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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, 1997
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 13-3675988
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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 on
(Title of Class) Which Registered)
Preferred Shares of Beneficial New York Stock Exchange
Interest, $0.01 Par Value (Name of Each Exchange on
(Title of Class) 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 4.6 billion based upon the closing price on March 12, 1998 of $49
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 13, 1998, 95,798,559 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 10.2, 10.4, 10.5, 10.6, 10.7, 10.8 and 10.9.
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 and 10.10.
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 10.1.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form 10-K on March 16, 1995 and as amended thereafter: Exhibit 10.3.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form 10-K for the year ended December 31, 1996 on March 20, 1997 and
as amended thereafter: Exhibit 10.11.
Part IV incorporates by reference the following exhibit as filed with the
Company's Form 8-K dated September 10, 1997 and filed on September 10, 1997:
Exhibit 10.12.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form 8-K dated May 30, 1997 and filed on June 5, 1997: Exhibit 3.1
and 3.2.
Part IV incorporates by reference the following exhibit as filed with the
Company's Form 8-K dated January 16, 1997 and filed on January 17, 1997:
Exhibit 2.1.
Part IV incorporates by reference the following appendix as filed with the
Company's Form S-4 filed on April 29, 1997: Exhibit 2.2.
Part IV incorporates by reference the following exhibit as filed with the
Company's Form 8-K dated August 27, 1997 and filed on August 29, 1997: Exhibit
2.3.
Part IV incorporates by reference the following appendix as filed with the
Company's Form S-4 filed on September 18, 1997: Exhibit 2.4.
Part IV incorporates by reference the following exhibits as filed with the
Company's Form S-4 filed on September 18, 1997: Exhibit 10.13 and 10.14.
2
PART I
EQUITY RESIDENTIAL PROPERTIES TRUST
TABLE OF CONTENTS
PART I. PAGE
----
Item 1. Business 4
Item 2. Properties 20
Item 3. Legal Proceedings 49
Item 4. Submission of Matters to a Vote of Security
Holders 49
PART II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 50
Item 6. Selected Financial Data 51
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 54
Item 8. Financial Statements and Supplementary Data 66
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 66
PART III.
Item 10. Trustees and Executive Officers of the Registrant 67
Item 11. Executive Compensation 67
Item 12. Security Ownership of Certain Beneficial Owners
and Management 67
Item 13. Certain Relationships and Related Transactions 67
PART IV.
Item 14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 68
3
PART I
ITEM 1. BUSINESS
GENERAL
Equity Residential Properties Trust ("EQR") is a self-administered and
self-managed equity real estate investment trust ("REIT"). EQR was organized
in March 1993 and commenced operations on August 18, 1993 upon completion of
its initial public offering (the "EQR 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. As used herein, the term "Company"
includes EQR and those entities owned or controlled by it, as the survivor of
the mergers between EQR and each of Wellsford Residential Property Trust
("Wellsford") (the "Wellsford Merger") and Evans Withycombe Residential, Inc.
("EWR") (the "EWR Merger").
The Company's subsidiaries include ERP Operating Limited Partnership
(the "Operating Partnership"), Evans Withycombe Residential, L.P. (the "EWR
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.
As of December 31, 1997, the Company owned or had interests in 489
multifamily properties, of which it controlled a portfolio of 463 multifamily
properties (individually, a "Property" and collectively, the "Properties")
containing 135,200 units. The remaining 26 properties represent an investment
in partnership interests and subordinated mortgages collateralized by 21
properties and mortgage loans collateralized by five properties (collectively,
the "Additional Properties") containing 5,267 units. Of the 5,267 units, 1,371
units are property managed by third party unaffiliated entities. The Company's
Properties and the Additional Properties are located throughout the United
States in the following states: Alabama, Arizona, Arkansas, California,
Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Missouri, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Ohio,
Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, Washington
and Wisconsin. 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 29 properties containing 9,295 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 EQR IPO and through December 31, 1997, the Company, through
the Operating Partnership, has acquired direct or indirect interests in 412
properties (which included the debt
4
PART I
collateralized by six Properties) containing 118,510 units in the aggregate
for a total purchase price of approximately $6.5 billion, including the
assumption of approximately $1.5 billion of mortgage indebtedness. The
Company also made an $89 million investment in partnership interests and
subordinated mortgages collateralized by 21 of the Additional Properties (its
"$89 Million Mortgage Note Investment") and an $88 million investment in
mortgage loans collateralized by 5 of the Additional Properties (its "$88
Million Mortgage Note Investment"). Since the EQR IPO through December 31,
1997, the Company has disposed of 18 properties, a portion of one Property,
containing 5,035 units, and a vacant land parcel for a total sales price of
approximately $129.8 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 29 management offices in the
following cities: Chicago, Illinois; Dallas, Houston and San Antonio, Texas;
Denver, Colorado; Bethesda, Maryland; Atlanta, Georgia; Las Vegas, Nevada;
Scottsdale and Tucson, Arizona; Portland, Oregon; Ypsilanti, Michigan; Charlotte
and Raleigh, North Carolina; Tampa, Jacksonville and Ft. Lauderdale, Florida;
Irvine, Pleasant Hill and Stockton, California; Kansas City, Kansas;
Minneapolis, Minnesota; Louisville, Kentucky; Tulsa, Oklahoma; Boston,
Massachusetts; Federal Way, Redmond and Seattle, Washington; and Nashville and
Memphis, Tennessee. The Company has approximately 4,200 employees. 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
Shareholder's value.
5
PART I
- - Purchasing newly developed as well as co-investing in the development
of multifamily communities in the Company's existing target markets
where the market conditions warrant such development.
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.
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.
DEVELOPMENT STRATEGIES
The Company seeks to acquire newly constructed properties and make
investments towards the development of properties in markets where it discerns
strong demand, which the Company believes will enable it to achieve superior
rates of return. The Company's current communities under development and
future developments are in markets or will be in markets where certain market
demographics justify the development of high quality multifamily communities.
In evaluating whether to develop an apartment community in a particular
location,
6
PART I
the Company analyzes relevant demographic, economic and financial data.
Specifically, the Company considers the following factors, among others, in
determining the viability of a potential new apartment community: (i) income
levels and employment growth trends in the relevant market, (ii) uniqueness of
location, (iii) household growth and net migration of the relevant market's
population, (iv) supply/demand ratio, competitive housing alternatives, sub-
market occupancy and rent levels (v) barriers to entry that would limit
competition, and (vi) the purchase price and yields of available existing
stabilized communities, if any.
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) potential 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, 1997, the Company had a
ratio of approximately 33% 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"). It is the Company's
policy that EQR shall not incur indebtedness other than short-term trade,
employee compensation, dividends payable or similar indebtedness that will be
paid in the ordinary course of business, and that indebtedness shall instead
be incurred by the Operating Partnership to the extent necessary to fund the
business activities conducted by the Operating Partnership and its
subsidiaries.
Equity Offerings For the Years Ended December 31, 1997, 1996 and 1995
- ---------------------------------------------------------------------
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 (the "Series A Preferred Shares"), at $25 per share. The Company
raised gross proceeds of $153 million from this offering. The liquidation
preference of each of the Series A Preferred Shares is $25 per Series A
Preferred Share.
In November 1995, the Company sold 5,000,000 depositary shares (the
"Series B Depositary Shares"). 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.
7
PART I
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.
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"). 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 net proceeds of $111.4 million from this offering (the
"Series C Preferred Share Offering").
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 (the "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.
In March 1997, the Company completed three separate public offerings
relating to an aggregate of 1,921,000 publicly registered Common Shares, which
were sold to the public at a price of $46 per share (the "March 1997 Common
Share Offerings"). The Company received net proceeds of approximately $88.3
million therefrom.
On May 14, 1997, the Company filed with the SEC a Form S-3
Registration Statement to register $500 million of equity securities (the
"June 1997 Equity Shelf Registration"). The SEC declared this registration
statement effective on June 5, 1997.
8
PART I
In May 1997, the Company sold 7,000,000 depositary shares (the "Series
D Depositary Shares") pursuant to the June 1997 Equity Shelf Registration.
Each Series D Depositary Share represents a 1/10 fractional interest in a
8.60% Series D Cumulative Redeemable Preferred Share of Beneficial Interest,
$0.01 par value per share (the "Series D Preferred Shares"). The liquidation
preference of each of the Series D Preferred shares is $250.00 (equivalent to
$25 per Series D Depositary Share). The Company received net proceeds of
approximately $169.5 million from this offering (the "Series D Preferred Share
Offering").
In June 1997, the Company completed five separate public offerings
comprising an aggregate of 8,992,023 publicly registered Common Shares, which
were sold to the public at prices ranging from $44.06 to $45.88 per share (the
"June 1997 Common Share Offerings"). The Company received net proceeds of
approximately $398.9 million therefrom.
On July 28, 1997, the Company filed with the SEC a Form S-3
Registration Statement to register $750 million of equity securities (the
"August 1997 Equity Shelf Registration"). The SEC declared this registration
statement effective on August 4, 1997.
In September 1997, the Company completed the sale of 498,000 publicly
registered Common Shares which were sold to the public at a price of $51.125
per share. The Company received net proceeds of approximately $24.2 million
in connection with this offering (the "September 1997 Common Share Offering").
In September 1997, the Company sold 11,000,000 depositary shares (the
"Series G Depositary Shares") pursuant to the August 1997 Equity Shelf
Registration. Each Series G Depositary Share represents a 1/10 fractional
interest in a 7 1/4% Series G Convertible Cumulative Preferred Share of
Beneficial Interest, $0.01 par value per share (the "Series G Preferred
Shares"). Series G Depositary Shares representing Series G Preferred Shares
are convertible at the option of the holder thereof at any time into Common
Shares at a conversion price of $58.58 per Common Share (equivalent to a
conversion rate of approximately .4268 Common Shares for each Series G
Depositary Share). The liquidation preference of each of the Series G
Preferred Shares is $250.00 per share (equivalent to $25 per Series G
Depositary Share). The Company received net proceeds of approximately $264
million from this offering (the "Series G Preferred Share Offering"). In
addition, in October 1997, the Company sold 1,650,000 additional Series G
Depositary Shares pursuant to an over-allotment option granted to the
underwriters and received net proceeds of approximately $39.6 million
therefrom.
In October 1997, in connection with the acquisition of a portfolio of
Properties, the Company issued 3,315,500 publicly registered Common Shares,
which were issued at a price of $45.25 per share with a value of approximately
$150 million (the "October 1997 Common Share Offering").
On November 3, 1997, the Company filed with the SEC a Form S-3
Registration Statement to register 7,000,000 Common Shares pursuant to a
Distribution Reinvestment and Share Purchase Plan. This registration
statement was declared effective on November 25, 1997. The Distribution
Reinvestment and Share Purchase Plan (the "DRIP Plan") of the Company provides
holders of record and beneficial owners of Common Shares, Preferred Shares,
and limited partnership interests
9
PART I
in the Operating Partnership with a simple and convenient method of investing
cash distributions in additional Common Shares. Common Shares may also be
purchased on a monthly basis with optional cash payments made by participants
in the Plan and interested new investors, not currently shareholders of the
Company, at the market price of the Common Shares less a discount ranging
between 0% and 5% (as determined in accordance with the DRIP Plan).
In December 1997, in connection with an acquisition of a Property, the
Company issued 736,296 publicly registered Common Shares, which were issued at a
price of $48.85 per share with a value of approximately $36 million.
Also in December 1997, the Company completed the sale of 467,722
publicly registered Common Shares, which were sold at a price of $51.3125 per
share. The Company received net proceeds of approximately $22.8 million in
connection with this offering (the "December 1997 Common Share Offering").
During 1997, the Company issued 84,183 Common Shares pursuant to the
Employee Share Purchase Plan at net prices which ranged from $35.63 per share
to $42.08 per share and raised approximately $3.2 million in connection
therewith.
Debt Offerings For the Years Ended December 31, 1997, 1996 and 1995
- -------------------------------------------------------------------
In April 1995, the Operating Partnership issued $125 million of 7.95%
unsecured fixed rate notes (the "2002 Notes") 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 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").
In October 1997, the Operating Partnership issued $150 million of
unsecured fixed rate notes (the "2017 Notes") pursuant to the 1996 Debt Shelf
Registration in a public debt offering (the "Fourth Public Debt Offering").
The 2017 Notes are due on October 15, 2017 and bear interest at 7.125%, which
is payable semiannually in arrears on April 15 and October 15, commencing
April 15, 1998. The 2017 Notes are redeemable at any time by the Operating
Partnership pursuant to the terms thereof. The Operating Partnership received
net proceeds of approximately $147.4 million in connection with this issuance.
In November 1997, the Operating Partnership issued $200 million of
unsecured fixed rate notes pursuant to the 1996 Debt Shelf Registration in a
public debt offering (the "Fifth Public Debt
10
PART I
Offering"). Of the $200 million issued, $150 million of these notes are due
November 15, 2001 (the "2001 Notes") and bear interest at a rate of 6.55%,
which is payable semiannually in arrears on May 15 and November 15, commencing
on May 15, 1998. The remaining $50 million of these notes are due November
15, 2003 (the "2003 Notes") and bear interest at a rate of 6.65%, which is
payable semiannually in arrears on May 15 and November 15, commencing on May
15, 1998. The Operating Partnership received net proceeds of approximately
$198.5 million in connection with the 2001 Notes and the 2003 Notes.
CREDIT FACILITY
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 Operating Partnership a $250
million unsecured line of credit. In September 1997, this agreement was
amended to increase the potential borrowings to $500 million. This 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 a certain rate
dependent upon the Company's credit rating, which rate is currently at 0.45%,
and is subject to an annual facility fee of $750,000. As of December 31,
1997, $235 million of borrowings were outstanding on this line of credit,
bearing interest at a weighted average rate of 6.46%.
BUSINESS COMBINATIONS
On May 30, 1997, the Company completed the acquisition of the
multifamily property business of Wellsford through the tax-free Wellsford
Merger. The transaction was valued at approximately $1 billion and included
72 Properties of Wellsford containing 19,004 units. The purchase price
consisted of 10.8 million Common Shares issued by the Company with a market
value of $443.7 million, the liquidation value of $157.5 million for the
Wellsford Series A Cumulative Convertible Preferred Shares of Beneficial
Interest and the Wellsford Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest, the assumption of mortgage indebtedness and unsecured
notes in the amount of $345 million, the assumption of other liabilities of
approximately $33.5 million and other merger related costs of approximately
$23.4 million. In the Wellsford Merger, each outstanding common share of
beneficial interest of Wellsford was converted into .625 of a Common Share. In
addition, Wellsford Series A Cumulative Convertible Preferred Shares of
Beneficial Interest were redesignated as the Company's 3,999,800 Series E
Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par
value per share (the "Series E Preferred Shares") and Wellsford's Series B
Cumulative Redeemable Preferred Shares of Beneficial Interest were
redesignated as the Company's 2,300,000 9.65% Series F Cumulative Redeemable
Preferred Shares of Beneficial Interest, $0.01 par value per share (the
"Series F Preferred Shares").
On December 23, 1997, the Company completed the acquisition of the
multifamily property business of EWR, through the tax-free EWR Merger. The
transaction was valued at approximately $1.2 billion and included 53
Properties of EWR containing 15,331 units and three Properties under
construction or expansion expected to contain 953 units. The purchase price
consisted of 10.3 million Common Shares issued by the Company with a total
market value of approximately $501.6
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PART I
million, the assumption of EWR's minority interest with a market value of
approximately $107.3 million, the assumption of mortgage indebtedness and
unsecured notes in the amount of $498 million, the assumption of other
liabilities of approximately $28.2 million and other EWR Merger related costs
of approximately $16.7 million. In the EWR Merger, each outstanding common
share of beneficial interest of EWR was converted into .50 of a Common Share.
RECENT TRANSACTIONS
From January 1, 1998 through March 13, 1998, the Company acquired 12
properties from unaffiliated third parties for a total purchase price of
approximately $158.2 million, which included the assumption of mortgage
indebtedness of approximately $50.8 million. These properties were Cityscape,
a 156-unit property located in St. Louis Park, Minnesota; 740 River Drive, a
162-unit property located in St. Paul, Minnesota; Prospect Towers, a 157-unit
property located in Hackensack, New Jersey; Park Westend, a 312-unit property
located in Richmond, Virginia; Park Place, a 229-unit property located in
Houston, Texas; Emerald Bay at Winter Park, a 431-unit property located in
Winter Park, Florida; Farnham Park, a 216-unit property located in Houston,
Texas; Plantation, a 232-unit property located in Houston, Texas; Balcones
Club, a 312-unit property located in Austin, Texas; Coach Lantern, a 90-unit
property located in Scarborough, Maine; Foxcroft, a 104-unit property located
in Scarborough, Maine; and Yarmouth Woods, a 138- unit property located in
Yarmouth, Maine.
In January 1998, the Company completed the sale of 4,000,000 publicly
registered Common Shares which were sold to the public at a price of $50.4375
per share. The Company received net proceeds of approximately $195.3 million
in connection with this offering (the "January 1998 Common Share Offering").
In February 1998, the Company completed offerings in the aggregate of
1,988,340 publicly registered Common Shares which were sold to the public at
prices ranging from $48 to $50.625 per share (the "February 1998 Common Share
Offerings"). The Company received net proceeds of approximately $95 million
therefrom.
Through February 1998, the Company sold approximately 639,000 Common
Shares pursuant to the DRIP Plan and raised proceeds of approximately $31.7
million therefrom.
On February 3, 1998, the Company filed with the SEC a Form S-3
Registration Statement to register $1 billion of equity securities. The SEC
declared this registration statement effective on February 27, 1998.
On February 3, 1998, the Operating Partnership filed a Form S-3
Registration Statement to register $1 billion of debt securities. The SEC
declared this registration statement effective on February 27, 1998.
On March 12, 1998, the Company disposed of two Properties for a total
sales price of $16.7 million.
12
PART I
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"). 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.
RISK FACTORS
The Company's results of operations are subject to certain risks and
uncertainties relating to the operations of its Properties. Investors should
carefully consider, among other factors, the matters described below prior to
making an investment decision regarding the securities of the Company.
Adverse Consequences of Debt Financing and Preferred Shares
General Risks. As of December 31, 1997, the Properties were subject to
approximately $1.6 billion of mortgage indebtedness and the Company's total
debt equaled approximately $2.9 billion. Of the total debt outstanding, $912.7
million, including the line of credit balance of $235 million, represented
floating rate debt, of which approximately $611 million was issued at tax
exempt rates. In addition, from June 1995 through October 1997, the Company
issued Preferred Shares and Depositary Shares pursuant to offerings previously
mentioned and utilized the proceeds to repay indebtedness and to acquire
additional Properties. The Company is subject to the risks normally
associated with debt or preferred equity financing, including the risk that
the Company's cash flow will be insufficient to meet required payments of
principal and interest as well as Preferred Share distributions, the risk that
existing indebtedness may not be refinanced or that the terms of such
refinancing will not be as favorable as the terms of current indebtedness and
the risk that necessary capital expenditures for such purposes as renovations
and other improvements may not be financed on favorable terms or at all. If
the Company were unable to refinance its indebtedness on acceptable terms, or
at all, the Company might be forced to dispose of one or more of the
Properties on disadvantageous terms, which might result in losses to the
Company and might adversely affect the
13
PART I
cash available for distributions to shareholders. If interest rates or other
factors at the time of the refinancing result in higher interest rates upon
refinancing, the Company's interest expense would increase, which would affect
the Company's ability to make distributions to its shareholders. Furthermore, if
a Property is mortgaged to secure payment of indebtedness and the Company is
unable to meet mortgage payments, the mortgagee could foreclose upon the
Property, appoint a receiver and receive an assignment of rents and leases or
pursue other remedies, all with a consequent loss of income and asset value to
the Company. Foreclosures could also create taxable income without accompanying
cash proceeds, thereby hindering the Company's ability to meet the REIT
distribution requirements of the Code.
Restrictions on the Company's Activities. A substantial portion of the
Company's debt was issued pursuant to certain indentures (the "Indentures")
which restrict the amount of indebtedness (including acquisition financing) the
Company may incur. Accordingly, in the event that the Company is unable to raise
additional equity or borrow money because of the debt restrictions in the
Indentures, the Company's ability to acquire additional properties may be
limited. If the Company is unable to acquire additional properties, its ability
to increase the distributions with respect to Common Shares, as it has done in
the past, will be limited to management's ability to increase funds from
operations, and thereby cash available for distributions, from the existing
Properties in the Company's portfolio at such time.
Bond Compliance Requirements. Certain of the Company's Properties are
subject to restrictive covenants or deed restrictions relating to current or
previous tax-exempt bond financing and owns the bonds collateralized by several
additional Properties. The Company has retained an independent outside
consultant to monitor compliance with the restrictive covenants and deed
restrictions that affect these Properties. The bond compliance requirements may
have the effect of limiting the Company's income from certain of these
Properties if the Company is required to lower its rental rates to attract low
or moderate income tenants, or eligible/qualified tenants.
CONTROL AND INFLUENCE BY SIGNIFICANT SHAREHOLDERS
As of March 13, 1998, Mr. Zell, certain of the current holders (the
"Zell Holders") of certain OP Units ("Original OP Units") issued at the time of
the EQR IPO to certain affiliates of Mr. Zell which contributed 33 of the
Properties at the time of the EQR IPO (the "Zell Original Owners"), Equity
Properties Management Corp. ("EPMC") and other affiliates of Mr. Zell owned in
the aggregate approximately 4.4% of the Common Shares (assuming that all of the
partnership interests in the Operating Partnership are exchanged for Common
Shares), and certain entities controlled by Starwood Capital Partners L.P.
("Starwood") and its affiliates which contributed 23 of the Properties at the
time of the EQR IPO (the "Starwood Original Owners") owned in the aggregate
approximately 1.7% of the Common Shares (assuming that all of the OP Units are
exchanged for Common Shares). The Starwood Original Owners, together with the
Zell Original Owners, shall be referred to collectively as the "Original
Owners." As of March 13, 1998, the Company had options outstanding to purchase
approximately 5.6 million Common Shares (plus an additional 1.3 million options
to purchase Common Shares which have been authorized by the Company for issuance
subject to shareholder approval) which it has granted to certain officers,
employees and trustees of the Company and consultants to the Company, some of
whom are
14
PART I
affiliated with Mr. Zell, representing in the aggregate approximately 6% of the
Common Shares outstanding (assuming that all such options are exercised for
Common Shares and all of the outstanding OP Units are exchanged for Common
Shares). Further, the consent of affiliates of Mr. Zell who are Zell Holders and
of the Starwood Original Owners is required for certain amendments to the
Operating Partnership's Fourth Amended and Restated ERP Operating Limited
Partnership Agreement of Limited Partnership (the "Partnership Agreement").
Accordingly, Mr. Zell and the Starwood Original Owners may continue to have
substantial influence over the Company, which influence might not be consistent
with the interests of other shareholders, and on the outcome of any matters
submitted to the Company's shareholders for approval. In addition, although
there is no current agreement, understanding or arrangement for these
shareholders to act together on any matter, these shareholders would be in a
position to exercise significant influence over the affairs of the Company if
they were to act together in the future.
POTENTIAL ENVIRONMENTAL LIABILITY AFFECTING THE COMPANY
Under various federal, state and local environmental laws, ordinances
and regulations, an owner of real estate may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on such
property. These laws often impose environmental liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The presence of such substances, or the failure
properly to remediate such substances, may adversely affect the owner's
ability to sell or rent the property or to borrow using the property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. Certain laws impose liability
for release of asbestos-containing materials ("ACMs") into the air and third
parties may seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership (direct
or indirect), operation, management and development of real properties, the
Company or the Subsidiaries, as the case may be, may be considered an owner or
operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable
for removal or remediation costs, as well as for certain other related costs,
including governmental fines and injuries to persons and property.
All of the Properties have been the subject of a Phase I, and in
certain cases a supplemental, environmental assessment completed by qualified
independent environmental consultant companies. The most recent environmental
assessments for each of the Properties were conducted within the last five
years. Environmental assessments were obtained prior to the acquisition by
the Company of each of the Properties. These environmental assessments have
not revealed, nor is the Company aware of, any environmental liability that
the Company's management believes would have a material adverse effect on the
Company's business, results of operations, financial condition or liquidity.
No assurance can be given that existing environmental assessments with
respect to any of the Properties reveal all environmental liabilities, that
any prior owner of a Property did not create any material environmental
15
PART I
condition not known to the Company, or that a material environmental condition
does not otherwise exist as to any one or more Properties.
GENERAL REAL ESTATE INVESTMENT CONSIDERATIONS; CHANGES IN LAWS
General. Real property investments are subject to varying degrees of
risk and are relatively illiquid. Income from real property investments and
the Company's resulting ability to make expected distributions to shareholders
may be adversely affected by the general economic climate, local conditions
such as oversupply of apartment units or a reduction in demand for apartment
units in the area, the attractiveness of the Properties to tenants, zoning or
other regulatory restrictions, the ability of the Company to provide adequate
maintenance and insurance, and increased operating costs (including insurance
premiums and real estate taxes). The Company's income would also be adversely
affected if tenants were unable to pay rent or the Company were unable to rent
apartment units on favorable terms. If the Company were unable to promptly
relet units or renew the leases for a significant number of apartment units,
or if the rental rates upon such renewal or reletting were significantly lower
than expected rates, then the Company's funds from operations and ability to
make expected distributions to shareholders may be adversely affected. In
addition, certain expenditures associated with each equity investment (such as
real estate taxes and maintenance costs) generally are not reduced when
circumstances cause a reduction in income from the investment. The Company
intends to purchase newly developed, as well as invest in the development of
multifamily communities, including the expansion of existing multifamily
communities. Such projects generally require the expenditure of capital, and
consequently there can be no assurance that any of such projects will be
completed or that such projects will prove to be profitable. The failure of
the Company to complete or to profitably operate planned development projects
may have an adverse affect on the Company's results of operations and
financial position. Furthermore, real estate investments are relatively
illiquid and, therefore, will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
Changes in Laws. Increases in real estate taxes, income taxes and
service or other taxes generally are not passed through to tenants under
existing leases and may adversely affect the Company's FFO and its ability to
make distributions to shareholders. Similarly, changes in laws increasing the
potential liability for environmental conditions existing on Properties or
increasing the restrictions on discharges or other conditions may result in
significant unanticipated expenditures, which would adversely affect the
Company's FFO and its ability to make distributions to shareholders.
OWNERSHIP LIMIT AND LIMITS ON CHANGES IN CONTROL
5% Ownership Limit; Inapplicability to Mr. Zell and Others. In order
to maintain its qualification as a REIT under the Code, not more than 50% of
the value of the outstanding shares of beneficial interest of the Company may
be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities). Certain beneficial owners of the Zell
Holders (i.e., beneficiaries of trusts established for the benefit of Mr. Zell
and his family and trusts established for the benefit of the family of Mr.
Robert Lurie, a deceased partner of Mr. Zell (the "Lurie Family Trusts")),
EPMC, the Starwood Original Owners, Mr. Keith Withycombe and Mr.
16
PART I
Stephen Evans, a Trustee of the Company (through their potential ownership of
Common Shares), together constitute five individuals for purposes of this test
and, under the Internal Revenue Service's (the "Service") rules applicable to
determining percentages of ownership, will be deemed to own approximately 4.8%
of the value of the outstanding shares of beneficial interest of the Company.
Due to such concentration of ownership of the Company, ownership of more than
5% or the lesser of the number or value of the outstanding shares of
beneficial interest of the Company by any single shareholder has been
restricted, with certain exceptions, for the purpose of maintaining the
Company's qualification as a REIT under the Code. Such restrictions in the
Company's Declaration of Trust do not apply to the ownership of the 5,499,403
Common Shares subject to acquisition by the holders of Original OP Units and
EPMC through the exchange of Original OP Units. Additionally, the Company's
Declaration of Trust allows certain transfers of such Common Shares without
the transferees being subject to the 5% ownership limit, provided such
transfers do not result in an increased concentration in the ownership of the
Company. The Company's Board of Trustees, upon receipt of a ruling from the
Service, an opinion of counsel or other evidence satisfactory to the Board of
Trustees and upon such other conditions as the Board of Trustees may direct,
may also exempt a proposed transferee from this restriction.
The 5% ownership limit, as well as the ability of the Company to issue
additional Common Shares or other shares of beneficial interest (which may
have rights and preferences senior to the Common Shares), may discourage a
change of control of the Company and may also (i) deter tender offers for the
Common Shares, which offers may be advantageous to shareholders, and (ii)
limit the opportunity for shareholders to receive a premium for their Common
Shares that might otherwise exist if an investor were attempting to assemble a
block of Common Shares in excess of 5% of the outstanding shares of beneficial
interest of the Company or otherwise effect a change of control of the
Company.
Possible Adverse Consequences of Ownership Limit. To maintain its
qualification as a REIT for federal income tax purposes, not more than 50% in
value of the outstanding shares of beneficial interest of the Company may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code, to include certain entities). Certain beneficial owners of the Zell
Holders (i.e., beneficiaries of trusts established for benefit of Mr. Zell and
his family and the Lurie Family Trusts and EPMC, together with the Starwood
Original Owners, Mr. Withycombe and Mr. Evans (through their potential
ownership of Common Shares) together constitute five individuals for purposes
of this test and, under the Service's rules applicable to determining
percentages of ownership, are deemed to own approximately 4.8% of the value of
the outstanding shares of beneficial interest of the Company. To facilitate
maintenance of its qualification as a REIT for federal income tax purposes,
the Company generally will prohibit ownership, directly or by virtue of the
attribution provisions of the Code, by any single shareholder of more than 5%
of the issued and outstanding Common Shares and generally will prohibit
ownership, directly or by virtue of the attribution provisions of the Code, by
any single shareholder of more than 5% of the issued and outstanding shares of
any class or series of the Company's Preferred Shares (collectively, the
"Ownership Limit"). The Board of Trustees may, in its reasonable discretion,
waive or modify the Ownership Limit with respect to one or more persons who
would not be treated as "individuals" for purposes of the Code if it is
satisfied, based upon information required to be provided by the party seeking
the waiver, that ownership in excess of this limit will not cause
17
PART I
a person who is an individual to be treated as owning Common Shares or
Preferred Shares in excess of the Ownership Limit, applying the applicable
constructive ownership rules, and will not otherwise jeopardize the Company's
status as a REIT for federal income tax purposes. The Company's Declaration
of Trust also exempts from the Ownership Limit certain of the beneficial
owners of the Original Owners and EPMC, who would exceed the Ownership Limit
as a result of the exchange of the OP Units for Common Shares, which OP Units
were received by them at the time of the formation of EQR. Absent any such
exemption or waiver, Common Shares or Preferred Shares acquired or held in
violation of the Ownership Limit will be transferred to a trust for the
benefit of a designated charitable beneficiary, with the person who acquired
such Common Shares and/or Preferred Shares in violation of the Ownership Limit
not entitled to receive any distributions thereon, to vote such Common Shares
or Preferred Shares, or to receive any proceeds from the subsequent sale
thereof in excess of the lesser of the price paid therefore or the amount
realized from such sale. A transfer of Common Shares and/or Preferred Shares
to a person who, as a result of the transfer, violates the Ownership Limit may
be void under certain circumstances. The Ownership Limit may have the effect
of delaying, deferring or preventing a change in control and, therefore, could
adversely affect the shareholders' ability to realize a premium over the
then-prevailing market price for the Common Shares in connection with such
transaction.
Staggered Board. The Board of Trustees of the Company has been divided
into three classes of trustees. As the term of each class expires, trustees
for that class will be elected for a three-year term and the trustees in the
other two classes will continue in office. The staggered terms for trustees
may impede the shareholders' ability to change control of the Company even if
a change in control were in the shareholders' interest.
Preferred Shares. The Company's Declaration of Trust authorizes the
Board of Trustees to issue up to 100,000,000 preferred shares of beneficial
interest, $.01 par value per share ("Preferred Shares"), and to establish the
preferences and rights (including the right to vote and the right to convert
into Common Shares) of any Preferred Shares issued. The power to issue
Preferred Shares could have the effect of delaying or preventing a change in
control of the Company even if a change in control were in the shareholders'
interest. As of March 13, 1998, 15,343,500 Preferred Shares were issued and
outstanding.
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Taxation as a Corporation. The Company believes that it has qualified
and will continue to qualify as a REIT under the Code, commencing with its
taxable year ended December 31, 1992. However, no assurance can be given that
the Company was organized and has been operated and will be able to operate in
a manner so as to qualify or remain so qualified. Qualification as a REIT
involves the satisfaction of numerous requirements (some on an annual and
quarterly basis) established under highly technical and complex Code
provisions for which there are only limited judicial or administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within the Company's control.
If the Company were to fail to qualify as a REIT in any taxable year,
the Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable
18
PART I
income at corporate rates. Moreover, unless entitled to relief under certain
statutory provisions, the Company also would be disqualified from treatment as
a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of the
Company available for investment or distribution to shareholders because of
the additional tax liability to the Company for the years involved. In
addition, distributions to shareholders would no longer be required to be
made.
Other Tax Liabilities. Even if the Company qualifies as a REIT, it
will be subject to certain federal, state and local taxes on its income and
property. In addition, the Company's management operations, which are
conducted through the Management Partnerships, generally will be subject to
federal income tax at regular corporate rates.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of its executive officers.
While the Company believes that it could find replacements for these key
personnel, the loss of their services could have a temporary adverse effect on
the operations of the Company. Only one of these officers has entered into an
employment agreement with the Company.
DISTRIBUTION REQUIREMENTS POTENTIALLY INCREASING INDEBTEDNESS OF THE COMPANY
The Company may be required from time to time, under certain
circumstances, to accrue as income for tax purposes interest and rent earned
but not yet received. In such event, or upon the repayment by the Company or
its Subsidiaries of principal on debt, the Company could have taxable income
without sufficient cash to enable the Company to meet the distribution
requirements of a REIT. Accordingly, the Company could be required to borrow
funds or liquidate investments on adverse terms in order to meet such
distribution requirements.
EXEMPTIONS FOR MR. ZELL AND OTHERS FROM MARYLAND BUSINESS COMBINATION LAW
WHICH TEND TO INHIBIT TAKEOVERS
Under the Maryland General Corporation Law, as amended ("MGCL"),
certain "business combinations" (including a merger, consolidation, share
exchange or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland real estate
investment trust and any person who beneficially owns 10% or more of the
voting power of the trust's shares of beneficial interest or an affiliate of
the trust who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
trust's shares of beneficial interest (an "Interested Shareholder"), or an
affiliate of such Interested Shareholder, are prohibited for five years after
the most recent date on which the Interested Shareholder becomes an Interested
Shareholder. Thereafter, any such business combination must be recommended by
the board of trustees of such trust and approved by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by holders of outstanding
voting shares of beneficial interest of the trust and (b) two-thirds of the
votes entitled to be cast by holders of voting shares of beneficial interest
of the trust other than shares held by the Interested Shareholder with whom
(or with whose affiliate) the business combination is to be effected,
19
PART I
(unless, among other conditions, the holders of the common shares of the trust
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by
the Interested Shareholder for its common shares. As permitted by the MGCL,
the Company has exempted any business combination involving Mr. Zell, the Zell
Original Owners, EPMC and their respective affiliates and associates, present
or future, or any other person acting in concert or as a group with any of the
foregoing persons and, consequently, the five- year prohibition and the
super-majority vote requirements will not apply to a business combination
between any of them and the Company. As a result, Mr. Zell, the Zell Original
Owners, EPMC, any present or future affiliate or associate of theirs or any
other person acting in concert or as a group with any of the foregoing persons
may be able to enter into business combinations with the Company, which may
not be in the best interest of the shareholders, without compliance by the
Company with the super-majority vote requirements and other provisions of the
MGCL.
ITEM 2. THE PROPERTIES
As of December 31, 1997, the Company controlled a portfolio of 463
multifamily Properties located in 34 states containing 135,200 apartment
units. The average number of units per Property was approximately 293. The
units are typically contained in a series of two-story buildings. The
Properties contain an aggregate of 118.9 million rentable square feet, with an
average unit size of 886 square feet. The average rent per unit was $696 and
the average rent per square foot was $0.79.
As of December 31, 1997, 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 456 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
20
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, 1997, the Company had an investment in
partnership interests and subordinated mortgages and mortgage loans
collateralized by the Additional Properties. The Additional Properties contain
5,267 units, located in seven states.
The following two tables set forth certain information relating to the
Properties and the Additional Properties:
21
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
ALABAMA
Meadows on the Lake/Park,
Birmingham (2 properties) 1986/1987 37 400 418,452 1,046 94% $570 $0.54
ARIZONA
Bay Club, Phoenix 1976 13 420 257,790 614 95% $526 $0.86
Camellero, Scottsdale (1) 1979 15 344 311,526 906 95% $723 $0.80
Canyon Creek, Tucson 1986 10 242 169,946 702 96% $488 $0.69
Canyon Sands, Phoenix (1) 1983 20 412 353,592 858 92% $557 $0.65
Chandler Court, Chandler 1987 20 311 263,338 847 92% $641 $0.76
Crystal Creek, Phoenix 1985 10 273 190,140 696 96% $571 $0.82
Del Coronado, Mesa (1) 1985 19 419 394,062 940 93% $671 $0.71
Desert Sands, Phoenix (1) 1982 20 412 353,592 858 92% $557 $0.65
Flying Sun, Phoenix 1983 4 108 93,708 868 98% $590 $0.68
Fountain Creek, Phoenix 1984 9 186 144,374 776 96% $603 $0.78
Indian Bend, Scottsdale 1973 14 275 226,444 823 93% $692 $0.84
Southbank, Mesa 1985 5 113 99,448 880 96% $573 $0.65
Southcreek, Mesa (1) 1986-89 23 528 472,152 894 93% $663 $0.74
Via Ventura, Scottsdale 1980 19 320 279,187 872 97% $728 $0.83
Villa Madeira, Scottsdale 1971 17 332 291,280 877 95% $700 $0.80
Villa Manana, Phoenix 1971-85 8 260 212,150 816 93% $619 $0.76
Copper Creek, Phoenix 1984 8 144 146,024 1,014 97% $789 $0.78
Crown Court, Phoenix 1987 27 416 464,582 1,117 99% $857 $0.77
22
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
ARIZONA , CONTINUED
Dos Caminos, Phoenix 1983 16 264 265,884 1,007 98% $781 $0.78
The Pointe ASM, Phoenix 1988 14 364 309,548 850 93% $666 $0.78
San Tropez, Phoenix 1989 13 316 332,080 1,051 98% $886 $0.84
Misson Palms, Tucson 1980 35 360 372,918 1,036 99% $669 $0.65
Skyline Gateway, Tucson 1985 8 246 179,422 729 98% $568 $0.78
Sedona Ridge, Phoenix 1988 17 250 235,345 941 95% $728 $0.77
Windemere, Mesa (1) 1986 18 224 187,192 836 95% $591 $0.71
Sycamore Creek, Scottsdale (1) 1984 19 350 335,420 958 91% $759 $0.79
Villa Serenas, Tucson (1) 1973 18 611 452,751 741 87% $506 $0.68
Acacia Creek, Scottsdale 1988-1994 20 508 462,280 910 95% $765 $0.84
Bayside at the Islands, Gilbert (1) 1989 15 272 236,640 870 93% $736 $0.85
Country Brook, Chandler (1) 1986-1996 24 396 380,556 961 95% $739 $0.77
Gateway Villas, Scottsdale 1995 18 180 179,664 998 97% $836 $0.84
Greenwood Village, Tempe (1) 1984 13 270 238,768 884 92% $670 $0.76
Superstition Vista, Mesa 1987 16 316 300,510 951 93% $649 $0.68
Heritage Point, Mesa 1986 7 148 114,436 773 91% $797 $1.03
La Mariposa, Mesa (1) 1986 11 222 206,052 928 96% $645 $0.69
Little Cottonwoods, Tempe (1) 1984 20 379 389,012 1,026 94% $766 $0.75
Miramonte, Scottsdale 1983 4 151 118,568 785 96% $666 $0.85
23
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
ARIZONA, continued
Morningside, Scottsdale (1) 1989 10 160 163,116 1,019 98% $802 $0.79
Mountain Park, Phoenix (1) 1994 12 240 230,560 961 92% $800 $0.83
Park Meadow, Gilbert (1) 1986 7 224 197,120 880 97% $691 $0.79
Rancho Murietta, Tempe 1983 14 292 253,016 866 95% $698 $0.81
Scottsdale Courtyards, Scottsdale (1) 1993 18 274 284,175 1,037 99% $895 $0.86
Scottsdale Meadows, Scottsdale 1984 7 168 149,520 890 95% $727 $0.82
Shadow Brook, Scottsdale (1) 1984 17 224 226,296 1,010 98% $863 $0.85
Shores at Andersen Springs,
Chandler (1) 1989 11 299 265,218 887 95% $776 $0.87
Sonoran, Phoenix (1) 1995 15 429 413,344 964 93% $770 $0.80
The Enclave, Tempe (1) 1994 25 204 194,142 952 98% $850 $0.89
The Meadows, Mesa 1984 15 306 247,378 808 92% $575 $0.71
Towne Square, Chandler 1987-1996 16 584 560,640 960 96% $683 $0.71
Villa Encanto, Phoenix 1983 21 382 309,982 811 93% $631 $0.78
Village at Lakewood, Phoenix (1) 1988 12 240 205,752 857 95% $754 $0.88
Harrison Park, Tucson (1) 1985 6 360 291,240 809 90% $623 $0.77
La Reserve Villas, Tucson (1) 1988 12 240 216,008 900 97% $619 $0.69
Orange Grove Village, Tucson (1) 1986-1995 17 400 285,600 714 90% $561 $0.79
Suntree Village, Tucson (1) 1986 16 424 345,761 815 92% $529 $0.65
Arboretum, Tucson (1) 1987 14 496 439,456 886 97% $569 $0.64
24
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
ARIZONA, continued
Village at Tanque Verde,
Tucson (1) 1984-1994 9 217 174,668 805 91% $571 $0.71
Legends at La Paloma, Tucson 1995 20 312 325,648 1,044 95% $783 $0.75
Bear Canyon, Tucson 1996 14 238 231,640 973 92% $726 $0.75
Promontory Pointe I&II,
Phoenix (1) 1984-1996 27 424 421,446 994 96% $772 $0.78
The Hawthorne, Phoenix 1996 10 276 259,784 941 91% $782 $0.83
Isle at Arrowhead Ranch, Glendale 1996 18 256 244,608 956 95% $839 $0.88
Ladera, Phoenix 1995 15 248 243,312 981 96% $832 $0.85
Ingleside, Phoenix 1995 5 120 118,664 989 98% $865 $0.87
The Heritage, Phoenix (1) 1995 8 204 198,276 972 91% $797 $0.82
Sun Creek, Glendale (1) 1985 7 175 129,661 741 94% $601 $0.81
Silver Creek, Phoenix (1) 1986 5 174 134,820 775 95% $614 $0.79
Preserve at Squaw Park, Phoenix (1) 1990 4 108 92,168 853 94% $836 $0.98
The Palms, Phoenix (1) 1990 5 132 135,460 1,026 98% $924 $0.90
Mirador, Phoenix 1995 16 316 311,928 987 92% $817 $0.83
La Valencia, Mesa 1997 18 361 342,946 950 94% $664 $0.70
ARKANSAS
Combined Little Rock
Properties (1)(3) 1974-1975 44 1,039 889,416 856 93% $520 $0.61
CALIFORNIA
Carmel Terrace, San Diego 1988-89 20 384 298,588 778 97% $816 $1.05
Casa Capricorn & Pardee Casas,
San Diego 1976-1986 19 388 346,720 894 97% $800 $0.90
Creekside Oaks, Walnut Creek (1) 1974 7 316 237,952 753 92% $850 $1.13
25
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA, continued
Deerwood, San Diego 1990 29 316 333,079 1,054 95% $1,072 $1.02
Eagle Canyon, Chino Hills 1985 32 252 252,493 1,002 93% $975 $0.97
Emerald Place, Bermuda Dunes 1988 17 240 214,072 892 97% $622 $0.70
Hathaway, Long Beach 1987 17 385 266,805 693 95% $885 $1.28
Lakeville Resort, Petaluma (1) 1984 45 492 461,798 939 98% $806 $0.86
Lands End, Pacifica 1974 7 260 161,121 620 97% $1,062 $1.71
Merrimac Woods, Costa Mesa 1970 39 123 88,160 717 98% $807 $1.13
Mountain Terrace, Stevenson Ranch 1992 39 510 425,612 835 93% $878 $1.05
Oak Park North & South, Agoura (1) 1989-1990 24 444 368,600 830 96% $1,078 $1.30
Park West, Los Angeles 1990 4 444 315,588 711 95% $1,015 $1.43
Promenade Terrace, Corona Hills (1) 1990 27 330 360,838 1,093 99% $882 $0.81
Regency Palms, Huntington Beach 1969 14 310 261,634 844 91% $866 $1.03
Summer Ridge, Riverside 1985 6 136 104,832 771 99% $695 $0.90
Summerset Village, Chatsworth 1985 29 280 286,752 1,024 96% $1,098 $1.07
Villa Solana, Laguna Hills 1984 13 272 245,104 901 97% $915 $1.02
Vista Del Lago, Mission Viejo (1) 1986-88 29 608 512,200 842 92% $941 $1.12
Windridge, Laguna Niguel (1) 1989 19 344 375,312 1,091 95% $1,046 $0.96
Bay Ridge, San Pedro 1987 2 60 46,836 781 95% $908 $1.16
La Mirage, San Diego 1988-1992 75 1,070 972,689 909 94% $1,094 $1.20
26
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA, continued
Harborview, San Pedro (1) 1985 7 160 171,800 1,074 89% $1,351 $1.26
Wood Creek, Pleasant Hill 1987 16 256 257,632 1,006 95% $1,253 $1.25
Geary Courtyard, San Francisco (1) 1990 0.4 164 85,675 522 86% $1,123 $2.15
Deerwood, Corona 1992 15 316 338,345 1,071 94% $871 $0.81
Larkspur Woods, Sacramento (1) 1989/1993 16 232 253,134 1,091 95% $959 $0.88
Ridgewood Village, San Diego 1997 9 192 163,336 851 95% $907 $1.07
The Ashton, Corona (1) 1986 24 492 457,184 929 90% $717 $0.77
Canyon Crest Views, Riverside 1982-1983 11 178 212,292 1,193 97% $945 $0.79
Canyon Ridge, San Diego 1989 8 162 126,000 778 99% $854 $1.10
Marquessa, Corona (1) 1992 14 336 299,744 892 94% $770 $0.86
Portofino, Chino Hills 1989 11 176 153,708 873 99% $860 $0.98
Parkview Terrace, Redlands (1) 1986 32 558 446,856 801 96% $699 $0.87
Redlands Lawn and Tennis Club,
Redlands (1) 1986 27 496 394,560 795 93% $658 $0.83
COLORADO
Cheyenne Crest, Colorado Springs 1984 9 208 175,424 843 96% $659 $0.78
Glenridge, Colorado Springs (1) 1985 8 220 176,792 804 96% $648 $0.81
Indian Tree, Arvada 1983 8 168 140,000 833 95% $666 $0.80
Trails, Aurora 1986 11 351 286,964 818 93% $633 $0.77
Willow Glen, Aurora 1983 20 384 302,944 789 94% $614 $0.78
27
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
COLORADO, continued
Windmill, Colorado Springs 1985 11 304 180,640 594 97% $523 $0.88
Yuma Court, Colorado Springs 1985 5 40 37,400 935 100% $620 $0.66
Village at Bear Creek, Denver 1987-1996 31 472 464,558 984 93% $848 $0.86
Cimmaron Ridge, Denver 1984 10 296 229,048 774 93% $586 $0.76
Colinas Pointe, Denver 1986 13 272 213,984 787 92% $647 $0.82
Highland Pointe, Denver 1984 14 318 237,886 748 97% $568 $0.76
Ironwood at the Ranch, Denver (1) 1986 9 226 184,081 815 97% $732 $0.90
The Marks, Denver (1) 1987-1996 24 616 520,712 845 93% $741 $0.88
The Registry, Denver 1987 9 208 156,558 753 98% $695 $0.92
Sterling Point, Denver 1979 9 143 130,120 910 94% $732 $0.80
Warwick Station, Denver (1) 1986 18 332 250,432 754 96% $689 $0.91
Parkwood East, Fort Collins 1986 25 259 215,064 830 92% $676 $0.81
Dartmouth Woods, Lakewood (1) 1990 13 201 165,777 825 97% $708 $0.86
Highline Oaks, Denver (1) 1986 10 220 170,756 776 94% $679 $0.88
Crescent at Cherry Creek, Denver (1) 1994 6 216 189,191 876 94% $821 $0.94
Cierra Crest, Denver 1996 22 480 439,498 916 95% $808 $0.88
CONNECTICUT
The Classic, Stamford 1990 1 144 165,727 1,151 97% $1,981 $1.72
FLORIDA
Brierwood, Jacksonville 1974 17 196 263,052 1,342 99% $642 $0.48
28
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
FLORIDA, continued
Casa Cordoba, Tallahassee 1972-73 12 168 164,336 978 95% $605 $0.62
Casa Cortez, Tallahassee 1970 4 66 74,916 1,135 94% $628 $0.55
Chaparral, Largo 1976 23 444 451,420 1,017 95% $613 $0.60
Gatehouse on the Green, Pembroke
Pines 1990 21 312 310,140 994 90% $944 $0.95
Gatehouse at Pine Lake, Plantation 1990 25 296 293,792 993 97% $861 $0.87
Habitat, Orlando 1974 17 344 334,352 972 93% $589 $0.61
Hammock's Place, Miami (1) 1986 15 296 307,900 1,040 93% $740 $0.71
Heron Cove, Coral Springs 1987 12 198 189,932 959 98% $786 $0.82
Heron Landing, Lauderhill 1988 11 144 151,684 1,053 94% $771 $0.73
Heron Run, Plantation 1987 13 198 185,504 937 93% $814 $0.87
La Costa Brava, Orlando 1967 10 194 190,780 983 98% $639 $0.65
La Costa Brava, Jacksonville (2) 1970-73 30 464 441,268 951 92% $556 $0.58
Marbrisa, Tampa 1984 37 224 188,544 842 97% $589 $0.70
Oaks of Lakebridge, Ormond Beach 1984 12 170 120,792 711 99% $598 $0.84
Paradise Point, Dania 1987-90 13 260 226,980 873 99% $832 $0.95
Pine Harbour, Orlando 1991 20 366 344,204 940 95% $690 $0.73
Pines of Springdale, W. Palm Beach 1986 5 151 126,975 841 95% $632 $0.75
The Place, Fort Meyers 1986 9 230 183,588 798 96% $556 $0.70
Combined Ft. Lauderdale
Properties (4) 1988-1991 36 737 528,591 717 97% $878 $1.22
29
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
FLORIDA, continued
River Bend, Tampa 1971 15 296 333,580 1,127 96% $565 $0.50
Sabal Pointe, Coral Springs 1995 14 275 355,575 1,293 96% $896 $0.69
Sawgrass Cove, Bradenton 1991 28 336 342,880 1,020 94% $678 $0.66
Springs Colony, Altamonte Springs (1) 1986 10 188 161,168 857 96% $589 $0.69
Stonelake Club, Ocala 1986 15 240 194,320 810 95% $511 $0.63
Woodlake at Killearn, Tallahassee 1986-90 25 352 305,480 868 91% $610 $0.70
Banyan Lake, Boynton Beach 1986 30 288 264,636 919 94% $712 $0.77
Boynton Place, Boynton Beach 1989 12 192 195,840 1,020 95% $715 $0.70
Crosswinds, St. Petersburg 1986 17 208 154,224 741 97% $567 $0.77
Sabal Palm, Pompano Beach 1989 23 416 384,032 923 96% $762 $0.83
Summit Chase, Coral Springs 1985 9 140 134,586 961 94% $714 $0.74
Mariners Wharf, Orange Park 1989 28 272 305,392 1,123 95% $753 $0.67
Northlake, Jacksonville 1989 20 240 193,832 808 94% $596 $0.74
Ocean Walk, Key West (1) 1990 16 296 208,256 704 97% $828 $1.18
Silver Springs, Jacksonville 1985 25 432 361,372 836 95% $547 $0.65
Tivoli Lakes, Deerfield Beach 1991 15 278 247,336 890 96% $789 $0.89
Westwood Pines, Tamarac 1991 15 208 204,460 983 96% $799 $0.81
Hidden Palms, Tampa (1) 1986 14 256 201,518 787 97% $542 $0.69
Vinings at Ashley Lake, Boynton
Beach (1) 1990 36 440 432,756 984 93% $649 $0.66
30
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
GEORGIA
Frey, Atlanta (1) 1985 44 489 453,760 928 90% $704 $0.76
Governor's Place, Augusta 1972 9 190 191,580 1,008 91% $449 $0.45
Greengate, Marietta 1971 11 152 157,808 1,038 92% $646 $0.62
Holcomb Bridge, Atlanta (1) 1985 36 437 419,150 959 96% $703 $0.73
Ivy Place, Atlanta 1978 15 122 180,830 1,482 94% $919 $0.62
Longwood, Decatur 1992 9 268 216,970 810 96% $742 $0.92
Maxwell House, Augusta 1951 1 216 97,173 450 96% $371 $0.82
Park Knoll, Marietta 1983 41 484 587,250 1,213 97% $821 $0.68
Preston Lake, Tucker 1984-86 32 320 338,130 1,057 97% $698 $0.66
Roswell, Atlanta (1) 1985 30 236 225,598 956 98% $731 $0.76
Terraces at Peachtree, Atlanta 1987 1 96 86,800 904 98% $913 $1.01
Woodland Hills, Decatur 1985 19 228 266,304 1,168 97% $788 $0.67
Paces (combined), Atlanta (8) 1984-1989 41 610 592,936 972 94% $768 $0.79
North Hill, Atlanta (1) 1984 30 420 481,150 1,146 93% $764 $0.67
The Clarion, Decatur 1990 9 217 211,582 975 94% $756 $0.78
Garden Lake, Riverdale 1991 19 278 274,256 986 91% $645 $0.65
Highland Grove, Stone Mountain 1988 20 268 243,360 908 94% $671 $0.74
Governor's Point, Roswell (1) 1982/1986 34 468 587,176 1,255 94% $783 $0.62
The Arboretum, Atlanta 1970 18 312 301,139 965 94% $790 $0.82
31
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
IDAHO
The Seasons, Boise 1990 6 120 108,460 904 97% $631 $0.70
ILLINOIS
Bourbon Square, Palatine (1) 1984-87 47 612 875,160 1,430 98% $1,034 $0.72
Four Lakes III-V, Lisle (1) 1968-1988 107 1,420 1,108,453 781 93% $819 $1.05
Spice Run, Naperville 1988 32 400 396,320 991 98% $862 $0.87
Chantecleer Lakes, Naperville (1) 1986 19 304 280,536 923 97% $894 $0.97
Glenlake Club, Glendale Heights (1) 1988 17 336 268,560 799 91% $767 $0.96
INDIANA
Idlewood, Indianapolis (1) 1991 28 320 262,355 820 90% $621 $0.76
IOWA
3000 Grand, Des Moines 1970 6 186 199,530 1,073 94% $829 $0.77
Regency Woods, West Des Moines (1) 1986 11 200 165,880 829 97% $515 $0.62
KANSAS
Cedar Crest, Overland Park 1986 30 466 430,034 923 98% $632 $0.68
Essex Place, Overland Park 1970-84 34 352 429,048 1,219 96% $792 $0.65
Rosehill Pointe, Lenexa 1984 35 498 459,318 922 93% $611 $0.66
Silverwood, Mission (1) 1986 15 280 234,876 839 98% $632 $0.75
Sunnyoak Village, Overland Park 1984 46 548 492,700 899 98% $588 $0.65
Concorde Bridge, Overland Park 1973 26 248 403,808 1,628 94% $798 $0.49
KENTUCKY
Cloisters on the Green, Lexington 1974 12 228 196,560 862 97% $576 $0.67
Doral, Louisville 1972 10 228 293,106 1,286 95% $618 $0.48
32
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
KENTUCKY, continued
Mallgate, Louisville 1969 24 540 535,444 992 93% $551 $0.56
Sonnet Cove I-II, Lexington 1972-1974 14 331 346,675 1,047 94% $627 $0.60
Breckinridge Court, Lexington (1) 1986-1987 16 382 276,010 723 95% $464 $0.64
River Oak, Louisville 1989 16 268 200,056 746 95% $516 $0.69
MAINE
Junipers of Yarmouth, Yarmouth 1970 9 225 188,000 836 97% $662 $0.79
Tamarlane, Portland 1986 19 115 101,801 885 98% $716 $0.81
MARYLAND
Canterbury, Germantown (1) 1986 23 544 481,083 884 97% $719 $0.81
Country Club I & II, Silver
Spring (1) 1980-1982 20 376 371,296 987 95% $770 $0.78
Georgian Woods II, Wheaton (1) 1967 17 371 305,693 824 98% $777 $0.94
Greenwich Woods & Hollyview,
Silver Springs (6) 1965-1967 14 606 546,518 902 97% $755 $0.84
Marymont, Laurel 1987-88 10 308 251,264 816 96% $771 $0.95
Northhampton I & II, Largo (1) 1977-1988 58 620 564,399 910 96% $806 $0.89
Oak Mill II, Germantown (1) 1985 8 192 165,611 863 96% $716 $0.83
Town Centre III & IV, Laurel (1) 1968-1969 30 562 553,083 984 98% $721 $0.73
Yorktowne at Olde Mill, Millersville 1974 21 216 195,100 903 97% $691 $0.77
MASSACHUSETTS
Lincoln Heights, Quincy 1991 16 336 266,590 793 93% $1,079 $1.36
Crystal Village, Attleboro 1974 7 91 92,880 1,021 100% $871 $0.85
Mill Village, Randolph 1971-77 11 310 237,755 767 97% $735 $0.96
33
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
MICHIGAN
Country Ridge, Farmington Hills 1986 18 252 278,060 1,103 92% $838 $0.76
Hidden Valley, Ann Arbor 1973 28 324 237,348 733 96% $717 $0.98
Lake in the Woods, Ypsilanti 1969 175 1,028 971,873 945 95% $736 $0.78
Pines of Cloverlane, Pittsfield
Township 1975-79 63 582 471,966 811 96% $624 $0.77
Walden Wood, Southfield (1) 1972 20 210 295,080 1,405 95% $879 $0.63
Arbor Glen, Pittsfield Township 1990 22 220 195,996 891 95% $600 $0.67
Burwick Farms, Howell 1991 37 264 274,540 1,040 95% $786 $0.76
Woodcrest Villa, Westland 1970 26 458 425,200 928 93% $561 $0.60
Woodland Meadows, Ann Arbor 1987-1989 34 306 392,930 1,284 89% $1,075 $0.84
MINNESOTA
Park Place I & II, Plymouth (1) 1986 60 500 569,768 1,140 94% $800 $0.70
Fountain Place I, Eden
Prairie (1)(7) 1989 22 332 382,170 1,151 97% $768 $0.67
Fountain Place II, Eden
Prairie (1)(7) 1989 158 162,598 1,029 97% $771 $0.75
Royal Oaks, Eagan (1) 1989 20 231 209,384 906 98% $740 $0.82
Trailway Pond I, Burnsville (1)(7) 1988 21 75 70,283 937 95% $684 $0.73
Trailway Pond II, Burnsville (1)(7) 1988 165 155,395 942 95% $675 $0.72
Valley Creek I, Woodbury (1)(7) 1989 40 225 212,100 943 92% $713 $0.76
Valley Creek II, Woodbury (1)(7) 1990 177 168,258 951 96% $717 $0.75
White Bear Woods I, White Bear
Lake (1) 1989 4 225 211,992 942 96% $736 $0.78
Woodlane Place I, Woodbury (1) 1989 32 216 297,902 1,379 95% $870 $0.63
Woodlands of Minnetonka, Minnetonka 1988 14 248 268,640 1,083 98% $880 $0.81
34
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
MISSOURI
Hunters Glen, Chesterfield 1985 19 192 156,489 815 98% $654 $0.80
Sleepy Hollow, Kansas City (1) 1987 33 388 325,486 839 93% $566 $0.67
Hunters Ridge, St. Louis (1) 1987 13 198 178,448 901 95% $616 $0.68
South Pointe, St. Louis (1) 1986 8 192 155,520 810 92% $602 $0.74
Ethan's Ridge I, Kansas City (1)(7) 1988 316 283,944 899 92% $542 $0.60
Ethan's Ridge II, Kansas City (1)(7) 1990 52 242 196,614 812 89% $534 $0.66
Ethan's Glen III, Kansas City (1)(7) 1990 48 33,600 700 88% $484 $0.69
NEVADA
Catalina Shores, Las Vegas 1989 13 240 211,200 880 93% $716 $0.81
Cypress Point, Las Vegas 1989 9 212 179,800 848 97% $698 $0.82
Desert Park, Las Vegas 1987 15 368 172,513 469 87% $519 $1.11
Fountains at Flamingo, Las Vegas 1989-91 30 521 417,870 802 94% $687 $0.86
Newport Cove, Henderson 1983 10 140 152,600 1,090 96% $777 $0.71
Silver Shadow, Las Vegas 1992 9 200 194,656 973 90% $716 $0.74
Sunrise Springs, Las Vegas 1989 10 192 164,424 856 94% $681 $0.80
Trails, Las Vegas 1988 28 440 453,656 1,031 94% $757 $0.73
Catalina Shores, Las Vegas
(Wellsford) 1989 14 256 230,872 902 97% $651 $0.72
Crossing at Green Valley, Las Vegas 1986 15 384 330,714 861 96% $654 $0.76
Reflections at the Lakes, Las Vegas 1989 16 326 274,992 844 98% $669 $0.79
NEW HAMPSHIRE
Wellington Hill, Manchester (1) 1987 40 390 394,627 1,012 96% $753 $0.74
35
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY
Ravens Crest, Plainsboro (1) 1984 19 704 583,176 828 96% $854 $1.03
NEW MEXICO
Pueblo Villas, Albuquerque 1975 12 232 173,118 746 94% $557 $0.75
Mountain Run, Albuquerque 1985 16 472 335,744 711 95% $554 $0.78
NORTH CAROLINA
Bainbridge, Durham 1984 24 216 191,240 885 94% $705 $0.80
Bridgeport, Raleigh 1990 17 276 252,190 914 95% $724 $0.79
Deerwood Meadows, Greensboro 1986 44 297 217,757 733 94% $562 $0.77
East Pointe, Charlotte (1) 1987 29 310 301,560 973 97% $650 $0.67
Laurel Ridge, Chapel Hill 1975 13 160 158,964 994 98% $727 $0.73
McAlpine Ridge, Charlotte 1989-90 15 320 238,125 744 96% $580 $0.78
Pine Meadow, Greensboro (1) 1974 14 204 226,600 1,111 95% $633 $0.57
Rock Creek, Corrboro 1986 16 188 153,548 817 97% $682 $0.84
Winterwood, Charlotte (1) 1986 23 384 369,260 962 96% $675 $0.70
Woodbridge, Cary (1) 1993-95 28 344 315,624 918 95% $733 $0.80
Woodscape & Woods of North Bend,
Raleigh 1979-1983 55 475 430,167 906 96% $640 $0.71
The Cardinal, Greensboro (1) 1994 17 256 237,727 913 93% $574 $0.63
Willow Brook, Durham 1986 21 176 139,860 795 91% $681 $0.86
The Atrium, Durham 1989 16 208 196,596 945 95% $645 $0.68
The Cedars, Charlotte 1983 32 360 312,400 868 92% $548 $0.63
The Chimneys, Charlotte 1974 16 214 150,152 702 95% $505 $0.72
Creekwood, Charlotte 1987-1990 23 384 322,868 841 93% $792 $0.94
Hidden Oaks & Northwoods Village,
Cary (5) 1986-1988 26 444 345,358 778 95% $660 $0.85
36
ITEM 2. PROPERTIES
PROPERTIES- CONTINUED
Occupancy December, 1997
Acreage Average As of Avg. Monthly
Year(s) (approx- Square Square Footage December Rental Rate Per
Property Constructed imate) Units Footage Per Unit 31, 1997 Unit Square Foot
- ----------------------------------------------------------------------------------------------------------------------------------
OHIO
Olentangy Commons, Columbus 1972 76 827 981,190 1,186 99% $773 $0.65
Reserve Square, Cleveland 1973 4 765 631,803 826 86% $917 $1.11
University Park, Toledo 1965 2 99 49,950 505 95% $456 $0.90
Village of Hampshire Heights, Toledo 1950 10 304 187,624 617 83% $431 $0.70
Eastland on the Lake, Columbus 1973 32 376 274,704 724 90% $431 $0.60
Orchard of Landen, Maineville (1) 1985-1988 33 312 288,514 925 96% $695 $0.75