquidation preference of each
of the Series B Preferred Shares is $250.00 (equivalent to $25 per Series B
Depositary Share). The Company raised gross proceeds of approximately $125
million from the sale of the Series B Depositary Shares.
In January 1996, the Company completed an offering of 1,725,000 registered
Common Shares, which were sold at a net price of $29.375 per share (the "January
1996 Common Share Offering") and received net proceeds of approximately $50.7
million in connection therewith. In February 1996, the Company completed an
offering of 2,300,000 registered Common Shares, which were sold at a net price
of $29.50 per share (the "February 1996 Common Share Offering") and received net
proceeds of approximately $67.8 million in connection therewith.
7
PART I
On May 21, 1996, the Company completed an offering of 2,300,000 publicly
registered Common Shares, which were sold at a net price of $30.50 per share.
On May 28, 1996 the Company completed the sale of 73,287 publicly registered
Common Shares to employees of the Company and to employees of Equity Group
Investments, Inc. ("EGI") and certain of their respective affiliates and
consultants at a net price equal to $30.50 per share. On May 30, 1996, the
Company completed an offering of 1,264,400 publicly registered Common Shares,
which were sold at a net price of $30.75 per share. The Company received net
proceeds of approximately $111.3 million in connection with the sale of the
3,637,687 Common Shares mentioned above (collectively, the "May 1996 Common
Share Offerings").
In September 1996, the Company sold 4,600,000 depositary shares (the
"Series C Depositary Shares") pursuant to the Second Shelf Registration. Each
Series C Depositary Share represents a 1/10 fractional interest in a 9 1/8%
Series C Cumulative Redeemable Preferred Share of Beneficial Interest, $0.01 par
value per share (the "Series C Preferred Shares"). The liquidation preference
of each of the Series C Preferred Shares is $250.00 (equivalent to $25 per
Series C Depositary Share). The Company raised gross proceeds of $115 million
from this offering (the "Series C Preferred Share Offering").
On September 18, 1996, the Company filed with the SEC a Form S-3
Registration Statement to register $500 million of equity securities (the "1996
Equity Shelf Registration").
Also in September 1996, the Company completed the sale of 2,272,728
publicly registered Common Shares which were sold at net price of $33 per share.
The Company received net proceeds of approximately $75 million in connection
with this offering (the "September 1996 Common Share Offering").
In November 1996, the Company issued 39,458 Common Shares pursuant to the
1996 Nonqualified Employee Share Purchase Plan at a net price of $30.44 and
received net proceeds of approximately $1.2 million.
In December 1996, the Company completed offerings of 4,440,000 publicly
registered Common Shares, which were sold to the public at a price of $41.25 per
share (the "December 1996 Common Share Offerings"). The Company received net
proceeds of approximately $177.4 million.
Debt Offerings
- - --------------
In May 1994, the Operating Partnership issued $125 million of 8 1/2%
unsecured notes due May 15, 1999 (the "1999 Notes") guaranteed by the Company in
a private placement (the "Debt Offering") to qualified institutional buyers as
defined in Rule 144A of the Securities Act of 1933, as amended (the "Securities
Act"). The Operating Partnership received net proceeds of $122.9 million in
connection with the Debt Offering.
8
PART I
In December 1994, the Operating Partnership registered $500 million in debt
securities pursuant to a debt shelf registration statement (the "Debt Shelf
Registration") of which $100 million of floating rate notes due December 22,
1997 (the "Floating Rate Notes") were issued by the Operating Partnership on
December 21, 1994 (the "Public Debt Offering"). The Operating Partnership
received net proceeds of $98.6 million in connection with the Public Debt
Offering. The Floating Rate Notes bear interest at three month London Interbank
Offered Rate ("LIBOR") plus 0.75%.
In April 1995, the Operating Partnership issued $125 million of 7.95%
unsecured fixed rate notes (the "2002 Notes") pursuant to the Debt Shelf
Registration in a public debt offering (the "Second Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $123.1 million in
connection with the Second Public Debt Offering.
In August 1996, the Operating Partnership issued $150 million of 7.57%
unsecured fixed rate notes (the "2026 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Third Public Debt Offering"). The
Operating Partnership received net proceeds of approximately $149 million in
connection with this issuance.
On September 18, 1996, the Operating Partnership filed with the SEC a Form
S-3 Registration Statement to register $500 million of debt securities (the
"1996 Debt Shelf Registration").
Credit Facility
The Company, through the Operating Partnership, had a $250 million
unsecured line of credit with Wells Fargo Realty Advisors Funding Incorporated,
as agent, through November 14, 1996. On November 15, 1996, the Company
completed an agreement with Morgan Guaranty Trust Company of New York ("Morgan
Guaranty") and Bank of America Illinois ("Bank of America") to provide the
Company a $250 million unsecured line of credit. This new line of credit
matures in November 1999 and borrowings generally will bear interest at a per
annum rate of one, two, three or six month LIBOR, plus 0.75%, and is subject to
an annual facility fee of $500,000. As of December 31, 1996, there were no
amounts outstanding on this line of credit.
Recent Developments
In January 1997, the Company acquired three properties from unaffiliated
third parties for a total purchase price of approximately $44.6 million, which
included the assumption of mortgage indebtedness of approximately $20.2 million.
These properties were Town Center, a 258-unit property located in Kingwood,
Texas; Harborview, a 160-unit property located in San Pedro, California and The
Cardinal, a 256-unit property located in Greensboro, North Carolina.
On January 16, 1997 the Company entered into an Agreement and Plan of
Merger regarding the planned acquisition of the multifamily property business of
Wellsford Residential Property Trust ("Wellsford"), a Maryland real estate
investment trust, through the tax free merger of the Company and Wellsford (the
"Merger"). The transaction is valued at approximately $1 billion and
9
PART I
includes 75 multifamily properties containing 19,004 units. In the Merger, each
outstanding common share of beneficial interest of Wellsford will be converted
into .625 of a Common Share of the Company, assuming the market price of a
Common Share remains in excess of $40. The Merger plans call for the issuance of
approximately 10.7 million new common shares valued at approximately $464
million based on the Company's January 16, 1997 closing price of $43.375 and
requires the assumption of all Wellsford outstanding debt of approximately $332
million and of approximately $158 million in preferred shares.
In February 1997, the Company acquired four properties from unaffiliated
third parties for a total purchase price of approximately $90.5 million, which
included the assumption of mortgage indebtedness of approximately $30.6 million.
These properties were Trails at Dominion, a 843-unit multifamily property
located in Houston, Texas; Dartmouth Woods, a 201-unit property located in
Denver, Colorado; Rincon Apartments, a 288-unit property located in Houston,
Texas; and Waterford at the Lakes, a 344-unit property located in Kent,
Washington.
In March 1997, the Company acquired one property from an unaffiliated third
party for a total purchase price of approximately $9.15 million. This property
was Junipers at Yarmouth, a 225-unit property located in Yarmouth, Maine.
As of March 20, 1997, the Company completed offerings of 938,800 publicly
registered Common Shares, which were sold at a net price of $46 per share. The
Company received net proceeds of approximately $43.2 million in connection with
these offerings (the "March 1997 Common Share Offerings").
Competition
All of the Properties are located in developed areas that include other
multifamily properties. The number of competitive multifamily properties in a
particular area could have a material effect on the Company's ability to lease
units at the Properties or at any newly acquired properties and on the rents
charged. The Company may be competing with other entities that have greater
resources than the Company and whose managers have more experience than the
Company's officers and trustees. In addition, other forms of multifamily
properties, including multifamily properties and manufactured housing controlled
by Mr. Zell, and single-family housing, provide housing alternatives to
potential residents of multifamily properties.
Tax Status
The Company has elected to be taxed as a REIT under Section 856(c) of the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
taxable year ending December 31, 1993. As a result, the Company generally will
not be subject to Federal income tax to the extent it distributes 95% of its
taxable income to its shareholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any year, its taxable income may be subject to income tax at regular
corporate rates (including any applicable alternative minimum tax). Even if the
Company qualifies for taxation as a REIT, the Company may be subject to certain
state and local taxes on its income and excise taxes on its undistributed
income.
10
PART I
Item 2. The Properties
As of December 31, 1996, the Company controlled a portfolio of 218
multifamily properties located in 30 states consisting of 5,198 buildings
containing 67,705 apartment units. The average number of units per Property was
approximately 311. The units are typically contained in a series of two-story
buildings. The Properties contain an aggregate of 59.5 million rentable square
feet, with an average unit size of 878 square feet. The average rent per unit
was $673 and the average rent per square foot was $0.77.
As of December 31, 1996, the Properties had an average occupancy rate of
95%. Tenant leases are generally year-to-year and require security deposits.
The Properties typically provide residents with attractive amenities, which may
include a clubhouse, swimming pool, laundry facilities and cable television
access. Certain Properties offer additional amenities such as saunas,
whirlpools, spas, sports courts and exercise rooms.
The Company believes that the Properties provide amenities and common
facilities that create an attractive residence for tenants. It is management's
role to monitor compliance with Property policies and to provide preventive
maintenance of the Properties including common areas, facilities and amenities.
The Company holds periodic meetings of its Property management personnel for
training and implementation of the Company's strategies. The Company believes
that, due in part to this strategy, the Properties historically have had high
occupancy rates.
The distribution of the Properties throughout the United States reflects
the Company's belief that geographic diversification helps insulate the
portfolio from regional and economic influences. At the same time, the Company
has sought to create clusters of Properties within each of its primary markets
in order to achieve economies of scale in management and operation; however, the
Company may acquire additional multifamily properties located anywhere in the
United States.
The Company beneficially owns fee simple title to 211 of the Properties and
holds a 73-year leasehold interest with respect to one Property (Mallgate).
Direct fee simple title for certain of the Properties is owned by single-purpose
nominee corporations or land trusts that engage in no business other than
holding title to the Property for the benefit of the Company. Holding title in
such a manner is expected to make it less costly to transfer such Property in
the future in the event of a sale and should facilitate financing, since lenders
often require title to a Property to be held in a single purpose entity in order
to isolate that Property from potential liabilities of other Properties. Direct
fee simple title for certain other Properties is owned by an LLC. In addition,
with respect to two Properties, the Company owns the debt collateralized by such
Properties and with respect to four Properties, the Company owns an interest in
the debt collateralized by the Properties.
As of December 31, 1996, the Company had an investment in partnership
interests and subordinated mortgages collateralized by the Additional
Properties. The Additional Properties consisted of 578 buildings containing
3,896 units, located in four states.
The following two tables set forth certain information relating to the
Properties and the Additional Properties:
11
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
ARIZONA
Bay Club, Phoenix (1) 1976 22 13 420 257,790 614 96% $493 $0.80
Camellero, Scottsdale (1) 1979 33 15 344 311,526 906 94% $722 $0.80
Canyon Creek, Tuscan 1986 15 10 242 169,946 702 97% $473 $0.67
Canyon Sands, Phoenix (1) 1983 38 20 412 353,592 858 91% $560 $0.65
Chandler Court, Chandler 1987 33 20 311 263,338 847 95% $613 $0.72
Crystal Creek, Phoenix 1985 24 10 273 190,140 696 97% $559 $0.80
Del Coronado, Mesa (1) 1985 43 19 419 394,062 940 95% $609 $0.65
Desert Sands, Phoenix (1) 1982 39 20 412 353,592 858 91% $560 $0.65
Flying Sun, Phoenix (1) 1983 10 4 108 93,708 868 97% $553 $0.64
Fountain Creek, Phoenix 1984 20 9 186 144,374 776 94% $600 $0.77
Indian Bend, Scottsdale 1973 8 14 275 226,444 823 97% $675 $0.82
Southbank, Mesa 1985 13 5 113 99,448 880 98% $552 $0.63
Southcreek, Mesa (1) 1986-89 66 23 528 472,152 894 95% $650 $0.73
Via Ventura, Scottsdale 1980 22 19 320 279,187 872 71% $712 $0.82
Villa Madeira, Scottsdale 1971 39 17 332 291,280 877 95% $692 $0.79
Villa Manana, Phoenix 1971-85 13 8 260 212,150 816 96% $587 $0.72
ARKANSAS
Fox Run, Little Rock (1) 1974 27 14 337 303,230 900 97% $536 $0.60
12
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
ARKANSAS, continued
Greenwood Forest, Little Rock (1) 1975 23 10 239 191,062 799 98% $ 501 $0.63
Walnut Ridge, Little Rock (1) 1975 18 10 252 210,776 836 95% $ 477 $0.57
Williamsburg, Little Rock (1) 1974 21 10 211 184,348 874 99% $ 552 $0.63
CALIFORNIA
Carmel Terrace, San Diego 1988-89 27 20 384 298,588 778 98% $ 771 $0.99
Casa Capricorn, San Diego 1981 24 10 192 178,320 929 96% $ 742 $0.80
Creekside Oaks, Walnut Creek (1) 1974 5 7 316 237,952 753 97% $ 724 $0.96
Deerwood, San Diego 1990 37 29 315 333,079 1,057 93% $ 987 $0.93
Eagle Canyon, Chino Hills 1985 34 32 252 252,493 1,002 95% $ 907 $0.90
Emerald Place, Bermuda Dunes 1988 27 17 240 214,072 892 98% $ 619 $0.69
Hathaway, Long Beach 1987 41 17 385 266,805 693 95% $ 843 $1.22
Lakeville Resort, Petaluma (1) 1984 84 45 492 461,798 939 99% $ 729 $0.78
Lands End, Pacifica 1974 11 7 260 161,121 620 98% $ 927 $1.50
Merrimac Woods, Costa Mesa 1970 19 39 123 88,160 717 97% $ 744 $1.04
Mountain Terrace, Stevenson Ranch 1992 19 39 510 425,612 835 77% $ 852 $1.02
Oak Park North, Agoura (1) 1990 31 12 220 180,600 821 94% $1,023 $1.25
Oak Park South, Agoura (1) 1989 31 12 224 188,000 839 93% $1,006 $1.20
Park West, Los Angeles 1990 1 4 444 315,588 711 95% $ 962 $1.35
13
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - -----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA, CONTINUED
Promenade Terrace, Corona Hills (1) 1990 38 27 330 360,838 1,093 96% $851 $0.78
Regency Palms, Huntington Beach 1969 39 14 310 261,634 844 97% $806 $0.95
Summer Ridge, Riverside 1985 9 6 136 104,832 771 98% $660 $0.86
Summerset Village, Chatsworth 1985 29 29 280 286,752 1,024 98% $1,067 $1.04
Villa Solana, Laguna Hills 1984 17 13 272 245,104 901 97% $827 $0.92
Vista Del Lago, Mission Viejo (1) 1986-88 51 29 608 512,200 842 98% $864 $1.03
Windridge, Laguna Niguel (1) 1989 22 19 344 375,312 1,091 92% $948 $0.87
COLORADO
Cheyenne Crest, Colorado Springs (1) 1984 13 9 208 175,424 843 94% $640 $0.76
Glenridge, Colorado Springs (1) 1985 12 8 220 176,792 804 96% $641 $0.80
Indian Tree, Arvada (1) 1983 7 8 168 140,000 833 99% $641 $0.77
Trails, Aurora (1) 1986 17 11 351 286,964 818 95% $614 $0.75
Willow Glen, Aurora 1983 22 20 384 302,944 789 90% $597 $0.76
Windmill, Colorado Springs (1) 1985 15 11 304 180,640 594 97% $503 $0.85
Yuma Court, Colorado Springs 1985 10 5 40 37,400 935 95% $597 $0.64
FLORIDA
Brierwood, Jacksonville 1974 22 17 196 263,052 1,342 97% $620 $0.46
Casa Cordoba, Tallahassee 1972-73 32 12 168 164,336 978 99% $615 $0.63
Casa Cortez, Tallahassee 1970 13 4 66 74,916 1,135 97% $613 $0.54
14
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA, CONTINUED
Chaparral, Largo (1) 1976 52 23 444 451,420 1,017 95% $582 $0.57
Gatehouse on the Green, Pambroke Pines 1990 12 21 312 310,140 994 98% $908 $0.91
Gatehouse at Pine Lake, Plantation 1990 11 25 296 293,792 993 92% $908 $0.92
Habitat, Orlando 1974 26 17 344 334,352 972 95% $556 $0.57
Hammock's Place, Miami (1) 1986 11 15 296 307,900 1,040 97% $739 $0.71
Heron Cove, Coral Springs 1987 13 12 198 189,932 959 96% $754 $0.79
Heron Landing, Lauderhill 1988 13 11 144 151,684 1,053 92% $769 $0.73
Heron Run, Plantation 1987 13 13 198 185,504 937 96% $793 $0.85
La Costa Brava, Orlando 1967 17 10 194 190,780 983 96% $615 $0.63
La Costa Brava, Jacksonville (1)(2) 1970-73 46 30 464 441,268 951 95% $530 $0.56
Marbrisa, Tampa 1984 16 37 224 188,544 842 98% $565 $0.67
Oaks of Lakebridge, Ormond Beach 1984 13 12 170 120,792 711 97% $578 $0.81
Paradise Point, Dania 1987-90 13 13 260 226,980 873 96% $810 $0.93
Pine Harbour, Orlando 1991 18 20 366 344,204 940 93% $654 $0.70
Pines of Springdale, W. Palm Beach 1986 3 5 151 126,975 841 95% $616 $0.73
The Place, Fort Meyers 1986 15 9 230 183,588 798 94% $544 $0.68
Port Royale, Fort Lauderdale 1988 10 17 252 182,380 724 98% $855 $1.18
Port Royale II, Fort Lauderdale 1991 3 5 161 115,025 714 99% $883 $1.24
15
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA, CONTINUED
River Bend, Tampa 1971 32 15 296 333,580 1,127 95% $558 $0.50
Sabal Pointe, Coral Springs 1995 11 14 275 355,575 1,293 97% $895 $0.69
Sawgrass Cove, Bradenton 1991 21 28 336 342,880 1,020 93% $664 $0.65
Springs Colony, Altamonte Springs 1986 9 10 188 161,168 857 98% $573 $0.67
Stonelake Club, Ocala (1) 1986 31 15 240 194,320 810 95% $501 $0.62
Woodlake at Killearn, Tallahassee 1986-90 18 25 352 305,480 868 91% $615 $0.71
GEORGIA
Frey, Atlanta (1) 1985 29 44 489 453,760 928 95% $697 $0.75
Governor's Place, Augusta 1972 20 9 190 191,580 1,008 94% $448 $0.44
Greengate, Marietta 1971 11 11 152 157,808 1,038 92% $621 $0.60
Holcomb Bridge, Atlanta (1) 1985 34 36 437 419,150 959 95% $695 $0.72
Ivy Place, Atlanta 1978 17 15 122 180,830 1,482 94% $918 $0.62
Longwood, Decatur 1992 9 9 268 216,970 810 96% $747 $0.92
Maxwell House, Augusta 1951 1 1 216 97,173 450 94% $370 $0.82
Park Knoll, Marietta 1983 51 41 484 587,250 1,213 95% $828 $0.68
Preston Lake, Tucker 1984-86 9 32 320 338,130 1,057 93% $708 $0.67
Roswell, Atlanta (1) 1985 23 30 236 225,598 956 93% $720 $0.75
Terraces at Peachtree, Atlanta 1987 1 1 96 86,800 904 93% $928 $1.03
16
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
GEORGIA, CONTINUED
Woodland Hills, Decatur 1985 25 19 228 266,304 1,168 91% $790 $0.68
IDAHO
The Seasons, Boise 1990 10 6 120 108,460 904 94% $623 $0.69
ILLINOIS
Bourbon Square, Palatine (1) 1984-87 102 47 612 875,160 1,430 90% $1,018 $0.71
Four Lakes III-IV, Lisle (1) 1968 31 92 942 798,245 847 92% $828 $0.98
Four Lakes V, Lisle (1) 1988 2 15 478 310,208 649 90% $735 $1.13
Spice Run, Naperville 1988 20 32 400 396,320 991 88% $872 $0.88
INDIANA
Diplomat South, Beech Grove (1) 1970 16 15 272 254,528 936 93% $502 $0.54
IOWA
3000 Grand, Des Moines 1970 1 6 186 199,530 1,073 84% $876 $0.82
KANSAS
Cedar Crest, Overland Park 1986 38 30 466 430,034 923 96% $610 $0.66
Essex Place, Overland Park (1) 1970-84 32 34 352 429,048 1,219 94% $767 $0.63
Rosehill Pointe, Lenexa 1984 32 35 498 459,318 922 88% $590 $0.64
Silverwood, Mission (1) 1986 20 15 280 234,876 839 98% $603 $0.72
Sunnyoak Village, Overland Park 1984 55 46 548 492,700 899 93% $578 $0.64
KENTUCKY
Cloisters on the Green, Lexington (1) 1974 6 12 228 196,560 862 97% $551 $0.64
Doral, Louisville (1) 1972 19 10 228 293,106 1,286 94% $600 $0.47
17
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
KENTUCKY, CONTINUED
Mallgate, Louisville 1969 46 24 540 535,444 992 92% $534 $0.54
Sonnet Cove I-II, Lexington (1) 1972-1974 11 14 331 346,675 1,047 97% $611 $0.58
LOUISIANA
Plantation, Monroe 1972 6 10 200 180,416 902 92% $437 $0.48
MARYLAND
Canterbury, Germantown (1) 1986 37 23 544 481,083 884 92% $710 $0.80
Country Club I & II, Silver Spring (1) 1980-1982 24 20 376 371,296 987 94% $779 $0.79
Georgian Woods II, Wheaton (1) 1967 21 17 371 305,693 824 95% $766 $0.93
Greenwich Woods, Silver Spring (1) 1967 47 12 564 514,318 912 96% $792 $0.87
Marymont, Laurel 1987-88 12 10 308 251,264 816 94% $759 $0.93
Northhampton I & II, Largo (1) 1977-1988 47 58 620 564,399 910 96% $792 $0.87
Oak Mill II, Germantown (1) 1985 16 8 192 165,611 863 92% $712 $0.83
Town Centre III & IV, Laurel (1) 1968-1969 49 30 562 553,083 984 96% $731 $0.74
Yorktowne at Olde Mill, Millersville 1974 18 21 216 195,100 903 96% $681 $0.75
MICHIGAN
Country Ridge, Farmington Hills 1986 26 18 252 278,060 1,103 94% $850 $0.77
Hidden Valley, Ann Arbor 1973 6 28 324 237,348 733 97% $695 $0.95
Lake in the Woods, Ypsilanti 1969 40 175 1,028 971,873 945 89% $728 $0.77
Pines of Cloverlane, Pittsfield Township 1975-79 59 63 582 471,966 811 94% $633 $0.78
18
Item 2. PROPERTIES
PROPERTIES-CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - -----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN, CONTINUED
Walden Wood, Southfield(1) 1972 23 20 210 295,080 1,405 98% $847 $0.60
MINNESOTA
Park Place I & II, Plymouth(1) 1986 4 60 500 569,768 1,140 98% $768 $0.67
MISSOURI
Hunters Glen, Chesterfield 1985 8 19 192 156,489 815 97% $626 $0.77
Sleepy Hollow, Kansas City(1) 1987 26 33 388 325,486 839 98% $546 $0.65
NEVADA
Catalina Shores, Las Vegas 1989 15 13 240 211,200 880 92% $709 $0.81
Cypress Point, Las Vegas(1) 1989 19 9 212 179,800 848 88% $675 $0.80
Desert Park, Las Vegas 1987 23 15 368 172,513 469 92% $508 $1.08
Fountains at Flamingo,
Las Vegas 1989-91 34 30 521 417,870 802 96% $679 $0.85
Newport Cove, Henderson 1983 35 10 140 152,600 1,090 94% $771 $0.71
Silver Shadow, Las Vegas 1992 13 9 200 194,656 973 93% $723 $0.74
Sunrise Springs, Las Vegas 1989 18 10 192 164,424 856 94% $678 $0.79
Trails, Las Vegas 1988 38 28 440 453,656 1,031 93% $755 $0.73
NEW HAMPSHIRE
Wellington Hill, Manchester(1) 1987 55 40 390 394,627 1,012 94% $729 $0.72
NEW JERSEY
Raven's Crest, Plainsboro(1) 1984 37 19 704 583,176 828 96% $822 $0.99
NEW MEXICO
Pueblo Villas, Albuquerque 1975 17 12 232 173,118 746 92% $559 $0.75
19
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA
Bainbridge, Durham 1984 15 24 216 191,240 885 90% $692 $0.78
Bridgeport, Raleigh 1990 13 17 276 252,190 914 92% $714 $0.78
Deerwood Meadows, Greensboro (1) 1986 49 44 297 217,757 733 93% $572 $0.78
East Pointe, Charlotte (1) 1987 22 29 310 301,560 973 95% $629 $0.65
Laurel Ridge, Chapel Hill 1975 28 13 160 158,964 994 99% $719 $0.72
McAlpine Ridge, Charlotte 1989-90 16 15 320 238,125 744 93% $582 $0.78
Pine Meadow, Greensboro (1) 1974 29 14 204 226,600 1,111 92% $593 $0.53
Rock Creek, Corrboro 1986 20 16 188 153,548 817 89% $673 $0.82
Winterwood, Charlotte (1) 1986 22 23 384 369,260 962 91% $658 $0.68
Woodbridge, Cary (1) 1993-95 16 28 344 315,624 918 92% $719 $0.78
Woodscape, Raleigh 1979 21 25 240 186,192 776 95% $570 $0.73
Woods of North Bend, Raleigh 1983 22 30 235 243,975 1,038 98% $673 $0.65
OHIO
Olentangy Commons, Columbus (1) 1972 95 76 827 981,190 1,186 93% $747 $0.63
Reserve Square, Cleveland 1973 1 4 765 631,803 826 78% $853 $1.03
University Park, Toledo 1965 1 2 99 49,950 505 99% $433 $0.86
Village of Hampshire Heights, Toledo 1950 92 10 392 241,920 617 99% $416 $0.67
OKLAHOMA
Brittany Square, Tulsa 1982 13 8 212 170,516 804 96% $508 $0.63
20
Item 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - -----------------------------------------------------------------------------------------------------------------------------------
OKLAHOMA, CONTINUED
Quail Run, Oklahoma City 1978-83 13 9 208 149,408 718 99% $385 $0.54
Stonebrook, Oklahoma City 1983 21 8 360 247,088 686 93% $408 $0.59
The Lodge, Tulsa 1979 13 11 208 152,240 732 99% $413 $0.56
OREGON
Bridgecreek, Wilsonville 1987 26 22 315 274,236 871 95% $647 $0.74
Kempton Downs, Gresham 1990 17 12 278 277,536 998 95% $679 $0.68
Meadowcreek, Tigard (1) 1985 19 15 304 247,690 815 97% $628 $0.77
Tanasbourne Terrace, Hillsboro 1986-89 29 18 373 363,758 975 95% $734 $0.75
Tanglewood, Lake Oswego 1976 35 8 158 200,660 1,270 97% $798 $0.63
Woodcreek, Beaverton (1) 1982-84 28 22 440 335,120 762 96% $584 $0.77
SOUTH CAROLINA
Mallard Cove, Greenville 1983 3 14 211 264,187 1,252 88% $602 $0.48
TENNESSEE
Arbors of Hickory Hollow,
Nashville (1) 1986 17 31 336 337,260 1,004 96% $634 $0.63
Arbors of Brentwood,
Nashville (1) 1986-87 20 41 346 320,993 928 94% $691 $0.74
Brixworth, Nashville 1985 5 6 216 144,912 671 92% $728 $1.09
Canterchase, Nashville (1) 1985 12 22 235 170,140 724 97% $567 $0.78
TEXAS
7979 Westheimer, Houston 1973 30 15 459 401,571 875 95% $625 $0.71
Altamonte, San Antonio (1) 1985 29 17 432 322,928 748 93% $536 $0.72
21
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
TEXAS, CONTINUED
Arbors of Las Colinas, Irving 1985 21 15 408 334,556 820 96% $676 $0.82
Breton Mill, Houston (1) 1986 21 14 392 294,152 750 98% $533 $0.71
Celebration at Westchase, Houston (1) 1979 27 13 367 305,609 833 96% $545 $0.65
Champion Oaks, Houston (1) 1984 20 10 252 190,628 756 97% $531 $0.70
Dawntree, Carrollton 1982 53 23 400 370,152 925 96% $577 $0.62
Forest Ridge, Arlington 1984-85 34 29 660 555,364 841 93% $600 $0.71
Fountainhead I-III, San Antonio (1) 1985-87 55 23 688 457,616 665 92% $520 $0.78
Harbour Landing, Corpus Christi 1985 22 11 284 193,288 681 96% $525 $0.77
Hampton Green, San Antonio (1) 1979 32 11 293 222,341 759 94% $486 $0.64
Hearthstone, San Antonio (1) 1982 17 11 252 167,464 665 96% $440 $0.66
Hunter's Green, Fort Worth (1) 1981 17 10 248 188,720 761 92% $486 $0.64
Keystone, Austin (1) 1981 13 6 166 111,440 671 92% $573 $0.85
Kingswood Manor, San Antonio (1) 1983 12 6 129 109,996 853 98% $507 $0.59
Lakewood Oaks, Dallas 1987 26 12 352 257,606 732 98% $647 $0.88
Lincoln Green I-III, San Antonio 1984-86 54 24 680 465,664 685 96% $478 $0.70
Marina Club, Ft. Worth 1987 19 14 387 265,475 686 94% $478 $0.70
Northgate Village, San Antonio (1) 1984 23 10 264 214,928 814 94% $523 $0.64
Parkwest, Austin (1) 1985 50 15 196 179,046 914 90% $759 $0.83
22
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
TEXAS, CONTINUED
Preston in Willow Bend, Plano 1985 23 13 229 233,893 1,021 97% $740 $0.72
Ridgetree, Dallas 1983 38 17 798 597,642 749 95% $502 $0.67
Saddle Creek, Carrollton 1980 18 16 238 244,488 1,027 95% $681 $0.66
Songbird, San Antonio (1) 1981 29 15 262 277,720 1,060 93% $643 $0.61
Sutton Place, Dallas 1985 16 10 456 301,440 661 94% $568 $0.86
The Lodge, San Antonio 1979 20 10 384 259,512 676 93% $494 $0.73
The Trails, Arlington 1984 10 9 208 141,696 681 99% $518 $0.76
Village Oaks, Austin (1) 1984 25 13 280 199,152 711 97% $660 $0.93
Woodmoor, Austin 1981 16 9 208 151,348 728 90% $592 $0.81
VIRGINIA
Amberton, Manassas (1) 1986 16 7 190 143,402 755 100% $682 $0.90
Kingsport, Alexandria 1985 73 13 416 285,793 687 97% $687 $1.00
Saddle Ridge, Ashburn 1989 25 14 216 194,142 899 94% $837 $0.93
Sheffield Court, Arlington 1986 36 14 597 356,822 598 97% $793 $1.33
Tanglewood, Manassas (1) 1987 36 29 432 388,704 900 99% $697 $0.77
Wilde Lake, Richmond (1) 1989 8 18 189 172,980 915 91% $672 $0.73
Woodside, Lorton 1987 21 13 252 231,781 920 96% $757 $0.82
WASHINGTON
2900 on First, Seattle 1989-91 1 1 135 87,320 647 99% $837 $1.29
23
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1996
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed Buildings imate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - ------------------------------------------------------------------------------------------------------------------------------------
WASHINGTON, CONTINUED
Brentwood, Vancouver 1990 28 14 296 286,132 967 95% $640 $0.66
Chandler's Bay I, Kent 1989 27 36 293 278,874 952 98% $680 $0.71
Charter Club, Everett 1991 17 12 201 172,773 860 99% $681 $0.79
Creekside, Mountlake Terrace (1) 1987 24 43 512 407,296 796 99% $656 $0.83
Eagle Rim, Redmond 1986-88 39 20 156 137,920 884 96% $743 $0.84
Edgewood, Woodinville (1) 1986 15 10 203 166,299 819 98% $693 $0.85
Fox Run, Federal Way 1988 9 5 143 127,960 895 100% $626 $0.70
Huntington Park, Everett 1991 27 14 381 307,793 808 100% $653 $0.81
Newport Heights, Seattle (1) 1985 12 5 80 59,056 738 99% $674 $0.91
Orchard Ridge, Lynnwood 1988 9 6 104 86,548 832 99% $649 $0.78
Pointe East, Redmond 1988 19 6 76 83,280 1,096 96% $944 $0.86
Village of Newport, Federal Way (1) 1987 7 4 100 76,890 769 98% $582 $0.76
Waterstone Place, Federal Way 1990 72 37 750 616,436 822 92% $571 $0.69
Wellington, Silverdale (1) 1990 17 11 240 214,024 892 80% $641 $0.72
------------------------------------------------------------------------------------
TOTAL PROPERTIES: 5,198 4,055 67,705 59,472,576
------------------------------------------------------------------------------------
AVERAGE: 24 19 311 272,810 878 95% $673 $0.77
====================================================================================
(1) Encumbered by a third party mortgage.
(2) Includes La Costa Brava (JAX) and Cedar Cove.
24
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
Occupancy December, 1996
Average As of Avg. Monthly
Years(s) Acreage Square Square Footage December Rental Rate Per
Property Constructed Buildings (approximate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - -----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
Brookside Place,
Stockton 1981 28 10 90 96,664 1,074 96% $740 $0.69
Canyon Creek,
San Ramon 1984 27 13 268 257,676 961 94% $1,055 $1.10
Cobblestone Village,
Fresno 1983 33 15 162 153,118 945 94% $563 $0.60
Country Oaks,
Agoura 1985 38 15 256 258,558 1,010 93% $1,184 $1.17
Edgewater, Bakersfield 1984 35 15 258 240,322 931 93% $638 $0.68
Feather River,
Stockton 1981 16 8 128 97,328 760 95% $547 $0.72
Hidden Lake,
Sacramento 1985 27 17 272 261,808 963 93% $677 $0.70
Lakeview, Lodi 1983 25 9 138 136,972 993 95% $682 $0.69
Lantern Cove,
Foster City 1985 29 17 232 228,432 985 94% $1,524 $1.55
Schooner Bay I,
Foster City 1985 21 12.5 168 167,345 996 95% $1,583 $1.59
Schooner Bay II,
Foster City 1985 18 12.5 144 143,442 996 97% $1,570 $1.58
South Shore,
Stockton 1979 24 8 129 141,055 1,093 93% $749 $0.69
Waterfield Square I,
Stockton 1984 22 10 170 160,100 942 95% $580 $0.62
Waterfield Square II,
Stockton 1984 24 9 158 151,488 959 96% $597 $0.62
Willow Brook,
Pleasant Hill 1985 38 12 228 234,840 1,030 95% $1,209 $1.17
Willow Creek,
Fresno 1984 15 7 116 118,422 1,021 91% $668 $0.65
COLORADO
25
ITEM 2. PROPERTIES (CONTINUED)
ADDITIONAL PROPERTIES
Occupancy December, 1996
Average As of Avg. Monthly
Years(s) Acreage Square Square Footage December Rental Rate Per
Property Constructed Buildings (approximate) Units Footage Per Unit 31, 1996 Unit Square Foot
- - -----------------------------------------------------------------------------------------------------------------------------------
Deerfield, Denver 1983 22 9 158 146,380 926 94% $705 $0.76
COLORADO, continued
Foxridge, Englewood 1984 27 15 300 292,992 977 92% $764 $0.78
NEW MEXICO
Mesa Del Oso,
Albuquerque 1983 69 25 221 252,169 1,141 99% $893 $0.78
Tierra Antigua,
Albuquerque 1985 19 9 148 152,241 1,029 93% $796 $0.77
OKLAHOMA
Lakewood, Tulsa 1985 21 9 152 157,372 1,035 95% $670 $0.65
-----------------------------------------------------------------------------------------------
TOTAL ADDITIONAL
PROPERTIES: 578 257 3,896 3,848,724
-----------------------------------------------------------------------------------------------
AVERAGE: 28 12 186 183,273 988 94% $899 $0.91
===============================================================================================
Note: All of these Additional Properties are encumbered by mortages, of which
the Company has an investment in the second and third mortgages (which
are subordinate to first mortgages owned by third party unaffiliated
entities).
26
PART I
Item 3. Legal Proceedings
Richard M. Perlman, a former employee of companies controlled by Mr. Zell,
filed a legal proceeding against Mr. Zell and various partnerships and
corporations controlled by Mr. Zell claiming, inter alia, that he had an
----------
interest in 20 of 46 of the Initial Properties (the "Zell Properties") and that
he suffered damages when those Properties were transferred into the REIT. The
proceeding was filed on July 21, 1995 (Richard M. Perlman et al. v. Samuel Zell,
----------------------------------------
et al.) (United States District Court for the Northern District of Illinois-
- - ------
Eastern Division, Case No. 95 C 4242). Mr. Perlman voluntarily dismissed the
action that he previously filed in the Circuit Court of Cook County, Illinois,
which was known as Richard M. Perlman v. Samuel Zell, et al, Case No. 92 CH
----------------------------------------
19915. Mr. Zell believes such claims lack merit and is vigorously contesting
the claims. The Company is not currently a party to this lawsuit. Discovery is
currently proceeding and trial is currently anticipated to commence in June,
1997. Because Mr. Perlman's entire claimed interest in these Properties, based
on Mr. Perlman's pleadings, does not exceed 1% of the value of these Properties,
the Company has title insurance coverage, and the Company has been indemnified
by Mr. Zell and certain of his affiliates for any actual losses incurred in
connection with such matters, the Company believes no material loss to the
Company could occur.
On March 20, 1996, a legal proceeding (Nick J. Miletich, Administrator of
the Estates of Dorothy Miletich and Madelyne Miletich, deceased, v. Equity
Residential Properties Trust, Equity Residential Properties Management
Corporation, Curt Vajgrt, Raymond Countryman and Darla Countryman) (Iowa
District Court, Polk County, Iowa, Law Case No. CL 68908) was filed against the
Company. This legal proceeding arises out of the Company's ownership and
management of the apartment building known as 3000 Grand Ave. in Des Moines,
Iowa and alleges that Raymond and Darla Countryman murdered Dorothy Miletich and
Madelyne Miletich, who were residents of the apartment complex, on June 15,
1995. Raymond Countryman is a former employee of the Company. The plaintiff
alleges, inter alia, that had the Company learned of the background of Mr.
----------
Countryman prior to his employment, the Company would not have hired him and the
deaths of the Miletichs would have been avoided. The Company is vigorously
contesting these claims and believes it has strong defenses to these claims,
nevertheless, there is no assurance that the Company will not be held liable for
said deaths and there is no assurance that its insurance coverage will cover all
damages that may be awarded against it.
In addition, only ordinary routine litigation incidental to the business
which is not deemed material was initiated during the year ended December 31,
1996. The Company does not believe there is any other litigation, except as
mentioned in the previous paragraph, threatened against the Company other than
routine litigation arising out of the ordinary course of business, some of which
is expected to be covered by liability insurance, none of which is expected to
have a material adverse effect on the consolidated financial statements of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
27
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
The following table sets forth for the periods indicated, the high and low
sales prices for and the distributions paid on the Company's Common Shares which
trade on the New York Stock Exchange under the trading symbol EQR.
Sales Price
-----------------
High Low Distributions
------- ------- -------------
Fiscal Year 1996
Fourth Quarter Ended December 31, 1996 $43 1/2 $35 5/8 $0.625
Third Quarter Ended September 30, 1996 $36 1/8 $32 7/8 $ 0.59
Second Quarter Ended June 30, 1996 $33 1/2 $30 7/8 $ 0.59
First Quarter Ended March 31, 1996 $33 3/4 $28 1/4 $ 0.59
Sales Price
-----------------
High Low Distributions
------- ------- -------------
Fiscal Year 1995
Fourth Quarter Ended December 31, 1995 $31 7/8 $27 3/4 $ 0.59
Third Quarter Ended September 30, 1995 $31 1/4 $27 3/4 $ 0.53
Second Quarter Ended June 30, 1995 $29 3/4 $24 7/8 $ 0.53
First Quarter Ended March 31, 1995 $29 1/8 $25 5/8 $ 0.53
In addition, on February 25, 1997, the Company declared a $0.625
distribution per Common Share payable on April 11, 1997 to shareholders of
record on March 28, 1997.
The number of beneficial holders of Common Shares at December 31, 1996 was
approximately 18,400. The number of outstanding Common Shares as of December
31, 1996 was 51,154,836.
Item 6. Selected Financial Data
The following table sets forth selected financial and operating information
on a historical basis for the Company and the Predecessor Business. The
following information should be read in conjunction with all of the financial
statements and notes thereto included elsewhere in this Form 10-K. The
historical operating data for the years ended December 31, 1995, 1994, 1993, and
1992 have been derived from the historical Financial Statements of the Company
and the Predecessor Business audited by Grant Thornton L.L.P., independent
accountants. The historical operating data for the year ended December 31, 1996
has been derived from the historical Financial Statements of the Company audited
by Ernst & Young LLP, independent auditors. Certain capitalized terms as used
herein, are defined in the Notes to the Consolidated Financial Statements as
included elsewhere in this Form 10-K.
28
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED AND COMBINED HISTORICAL, INCLUDING PREDECESSOR BUSINESS
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AND PROPERTY DATA)
YEAR ENDED DECEMBER 31, (1)
-------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ---------- ---------- ----------- ----------
OPERATING DATA:
Total revenues $ 478,385 $ 390,384 $ 231,034 $ 112,070 $ 92,973
========= ========= ========= ========= =========
Income (loss) before gain on
disposition of properties, extraordinary items and
allocation to Minority Interests/Predecessor Business $ 97,033 $ 59,738 $ 45,988 $ 8,137 $ (3,281)
========= ========= ========= ========= =========
Net income $ 101,624 $ 67,719 $ 34,418 $ 6,095 $ -
========= ========= ========= ========= =========
Net income available to Common Shares $ 72,609 $ 57,610 $ 34,418 $ 6,095 $ -
========= ========= ========= ========= =========
Net income per weighted average Common Share outstanding $ 1.70 $ 1.68 $ 1.34 $ 0.42 $ -
========= ========= ========= ========= =========
Weighted average Common Shares outstanding 42,586 34,358 25,621 14,601 $ -
========= ========= ========= ========= =========
Distributions declared per Common Share outstanding $ 2.40 $ 2.18 $ 2.01 $ 0.68 $ -
========= ========= ========= ========= =========
BALANCE SHEET DATA (at end of period):
Real estate, before accumulated depreciation $2,983,510 $2,188,939 $ 1,963,476 $ 634,577 $ 358,212
Real estate, after accumulated depreciation $2,681,998 $1,970,600 $ 1,770,735 $ 478,210 $ 218,825
Total assets $2,986,127 $2,141,260 $ 1,847,685 $ 535,914 $ 238,878
Total debt $1,254,274 $1,002,219 $ 994,746 $ 278,642 $ 343,282
Minority Interests $ 150,637 $ 168,963 $ 177,438 $ 83,159 $ -
Shareholders' equity $1,458,830 $ 884,517 $ 609,936 $ 146,485 $ -
OTHER DATA:
Total properties (at end of period) (2) 218 174 163 79 46
Total apartment units (at end of period) (2) 67,705 53,294 50,704 24,419 15,732
Funds from operations available to Common Shares (unaudited)(3) $ 160,267 $ 120,965 $ 83,886 $ 30,127 $ 11,975
Cash flow provided by (used for):
Operating activities $ 210,930 $ 141,534 $ 93,997 $ 25,582 $ 10,871
Investing activities $ (635,655) $ (324,018) $ (896,515) $(106,543) $ (5,917)
Financing activities $ 558,568 $ 175,874 $ 808,495 $ 94,802 $ (4,945)
29
PART II
ITEM 6. SELECTED FINANCIAL AND OPERATING INFORMATION (COMBINED HISTORICAL
(CONTINUED))
(1) Historical results for the year ended December 31, 1992 represented the
combined results of the Predecessor Business. Historical results for the year
ended December 31, 1993 included combined results of the Predecessor Business
for the period January 1, 1993 through August 17, 1993.
(2) In August 1995 the Company also made an $89 million investment in
partnership interests and subordinated mortgages collateralized by the
Additional Properties. The Additional Properties consist of 3,896 units.
(3) The Company generally considers FFO to be one measure of the performance of
real estate companies, including an equity REIT. The new definition of FFO
adopted in March 1995 by the Board of Governors of the National Association of
Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss)
(computed in accordance with generally accepted accounting principles ("GAAP"),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation on real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures are calculated to reflect FFO on the same basis. The Company
believes that FFO is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flows from operating activities, financing
activities and investing activities, it provides investors an understanding of
the ability of the Company to incur and service debt and to make capital
expenditures. FFO does not represent cash generated from operating activities
in accordance with GAAP and therefore should not be considered an alternative to
net income as an indication of the Company's performance or to net cash flows
from operating activities as determined by GAAP as a measure of liquidity and is
not necessarily indicative of cash available to fund cash needs. The Company's
calculation of FFO represents net income available to Common Shares, excluding
gains on dispositions of properties, gains on early extinguishment of debt, and
write-off of unamortized costs on refinanced debt, plus depreciation on real
estate assets, income allocated to Minority Interests and amortization of
deferred financing costs related to the Predecessor Business. The Company's
calculation of FFO may differ from the methodology for calculating FFO utilized
by other REITs and, accordingly, may not be comparable to such other REITs. The
Company's calculation of FFO for 1995 and 1994 has been restated to reflect the
effects of the new definition as mentioned above. FFO for the year ended
December 31, 1994 includes the effect of a one-time charge of approximately
$879,000 for the relocation of the property management headquarters to Chicago.
In addition, FFO for the year ended December 31, 1993 excludes the effect of
refinancing costs of approximately $3.3 million which represented costs
associated with the prepayment of certain mortgage loans.
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7. OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with "Selected
Financial Data" and the historical Consolidated Financial Statements thereto
appearing elsewhere in this Form 10-K. Due to the Company's ability to control
the Operating Partnership, the Management Partnerships, the Financing
Partnerships and the LLCs, each entity has been consolidated with the Company
for financial reporting purposes.
RESULTS OF OPERATIONS
Since the Company's IPO, the Company has acquired direct or indirect
interests in 160 properties (the "Acquired Properties"), containing 49,679 units
in the aggregate for a total purchase price of approximately $2.4 billion,
including the assumption of approximately $554.2 million of mortgage
indebtedness. The Company's interest in six of the Acquired Properties at the
time of acquisition thereof consisted solely of ownership of the debt
collateralized by such Acquired Properties. The Company purchased ten of such
Acquired Properties or 2,694 units between the IPO and December 31, 1993 (the
"1993 Acquired Properties"); 84 of such Acquired Properties or 26,285 units in
1994 (the "1994 Acquired Properties"); 17 of such Acquired Properties or 5,035
units in 1995 (the "1995 Acquired Properties") and 49 of such Acquired
Properties consisting of 15,665 units in 1996 (the "1996 Acquired Properties").
In addition, in August 1995, the Company made an investment in partnership
interests and subordinated mortgages collateralized by the 21 Additional
Properties. The Acquired Properties were presented in the Consolidated and
Combined Financial Statements of the Company from the date of each acquisition.
During 1995, the Company also disposed of six properties containing
2,445 units (the "1995 Disposed Properties") for a total sales price of
approximately $52 million and the release of mortgage indebtedness of $20.5
million. During 1996, the Company disposed of five properties containing 1,254
units (the "1996 Disposed Properties ") for a total sales price of approximately
$41.3 million.
The Company's overall results of operations for the three years ended
December 31, 1996 have been significantly impacted by the Company's acquisition
activity. The significant changes in rental revenues, property and maintenance
expenses, real estate taxes and insurance, depreciation expense, property
management and interest expense can all primarily be attributed to the
acquisition of the Acquired Properties. The impact of the Acquired Properties
is discussed in greater detail in the following paragraphs.
Properties that the Company owned for all of both 1996 and 1995 (the
"1996 Same Store Properties") and Properties that the Company owned for all of
both 1995 and 1994 (the "1995 Same Store Properties") also impacted the
Company's results of operations and are discussed as well in the following
paragraphs.
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
For the year ended December 31, 1996, income before gain on disposition of
properties, extraordinary items and allocation to Minority Interests increased
by $37.3 million when compared to the year ended December 31, 1995. This
increase was primarily due to increases in rental revenues net of increases in
property and maintenance expenses, real estate taxes and insurance, property
management expenses, depreciation, interest expense and general and
administrative expenses. All of the increases in the various line item accounts
mentioned above can be primarily attributed to the 1996 Acquired Properties and
1995 Acquired Properties. These increases were partially offset by the 1996
Disposed Properties and the 1995 Disposed Properties. Interest income earned on
the Company's mortgage note investment increased by approximately $8 million and
was an additional factor that impacted the year to year changes.
In regard to the 1996 Same Store Properties, rental revenues increased by
approximately $15.9 million or 4.8 % primarily as a result of higher rental
rates charged to new tenants and tenant renewals and higher average occupancy
levels. Overall property operating expenses which include property and
maintenance, real estate taxes and insurance and an allocation of property
management expenses increased approximately $1.7 million or 1.2%. This
increase was primarily the result of higher payroll expenses and utilities
costs. For 1996 the Company also increased its per unit charge for property
level insurance which increased insurance expense by approximately $0.7 million.
In addition, real estate taxes increased due to reassessments on certain of the
1996 Same Store Properties.
Property management represents expenses associated with the management of the
Company's Properties. These expenses increased by approximately $2.3 million
primarily as a result of the expansion of the Company's property management
business with the addition of a regional operations center ("ROC") in Seattle,
Washington and during the third quarter of 1996 the addition of two new area
offices located in Raleigh, North Carolina and Ft. Lauderdale, Florida. Other
factors that impacted this increase were higher payroll and travel costs and
legal and professional fees.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Company that are
managed for affiliates. These revenues decreased by $0.3 million primarily due
to the disposition of certain of these properties.
Interest expense, including amortization of deferred financing costs,
increased by approximately $3.8 million. This increase was primarily the result
of an increase in the Company's average indebtedness outstanding which increased
by $75.8 million. However, the Company's effective interest cost decreased from
8.09% in 1995 to 7.87% in 1996.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.7 million between the years under
comparison. This increase was primarily due to adding corporate personnel,
higher salary costs and shareholder reporting costs as well as an increase in
professional fees. General and administrative expenses as a percentage of total
revenues were 2.06% for the year ended December 31, 1996, which was a slight
decrease from 2.08% in 1995.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
For the year ended December 31, 1995, income before gain from disposition of
properties, extraordinary items and allocation to Minority Interest increased by
$13.8 million when compared to the year ended December 31, 1994. This increase
was primarily due to increases in rental revenues net of increases in interest
expense, property and maintenance expenses, real estate taxes and insurance,
property management expenses, depreciation expense and general and
administrative expenses. All of the increases in the various line item accounts
mentioned above can be primarily attributed to the 1995 Acquired Properties and
1994 Acquired Properties which was partially offset by the 1995 Disposed
Properties. Increases in fee and asset management revenues, net of fee and
asset management expenses as well as interest income of approximately $4.9
million earned on the Company's mortgage note investment were additional factors
that impacted the change from 1994 to 1995.
In regard to the 1995 Same Store Properties, rental revenues increased by
approximately $5.5 million or 4% as a result of higher rental rates charged to
new tenants and tenant renewals. Overall property operating expenses which
include property and maintenance, real estate taxes and insurance and an
allocation of property management expenses increased approximately $0.9 million
or 1.5%. This increase was the result of higher leasing and advertising costs,
repair and maintenance and real estate taxes for certain of the 1995 Same Store
Properties located in Texas.
Property management represents expenses associated with the management of
the Company's Properties. These expenses increased by approximately $5 million
primarily as a result of the expansion of the Company's property management with
the addition of ROCs in Bethesda, Maryland, Denver, Colorado and Seattle,
Washington. These new ROCs were the result of acquiring Artery Property
Management, Inc. ("Artery") in December 1994 and assuming property management
for 31 Properties in January and February, 1995.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Company that are
managed for affiliates. These revenues increased by $2.3 million and expenses
increased by $1.8 million, primarily due to the management of an additional
6,213 units for certain properties owned by various Artery entities.
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Interest expense, including amortization of deferred financing costs,
increased by approximately $42.8 million. Of this increase, $18.1 million was
due to the interest associated with the debt assumed on the 1994 Acquired
Properties and 1995 Acquired Properties, $4.1 million was due to the 1999 Notes,
$7.3 million was due to the Floating Rate Notes, $8 million was due to the
Company's line of credit and $7.3 million was due to the 2002 Notes. This
increase was partially offset by a decrease of approximately $2 million in
interest expense due to repayment of mortgage indebtedness in the amount of
$45.5 million on seven of the Company's Properties at various times in 1995.
General and administrative expenses, which include corporate operating
expenses, increased by approximately $2.1 million, primarily due to an increase
in state and local income and franchise taxes as well as adding corporate
personnel and incurring higher administrative costs associated with increasing
the size of the Company. However, general and administrative expenses as a
percentage of total revenues decreased from 2.6% in 1994 to 2.1% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of January 1, 1996, the Company had approximately $13.4 million of cash and
cash equivalents and $158 million available on its line of credit. After taking
into effect the various transactions discussed in the following paragraphs, cash
and cash equivalents at December 31, 1996 was approximately $147.3 million and
the amounts available on the Company's line of credit were $250 million. In
addition, the Company had $3.6 million of proceeds from a property sale included
in deposits-restricted. The following discussion also explains the changes in
net cash provided by operating activities, net cash (used for) investing
activities and net cash provided by financing activities, all of which are
presented in the Company's Consolidated Statements of Cash Flows.
Part of the Company's strategy in funding the purchase of multifamily
properties is to utilize its line of credit and to subsequently repay the line
of credit from the issuance of additional equity or debt securities. Continuing
to employ this strategy, during 1996 the Company and/or the Operating
Partnership: (i) issued a total of approximately 14.4 million Common Shares
through various offerings and received total net proceeds of $483 million, (ii)
completed the offering of the Series C Preferred Shares and received net
proceeds of $111.4 million, (iii) issued the 2026 Notes and received net
proceeds of $149 million and (iv) refinanced certain of its tax-exempt bonds in
two separate transactions for a total of $112.2 million of net proceeds. All of
these proceeds have been or will be utilized to purchase additional properties
and/or repay the line of credit and mortgage indebtedness on certain properties.
With respect to Property acquisitions during the year, the Company purchased
49 Properties containing 15,665 units for a total acquisition cost of $778.2
million, which included the assumption of $142.2 million of mortgage
indebtedness, the forgiveness of debt of $2.7 million and the issuance of OP
Units having a value of approximately $0.4 million. These
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
acquisitions were primarily funded from amounts drawn on the Company's line of
credit and a portion of the proceeds received in connection with the
transactions mentioned in the previous paragraph.
During the year ended December 31, 1996, the Company also disposed of five
properties which generated net proceeds of approximately $40 million. Proceeds
from four of the dispositions were ultimately applied to purchase additional
Properties and the remaining proceeds have been set aside for future property
acquisitions.
As of December 31, 1996, the Company had total indebtedness of approximately
$1.3 billion, which included mortgage indebtedness of $755.4 million, of which
$274 million represented tax exempt bond indebtedness, and unsecured debt of
$498.8 million (net of a $1.2 million discount). During the year, the Company
repaid an aggregate of $57 million of mortgage indebtedness on eight of its
Properties. These repayments were funded from the Company's line of credit or
from proceeds received from the various capital transactions mentioned in
previous paragraphs. The Company has, from time to time, entered into interest
rate protection agreements, financial instruments, to reduce the potential
impact of increases in interest rates but has limited exposure to the extent of
non-performance by the counterparties of each protection agreement since each
counterparty is a major U.S. financial institution, and the Company does not
anticipate their non-performance. No such financial instrument has been used for
trading purposes. On February 12, 1996, the Company entered into two interest
rate protection agreements that will hedge the Company's interest rate risk at
maturity of $175 million of indebtedness. The firs