Attached files
file | filename |
---|---|
EX-3.1 - EXHIBIT 3.1 - COLONIAL PROPERTIES TRUST | c07406exv3w1.htm |
EX-32.2 - EXHIBIT 32.2 - COLONIAL PROPERTIES TRUST | c07406exv32w2.htm |
EX-32.1 - EXHIBIT 32.1 - COLONIAL PROPERTIES TRUST | c07406exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - COLONIAL PROPERTIES TRUST | c07406exv31w1.htm |
EX-12.2 - EXHIBIT 12.2 - COLONIAL PROPERTIES TRUST | c07406exv12w2.htm |
EX-31.4 - EXHIBIT 31.4 - COLONIAL PROPERTIES TRUST | c07406exv31w4.htm |
EX-32.3 - EXHIBIT 32.3 - COLONIAL PROPERTIES TRUST | c07406exv32w3.htm |
EX-31.3 - EXHIBIT 31.3 - COLONIAL PROPERTIES TRUST | c07406exv31w3.htm |
EX-12.1 - EXHIBIT 12.1 - COLONIAL PROPERTIES TRUST | c07406exv12w1.htm |
EX-32.4 - EXHIBIT 32.4 - COLONIAL PROPERTIES TRUST | c07406exv32w4.htm |
EX-31.2 - EXHIBIT 31.2 - COLONIAL PROPERTIES TRUST | c07406exv31w2.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 2010
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
1-12358 (Colonial Properties Trust)
0-20707 (Colonial Realty Limited Partnership)
0-20707 (Colonial Realty Limited Partnership)
COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP
COLONIAL REALTY LIMITED PARTNERSHIP
(Exact name of
registrant as specified in its charter)
Alabama (Colonial Properties Trust) | 59-7007599 | |
Delaware (Colonial Realty Limited Partnership) | 63-1098468 | |
(State or other jurisdiction | (IRS Employer | |
of incorporation or organization) | Identification Number) |
2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
(205) 250-8700
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
(Former name, former address and former fiscal year, if changed since last report)
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.
Colonial Properties Trust
|
YES þ NO o | |
Colonial Realty Limited Partnership
|
YES þ NO o |
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Colonial Properties Trust
|
YES o NO o | |
Colonial Realty Limited Partnership
|
YES o NO o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a small reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Colonial Properties Trust | Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if smaller reporting company) |
Smaller reporting company o | ||||
Colonial Realty Limited Partnership |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Colonial Properties Trust
|
YES o NO þ | |
Colonial Realty Limited Partnership
|
YES o NO þ |
As of November 2, 2010, Colonial Properties Trust had 77,684,026 Common Shares of Beneficial
Interest outstanding.
COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
Page | ||||||||
Colonial Properties Trust |
||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
7 | ||||||||
8 | ||||||||
Colonial Realty Limited Partnership |
||||||||
28 | ||||||||
29 | ||||||||
30 | ||||||||
31 | ||||||||
32 | ||||||||
53 | ||||||||
73 | ||||||||
73 | ||||||||
74 | ||||||||
74 | ||||||||
75 | ||||||||
76 | ||||||||
77 | ||||||||
Exhibit 3.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 31.3 | ||||||||
Exhibit 31.4 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
Exhibit 32.3 | ||||||||
Exhibit 32.4 |
Table of Contents
Explanatory Note
This Form 10-Q includes information with respect to both Colonial Properties Trust (the Trust)
and Colonial Realty Limited Partnership (CRLP), of which the Trust is the sole general partner
and in which the Trust owned a 91.4% limited partner interest as of September 30, 2010. The Trust
conducts all of its business and owns all of its properties through CRLP and CRLPs various
subsidiaries. Separate financial statements and accompanying notes are provided for each of the
Trust and CRLP. Except as specifically noted otherwise, Managements Discussion and Analysis of
Financial Condition and Results of Operations is presented as a single discussion with respect to
both the Trust and CRLP since the Trust conducts all of its business and owns all of its properties
through CRLP and CRLPs various subsidiaries.
Table of Contents
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited) | ||||||||
September 30, 2010 | December 31, 2009 | |||||||
ASSETS |
||||||||
Land, buildings & equipment |
$ | 3,260,508 | $ | 3,210,350 | ||||
Undeveloped land and construction in progress |
283,482 | 237,100 | ||||||
Less: Accumulated depreciation |
(610,031 | ) | (519,728 | ) | ||||
Real estate assets held for sale, net |
29,793 | 65,022 | ||||||
Net real estate assets |
2,963,752 | 2,992,744 | ||||||
Cash and cash equivalents |
7,639 | 4,590 | ||||||
Restricted cash |
9,327 | 7,952 | ||||||
Accounts receivable, net |
15,738 | 33,934 | ||||||
Notes receivable |
43,776 | 22,208 | ||||||
Prepaid expenses |
26,151 | 16,503 | ||||||
Deferred debt and lease costs |
21,992 | 22,560 | ||||||
Investment in partially-owned entities |
38,052 | 17,422 | ||||||
Other assets |
53,250 | 54,719 | ||||||
Total assets |
$ | 3,179,677 | $ | 3,172,632 | ||||
LIABILITIES AND EQUITY |
||||||||
Notes and mortgages payable |
$ | 1,404,466 | $ | 1,393,797 | ||||
Unsecured credit facility |
301,363 | 310,546 | ||||||
Total debt |
1,705,829 | 1,704,343 | ||||||
Accounts payable |
31,981 | 28,299 | ||||||
Accrued interest |
17,646 | 13,133 | ||||||
Accrued expenses |
26,425 | 26,142 | ||||||
Investment in partially-owned entities |
23,073 | | ||||||
Other liabilities |
12,940 | 15,054 | ||||||
Total liabilities |
1,817,894 | 1,786,971 | ||||||
Redeemable noncontrolling interest: |
||||||||
Common Units |
136,783 | 133,537 | ||||||
Equity: |
||||||||
Preferred shares of beneficial interest, $0.01 par value, 20,000,000 shares
authorized: 8 1/8% Series D Cumulative Redeemable Preferred Shares of beneficial
interest, liquidation preference
$25 per depositary share, 0 and 4,004,735
depositary shares (liquidation value of $0 and $100,118,000) issued and
outstanding at September 30, 2010 and December 31, 2009, respectively |
| 4 | ||||||
Common shares of beneficial interest, $0.01 par value, 125,000,000 shares
authorized; 83,277,903 and 71,989,227 shares issued at September 30,
2010 and December 31, 2009, respectively |
833 | 720 | ||||||
Additional paid-in capital |
1,804,857 | 1,760,362 | ||||||
Cumulative earnings |
1,266,361 | 1,296,188 | ||||||
Cumulative distributions |
(1,795,317 | ) | (1,753,015 | ) | ||||
Noncontrolling interest: |
||||||||
Limited partners noncontrolling interest |
780 | 985 | ||||||
7 1/4% Series B Cumulative Redeemable Preferred Units |
100,000 | 100,000 | ||||||
Treasury shares, at cost; 5,623,150 shares at September 30, 2010 and December 31, 2009 |
(150,163 | ) | (150,163 | ) | ||||
Accumulated other comprehensive loss |
(2,351 | ) | (2,957 | ) | ||||
Total equity |
1,225,000 | 1,252,124 | ||||||
Total liabilities and equity |
$ | 3,179,677 | $ | 3,172,632 | ||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
4
Table of Contents
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Minimum rent |
$ | 73,751 | $ | 69,028 | $ | 220,842 | $ | 209,475 | ||||||||
Tenant recoveries |
2,416 | 848 | 7,798 | 2,823 | ||||||||||||
Other property related revenue |
12,358 | 10,870 | 36,016 | 30,505 | ||||||||||||
Other non-property related revenue |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Total Revenue |
91,139 | 84,733 | 273,568 | 254,205 | ||||||||||||
Expenses: |
||||||||||||||||
Property operating expenses |
28,255 | 25,615 | 79,632 | 70,976 | ||||||||||||
Taxes, licenses and insurance |
9,826 | 8,386 | 31,866 | 29,674 | ||||||||||||
Property management expenses |
2,323 | 1,728 | 6,008 | 5,329 | ||||||||||||
General and administrative expenses |
3,757 | 4,073 | 14,022 | 12,982 | ||||||||||||
Management fees and other expenses |
2,001 | 3,340 | 7,259 | 11,131 | ||||||||||||
Restructuring charges |
| 588 | | 1,400 | ||||||||||||
Investment and development |
9 | 100 | 42 | 1,585 | ||||||||||||
Depreciation |
30,554 | 28,070 | 91,075 | 84,130 | ||||||||||||
Amortization |
2,299 | 864 | 6,693 | 2,936 | ||||||||||||
Impairment and other losses |
131 | 221 | 914 | 1,839 | ||||||||||||
Total operating expenses |
79,155 | 72,985 | 237,511 | 221,982 | ||||||||||||
Income from operations |
11,984 | 11,748 | 36,057 | 32,223 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest expense |
(21,223 | ) | (22,593 | ) | (63,051 | ) | (65,835 | ) | ||||||||
Debt cost amortization |
(1,156 | ) | (1,247 | ) | (3,472 | ) | (3,357 | ) | ||||||||
Gains on retirement of debt |
| 14,929 | 1,044 | 56,480 | ||||||||||||
Interest income |
444 | 345 | 1,162 | 1,095 | ||||||||||||
(Loss) from partially-owned investments |
(687 | ) | (3,317 | ) | (23 | ) | (4,595 | ) | ||||||||
(Loss) on hedging activities |
| (649 | ) | (289 | ) | (1,709 | ) | |||||||||
(Loss) gain from sales of property, net of income taxes of $24 (3Q10)
and $1 (3Q09) and $117 (YTD10) and $3,157 (YTD09) |
(287 | ) | 506 | (947 | ) | 5,745 | ||||||||||
Income taxes and other |
(196 | ) | (352 | ) | (883 | ) | 2,518 | |||||||||
Total other income (expense) |
(23,105 | ) | (12,378 | ) | (66,459 | ) | (9,658 | ) | ||||||||
(Loss) income from continuing operations |
(11,121 | ) | (630 | ) | (30,402 | ) | 22,565 | |||||||||
(Loss) income from discontinued operations |
(11 | ) | 234 | (59 | ) | (512 | ) | |||||||||
(Loss) gain on disposal of discontinued operations, net of income taxes of $- (3Q10)
and $- (3Q09) and $- (YTD10) and $70 (YTD09) |
(347 | ) | (5 | ) | (396 | ) | 7 | |||||||||
(Loss) income from discontinued operations |
(358 | ) | 229 | (455 | ) | (505 | ) | |||||||||
Net (loss) income |
(11,479 | ) | (401 | ) | (30,857 | ) | 22,060 | |||||||||
Noncontrolling interest |
||||||||||||||||
Continuing Operations |
||||||||||||||||
Noncontrolling interest in CRLP common unitholders |
1,615 | 616 | 4,430 | (1,492 | ) | |||||||||||
Noncontrolling interest in CRLP preferred unitholders |
(1,813 | ) | (1,813 | ) | (5,438 | ) | (5,438 | ) | ||||||||
Noncontrolling interest of limited partners |
(1 | ) | | 110 | (999 | ) | ||||||||||
Discontinued Operations |
||||||||||||||||
Noncontrolling interest in CRLP from discontinued operations |
32 | (53 | ) | 45 | (14 | ) | ||||||||||
Noncontrolling interest of limited partners |
| 155 | (5 | ) | 597 | |||||||||||
Income attributable to noncontrolling interest |
(167 | ) | (1,095 | ) | (858 | ) | (7,346 | ) | ||||||||
Net (loss) income attributable to parent company |
(11,646 | ) | (1,496 | ) | (31,715 | ) | 14,714 | |||||||||
Dividends to preferred shareholders |
(1,582 | ) | (1,998 | ) | (5,649 | ) | (6,108 | ) | ||||||||
Preferred share issuance costs write-off, net of discount |
(3,550 | ) | 30 | (3,550 | ) | 25 | ||||||||||
Net (loss) income available to common shareholders |
$ | (16,778 | ) | $ | (3,464 | ) | $ | (40,914 | ) | $ | 8,631 | |||||
Net (loss) income per common share Basic: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.22 | ) | $ | (0.08 | ) | $ | (0.58 | ) | $ | 0.17 | |||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.01 | (0.01 | ) | | ||||||||||
Net (loss) income per common share Basic |
$ | (0.23 | ) | $ | (0.07 | ) | $ | (0.59 | ) | $ | 0.17 | |||||
Net (loss) income per common share Diluted: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.22 | ) | $ | (0.08 | ) | $ | (0.58 | ) | $ | 0.17 | |||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.01 | (0.01 | ) | | ||||||||||
Net (loss) income per common share Diluted |
$ | (0.23 | ) | $ | (0.07 | ) | $ | (0.59 | ) | $ | 0.17 | |||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
74,411 | 50,787 | 70,157 | 49,222 | ||||||||||||
Diluted |
74,411 | 50,787 | 70,157 | 49,222 |
The accompanying notes are an integral part of these consolidated condensed financial
statements.
5
Table of Contents
COLONIAL PROPERTIES TRUST
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net (loss) income |
$ | (30,857 | ) | $ | 22,060 | |||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||
Depreciation and amortization |
98,173 | 88,717 | ||||||
Loss from partially-owned entities |
23 | 4,595 | ||||||
Losses (gains) from sales of property |
1,226 | (8,887 | ) | |||||
Impairment and other losses |
914 | 3,890 | ||||||
Gain on retirement of debt |
(1,044 | ) | (56,480 | ) | ||||
Distributions of income from partially-owned entities |
4,707 | 9,529 | ||||||
Other, net |
4,692 | 3,312 | ||||||
Change in: |
||||||||
Restricted cash |
(1,375 | ) | (878 | ) | ||||
Accounts receivable |
18,269 | 10,689 | ||||||
Prepaid expenses |
(3,421 | ) | (11,424 | ) | ||||
Other assets |
(531 | ) | 8,972 | |||||
Change in: |
||||||||
Accounts payable |
4,330 | (18,234 | ) | |||||
Accrued interest |
4,513 | (2,605 | ) | |||||
Accrued expenses and other |
(1,830 | ) | 21,292 | |||||
Net cash provided by operating activities |
97,789 | 74,548 | ||||||
Cash flows from investing activities: |
||||||||
Acquisition of properties |
(4,512 | ) | | |||||
Development expenditures |
(25,870 | ) | (40,591 | ) | ||||
Tenant improvements and leasing commissions |
(6,196 | ) | 99 | |||||
Capital expenditures |
(22,169 | ) | (13,129 | ) | ||||
Proceeds from sales of property, net of selling costs |
6,593 | 62,507 | ||||||
Issuance of notes receivable |
(28,228 | ) | (21 | ) | ||||
Repayments of notes receivable |
5,548 | 2,334 | ||||||
Distributions from partially-owned entities |
768 | 2,702 | ||||||
Capital contributions to partially-owned entities |
(5,376 | ) | (58 | ) | ||||
Sale of securities |
| 1,622 | ||||||
Net cash (used in) provided by investing activities |
(79,442 | ) | 15,465 | |||||
Cash flows from financing activities: |
||||||||
Proceeds from additional borrowings |
73,200 | 521,959 | ||||||
Proceeds from dividend reinvestment plan and exercise of stock options |
1,044 | 2,317 | ||||||
Proceeds from common share issuance, net of expenses |
147,731 | 41,123 | ||||||
Principal reductions of debt |
(81,193 | ) | (550,538 | ) | ||||
Payment of debt issuance costs |
(1,346 | ) | (5,841 | ) | ||||
Proceeds from borrowings on revolving credit lines |
635,000 | 610,000 | ||||||
Payments on revolving credit lines and overdrafts |
(643,868 | ) | (648,706 | ) | ||||
Dividends paid to common and preferred shareholders |
(42,302 | ) | (38,479 | ) | ||||
Redemption of Nord du Lac CDD bonds |
| (22,429 | ) | |||||
Redemption of Preferred Series D Shares |
(100,118 | ) | | |||||
Distributions to noncontrolling partners in CRLP |
(3,446 | ) | (4,753 | ) | ||||
Net cash used in financing activities |
(15,298 | ) | (95,347 | ) | ||||
Decrease in cash and cash equivalents |
3,049 | (5,334 | ) | |||||
Cash and cash equivalents, beginning of period |
4,590 | 9,185 | ||||||
Cash and cash equivalents, end of period |
$ | 7,639 | $ | 3,851 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for interest, including amounts capitalized |
$ | 59,488 | $ | 71,973 | ||||
Cash received during the period for income taxes |
$ | (17,368 | ) | $ | (9,849 | ) | ||
Supplemental disclosure of non-cash transactions: |
||||||||
Exchange of interest in DRA multifamily joint ventures for acquisition of CG at Riverchase |
$ | 1,637 | $ | | ||||
Consolidation of CMS V / CG at Canyon Creek Joint Venture |
$ | | $ | 30,689 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
6
Table of Contents
COLONIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Unaudited)
(in thousands, except per share data)
Series D | Additional | Limited Partners | Series B | Accumulated Other | Total | Redeemable | ||||||||||||||||||||||||||||||||||||||
Preferred | Common | Paid-In | Cumulative | Cumulative | Noncontrolling | Preferred | Treasury | Comprehensive | Shareholders | Common | ||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2010 and 2009 | Shares | Shares | Capital | Earnings | Distributions | Interest | Units | Shares | Loss | Equity | Units | |||||||||||||||||||||||||||||||||
Balance December 31, 2008 |
$ | 4 | $ | 542 | $ | 1,619,897 | $ | 1,281,330 | $ | (1,700,739 | ) | $ | 1,943 | $ | 100,000 | $ | (150,163 | ) | $ | (5,205 | ) | $ | 1,147,609 | $ | 124,848 | |||||||||||||||||||
Net income |
20,034 | 396 | 20,430 | $ | 1,629 | |||||||||||||||||||||||||||||||||||||||
Adjustment for amounts included in net income |
2,134 | 2,134 | ||||||||||||||||||||||||||||||||||||||||||
Distributions on common shares ($0.55 per share) |
(26,959 | ) | (26,959 | ) | (4,753 | ) | ||||||||||||||||||||||||||||||||||||||
Distributions on preferred shares |
(11,520 | ) | (11,520 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of restricted common shares of
beneficial Interest |
(273 | ) | (273 | ) | ||||||||||||||||||||||||||||||||||||||||
Amortization of stock based compensation |
1,938 | 1,938 | ||||||||||||||||||||||||||||||||||||||||||
Redemption of Series D preferred shares of
beneficial interest |
(157 | ) | (157 | ) | ||||||||||||||||||||||||||||||||||||||||
Cancellation of vested restricted shares to pay taxes |
(168 | ) | (168 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common shares of beneficial
interest through the Companys dividend
reinvestment plan and Employee Stock
Purchase Plan |
1 | 1,322 | 1,323 | |||||||||||||||||||||||||||||||||||||||||
Issuance of common shares of beneficial
interest through conversion of units from
Colonial Realty Limited Partnership |
7 | 4,709 | 4,716 | (4,715 | ) | |||||||||||||||||||||||||||||||||||||||
Equity Offering Programs, net of cost |
48 | 41,755 | 41,803 | |||||||||||||||||||||||||||||||||||||||||
Change in interest of limited partners |
(1,271 | ) | (1,271 | ) | ||||||||||||||||||||||||||||||||||||||||
Change in redemption value of common units |
(7,993 | ) | (7,993 | ) | 7,993 | |||||||||||||||||||||||||||||||||||||||
Balance September 30, 2009 |
$ | 4 | $ | 598 | $ | 1,661,030 | $ | 1,301,364 | $ | (1,739,218 | ) | $ | 1,068 | $ | 100,000 | $ | (150,163 | ) | $ | (3,071 | ) | $ | 1,171,612 | $ | 125,002 | |||||||||||||||||||
Balance December 31, 2009 |
$ | 4 | $ | 720 | $ | 1,760,362 | $ | 1,296,188 | $ | (1,753,015 | ) | $ | 985 | $ | 100,000 | $ | (150,163 | ) | $ | (2,957 | ) | $ | 1,252,124 | $ | 133,537 | |||||||||||||||||||
Net income (loss) |
(26,277 | ) | (105 | ) | (26,382 | ) | $ | (4,475 | ) | |||||||||||||||||||||||||||||||||||
Adjustment for amounts included in net income (loss) |
606 | 606 | ||||||||||||||||||||||||||||||||||||||||||
Distributions on common shares ($0.15 per share) |
(31,215 | ) | (31,215 | ) | (3,446 | ) | ||||||||||||||||||||||||||||||||||||||
Distributions on preferred shares |
(5,649 | ) | (5,649 | ) | ||||||||||||||||||||||||||||||||||||||||
Distributions on preferred units of CRLP |
(5,438 | ) | (5,438 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of restricted common shares of
beneficial interest |
4 | 204 | 208 | |||||||||||||||||||||||||||||||||||||||||
Amortization of stock based compensation |
3,357 | 3,357 | ||||||||||||||||||||||||||||||||||||||||||
Redemption of Series D preferred shares of
beneficial interest |
(4 | ) | (96,564 | ) | (3,550 | ) | (100,118 | ) | ||||||||||||||||||||||||||||||||||||
Cancellation of vested restricted shares to pay taxes |
(202 | ) | (202 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common shares from options exercised |
35 | 35 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares of beneficial
interest through the Companys dividend
reinvestment plan and Employee Stock
Purchase Plan |
1 | 1,209 | 1,210 | |||||||||||||||||||||||||||||||||||||||||
Issuance of common shares of beneficial
interest through conversion of units from
Colonial Realty Limited Partnership |
9 | 13,749 | 13,758 | (13,758 | ) | |||||||||||||||||||||||||||||||||||||||
Equity Offering Programs, net of cost |
99 | 147,632 | 147,731 | |||||||||||||||||||||||||||||||||||||||||
Change in interest of limited partners |
(100 | ) | (100 | ) | ||||||||||||||||||||||||||||||||||||||||
Change in redemption value of common units |
(24,925 | ) | (24,925 | ) | 24,925 | |||||||||||||||||||||||||||||||||||||||
Balance September 30, 2010 |
$ | -0- | $ | 833 | $ | 1,804,857 | $ | 1,266,361 | $ | (1,795,317 | ) | $ | 780 | $ | 100,000 | $ | (150,163 | ) | $ | (2,351 | ) | $ | 1,225,000 | $ | 136,783 | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
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COLONIAL PROPERTIES TRUST
NOTES TO
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
(Unaudited)
The consolidated condensed financial statements of Colonial Properties Trust (the Trust)
have been prepared pursuant to the Securities and Exchange Commission (SEC) rules and
regulations. The following notes, which represent interim disclosures as required by the SEC,
highlight significant changes to the notes included in the December 31, 2009 audited consolidated
financial statements of Colonial Properties Trust and should be read together with the consolidated
financial statements and notes thereto included in the Colonial Properties Trust 2009 Annual Report
on Form 10-K.
Note 1 Organization and Business
As used herein, the Company means Colonial Properties Trust, an Alabama real estate
investment trust (REIT) and one or more of its subsidiaries and other affiliates, including
Colonial Realty Limited Partnership, a Delaware limited partnership (CRLP), Colonial Properties
Services, Inc. (CPSI), Colonial Properties Services Limited Partnership (CPSLP) and CLNL
Acquisition Sub, LLC (CLNL). The Company was originally formed as a Maryland REIT on July 9, 1993
and reorganized as an Alabama REIT under a new Alabama REIT statute on August 21, 1995. The Company
is a multifamily-focused self-administered and self-managed equity REIT, which means that it is
engaged in the acquisition, development, ownership, management and leasing of multifamily apartment
communities and other commercial real estate properties.
The Companys activities include full or partial ownership and operation of a portfolio of 155
properties as of September 30, 2010, consisting of multifamily and commercial properties located in
Alabama, Arizona, Florida, Georgia, Louisiana, Nevada, North Carolina, South Carolina, Tennessee,
Texas and Virginia. As of September 30, 2010, including properties in lease-up, the Company owns
interests in 110 multifamily apartment communities (including 106 consolidated properties, of which
105 are wholly-owned and one is partially-owned, and four properties partially-owned through
unconsolidated joint venture entities), and 45 commercial properties, consisting of 30 office
properties (including four wholly-owned consolidated properties and 26 properties partially-owned
through unconsolidated joint venture entities) and 15 retail properties (including five
wholly-owned consolidated properties and 10 properties partially-owned through unconsolidated joint
venture entities).
Note 2 Summary of Significant Accounting Policies
Unaudited Interim Consolidated Condensed Financial Statements
The accompanying unaudited interim consolidated condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the United States (GAAP)
for interim financial information, including rules and regulations of the SEC. Accordingly, the
interim financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 2010, are not necessarily
indicative of the results that may be expected for the year ending December 31, 2010. The
Consolidated Condensed Balance Sheet at December 31, 2009 has been derived from the audited
financial statements at that date, but does not include all of the information and footnotes
required by GAAP for complete financial statements.
Federal Income Tax Status
The Company, which is considered a corporation for federal income tax purposes, qualifies as a
REIT and generally will not be subject to federal income tax to the extent it distributes its REIT
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 taxable year, the Company will be
subject to federal income tax on its taxable income at regular corporate rates. The Company may
also be subject to certain federal, state and local taxes on its income and property and to federal
income and excise taxes on its undistributed income even if it does qualify as a REIT. For example,
the Company will be subject to income tax to the extent it distributes less than 100% of its REIT
taxable income (including capital gains) and the Company has certain gains that, if recognized,
will be subject to corporate tax because it acquired the assets in tax-free acquisitions of
non-REIT corporations.
8
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The Companys consolidated financial statements include the operations of a taxable REIT
subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal,
state and local income taxes. CPSI uses the liability method of accounting for income taxes.
Deferred income tax assets and liabilities result from temporary differences. Temporary differences
are differences between tax bases of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future periods. CPSI
provides property development, construction services, leasing and management services for joint
venture and third-party owned properties and administrative services to the Company and engages in
for-sale development and condominium conversion activity. The Company generally reimburses CPSI for
payroll and other costs incurred in providing services to the Company. All inter-company
transactions are eliminated in the accompanying consolidated condensed financial statements. CPSI
has an income tax receivable of $0.5 million and $17.8 million as of September 30, 2010 and
December 31, 2009, respectively, which is included in Accounts receivable, net on the Companys
Consolidated Condensed Balance Sheet. CPSIs consolidated provision for income taxes and effective
income tax rate were zero for each of the three and nine months ended September 30, 2010 and 2009,
due to the continued assessment that CPSIs deferred tax assets are not likely to be recoverable
and, as such, are fully reserved.
Tax years 2003 through 2009 are subject to examination by the federal taxing authorities.
Generally, tax years 2007 through 2009 are subject to examination by state taxing authorities.
There is one state tax examination currently in process.
On November 6, 2009, the Worker, Homeownership and Business Assistance Act of 2009 was signed
into law, which expanded the net operating loss (NOL) carryback rules to allow businesses to
carryback NOLs incurred in either 2008 or 2009 up to five years. As a result of the new
legislation, CPSI is able to carryback tax losses that occurred in the year ended December 31, 2009
against income that was recognized in 2005 and 2006. During the fourth quarter 2009, CPSI recorded an income tax benefit as a result of the new NOL carryback rules. During the
nine months ended September 30, 2010, the Company received $17.4 million of tax refunds. The
Company anticipates receiving the remaining refund amounts by December 31, 2010.
On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (the Act) was
signed into law. Section 1231 of the Act allows some business taxpayers to elect to defer
cancellation of indebtedness income when the taxpayer repurchased applicable debt instruments after
December 31, 2008 and before January 1, 2011. Under the Act, the cancellation of indebtedness
income in 2009 could be deferred for five years (until 2014), and the cancellation of indebtedness
income in 2010 could be deferred for four years (until 2014), subject in both cases to acceleration
events. After the deferral period, 20% of the cancellation of indebtedness income would be included
in taxpayers gross income in each of the next five taxable years. The deferral is an irrevocable
election made on the taxpayers income tax return for the taxable year of the reacquisition. The
Company made this election with regard to a portion of the CRLP debt repurchased in 2009.
The Company may from time to time be assessed interest or penalties by major tax
jurisdictions, although any such assessments historically have been minimal and immaterial to the
Companys financial results. When the Company has received an assessment for interest and/or
penalties, it has been classified in the financial statements as income tax expense.
Notes Receivable
Notes receivable consists primarily of promissory notes representing loans by the Company to
third parties. The Company records notes receivable at cost. The Company evaluates the
collectability of both interest and principal for each of its notes to determine whether they are
impaired. A note is considered to be impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due according to the existing
contractual terms. When a note is considered to be impaired, the amount of the allowance is
calculated by comparing the recorded investment to either the value determined by discounting the
expected future cash flows at the notes effective interest rate or to the value of the collateral
if the note is collateral-dependent.
As of September 30, 2010, the Company had notes receivable of $45.5 million consisting
primarily of:
| $26.4 million, net of premium, outstanding on the construction note for the Colonial Promenade Smyrna joint venture, which the Company acquired from the lender in May 2010. The note has an annual interest rate of one-month LIBOR plus 1.20% (see Note 12 Unconsolidated Joint Venture Financing Activity). |
| $16.6 million outstanding on a seller-financing note with a five year term at an annual interest rate of 5.60% associated with the disposition of Colonial Promenade at Fultondale in February 2009. |
In September 2010, the principal balance on the Colonial Promenade Smyrna note receivable was
reduced by $0.6 million, to $26.4 million, from proceeds received from the sale of an outparcel.
9
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The Company had accrued interest related to its outstanding notes receivable of $0.4 million
and $0.1 million as of September 30, 2010 and December 31, 2009, respectively. As of September 30,
2010 and December 31, 2009, the Company had recorded a reserve of $2.1 million against its
outstanding notes receivable and accrued interest. The weighted average interest rate on the notes
receivable outstanding at September 30, 2010 and December 31, 2009 was approximately 4.6% and 6.0%,
respectively. Interest income is recognized on an accrual basis.
Fair Value Measures
The Company applies the Financial Accounting Standards Boards (the FASB) Accounting
Standards Codification (ASC) 820-10 Fair Value Measurements and Disclosures, in relation to the
valuation of real estate assets recorded at fair value, to its impairment valuation analysis of
real estate assets (see Note 4) and to its disclosure of the fair value of financial instruments,
principally indebtedness (see Note 12) and notes receivable (see above). The disclosure of
estimated fair values was determined by management using available market information, considering
market participant assumptions and appropriate valuation methodologies available to management at
September 30, 2010. Considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, there can be no assurance that the estimates presented below,
using Level 2 and 3 inputs, are indicative of the amounts the Company could realize on disposition
of the real estate assets or financial instruments. The use of different market assumptions and/or
estimation methodologies could have material effect on the estimated fair value amounts.
The following table presents the Companys real estate assets reported at fair market value
and the related level in the fair value hierarchy as defined by ASC 820 used to measure those
assets, liabilities and disclosures:
(in thousands) | Fair value measurements as of September 30, 2010 | |||||||||||||||
Assets (Liabilities) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Real estate assets held for sale, net |
$ | 27,365 | $ | | $ | | $ | 27,365 |
Real estate assets, including land held for sale, were valued using sales activity for similar
assets, current contracts and other inputs management believes are consistent with those that
market participants would use. The fair values of these assets are determined using widely
accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among
other things, unit sales assumptions, leasing assumptions, cost structure, growth rates, discount
rates and terminal capitalization rates, (ii) income capitalization approach, which considers
prevailing market capitalization rates and (iii) comparable sales activity. The valuation technique
and related inputs vary with the specific facts and circumstances of each project.
At September 30, 2010, the estimated fair value of fixed rate debt was approximately $1.4
billion (carrying value of $1.39 billion) and the estimated fair value of the Companys variable
rate debt, including the Companys unsecured credit facility, is consistent with the carrying value
of $314.5 million.
The estimated fair value of the Companys notes receivable at September 30, 2010 and December
31, 2009 was approximately $43.8 million and $22.2 million, respectively, based on market rates and
similar financing arrangements.
Accounting Pronouncements
Pronouncements Recently Adopted
In June 2009, the FASB issued Statement of Accounting Standards (SFAS) No. 167, Amendments
to FASB Interpretation No. FIN 46(R), now known as ASC 810-10-30, Initial Measurement. ASC
810-10-30 amends the manner in which entities evaluate whether consolidation is required for
variable interest entities (VIEs). A company must first perform a qualitative analysis in
determining whether it must consolidate a VIE, and if the qualitative analysis is not
determinative, must perform a quantitative analysis. Further, ASC 810-10-30 requires that companies
continually evaluate VIEs for consolidation, rather than assessing based upon the occurrence of
triggering events. ASC 810-10-30 also requires enhanced disclosures about how a companys
involvement with a VIE affects its financial statements and exposure to risks. ASC 810-10-30 is
effective for fiscal years and interim periods beginning after November 15, 2009. The adoption of
ASC 810-10-30 did not have a material impact on the Companys consolidated condensed financial
statements.
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In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, an update to ASC
820, Fair Value Measurements and Disclosures. ASU 2010-06 provides an update specifically to
Subtopic 820-10 that requires new disclosures including (i) details of significant transfers in and
out of Level 1 and Level 2 measurements and the reasons for the transfers, (ii) the reasons for any
transfers in or out of Level 3 and (iii) and a gross presentation of activity within the Level 3
roll forward, presenting separately information about purchases, sales, issuances, and settlements. ASU
2010-06 was effective for the first interim or annual reporting period beginning after December 15,
2009, except for the gross presentation of the Level 3 roll forward, which is required for interim
and annual reporting periods beginning after December 15, 2010. The adoption of ASU 2010-06 did not
have a material impact on the Companys consolidated condensed financial statements.
Loss Contingencies
The Company is subject to various claims, disputes and legal proceedings, including those
described under Liquidity and Capital Resources Contingencies and Off-Balance Sheet
Arrangements, the outcomes of which are subject to significant uncertainty. The Company records
an accrual for loss contingencies when a loss is probable and the amount of the loss can be
reasonably estimated. The Company reviews these accruals quarterly and makes revisions based on
changes in facts and circumstances. During the three months ended September 30, 2010, the Company
increased its loss contingency accrual by $1.5 million, to $2.6 million in the aggregate.
Note 3 Restructuring Charges
The Company did not incur restructuring charges during the three or nine months ended
September 30, 2010.
As a result of the Companys 2009 initiative to improve efficiencies with respect to
management of its properties and operation of the Companys portfolio, including reducing overhead
and postponing or phasing future development activities, during the first and third quarters of
2009, the Company reduced its workforce by 30 and 24 employees, respectively, through the
elimination of certain positions resulting in the incurrence of an aggregate of $0.8 million and
$0.6 million, respectively, in termination benefits and severance related charges. Of the $1.4
million in restructuring charges recorded in 2009, approximately $0.5 million was associated with
the Companys multifamily segment, including $0.2 million associated with development personnel,
$0.8 million was associated with the Companys commercial segment, including $0.3 million
associated with development personnel, and $0.1 million were non-divisional charges.
The expenses of the Companys reduction in workforce and other termination costs, as described
above, are included in Restructuring charges in the Consolidated Condensed Statements of
Operations for the three and nine months ended September 30, 2009.
Note 4 Impairment and other losses
During the three months ended September 30, 2010, the Company recorded $0.1 million in
non-cash impairment charges resulting from additional costs related to the sale of the remaining
units at one of the Companys for-sale residential projects. In addition, during the nine months
ended September 30, 2010, the Company recorded $0.8 million as a result of casualty losses at three
multifamily apartment communities. The losses at two of these communities were a result of fire
damage and the loss at the other community was a result of carport structural damage caused by
inclement weather. These charges are included in Impairment and other losses in the Consolidated
Condensed Statement of Operations for the nine months ended September 30, 2010.
During the three months ended September 30, 2009, the Company recorded $0.5 million in
non-cash impairment charges. Of these charges, $0.2 million was attributable to Colonial Grand at
Traditions and $0.3 million was related to the bulk sale of the remaining units at Portofino at
Jensen Beach.
In September 2009, the Company determined that it was probable that the Company will have to
fund a $3.5 million partial loan repayment guarantee provided on the original construction loan for
Colonial Grand at Traditions, a 324-unit apartment community located in Gulf Shores, Alabama.
Accordingly, the Company recognized a charge to earnings of $3.5 million in the third quarter of
2009 for this expected payment, which is included in Loss from partially-owned investments in the
Companys Consolidated Statements of Operations. In addition, the Company determined that its 35%
joint venture interest was impaired and that this impairment was other than temporary. The
impairment charge was calculated as the difference between the estimated fair value of the
Companys joint venture interest and the current book value of the Companys joint venture
interest. As a result, the Company recognized a non-cash impairment charge of $0.2 million in
third quarter of 2009 for this other-than-temporary impairment, which is included in Impairment
and other losses in the Consolidated Condensed Statement of Operations.
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As a result of the bulk sale of the remaining units at Portofino at Jensen Beach, during the
third quarter of 2009, the Company recorded an additional non-cash impairment charge of $0.3
million as a result of the sales price versus the net book
value of the asset. The $0.3 million charge is included in (Loss) income from discontinued
operations on the Companys Consolidated Condensed Statement of Operations.
The Company recorded an aggregate of $3.9 million of non-cash impairment charges during the
nine months ended September 30, 2009. Of the $1.8 million reflected in Impairment and other
losses in the Consolidated Condensed Statements of Operations for the nine months ended September
30, 2009, $0.7 million was recorded for Colonial Pinnacle Craft Farms, $0.5 million was recorded
for Grander, $0.3 million was recorded for Regents Park, $0.2 million was recorded for Colonial
Grand at Traditions and $0.1 million is related to three outparcels at Colonial Promenade at
Tannehill. Of the $2.1 million included in (Loss) income from discontinued operations in the
Consolidated Condensed Statements of Operations, $1.2 million was recorded for Murano at Delray
Beach and $0.9 million for Portofino at Jensen Beach.
The Companys determination of fair value is based on inputs management believes are
consistent with those that market participants would use. The Company estimates the fair value of
each property and development project evaluated for impairment based on current market conditions
and assumptions made by management, which may differ materially from actual results if market
conditions continue to deteriorate or improve. The fair value of these assets are determined using
widely accepted valuation techniques, including (i) discounted cash flow analysis, which considers,
among other things, unit sales assumptions, leasing assumptions, cost structure, growth rates,
discount rates and terminal capitalization rates, (ii) income capitalization approach, which
considers prevailing market capitalization rates and (iii) comparable sales activity. The Company
will continue to monitor the specific facts and circumstances at the Companys for-sale properties
and development projects. Existing economic and market uncertainties may impact the number of
projects the Company can sell, the timing of the sales and/or the prices at which the Company can
sell them in future periods, and may result in additional impairment charges in connection with
sales. If the Company is unable to sell projects, the Company may incur additional impairment
charges on projects previously impaired as well as on projects not currently impaired but for which
indicators of impairment may exist, which would decrease the value of the Companys assets as
reflected on the balance sheet and adversely affect net income and equity. There can be no
assurances of the amount or pace of future property sales and closings, particularly given current
economic and market conditions. In particular, the recent oil spill in the Gulf of Mexico has
negatively impacted the current economic conditions in Gulf Shores, Alabama, where the Company owns
several assets. If economic conditions in the Gulf Shores area do not improve, the Companys
current basis in such assets could become impaired.
Note 5 Acquisition and Disposition Activity
During the second quarter of 2010, the Company exited two single-asset multifamily joint
ventures with DRA Advisors LLC, transferring its 20% ownership interest in Colonial Village at
Cary, located in Raleigh, North Carolina, and making a net cash payment of $2.7 million in exchange
for the remaining 80% ownership interest in Colonial Grand at Riverchase Trails, located in
Birmingham, Alabama (see Note 11).
Net income and gain on disposition of real estate for properties sold in which the Company
does not maintain continuing involvement are reflected in the Consolidated Condensed Statements of
Operations as Discontinued Operations for all periods presented. All of the operating properties
sold during 2009 in which the Company did not maintain a continuing interest were classified as
discontinued operations. The following are the properties the Company disposed of in 2009 that are
classified as discontinued operations:
Units/Square | ||||||||
Property | Location | Date Sold | Feet | |||||
Multifamiy |
||||||||
Portofino at Jensen Beach |
Port St. Lucie, FL | September 2009 | 118 | |||||
Murano at Delray Beach |
West Palm Beach, FL | September 2009 | 93 | |||||
Commercial |
||||||||
Colonial Promenade Winter Haven |
Orlando, FL | December 2009 | 286,297 |
Additionally, the Company classifies real estate assets as held for sale only after the
Company has received approval by its internal investment committee, the Company has commenced an
active program to sell the assets, the Company does not intend to retain a continuing interest in
the property, and in the opinion of the Companys management, it is probable the assets will sell
within the next 12 months. As of September 30, 2010, the Company had classified four for-sale
developments as held for sale. These real estate assets are reflected in the accompanying
Consolidated Condensed Balance Sheet at $29.8 million as of September 30, 2010, which represents
the lower of depreciated cost or fair value less costs to sell. There was no mortgage debt
associated with these properties as of September 30, 2010.
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As of September 30, 2010, there were no operating properties classified as held for sale.
During the three months ended March 31, 2010, the Company transferred one commercial development
and two for-sale developments from assets held for sale to assets held for investment as the
Company decided it will hold this land for a longer term. In addition, the Company reallocated the
commercial portion of two mixed-use development sites from assets held for sale to assets held
for investment.
The operating results of properties (excluding condominium conversion properties not
previously operated) designated as held for sale or sold, are included in discontinued operations
in the Consolidated Condensed Statements of Operations for all periods presented. The reserves, if
any, to write down the carrying value of the real estate assets designated and classified as held
for sale are also included in discontinued operations (excluding condominium conversion properties
not previously operated).
Below is a summary of the operations of the properties classified as discontinued operations
during the three and nine months ended September 30, 2010 and 2009:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Property revenues: |
||||||||||||||||
Minimum rent |
$ | | $ | 834 | $ | | $ | 3,064 | ||||||||
Tenant recoveries |
| 41 | | 158 | ||||||||||||
Other revenue |
| 116 | | 340 | ||||||||||||
Total revenues |
| 991 | | 3,562 | ||||||||||||
Property operating and adminstrative expenses |
11 | 506 | 59 | 1,892 | ||||||||||||
Impairment |
| 251 | | 2,051 | ||||||||||||
Depreciation and amortization |
| | | 131 | ||||||||||||
Total expenses |
11 | 757 | 59 | 4,074 | ||||||||||||
(Loss) income from discontinued operations before net gain
on disposition of dicontinued operations |
(11 | ) | 234 | (59 | ) | (512 | ) | |||||||||
Net (loss) gain on dispostion of discontinued operations, net of income taxes |
(347 | ) | (5 | ) | (396 | ) | 7 | |||||||||
Noncontrolling interest in CRLP from discontinued operations |
32 | (53 | ) | 45 | (14 | ) | ||||||||||
Noncontrolling interest to limited partners |
| 155 | (5 | ) | 597 | |||||||||||
(Loss) income from discontinued operations attributable to parent company |
$ | (326 | ) | $ | 331 | $ | (415 | ) | $ | 78 | ||||||
Note 6 For-Sale Activities
The total number of units sold for condominium conversion properties, for-sale residential
properties and lots for the three and nine months ended September 30, 2010 and 2009 are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
For-Sale Residential |
15 | 53 | 24 | 112 | ||||||||||||
Condominium Conversion |
| 211 | | 238 | ||||||||||||
15 | 264 | 24 | 350 | |||||||||||||
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The following is a summary of revenues and costs of condominium conversion and for-sale
residential activities (including activities in continuing and discontinued operations) for the
three and nine months ended September 30, 2010 and 2009:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Condominium revenues |
$ | | $ | 15,730 | $ | | $ | 16,851 | ||||||||
Condominium costs |
(350 | ) | (15,714 | ) | (350 | ) | (16,592 | ) | ||||||||
(Losses) gains on condominium sales, before income taxes |
(350 | ) | 16 | (350 | ) | 259 | ||||||||||
For-sale residential revenues |
4,782 | 8,855 | 7,416 | 33,553 | ||||||||||||
For-sale residential costs |
(4,906 | ) | (8,260 | ) | (7,594 | ) | (33,083 | ) | ||||||||
(Losses) gains on for-sale residential sales, before income taxes |
(124 | ) | 595 | (178 | ) | 470 | ||||||||||
Provisions for income taxes |
| | | (70 | ) | |||||||||||
(Losses) gains on condominium conversions and for-sale
residential sales, net of income taxes |
$ | (474 | ) | $ | 611 | $ | (528 | ) | $ | 659 | ||||||
The net gains on condominium conversion sales are classified in discontinued operations
if the related condominium property was previously operated by the Company as an apartment
community. During the three and nine months ended September 30, 2010, the Company recorded $0.4
million for HOA settlement costs related to infrastructure repairs with respect to a previously
sold condominium conversion property. For the three and nine months ended September 30, 2009, net
gains on condominium conversion sales, net of income taxes, of approximately $16,000 and $189,000
are included in discontinued operations, respectively. As of December 31, 2009, the Company had
sold all remaining condominium conversion properties.
For cash flow statement purposes, the Company classifies capital expenditures for newly
developed for-sale residential communities and for other condominium conversion communities in
investing activities. Likewise, the proceeds from the sales of condominium units and other
residential sales are also included in investing activities.
Note 7 Undeveloped Land and Construction in Progress
During the second quarter of 2010, the Company placed into service Colonial Promenade Craft
Farms, located in Gulf Shores, Alabama, adding 68,000 square feet to the Companys commercial
portfolio.
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The Company currently has one active development project, as outlined in the table below. In
2009, the Company decided to postpone development activities associated with the projects listed
under Future Developments in the table below until it determined that the current economic
environment had sufficiently improved.
Costs | ||||||||||
Total Units/ | Capitalized to | |||||||||
Square Feet (1) | Date | |||||||||
Location | (unaudited) | (in thousands) | ||||||||
Active Developments: |
||||||||||
Commercial Projects: |
||||||||||
Colonial Promenade Nord du Lac (Phase I) (2) |
Covington, LA | 174 | $ | 22,703 | ||||||
174 | 22,703 | |||||||||
Future Developments: |
||||||||||
Multifamily Projects: |
||||||||||
Colonial Grand at Sweetwater |
Phoenix, AZ | 195 | 7,280 | |||||||
Colonial Grand at Thunderbird |
Phoenix, AZ | 244 | 8,379 | |||||||
Colonial Grand at Randal Park (3) |
Orlando, FL | 750 | 19,171 | |||||||
Colonial Grand at Hampton Preserve |
Tampa, FL | 486 | 15,412 | |||||||
Colonial Grand at South End |
Charlotte, NC | 353 | 12,988 | |||||||
Colonial Grand at Azure |
Las Vegas, NV | 188 | 7,804 | |||||||
Colonial Grand at Cityway |
Austin, TX | 320 | 5,140 | |||||||
2,536 | 76,174 | |||||||||
Commercial Projects: |
||||||||||
Colonial Promenade Huntsville |
Huntsville, AL | 111 | 9,751 | |||||||
Colonial Promenade Nord du Lac (2) |
Covington, LA | | 30,508 | |||||||
111 | 40,259 | |||||||||
Other Projects and Undeveloped Land |
||||||||||
Multifamily |
3,292 | |||||||||
Commercial |
55,835 | |||||||||
Commercial Outparcels/Pads |
15,223 | |||||||||
For-Sale Residential Land (4) |
69,996 | |||||||||
144,346 | ||||||||||
Consolidated Construction in Progress |
$ | 283,482 | ||||||||
(1) | Square footage is presented in thousands. Square footage for the retail assets excludes anchor owned square footage. | |
(2) | The Company intends to develop this project in phases over time. Costs capitalized to date for this development, including costs for Phase I, are presented net of an aggregate of $25.8 million of non-cash impairment charges recorded during 2009 and 2008. | |
(3) | This project is part of a mixed-use development. The Company is still evaluating plans for a multifamily apartment community. Therefore, costs attributable to this phase of development are subject to change. | |
(4) | These costs are presented net of a $24.6 million non-cash impairment charge recorded on two of the projects in 2009, 2008 and 2007. |
Interest capitalized on construction in progress during the three months ended September
30, 2010 and 2009 was $0.3 million and $0.5 million, respectively. Interest capitalized on
construction in progress during the nine months ended September 30, 2010 and 2009 was $1.0 million
and $3.5 million, respectively.
15
Table of Contents
Note 8 Net (Loss) Income Per Share
For the three and nine months ended September 30, 2010 and 2009, a reconciliation of the
numerator and denominator used in the basic and diluted income from continuing operations per
common share is as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Numerator: |
||||||||||||||||
Net (loss) income attributable to parent company |
$ | (11,646 | ) | $ | (1,496 | ) | $ | (31,715 | ) | $ | 14,714 | |||||
Less: |
||||||||||||||||
Preferred stock dividends |
(1,582 | ) | (1,998 | ) | (5,649 | ) | (6,108 | ) | ||||||||
Loss (income) from discontinued operations |
326 | (331 | ) | 415 | (78 | ) | ||||||||||
Income allocated to participating securities |
(89 | ) | (41 | ) | (277 | ) | (152 | ) | ||||||||
Preferred share issuance costs write-off, net of discount |
(3,550 | ) | 30 | (3,550 | ) | 25 | ||||||||||
(Loss) income from continuing operations available to
common shareholders |
$ | (16,541 | ) | $ | (3,836 | ) | $ | (40,776 | ) | $ | 8,401 | |||||
Denominator: |
||||||||||||||||
Denominator for basic net income per share weighted
average common shares |
74,411 | 50,787 | 70,157 | 49,222 | ||||||||||||
Effect of dilutive securities |
| | | | ||||||||||||
Denominator for diluted net income per share adjusted
weighted average common shares |
74,411 | 50,787 | 70,157 | 49,222 | ||||||||||||
For the three months ended September 30, 2010 and 2009, the Company reported a net loss
from continuing operations, and as such, 82,584 and 1,669 dilutive share equivalents, respectively,
have been excluded from the computation of diluted net income per share because including such
shares would be anti-dilutive. For the three months ended September 30, 2010 and 2009, 1,160,917
and 1,354,335 outstanding share options, respectively, were excluded from the computation of
diluted net income per share because the grant date prices were greater than the average market
price of the common shares and, therefore, the effect would be anti-dilutive. For the nine months
ended September 30, 2010, the Company reported a net loss from continuing operations, and as such,
20,969 dilutive share equivalents have been excluded from the computation of diluted net income per
share because including such shares would be anti-dilutive. For the nine months ended September
30, 2010, 1,205,917 outstanding share options were excluded from the computation of diluted net
income per share because the grant date prices were greater than the average market price of the
common shares and, therefore, the effect would be anti-dilutive. For the nine months ended
September 30, 2009, 1,331,467 outstanding share options were excluded from the computation of
diluted net income per share because the grant date prices were greater than the average market
price of the common shares, and therefore, the effect of including such shares would be
anti-dilutive.
Note 9 Equity
The following table presents the changes in the issued common shares of beneficial interest
since December 31, 2009 (but excluding 7,317,125 and 8,162,845 units of CRLP at September 30, 2010
and December 31, 2009, respectively, which are redeemable for either cash equal to the fair market
value of a common share at the time of redemption or, at the option of the Company, one common
share):
Issued at December 31, 2009 (1) |
71,989,227 | |||
Common shares issued through dividend reinvestments |
54,124 | |||
Restricted shares issued (cancelled), net |
389,279 | |||
Shares offered under at-the-market equity offering programs |
9,931,374 | |||
Redemption of CRLP units for common shares |
845,720 | |||
Issuances under other employee and nonemployee share plans |
68,179 | |||
Issued at September 30, 2010 (1) |
83,277,903 | |||
(1) | Includes 5,623,150 treasury shares. |
16
Table of Contents
At-the-Market Equity Offering Programs
On February 22, 2010, the Trusts Board of Trustees approved the issuance of up to $50.0
million of the Trusts common shares under an at-the-market equity offering program, which the
Trust launched on March 4, 2010. During the six months ended June 30, 2010, the Company issued
3,602,348 common shares at a weighted average issue price of $13.88 per share generating net
proceeds of approximately $49.0 million, exhausting its full $50.0 million authorization under this
at-the-market equity offering program. On July 21, 2010, the Trusts Board of Trustees approved
the issuance of up to $100.0 million of the Trusts common shares under a new at-the-market
equity offering program, which the Trust launched on July 30, 2010. On August 2, 2010, the Trust
completed the new at-the-market equity offering program, which resulted in the sale of 6,329,026
common shares of the Trust generating net proceeds of approximately $99.0 million, at an average
price of $15.80 per share. This exhausted the approved issuance of up to $100.0 million of common
shares under this at-the-market equity offering program.
As of September 30, 2010, the Trust had issued an aggregate of 9,931,374 common shares at a
weighted average issue price of $15.10 per share generating net proceeds of approximately $148.0
million. The Company used these proceeds to redeem all of the Trusts outstanding Series D
preferred depositary shares (the Series D Preferred Depositary Shares), each representing
1/10th of an 8 1/8 percent Series D Cumulative Redeemable Preferred Share of the Trust
(the Series D Preferred Shares), to repay a portion of the outstanding balance under its
unsecured credit facility and to fund general corporate purposes.
Repurchases of Series D Preferred Depositary Shares
In October 2008, the Trusts Board of Trustees authorized a repurchase program which allowed
the Trust to repurchase up to an additional $25.0 million of its outstanding Series D Preferred
Depositary Shares over a 12 month period. The Board of Trustees of the Trust, as general partner of
CRLP, also authorized the repurchase of a corresponding amount of Series D Preferred Units of CRLP.
During 2009, the Trust repurchased 6,515 Series D Preferred Depositary Shares (and CRLP repurchased
a corresponding amount of Series D Preferred Units) in open market transactions for a purchase
price of $126,761, or $19.46 per Series D Preferred Depositary Share. The Company received a 22.2%
discount on the repurchase to the liquidation preference price of $25.00 per depositary share and
wrote off a nominal amount of issuance costs. In the aggregate, the Trust repurchased $24.1 million
of its outstanding Series D Preferred Depositary Shares (and CRLP has repurchased a corresponding
amount of Series D Preferred Units) under this program, which expired in late October 2009.
In August 2010, the Board of Trustees of the Trust authorized the redemption of all of the
outstanding 4,004,735 Series D Preferred Depositary Shares. The Series D Preferred Depositary
Shares were redeemed by the Trust (and CRLP repurchased all of the Series D Preferred Units) on
September 10, 2010 for a purchase price of $25.00 per Series D Preferred Depositary Share, plus
accrued and unpaid dividends for the period from August 1, 2010 through and including the
redemption date, for an aggregate redemption price per Series D Preferred Depositary Share of
$25.2257, or $100.1 million in the aggregate. After the redemption date, dividends on the Series D
Preferred Depositary Shares ceased to be accrued, the Series D Preferred Depositary Shares were no
longer deemed outstanding, and all rights of the holders of the Series D Preferred Depositary
Shares ceased. The redemption price was paid by the Company from the proceeds from the Trusts
$100.0 million at-the-market program in August 2010. As a result of the redemption of the Series
D Preferred Depositary Shares, the Company recorded a charge of approximately $3.6 million during
the three months ended September 30, 2010, related to the original preferred share issuance costs.
Note 10 Segment Information
The Company currently manages its business based on the performance of two operating segments:
multifamily and commercial. The multifamily and commercial segments have separate management teams
that are responsible for acquiring, developing, managing and leasing properties within each
respective segment.
Multifamily management is responsible for all aspects of the Companys multifamily property
operations, including the management and leasing services for 110 multifamily apartment
communities, as well as third-party management services for multifamily apartment communities in
which the Company does not have an ownership interest. Additionally, the multifamily management
team is responsible for all aspects of for-sale developments, including disposition activities. The
multifamily segment includes the operations and assets of the for-sale developments due to the
insignificance of these operations in the periods presented. Commercial management is responsible
for all aspects of the Companys commercial property operations, including the management and
leasing services for 45 commercial properties, as well as third-party management services for
commercial properties in which the Company does not have an ownership interest and for brokerage
services in other commercial property transactions.
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Table of Contents
The pro-rata portion of the revenues and net operating income (NOI) of the partially-owned
unconsolidated entities in which the Company has an interest are included in the applicable segment
information. Additionally, the revenues and NOI of properties sold that are classified as
discontinued operations are also included in the applicable segment information. In reconciling the
segment information presented below to total revenues, income from continuing operations, and total
assets, investments in partially-owned unconsolidated entities are eliminated as equity investments
and their related activity are reflected in the consolidated financial statements as investments
accounted for under the equity method, and discontinued operations are reported separately.
Management evaluates the performance of its multifamily and commercial segments and allocates
resources to them based on segment NOI. Segment NOI is defined as total property revenues less
total property operating expenses (such items as repairs and maintenance, payroll, utilities,
property taxes, insurance and advertising ), and includes revenues/expenses from unconsolidated
partnerships and joint ventures. Presented below is segment information, for the multifamily and
commercial segments, including the reconciliation of total segment revenues to total revenues and
total segment NOI to income from continuing operations before noncontrolling interest for the three
and nine months ended September 30, 2010 and 2009, and total segment assets to total assets as of
September 30, 2010 and December 31, 2009.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues: |
||||||||||||||||
Segment Revenues: |
||||||||||||||||
Multifamily |
$ | 77,579 | $ | 76,566 | $ | 230,490 | $ | 231,330 | ||||||||
Commercial |
19,477 | 22,470 | 60,789 | 68,980 | ||||||||||||
Total Segment Revenues |
97,056 | 99,036 | 291,279 | 300,310 | ||||||||||||
Partially-owned unconsolidated entities Multifamily |
(662 | ) | (1,485 | ) | (2,573 | ) | (5,527 | ) | ||||||||
Partially-owned unconsolidated entities Commercial |
(7,866 | ) | (15,814 | ) | (24,050 | ) | (48,418 | ) | ||||||||
Other non-property related revenues |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Discontinued operations property revenues |
(3 | ) | (991 | ) | | (3,562 | ) | |||||||||
Total Consolidated Revenues |
91,139 | 84,733 | 273,568 | 254,205 | ||||||||||||
NOI: |
||||||||||||||||
Segment NOI: |
||||||||||||||||
Multifamily |
43,087 | 43,578 | 129,260 | 133,112 | ||||||||||||
Commercial |
12,832 | 14,233 | 41,155 | 44,049 | ||||||||||||
Total Segment NOI |
55,919 | 57,811 | 170,415 | 177,161 | ||||||||||||
Partially-owned unconsolidated entities Multifamily |
(283 | ) | (719 | ) | (1,161 | ) | (2,792 | ) | ||||||||
Partially-owned unconsolidated entities Commercial |
(5,203 | ) | (9,862 | ) | (16,155 | ) | (30,546 | ) | ||||||||
Other non-property related revenues |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Discontinued operations property NOI |
11 | (234 | ) | 59 | 381 | |||||||||||
Impairment charge discontinued operations (1) |
| (251 | ) | | (2,051 | ) | ||||||||||
Property management expenses |
(2,323 | ) | (1,728 | ) | (6,008 | ) | (5,329 | ) | ||||||||
General and administrative expenses |
(3,757 | ) | (4,073 | ) | (14,022 | ) | (12,982 | ) | ||||||||
Management fee and other expenses |
(2,001 | ) | (3,340 | ) | (7,259 | ) | (11,131 | ) | ||||||||
Restructuring charges |
| (588 | ) | | (1,400 | ) | ||||||||||
Investment and development (2) |
(9 | ) | (100 | ) | (42 | ) | (1,585 | ) | ||||||||
Depreciation |
(30,554 | ) | (28,070 | ) | (91,075 | ) | (84,130 | ) | ||||||||
Amortization |
(2,299 | ) | (864 | ) | (6,693 | ) | (2,936 | ) | ||||||||
Impairment and other losses (1) |
(131 | ) | (221 | ) | (914 | ) | (1,839 | ) | ||||||||
Income from operations |
11,984 | 11,748 | 36,057 | 32,223 | ||||||||||||
Total other income (expense), net (3) |
(23,105 | ) | (12,378 | ) | (66,459 | ) | (9,658 | ) | ||||||||
(Loss) income from continuing operations |
$ | (11,121 | ) | $ | (630 | ) | $ | (30,402 | ) | $ | 22,565 | |||||
September 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Assets |
||||||||
Segment Assets: |
||||||||
Multifamily |
$ | 2,465,957 | $ | 2,502,772 | ||||
Commercial |
558,030 | 538,046 | ||||||
Total Segment Assets |
3,023,987 | 3,040,818 | ||||||
Unallocated corporate assets (4) |
155,690 | 131,814 | ||||||
$ | 3,179,677 | $ | 3,172,632 | |||||
Footnotes on following page
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Table of Contents
(1) | See Note 4 Impairment and other losses for description of charges. | |
(2) | Reflects costs incurred related to potential mergers, acquisitions and abandoned pursuits. These costs are volatile and, therefore, may vary between periods. | |
(3) | For-sale residential activities, including net gain on sales and income tax expense (benefit), are included in the line item Total other income (expense). See Note 6 related to for-sale activities. | |
(4) | Includes the Companys investment in partially-owned entities of $38,052 as of September 30, 2010 and net investment of $17,422 as of December 31, 2009. As of September 30, 2010, investments in partially-owned entities of $23.1 million, for which the Companys basis is a negative balance (i.e., credit balance), have been classified as a liability. |
Note 11 Investment in Partially-Owned Entities
During the second quarter of 2010, the Company exited two single-asset multifamily joint
ventures with DRA Advisors LLC (DRA) totaling 664 units, in each of which the Company had a 20%
ownership interest. Pursuant to the transaction, the Company transferred its 20% ownership interest
in Colonial Village at Cary to DRA and made a net cash payment of $2.7 million in exchange for
DRAs 80% ownership in the 345-unit Colonial Grand at Riverchase Trails located in Birmingham,
Alabama. Additionally, the Company paid off the $19.3 million loan securing Colonial Grand at
Riverchase Trails, which was set to mature in October 2010. The Company now owns 100% of Colonial
Grand at Riverchase Trails and DRA owns 100% of Colonial Village at Cary, with respect to which DRA
assumed the existing secured mortgage. As of September 30, 2010, the Company no longer manages
Colonial Village at Cary. The transaction was funded by borrowings from the Companys unsecured
credit facility and proceeds from issuances of common shares through the Companys at-the-market
equity offering programs.
Investments in Consolidated Partially-Owned Entities
The Company has one partially-owned investment, the CMS/Colonial Canyon Creek joint venture,
which is consolidated in its financial statements. As a result of a preferred equity contribution
of $11.5 million made by the Company to the joint venture in September 2009 in connection with a
construction loan refinancing, the Company began consolidating the CMS/Colonial Canyon Creek joint
venture in its financial statements beginning with the third quarter of 2009. This joint venture is
a variable interest entity and the Companys $11.5 million preferred equity contribution
constituted a reconsideration event. With the preferred equity contribution, the Company became the
primary beneficiary, as it will absorb the majority of the variability in the joint ventures
operating results.
In assessing whether or not the Company was the primary beneficiary under FASB ASU 2009-17,
the Company considered the significant economic activities of this variable interest entity to
consist of:
(1) | the sale of the single apartment community owned by the partnership, |
(2) | the financing arrangements with banks or other creditors, | ||
(3) | the capital improvements or significant repairs, and | ||
(4) | the pricing of apartment units for rent. |
The Company concluded that it has the power to direct these activities and that the Company has the
obligation to absorb losses and right to receive benefits from the joint venture that could be
significant to the joint venture. Therefore, the Company believes the consolidation of the
CMS/Canyon Creek joint venture is appropriate.
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Table of Contents
Investments in Unconsolidated Partially-Owned Entities
The Company accounts for the following investments in unconsolidated partially-owned entities
using the equity method. The following table summarizes the investments in partially-owned entities
as of September 30, 2010 and December 31, 2009:
(in thousands) | ||||||||||||
Percent | September 30, | December 31, | ||||||||||
Owned | 2010 | 2009 | ||||||||||
Mulitfamily: |
||||||||||||
Belterra, Ft. Worth, TX |
10.00 | % | $ | 459 | $ | 525 | ||||||
Regents Park (Phase II), Atlanta, GA |
40.00 | % (1) | 3,369 | 3,387 | ||||||||
CG at Huntcliff, Atlanta, GA |
20.00 | % | 1,511 | 1,646 | ||||||||
CG at McKinney, Dallas, TX |
25.00 | % (1) | 1,721 | 1,721 | ||||||||
CG at Research Park, Raleigh, NC |
20.00 | % | 819 | 914 | ||||||||
DRA CV at Cary, Raleigh, NC |
20.00 | % | | 1,440 | ||||||||
DRA The Groves at Riverchase, Birmingham, AL |
20.00 | % | | 1,133 | ||||||||
Total Multifamily |
$ | 7,879 | $ | 10,766 | ||||||||
Commercial: |
||||||||||||
600 Building Partnership, Birmingham, AL |
33.33 | % | 189 | 154 | ||||||||
Colonial Promenade Alabaster II/Tutwiler II, Birmingham, AL |
5.00 | % | 41 | (190 | ) | |||||||
Colonial Promenade Madison, Huntsville, AL |
25.00 | % | 2,101 | 2,119 | ||||||||
Colonial Promenade Smyrna, Smyrna, TN |
50.00 | % | 2,183 | 2,174 | ||||||||
DRA/CLP JV |
15.00 | % (2) | (17,877 | ) | (15,321 | ) | ||||||
Highway 150, LLC, Birmingham, AL |
10.00 | % | 55 | 59 | ||||||||
Bluerock, Huntsville, AL |
10.00 | % (3) | (5,195 | ) | (4,617 | ) | ||||||
Parkside Drive LLC I, Knoxville, TN |
50.00 | % | 1,809 | 3,073 | ||||||||
Parkside Drive LLC II, Knoxville, TN |
50.00 | % | 7,085 | 7,210 | ||||||||
Parkway Place Limited Partnership, Huntsville, AL |
50.00 | % | 14,943 | 10,168 | ||||||||
Total Commercial |
$ | 5,334 | $ | 4,829 | ||||||||
Other |
||||||||||||
Colonial/Polar-BEK Management Company, Birmingham, AL |
50.00 | % | 17 | 35 | ||||||||
Heathrow, Orlando, FL |
50.00 | % (1) | 1,749 | 1,792 | ||||||||
$ | 1,766 | $ | 1,827 | |||||||||
$ | 14,979 | $ | 17,422 | |||||||||
(1) | These joint ventures consist of undeveloped land. | |
(2) | As of September 30, 2010, this joint venture included 16 office properties and two retail properties located in Birmingham, Alabama; Orlando and Tampa, Florida; Atlanta, Georgia; Charlotte, North Carolina; and Austin, Texas. Equity investment includes the value of the Companys investment of approximately $13.8 million, offset by the excess basis difference on the June 2007 joint venture transaction of approximately ($31.7) million, which is being amortized over the life of the properties. This joint venture is presented under Liabilities on the Companys Consolidated Condensed Balance Sheet as of September 30, 2010. | |
(3) | Equity investment includes the Companys investment of approximately $1.9 million, offset by the excess basis difference on the transaction of approximately ($7.1) million, which is being amortized over the life of the properties. This joint venture is presented under Liabilities on the Companys Consolidated Condensed Balance Sheet as of September 30, 2010. |
20
Table of Contents
Combined financial information for the Companys investments in unconsolidated partially-owned
entities since the date of the Companys acquisitions is as follows:
As of | As of | |||||||
September 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Balance Sheet |
||||||||
Assets |
||||||||
Land, building, & equipment, net |
$ | 1,320,546 | $ | 1,416,526 | ||||
Construction in progress |
27,121 | 19,695 | ||||||
Other assets |
113,469 | 118,095 | ||||||
Total assets |
$ | 1,461,136 | $ | 1,554,316 | ||||
Liabilities and Partners Equity |
||||||||
Notes payable (1) |
$ | 1,158,333 | $ | 1,211,927 | ||||
Other liabilities |
110,970 | 108,277 | ||||||
Partners equity |
191,833 | 234,112 | ||||||
Total liabilities and partners
capital |
$ | 1,461,136 | $ | 1,554,316 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Statement of Operations |
||||||||||||||||
Revenues |
$ | 44,472 | $ | 99,958 | $ | 136,996 | $ | 311,953 | ||||||||
Operating expenses |
(16,623 | ) | (39,962 | ) | (49,864 | ) | (121,915 | ) | ||||||||
Interest expense |
(18,476 | ) | (35,218 | ) | (54,453 | ) | (111,117 | ) | ||||||||
Depreciation,
amortization and other |
(18,818 | ) | (41,926 | ) | (57,020 | ) | (123,241 | ) | ||||||||
Net loss (2) |
$ | (9,445 | ) | $ | (17,148 | ) | $ | (24,341 | ) | $ | (44,320 | ) | ||||
(1) | The Companys pro-rata share of indebtedness, as calculated based on ownership percentage, at September 30, 2010 and December 31, 2009 was $224.9 million and $239.1 million, respectively. | |
(2) | In addition to the Companys pro-rata share of income (loss) from partially-owned unconsolidated entities, Loss from partially-owned investments of ($0.7) million and ($3.3) million for the three months ended September 30, 2010 and 2009, respectively, and ($23,000) and ($4.6) million for the nine months ended September 30, 2010 and 2009, respectively, includes gains on the Companys dispositions of joint-venture interests and amortization of basis differences which are not reflected in the table above. |
Investments in Variable Interest Entities
The Company evaluates all transactions and relationships with variable interest entities
(VIEs) to determine whether the Company is the primary beneficiary.
Based on the Companys evaluation, as of September 30, 2010, the Company did not have a
controlling interest in, nor is the Company the primary beneficiary of any VIEs for which there is
a significant variable interest except for, as discussed above in Investments in Consolidated
Partially-Owned Entities, CMS/Colonial Canyon Creek, which the Company began consolidating in
September 2009.
Unconsolidated Variable Interest Entities
As of September 30, 2010, the Company had an interest in one VIE with significant variable
interests for which the Company is not the primary beneficiary.
With respect to the Colonial Grand at Traditions joint venture, the Company and its joint
venture partner each committed to a partial loan repayment guarantee of $3.5 million of the
principal amount of a $34.1 million construction loan obtained by the joint venture, for a total
guarantee of $7.0 million of the principal amount. The Company and its joint venture partner each
committed to provide 50% of the guarantee, which is different from the relative voting and economic
interests of the parties in the joint venture. As a result, this investment qualifies as a VIE, but
the Company has determined that it would not absorb a majority of the expected losses for this
joint venture and, therefore, does not consolidate the joint venture. In
September 2009, the Company determined that it was probable that it would have to fund its partial
loan repayment guarantee provided on the original construction loan and recognized a $3.5 million
charge to earnings. In addition, the Company determined that is 35% noncontrolling joint venture
interest was impaired and that this impairment was other than temporary. As a result, the Company
wrote-off its entire investment in the joint venture by recording a non-cash impairment charge of
$0.2 million during the quarter ended September 30, 2009. The construction loan matured on April
15, 2010, but has not been repaid by the joint venture (see Note 12 Unconsolidated Joint Venture
Financing Activity).
21
Table of Contents
Note 12 Financing Activities
In the second quarter of 2010, the Company closed on $73.2 million of secured financing
originated by Berkadia Commercial Mortgage LLC for repurchase by Fannie Mae. The financing has a
10-year term, carries a fixed interest rate of 5.02% and is secured by three multifamily
properties. The proceeds from this financing were used to repay a portion of outstanding balance on
the Companys unsecured credit facility.
During 2009, the Company obtained the following secured financing from Fannie Mae:
| In the first quarter of 2009, the Company closed on a $350.0 million collateralized credit facility (collateralized with 19 of CRLPs multifamily apartment communities totaling 6,565 units). Of the $350.0 million, $259.0 million bears interest at a fixed interest rate equal to 6.07% and $91.0 million bears interest at a fixed interest rate of 5.96%. The weighted average interest rate for this credit facility is 6.04%, and it matures on March 1, 2019; and |
| In the second quarter of 2009, the Company closed on a $156.4 million collateralized credit facility (collateralized by eight of CRLPs multifamily apartment communities totaling 2,816 units). Of the $156.4 million, $145.2 million bears interest at a fixed interest rate equal to 5.27% and $11.2 million bears interest at a fixed interest rate of 5.57%. The weighted average interest rate for this credit facility is 5.31%, and it matures on June 1, 2019. |
Under both facilities, accrued interest is required to be paid monthly with no scheduled principal
payments required prior to the maturity date. The proceeds from these financings were used to repay
a portion of the outstanding borrowings under the Companys unsecured credit facility.
As of September 30, 2010, CRLP, with the Company as guarantor, had a $675.0 million unsecured
credit facility (as amended, the Credit Facility) with Wells Fargo Bank, National Association
(Wells Fargo), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Citicorp
North America, Inc. and Regions Bank, as Co-Documentation Agents, and U.S. Bank National
Association and PNC Bank, National Association, as Co-Senior Managing Agents and other lenders
named therein. The Credit Facility has a maturity date of June 21, 2012. In addition to the Credit
Facility, the Company has a $35.0 million cash management line provided by Wells Fargo that will
expire on June 21, 2010.
Base rate loans and revolving loans are available under the Credit Facility. The Credit
Facility also includes a competitive bid feature that allows the Company to convert up to $337.5
million under the Credit Facility to a fixed rate and for a fixed term not to exceed 90 days.
Generally, base rate loans bear interest at Wells Fargos designated base rate, plus a base rate
margin ranging up to 0.25% based on the Companys unsecured debt ratings from time to time.
Revolving loans bear interest at LIBOR plus a margin ranging from 0.325% to 1.05% based on the
Companys unsecured debt ratings. Competitive bid loans bear interest at LIBOR plus a margin, as
specified by the participating lenders. Based on CRLPs current unsecured debt rating, the
revolving loans currently bear interest at a rate of LIBOR plus 105 basis points.
The Credit Facility and the cash management line, which primarily are used by the Company to
finance property acquisitions and developments and more recently, to also fund repurchases of CRLP
senior notes and Series D preferred depositary shares, had an outstanding balance at September 30,
2010 of $301.4 million, including $11.4 million outstanding on the cash management line. The
weighted average interest rate of the Credit Facility (including the cash management line) was
1.31% at September 30, 2010 and 2009.
The Credit Facility contains various restrictions, representations, covenants and events of
default that could preclude future borrowings (including future issuances of letters of credit) or
trigger early repayment obligations, including, but not limited to the following: nonpayment;
violation or breach of certain covenants; failure to perform certain covenants beyond a cure
period; failure to satisfy certain financial ratios; a material adverse change in the consolidated
financial condition, results of operations, business or prospects of the Company; and generally not
paying the Companys debts as they become due. At September 30, 2010, the Company was in
compliance with these covenants. However, given the downturn in the economy and continued
uncertainty in the stock and credit markets, there can be no assurance that the Company will be
able to maintain compliance with these ratios and other debt covenants in the future.
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Many of the recent disruptions in the financial markets have been brought about in large part
by failures in the U.S. banking system. If Wells Fargo or any of the other financial institutions
that have extended credit commitments to the Company under the Credit Facility or otherwise are
adversely affected by the conditions of the financial markets, these financial institutions may
become unable to fund borrowings under credit commitments to the Company under the Credit Facility,
the cash management line or otherwise. If these lenders become unable to fund the Companys
borrowings pursuant to the financial institutions commitments, the Company may need to obtain
replacement financings, and such financing, if available, may not be on commercially attractive
terms.
Unsecured Senior Notes Repurchases
In January 2010, the Trusts Board of Trustees authorized a new unsecured notes repurchase
program, which allows the Company to repurchase up to $100.0 million of outstanding unsecured
senior notes of CRLP. This new repurchase program runs through December 31, 2010. Under this
program, senior notes may be repurchased from time to time in open market transactions or privately
negotiated transactions, subject to applicable legal requirements, market conditions and other
factors. The repurchase program does not obligate the repurchase of any specific amounts of senior
notes, and repurchases pursuant to the program may be suspended or resumed at any time from time to
time without further notice or announcement. The Company will continue to monitor the debt markets
and repurchase certain senior notes that meet the Companys required criteria, as funds are
available. The Company anticipates funding potential repurchases from borrowings under its
existing Credit Facility, proceeds from property sales and/or other available funds.
Repurchases of the outstanding unsecured senior notes of CRLP during 2010 are as follows:
Yield-to- | Net | |||||||||||||||
(in millions) | Amount | Discount | Maturity | Gain (1) | ||||||||||||
1st Quarter |
$ | 8.7 | 1.0 | % | 6.5 | % | $ | | ||||||||
2nd Quarter |
29.0 | 4.3 | % | 6.8 | % | 0.8 | ||||||||||
3rd Quarter |
| | | | ||||||||||||
YTD 10 |
$ | 37.7 | 3.5 | % | 6.7 | % | $ | 0.8 |
(1) | Gains are presented net of the loss on hedging activities of $0.3 million recorded during the nine months ended September 30, 2010 as the result of a reclassification of amounts in Accumulated Other Comprehensive Loss in connection with the Companys conclusion that it is probable that the Company will not make interest payments associated with previously hedged debt as a result of the repurchases under the senior note repurchase program. |
During 2009, under the Companys prior senior note repurchase program, the Company repurchased
an aggregate of $181.0 million of outstanding unsecured senior notes of CRLP in separate
transactions. In addition to the shares repurchased pursuant to the senior note repurchase, during
2009, the Company completed two separate cash tender offers for outstanding unsecured notes of
CRLP. In April 2009, the Company completed a cash tender offer for $250.0 million in aggregate
principal amount of outstanding notes maturing in 2010 and 2011, and in September 2009, the Company
completed an additional cash tender offer for $148.2 million in aggregate principal amount of
outstanding notes maturing in 2014, 2015 and 2016. The prior senior note repurchase program and
both tender offers were approved by the Companys Board of Trustees before they were commenced. As
a result, during 2009, the Company repurchased an aggregate of $579.2 million of its outstanding
unsecured senior notes at an aggregate average of 10.6% discount to par value, which represents an
8.1% yield to maturity. As a result of the repurchases, during 2009, the Company recognized net
gains of approximately $54.7 million, which is included in Gains on retirement of debt on the
Companys Consolidated Statements of Operations.
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Repurchases of the outstanding unsecured senior notes of CRLP during 2009 are as follows:
Yield-to- | Net | |||||||||||||||
(in millions) | Amount | Discount | Maturity | Gain (1) | ||||||||||||
1st Quarter |
$ | 96.9 | 27.1 | % | 12.6 | % | $ | 24.2 | ||||||||
2nd Quarter (2) |
315.5 | 5.9 | % | 6.8 | % | 16.2 | ||||||||||
3rd Quarter (3) |
166.8 | 10.0 | % | 7.9 | % | 14.3 | ||||||||||
4th Quarter |
| | | | ||||||||||||
YE 09 |
$ | 579.2 | 10.6 | % | 8.1 | % | $ | 54.7 |
(1) | Gains are presented net of the loss on hedging activities of $1.1 million recorded during the three months ended March 31, 2009 and $0.6 million recorded during the three months ended September 30, 2009 as the result of a reclassification of amounts in Accumulated Other Comprehensive Loss in connection with the conclusion that it is probable that the Company will not make interest payments associated with previously hedged debt as a result of the repurchases under the senior note repurchase program. | |
(2) | Repurchases include $250.0 million repurchased pursuant to the Companys tender offer that closed on May 4, 2009, which was conducted outside of the senior note repurchase program. | |
(3) | Repurchases include $148.2 million repurchased pursuant to the Companys tender offer that closed on August 31, 2009, which was conducted outside of the senior note repurchase program. |
Unconsolidated Joint Venture Financing Activity
During April 2007, the Company and its joint venture partner each guaranteed up to $3.5
million, for an aggregate of up to $7.0 million, of a $34.1 million construction loan obtained by
the Colonial Grand at Traditions joint venture. Construction at this site is complete as the
project was placed into service during 2008. On September 25, 2009, the Company determined it was
probable that it would have to fund the partial loan repayment guarantee provided on the original
construction loan. Accordingly, on September 30, 2009, $3.5 million was recorded for the
guarantee. As of September 30, 2010, the joint venture had drawn $33.4 million on the construction
loan, which matured by its terms on April 15, 2010. The estimated fair market value of the
property in the joint venture is significantly less than the principal amount due on the
construction loan. The lender has made a demand on the joint venture for the outstanding balance
under the loan. The lender has also made a demand on the Company for the $3.5 million guarantee
payment, together with outstanding interest on the loan (which as of September 30, 2010, was
approximately $1.1 million). On October 26, 2010, the lender placed the property in receivership,
which allowed the lender to replace the Company as property manager and take control of the
propertys cash flow. To date, discussions among the Company, its joint venture partner and the
lender to reach a mutually acceptable arrangement with respect to the outstanding loan have been
unsuccessful. However, no assurance can be given that the joint venture or the Company will be
able to reach a mutually satisfactory resolution of this situation.
In November 2006, the Company and its joint venture partner each committed to guarantee up to
$8.7 million, for an aggregate of up to $17.3 million, of a $34.6 million construction loan
obtained by the Colonial Promenade Smyrna joint venture. The Company and its joint venture partner
each committed to provide 50% of the $17.3 million guarantee, as each partner has a 50% ownership
interest in the joint venture. Construction at this site was completed in 2008. The guarantee
provided, among other things, for a reduction in the guarantee amount in the event the property
achieves and maintains a 1.15 debt service charge. Accordingly, the guarantee has been reduced to
$4.3 million. On May 3, 2010, the Company acquired from the lender at par the outstanding
construction loan originally obtained by the Colonial Promenade Smyrna joint venture. This note,
which had an original principal amount of $34.6 million and matured by its terms in December 2009,
had not been repaid and had an outstanding balance of $28.3 million as of the date of purchase.
The note has an interest rate of one-month LIBOR plus 1.20%. The Company has agreed with its joint
venture partner to extend the maturity date of the note consistent with the original extension
terms of the note, which provided for an option to extend maturity for two additional consecutive
one year periods. Accordingly, the maturity date of the note has been extended to December 2010
with an option to extend for one additional year. As a result of this transaction, the Companys
guarantee on this note was terminated, but the joint venture partners guarantee remains in place.
On June 7, 2010, one of the Companys joint ventures, Parkway Place Limited Partnership,
completed the refinancing of a $51.0 outstanding mortgage loan associated with the joint ventures
Parkway Place retail shopping center, located in Huntsville, Alabama, which was set to mature in
June 2010. The joint venture, of which the Company has a 50% ownership interest, obtained a new
ten-year $42.0 million mortgage loan that bears interest at a fixed rate of 6.5% per annum. Each
of the Company and its joint venture partner contributed its pro-rata portion of the existing
mortgage debt shortfall in cash to the joint
venture, which was used to pay off the balance on the existing mortgage debt. The Companys
pro-rata portion of the cash payment, $5.4 million, was funded from the Companys unsecured credit
facility. See Note 15 Subsequent Events for additional details regarding this joint venture.
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On June 30, 2010, upon the Company completing its exit from two single-asset multifamily joint
ventures (discussed above in Note 11), the Company paid off the $19.3 million loan securing
Colonial Grand at Riverchase Trails, in which the Company now has 100% interest. The loan was
originally set to mature in October 2010.
There can be no assurance that the Companys joint ventures will be successful in refinancing
and/or replacing existing debt at maturity or otherwise. If the joint ventures are unable to
obtain additional financing, pay off the existing loans that are maturing, or renegotiating
suitable terms with the existing lenders, the lenders generally would have the right to foreclose
on the properties in question and, accordingly, the joint ventures will lose their interests in the
assets. The failure to refinance and/or replace such debt and other factors with respect to the
Companys joint venture interests (discussed in Item 1A: Risk Factors in the Companys 2009
Annual Report on Form 10-K) may materially adversely impact the value of the Companys joint
venture interests, which, in turn, could have a material adverse effect on the Companys financial
condition and results of operations.
Note 13 Derivatives and Hedging
The Company is exposed to certain risks arising from both its business operations and economic
conditions. The Company principally manages its exposures to a wide variety of business and
operational risks through management of its core business activities. The Company manages economic
risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources
and duration of its debt funding and the use of derivative financial instruments. Specifically,
the Company enters into derivative financial instruments to manage exposures that arise from
business activities that result in the receipt or payment of future known and uncertain cash
amounts, the value of which is determined by interest rates. The Companys derivative financial
instruments are used to manage differences in the amount, timing and duration of the Companys
known or expected cash receipts and its known or expected cash payments principally related to the
Companys investments and borrowings.
The Companys objectives in using interest rate derivatives are to add stability to interest
expense and to manage its exposure to interest rate movements. To accomplish this objective, the
Company primarily uses interest rate swaps and caps as part of its interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate
amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of
the agreements without exchange of the underlying notional amount. Interest rate caps designated
as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest
rates rise above the strike rate on the contract in exchange for an upfront premium.
At September 30, 2010, the Company had $2.4 million in Accumulated other comprehensive loss
related to settled or terminated derivatives. Amounts reported in Accumulated other comprehensive
loss related to derivatives will be reclassified to Interest expense as interest payments are
made on the Companys variable-rate debt or to Loss on hedging activities at such time that the
interest payments on the hedged debt become probable of not occurring as a result of the Companys
senior note repurchase programs. The changes in Accumulated other comprehensive loss for
reclassifications to Interest expense tied to interest payments on the hedged debt were
immaterial for all periods presented. The changes in Accumulated other comprehensive loss for
reclassification to Loss on hedging activities related to interest payments on the hedged debt
that have been deemed no longer probable to occur as a result of the Companys senior note
repurchase program was $0.6 million for the three months ended September 30, 2009, and $0.3 million
and $1.7 million for the nine months ended September 30, 2010 and 2009, respectively. The Company
did not reclassify amounts to Loss on hedging activities for the three months ended September 30,
2010.
Note 14 Contingencies and Guarantees
Contingencies
The Company is involved in a contract dispute with a general contractor in connection with
construction costs and cost overruns with respect to certain of its for-sale projects, which were
developed in a joint venture in which the Company is a majority owner. The contractor is
affiliated with the Companys joint venture partner.
| In connection with the dispute, in January 2008, the contractor filed a lawsuit against the Company alleging, among other things, breach of contract, enforcement of a lien against real property, misrepresentation, conversion, declaratory judgment and accounting of costs, and is seeking $10.3 million in damages, plus consequential and punitive damages. |
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| Certain of the subcontractors, vendors and other parties, involved in the projects, including purchasers of units, have also made claims in the form of lien claims, general claims or lawsuits. The Company has been sued by purchasers of certain condominium units alleging breach of contract, fraud, construction deficiencies and misleading sales practices. Both compensatory and punitive damages are sought in these actions. Some of these claims have been resolved by negotiations and mediations, and others may also be similarly resolved. Some of these claims will likely be arbitrated or litigated to conclusion. |
The Company is continuing to evaluate its options and investigate certain of these claims,
including possible claims against the contractor and other parties. The Company intends to
vigorously defend itself against these claims. However, no prediction of the likelihood, or
amount, of any resulting loss or recovery can be made at this time and no assurance can be given
that the matter will be resolved favorably.
Approximately 60 purchasers of condominium units at the Companys Mira Vista at James Island
property in Charleston, South Carolina, a condominium conversion property in which all units were sold in 2006, have filed lawsuits against the Company seeking damages
resulting from, among other things, alleged construction deficiencies and misleading sales
practices. There were a total of 230 units built at this condominium conversion property. The
Company anticipates that additional purchasers of these units also may file lawsuits. The Company
is currently investigating the matter and evaluating its options, and the Company intends to
vigorously defend itself against these claims. However, no prediction of the likelihood, or
amount, of any resulting loss or recovery can be made at this time. Further, no assurance can be
given that the matter will be resolved favorably to the Company.
During the three and nine months ended September 30, 2010, the Company accrued $0.3 million
and $1.1 million, respectively, for certain contingent liabilities related to mitigation of
structural settlement at Colonial Promenade Alabaster II and additional infrastructure cost at
Colonial Promenade Fultondale. Both of these properties were sold by CPSI in previous years, and
therefore are expensed as additional development costs in (Loss) gain from sales of property in
the Companys Consolidated Condensed Statements of Operations.
As a result of transactions executed in 2007, the Company implemented its strategic initiative
to become a multifamily focused REIT, which included two significant joint venture transactions
whereby the majority of the Companys wholly-owned commercial properties were transferred into
separate joint ventures. In December 2009, the Company disposed of its interest in one of these
joint ventures but continues to retain its interest in the other joint venture. In connection with
the 2007 joint venture transactions, the Company assumed certain contingent obligations for a total
of $15.7 million, of which $5.9 million remains outstanding as of September 30, 2010.
As of September 30, 2010, the Company is self-insured up to $0.8 million, $1.0 million and
$1.8 million for general liability, workers compensation and property insurance, respectively.
The Company is also self-insured for health insurance and responsible for amounts up to $135,000
per claim and up to $2.0 million per person.
The Company is a party to various other legal proceedings incidental to its business. In the
opinion of management, after consultation with legal counsel, the ultimate liability, if any, with
respect to those proceedings is not presently expected to materially affect the financial position,
results of operations or cash flows of the Company.
Guarantees and Other Arrangements
With respect to the Colonial Grand at Traditions joint venture, the Company and its joint
venture partner each committed to guarantee $3.5 million, for a total of $7.0 million, of a $34.1
million construction loan obtained by the joint venture. As of September 30, 2010, the joint
venture had drawn $33.4 million on the construction loan, which matured by its terms on April 15,
2010 (see Note 12).
With respect to the Colonial Promenade Smyrna joint venture, the Company and its joint venture
partner each committed to guarantee up to $8.7 million, for an aggregate of up to $17.3 million, of
a $34.6 million construction loan obtained by the Colonial Promenade Smyrna joint venture. The
guarantee provided, among other things, for a reduction in the guarantee amount in the event the
property achieves and maintains a 1.15 debt service charge. Accordingly, the Companys committed
portion of the guarantee was reduced to $4.3 million. On May 3, 2010, the Company acquired the
outstanding Colonial Promenade Smyrna joint venture construction note from the lender at par (see
Note 12). As a result of this transaction, the Companys guarantee on this note was terminated,
but the joint venture partners guarantee remains in place.
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In connection with the formation of Highway 150 LLC in 2002, the Company executed a guarantee,
pursuant to which the Company serves as a guarantor of $1.0 million of the debt related to the
joint venture, which is collateralized by the Colonial Promenade Hoover retail property. The
Companys maximum guarantee of $1.0 million may be requested by the lender only after all of the
rights and remedies available under the associated note and security agreements have been exercised
and exhausted. At September 30, 2010, the total amount of debt of the joint venture was
approximately $15.8 million and the debt matures in December 2012. At September 30, 2010, no
liability was recorded for the guarantee.
In connection with certain retail developments, the Company has received funding from
municipalities for infrastructure costs. In most cases, the municipalities issue bonds that are
repaid primarily from sales tax revenues generated from the tenants at each respective development.
The Company has guaranteed the shortfall, if any, of tax revenues to the debt service requirements
on the bonds. The total amount outstanding on these bonds is approximately $13.5 million at
September 30, 2010 and December 31, 2009. At September 30, 2010, no liability was recorded for
these guarantees.
In connection with the contribution of certain assets to CRLP, certain partners of CRLP have
guaranteed indebtedness of the Company totaling $21.2 million at September 30, 2010. The
guarantees are held in order for the contributing partners to maintain their tax deferred status on
the contributed assets. These individuals have not been indemnified by the Company.
The fair value of the above guarantees could change in the near term if the markets in which
these properties are located deteriorate or if there are other negative indicators.
Note 15 Subsequent Events
Acquisition Activity
On October 22, 2010, the Company acquired the Villas at Brier Creek, a 364-unit Class A
apartment community located in Raleigh, North Carolina, for $37.9 million. The apartment community
was built in 2009 and is currently 94% occupied. The apartment community is unencumbered, and the
acquisition was funded through the Companys unsecured Credit Facility.
Disposition Activity
On October 4, 2010, the Company completed the sale of its remaining 50% interest in Parkway
Place Mall in Huntsville, Alabama to joint venture partner CBL & Associates Properties, Inc.
(CBL). The total consideration was $38.8 million, comprised of $17.9 million in cash paid by CBL
and CBLs assumption of the Companys pro rata share of the joint ventures existing loan, which
was $20.9 million. Proceeds from the sale were used to repay a portion of the outstanding balance
on the Companys unsecured Credit Facility.
Distribution
On October 27, 2010, a cash distribution was declared to shareholders of the Company and
partners of CRLP in the amount of $0.15 per common share and per unit, totaling approximately $12.7
million. The distribution was declared to shareholders and partners of record as of November 8,
2010 and will be paid on November 15, 2010.
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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited) | ||||||||
September 30, 2010 | December 31, 2009 | |||||||
ASSETS |
||||||||
Land, buildings & equipment |
$ | 3,260,495 | $ | 3,210,336 | ||||
Undeveloped land and construction in progress |
283,482 | 237,101 | ||||||
Less: Accumulated depreciation |
(610,018 | ) | (519,715 | ) | ||||
Real estate assets held for sale, net |
29,793 | 65,022 | ||||||
Net real estate assets |
2,963,752 | 2,992,744 | ||||||
Cash and cash equivalents |
7,660 | 4,590 | ||||||
Restricted cash |
9,326 | 7,952 | ||||||
Accounts receivable, net |
15,738 | 33,915 | ||||||
Notes receivable |
43,776 | 22,208 | ||||||
Prepaid expenses |
26,151 | 16,503 | ||||||
Deferred debt and lease costs |
21,992 | 22,560 | ||||||
Investment in partially-owned entities |
38,052 | 17,422 | ||||||
Other assets |
52,501 | 54,066 | ||||||
Total assets |
$ | 3,178,948 | $ | 3,171,960 | ||||
LIABILITIES AND EQUITY |
||||||||
Notes and mortgages payable |
$ | 1,404,466 | $ | 1,393,797 | ||||
Unsecured credit facility |
301,363 | 310,546 | ||||||
Total debt |
1,705,829 | 1,704,343 | ||||||
Accounts payable |
31,252 | 27,626 | ||||||
Accrued interest |
17,646 | 13,133 | ||||||
Accrued expenses |
26,425 | 26,142 | ||||||
Investment in partially-owned entities |
23,073 | | ||||||
Other liabilities |
7,026 | 8,805 | ||||||
Total liabilities |
1,811,251 | 1,780,049 | ||||||
Redeemable units, at redemption value - 7,317,125 and 8,162,845 units
outstanding at September 30, 2010 and December 31, 2009, respectively |
136,783 | 133,537 | ||||||
General partner |
||||||||
Common equity - 77,654,753 and 66,366,077 units outstanding at
September 30, 2010 and December 31, 2009, respectively |
1,135,079 | 1,066,390 | ||||||
Preferred equity ($125,000 liquidation preference) |
| 96,550 | ||||||
Limited partners preferred equity ($100,000 liquidation preference) |
97,406 | 97,406 | ||||||
Limited partners noncontrolling interest in consolidated partnership |
780 | 985 | ||||||
Accumulated other comprehensive loss |
(2,351 | ) | (2,957 | ) | ||||
Total equity |
1,230,914 | 1,258,374 | ||||||
Total liabilities and equity |
$ | 3,178,948 | $ | 3,171,960 | ||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue: |
||||||||||||||||
Minimum rent |
$ | 73,751 | $ | 69,028 | $ | 220,842 | $ | 209,475 | ||||||||
Tenant recoveries |
2,416 | 848 | 7,798 | 2,823 | ||||||||||||
Other property related revenue |
12,358 | 10,870 | 36,016 | 30,505 | ||||||||||||
Other non-property related revenue |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Total revenue |
91,139 | 84,733 | 273,568 | 254,205 | ||||||||||||
Expenses: |
||||||||||||||||
Property operating expenses |
28,255 | 25,615 | 79,632 | 70,976 | ||||||||||||
Taxes, licenses and insurance |
9,826 | 8,386 | 31,866 | 29,674 | ||||||||||||
Property management expenses |
2,323 | 1,728 | 6,008 | 5,329 | ||||||||||||
General and administrative expenses |
3,757 | 4,073 | 14,022 | 12,982 | ||||||||||||
Management fees and other expenses |
2,001 | 3,340 | 7,259 | 11,131 | ||||||||||||
Restructuring charges |
| 588 | | 1,400 | ||||||||||||
Investment and development |
9 | 100 | 42 | 1,585 | ||||||||||||
Depreciation |
30,554 | 28,070 | 91,075 | 84,130 | ||||||||||||
Amortization |
2,299 | 864 | 6,693 | 2,936 | ||||||||||||
Impairment and other losses |
131 | 221 | 914 | 1,839 | ||||||||||||
Total operating expenses |
79,155 | 72,985 | 237,511 | 221,982 | ||||||||||||
Income from operations |
11,984 | 11,748 | 36,057 | 32,223 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest expense |
(21,223 | ) | (22,593 | ) | (63,051 | ) | (65,835 | ) | ||||||||
Debt cost amortization |
(1,156 | ) | (1,247 | ) | (3,472 | ) | (3,357 | ) | ||||||||
Gains on retirement of debt |
| 14,929 | 1,044 | 56,480 | ||||||||||||
Interest income |
444 | 345 | 1,162 | 1,095 | ||||||||||||
Loss from partially-owned investments |
(687 | ) | (3,317 | ) | (23 | ) | (4,595 | ) | ||||||||
Loss on hedging activities |
| (649 | ) | (289 | ) | (1,709 | ) | |||||||||
(Loss) gain from sales of property, net of income taxes of $24 (3Q10)
and $1 (3Q09) and $117 (YTD10) and $3,157 (YTD09) |
(287 | ) | 506 | (947 | ) | 5,745 | ||||||||||
Income taxes and other |
(196 | ) | (352 | ) | (883 | ) | 2,518 | |||||||||
Total other income (expense) |
(23,105 | ) | (12,378 | ) | (66,459 | ) | (9,658 | ) | ||||||||
(Loss) income from continuing operations |
(11,121 | ) | (630 | ) | (30,402 | ) | 22,565 | |||||||||
(Loss) income from discontinued operations |
(11 | ) | 234 | (59 | ) | (512 | ) | |||||||||
(Loss) gain on disposal of discontinued operations, net of income taxes of $- (3Q10) and $- (3Q09) and
$- (YTD10) and $70 (YTD09) |
(347 | ) | (5 | ) | (396 | ) | 7 | |||||||||
Loss from discontinued operations |
(358 | ) | 229 | (455 | ) | (505 | ) | |||||||||
Net (loss) income |
(11,479 | ) | (401 | ) | (30,857 | ) | 22,060 | |||||||||
Noncontrolling interest of limited partners continuing operations |
(1 | ) | | 110 | (999 | ) | ||||||||||
Noncontrolling interest of limited partners discontinued operations |
| 155 | (5 | ) | 597 | |||||||||||
(Income) loss attributable to noncontrolling interest |
(1 | ) | 155 | 105 | (402 | ) | ||||||||||
Net (loss) income attributable to CRLP |
(11,480 | ) | (246 | ) | (30,752 | ) | 21,658 | |||||||||
Distributions to limited partner preferred unitholders |
(1,813 | ) | (1,813 | ) | (5,438 | ) | (5,438 | ) | ||||||||
Distributions to general partner preferred unitholders |
(1,582 | ) | (1,998 | ) | (5,649 | ) | (6,108 | ) | ||||||||
Preferred unit issuance costs write-off, net of discount |
(3,550 | ) | 30 | (3,550 | ) | 25 | ||||||||||
Net (loss) income available to common unitholders |
$ | (18,425 | ) | $ | (4,027 | ) | $ | (45,389 | ) | $ | 10,137 | |||||
Net (income) loss available to common unitholders allocated to limited partners continuing operations |
1,615 | 616 | 4,430 | (1,492 | ) | |||||||||||
Net (income) loss available to common unitholders allocated to limited partners discontinued operations |
32 | (53 | ) | 45 | (14 | ) | ||||||||||
Net (loss) income available to common unitholders allocated to general partner |
$ | (16,778 | ) | $ | (3,464 | ) | $ | (40,914 | ) | $ | 8,631 | |||||
Net (loss) income per unit Basic: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.22 | ) | $ | (0.08 | ) | $ | (0.58 | ) | $ | 0.17 | |||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.01 | (0.01 | ) | | ||||||||||
Net (loss) income per common unit Basic |
$ | (0.23 | ) | $ | (0.07 | ) | $ | (0.59 | ) | $ | 0.17 | |||||
Net (loss) income per common unit Diluted: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (0.22 | ) | $ | (0.08 | ) | $ | (0.58 | ) | $ | 0.17 | |||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.01 | (0.01 | ) | | ||||||||||
Net (loss) income per common unit Diluted |
$ | (0.23 | ) | $ | (0.07 | ) | $ | (0.59 | ) | $ | 0.17 | |||||
Average units outstanding: |
||||||||||||||||
Basic |
81,782 | 59,112 | 77,879 | 57,858 | ||||||||||||
Diluted |
81,782 | 59,112 | 77,879 | 57,858 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net (loss) income |
$ | (30,857 | ) | $ | 22,060 | |||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||
Depreciation and amortization |
98,173 | 88,717 | ||||||
Loss from partially-owned entities |
23 | 4,595 | ||||||
Losses (gains) from sales of property |
1,226 | (8,887 | ) | |||||
Impairment and other losses |
914 | 3,890 | ||||||
Gain on retirement of debt |
(1,044 | ) | (56,480 | ) | ||||
Distributions of income from partially-owned entities |
4,707 | 9,529 | ||||||
Other, net |
4,692 | 3,312 | ||||||
Change in: |
||||||||
Restricted cash |
(1,375 | ) | (878 | ) | ||||
Accounts receivable |
18,269 | 10,689 | ||||||
Prepaid expenses |
(3,421 | ) | (11,424 | ) | ||||
Other assets |
(531 | ) | 8,972 | |||||
Change in: |
||||||||
Accounts payable |
4,330 | (18,234 | ) | |||||
Accrued interest |
4,513 | (2,605 | ) | |||||
Accrued expenses and other |
(1,830 | ) | 21,292 | |||||
Net cash provided by operating activities |
97,789 | 74,548 | ||||||
Cash flows from investing activities: |
||||||||
Acquisition of properties |
(4,512 | ) | | |||||
Development expenditures |
(25,870 | ) | (40,591 | ) | ||||
Tenant improvements and leasing commissions |
(6,196 | ) | 99 | |||||
Capital expenditures |
(22,169 | ) | (13,129 | ) | ||||
Proceeds from sales of property, net of selling costs |
6,593 | 62,507 | ||||||
Issuance of notes receivable |
(28,228 | ) | (21 | ) | ||||
Repayments of notes receivable |
5,548 | 2,334 | ||||||
Distributions from partially-owned entities |
768 | 2,702 | ||||||
Capital contributions to partially-owned entities |
(5,376 | ) | (58 | ) | ||||
Sale of securities |
| 1,622 | ||||||
Net cash (used in) provided by investing activities |
(79,442 | ) | 15,465 | |||||
Cash flows from financing activities: |
||||||||
Proceeds from additional borrowings |
73,200 | 521,959 | ||||||
Proceeds from dividend reinvestment plan and exercise of stock options |
1,044 | 2,317 | ||||||
Proceeds from common share issuance, net of expenses |
147,731 | 41,123 | ||||||
Principal reductions of debt |
(81,193 | ) | (550,538 | ) | ||||
Payment of debt issuance costs |
(1,346 | ) | (5,841 | ) | ||||
Proceeds from borrowings on revolving credit lines |
635,000 | 610,000 | ||||||
Payments on revolving credit lines and overdrafts |
(643,868 | ) | (648,706 | ) | ||||
Dividends paid to common and preferred shareholders |
(42,302 | ) | (38,479 | ) | ||||
Redemption of Nord du Lac CDD bonds |
| (22,429 | ) | |||||
Redemption of Preferred Series D Shares |
(100,118 | ) | | |||||
Distributions to noncontrolling partners in CRLP |
(3,446 | ) | (4,753 | ) | ||||
Net cash used in financing activities |
(15,298 | ) | (95,347 | ) | ||||
Decrease in cash and cash equivalents |
3,049 | (5,334 | ) | |||||
Cash and cash equivalents, beginning of period |
4,590 | 9,185 | ||||||
Cash and cash equivalents, end of period |
$ | 7,639 | $ | 3,851 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for interest, including amounts capitalized |
$ | 59,488 | $ | 71,973 | ||||
Cash received during the period for income taxes |
$ | (17,368 | ) | $ | (9,849 | ) | ||
Supplemental disclosure of non-cash transactions: |
||||||||
Exchange of interest in DRA multifamily joint ventures for acquisition of CG at Riverchase |
$ | 1,637 | $ | | ||||
Consolidation of CMS V / CG at Canyon Creek Joint Venture |
$ | | $ | 30,689 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
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COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF EQUITY
(amounts in thousands)
Limited | Limited | Accumulated | ||||||||||||||||||||||||||
General Partner | Partners | Partners | Other | Redeemable | ||||||||||||||||||||||||
For the nine months ended | Common | Preferred | Preferred | Noncontrolling | Comprehensive | Common | ||||||||||||||||||||||
September 30, 2010 and 2009 | Equity | Equity | Equity | Interest | Income (Loss) | Total | Units | |||||||||||||||||||||
Balance, December 31, 2008 |
$ | 963,509 | $ | 96,707 | $ | 97,406 | $ | 1,943 | $ | (5,205 | ) | $ | 1,154,360 | $ | 124,848 | |||||||||||||
Net income |
8,488 | 6,108 | 5,438 | 396 | 20,430 | 1,629 | ||||||||||||||||||||||
Adjustment for amounts included in net income |
2,134 | 2,134 | ||||||||||||||||||||||||||
Distributions to common unitholders |
(26,959 | ) | (26,959 | ) | (4,753 | ) | ||||||||||||||||||||||
Distributions to preferred unitholders |
(6,108 | ) | (5,438 | ) | (11,546 | ) | ||||||||||||||||||||||
Change in interest of limited partners |
(1,271 | ) | (1,271 | ) | ||||||||||||||||||||||||
Contributions from partners and the Company related
to employee
stock purchase, dividend reinvestment plans |
44,265 | 44,265 | ||||||||||||||||||||||||||
Redemption of preferred units |
(157 | ) | (157 | ) | ||||||||||||||||||||||||
Redeemption of partnership units for shares |
4,709 | 4,709 | (4,715 | ) | ||||||||||||||||||||||||
Change in redeembable noncontrolling interest |
(7,993 | ) | (7,993 | ) | 7,993 | |||||||||||||||||||||||
Balance, September 30, 2009 |
$ | 986,019 | $ | 96,550 | $ | 97,406 | $ | 1,068 | $ | (3,071 | ) | $ | 1,177,972 | $ | 125,002 | |||||||||||||
Balance, December 31, 2009 |
$ | 1,066,390 | $ | 96,550 | $ | 97,406 | $ | 985 | $ | (2,957 | ) | $ | 1,258,374 | $ | 133,537 | |||||||||||||
Net income (loss) |
(37,364 | ) | 5,649 | 5,438 | (105 | ) | (26,382 | ) | (4,475 | ) | ||||||||||||||||||
Adjustment for amounts included in net income (loss) |
606 | 606 | ||||||||||||||||||||||||||
Distributions to common unitholders |
(31,215 | ) | (31,215 | ) | (3,446 | ) | ||||||||||||||||||||||
Distributions to preferred unitholders |
(5,649 | ) | (5,438 | ) | (11,087 | ) | ||||||||||||||||||||||
Change in interest of limited partners |
(100 | ) | (100 | ) | ||||||||||||||||||||||||
Contributions from partners and the Company related
to employee
stock purchase, dividend reinvestment plans
and equity offerings |
151,994 | 151,994 | ||||||||||||||||||||||||||
Redemption of preferred units |
(3,550 | ) | (96,568 | ) | (100,118 | ) | ||||||||||||||||||||||
Writeoff of Issuance Cost |
| |||||||||||||||||||||||||||
Redeemption of partnership units for shares |
13,749 | 13,749 | (13,758 | ) | ||||||||||||||||||||||||
Change in redeembable noncontrolling interest |
(24,925 | ) | (24,925 | ) | 24,925 | |||||||||||||||||||||||
Other |
18 | |||||||||||||||||||||||||||
Balance, September 30, 2010 |
$ | 1,135,079 | $ | -0- | $ | 97,406 | $ | 780 | $ | (2,351 | ) | $ | 1,230,914 | $ | 136,783 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2010
(Unaudited)
The consolidated condensed financial statements of Colonial Realty Limited Partnership have
been prepared pursuant to the Securities and Exchange Commission (SEC) rules and regulations. The
following notes, which represent interim disclosures as required by the SEC, highlight significant
changes to the notes included in the December 31, 2009 audited consolidated financial statements of
Colonial Realty Limited Partnership and should be read together with the consolidated financial
statements and notes thereto included in the Colonial Realty Limited Partnerships 2009 Annual
Report on Form 10-K.
Note 1 Organization and Business
Colonial Realty Limited Partnership (CRLP) is the operating partnership of Colonial
Properties Trust (the Trust), an Alabama real estate investment trust (REIT) whose shares are
traded on the New York Stock Exchange. The Trust was originally formed as a Maryland REIT on July
9, 1993 and reorganized as an Alabama REIT under a new Alabama REIT statute on August 21, 1995. The
Trust is a multifamily-focused self-administered and self-managed equity REIT, which means that it
is engaged in the acquisition, development, ownership, management and leasing of multifamily
apartment communities and other commercial real estate properties.
The Trusts activities include full or partial ownership and operation of a portfolio of 155
properties as of September 30, 2010, consisting of multifamily and commercial properties located in
Alabama, Arizona, Florida, Georgia, Louisiana, Nevada, North Carolina, South Carolina, Tennessee,
Texas and Virginia. As of September 30, 2010, including properties in lease-up, the Trust owns
interests in 110 multifamily apartment communities (including 106 consolidated properties, of which
105 are wholly-owned and one is partially-owned, and four properties partially-owned through
unconsolidated joint venture entities), and 45 commercial properties, consisting of 30 office
properties (including four wholly-owned consolidated properties and 26 properties partially-owned
through unconsolidated joint venture entities) and 15 retail properties (including five
wholly-owned consolidated properties and 10 properties partially-owned through unconsolidated joint
venture entities).
Note 2 Summary of Significant Accounting Policies
Unaudited Interim Consolidated Condensed Financial Statements
The accompanying unaudited interim consolidated condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the United States (GAAP)
for interim financial information, including rules and regulations of the SEC. Accordingly, the
interim financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 2010, are not necessarily
indicative of the results that may be expected for the year ending December 31, 2010. The
Consolidated Condensed Balance Sheet at December 31, 2009 has been derived from the audited
financial statements at that date, but does not include all of the information and footnotes
required by GAAP for complete financial statements.
Federal Income Tax Status
CRLP is a partnership for federal income tax purposes. As a partnership CRLP is not subject to
federal income tax on its income. Instead, each of CRLPs partners, including the Trust, is
required to pay tax on such partners allocable share of income. The Trust has elected to be taxed
as a REIT under Sections 856 through 860 of the Code, commencing with its short taxable year ending
December 31, 1993. A REIT generally is not subject to federal income tax on the income that it
distributes to shareholders provided that the REIT meets the applicable REIT distribution
requirements and other requirements for qualification as a REIT under the Code. The Trust believes
that it is organized and has operated and intends to continue to operate, in a manner to qualify
for taxation as a REIT under the Code. For each taxable year in which the Trust qualifies for
taxation as a REIT, the Trust generally will not be subject to federal corporate tax on its net
income that is distributed currently to its shareholders. While the Trust generally will not be
subject to corporate federal income tax on income that it distributes currently to shareholders, it
will be subject to federal income tax in certain circumstances including: the Trust will be subject
to
income tax to the extent it distributes less than 100% of its REIT taxable income (including
capital gains); and, if the Trust acquires any assets from a non-REIT C corporation in a
carry-over basis transaction, the Trust would be liable for corporate federal income tax, at the
highest applicable corporate rate for the built-in gain with respect to those assets if it
disposed of those assets within 10 years after they were acquired. CRLP and the REIT are subject
to certain state and local taxes on income and property, including the margin-based tax in Texas
and franchise taxes in Tennessee and North Carolina.
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CRLPs consolidated financial statements include the operations of a taxable REIT subsidiary,
CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and
local income taxes. CPSI uses the liability method of accounting for income taxes. Deferred income
tax assets and liabilities result from temporary differences. Temporary differences are differences
between tax bases of assets and liabilities and their reported amounts in the financial statements
that will result in taxable or deductible amounts in future periods. All inter-company transactions
are eliminated in the accompanying consolidated condensed financial statements. CPSI has an income
tax receivable of $0.5 million and $17.8 million as of September 30, 2010 and December 31, 2009,
respectively, which is included in Accounts receivable, net on CRLPs Consolidated Condensed
Balance Sheet. CPSIs consolidated provision for income taxes and effective income tax rate were
zero for each of the three and nine months ended September 30, 2010 and 2009, due to the continued
assessment that CPSIs deferred tax assets are not likely to be recoverable and, as such, are fully
reserved.
Tax years 2003 through 2009 are subject to examination by the federal taxing authorities.
Generally, tax years 2007 through 2009 are subject to examination by state taxing authorities.
There is one state tax examination currently in process.
On November 6, 2009, the Worker, Homeownership and Business Assistance Act of 2009 was signed
into law, which expanded the net operating loss (NOL) carryback rules to allow businesses to
carryback NOLs incurred in either 2008 or 2009 up to five years. As a result of the new
legislation, CPSI is able to carryback tax losses that occurred in the year ended December 31, 2009
against income that was recognized in 2005 and 2006. During the fourth quarter 2009, CPSI recorded an income tax benefit as a result of the new NOL carryback rules. During the
nine months ended September 30, 2010, CRLP received $17.4 million of tax refunds. CRLP anticipates
receiving the remaining refund amounts by December 31, 2010.
On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (the Act) was
signed into law. Section 1231 of the Act allows some business taxpayers to elect to defer
cancellation of indebtedness income when the taxpayer repurchased applicable debt instruments after
December 31, 2008 and before January 1, 2011. Under the Act, the cancellation of indebtedness
income in 2009 could be deferred for five years (until 2014), and the cancellation of indebtedness
income in 2010 could be deferred for four years (until 2014), subject in both cases to acceleration
events. After the deferral period, 20% of the cancellation of indebtedness income would be included
in taxpayers gross income in each of the next five taxable years. The deferral is an irrevocable
election made on the taxpayers income tax return for the taxable year of the reacquisition. CRLP
made this election with regard to a portion of the CRLP debt repurchased in 2009.
CRLP may from time to time be assessed interest or penalties by major tax jurisdictions,
although any such assessments historically have been minimal and immaterial to CRLPs financial
results. When CRLP has received an assessment for interest and/or penalties, it has been classified
in the financial statements as income tax expense.
Notes Receivable
Notes receivable consists primarily of promissory notes representing loans by CRLP to third
parties. CRLP records notes receivable at cost. CRLP evaluates the collectability of both interest
and principal for each of its notes to determine whether they are impaired. A note is considered to
be impaired when, based on current information and events, it is probable that CRLP will be unable
to collect all amounts due according to the existing contractual terms. When a note is considered
to be impaired, the amount of the allowance is calculated by comparing the recorded investment to
either the value determined by discounting the expected future cash flows at the notes effective
interest rate or to the value of the collateral if the note is collateral-dependent.
As of September 30, 2010, CRLP had notes receivable of $45.5 million consisting primarily of:
| $26.4 million, net of premium, outstanding on the construction note for the Colonial Promenade Smyrna joint venture, which CRLP acquired from the lender in May 2010. The note has an annual interest rate of one-month LIBOR plus 1.20% (see Note 12 Unconsolidated Joint Venture Financing Activity). |
| $16.6 million outstanding on a seller-financing note with a five year term at an annual interest rate of 5.60% associated with the disposition of Colonial Promenade at Fultondale in February 2009. |
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In September 2010, the principal balance on the Colonial Promenade Smyrna note receivable was
reduced by $0.6 million, to $26.4 million, from proceeds received from the sale of an outparcel.
CRLP had accrued interest related to its outstanding notes receivable of $0.4 million and $0.1
million as of September 30, 2010 and December 31, 2009, respectively. As of September 30, 2010 and
December 31, 2009, CRLP had recorded a reserve of $2.1 million against its outstanding notes
receivable and accrued interest. The weighted average interest rate on the notes receivable
outstanding at September 30, 2010 and December 31, 2009 was approximately 4.6% and 6.0%,
respectively. Interest income is recognized on an accrual basis.
Fair Value Measures
CRLP applies the Financial Accounting Standards Boards (the FASB) Accounting Standards
Codification (ASC) 820-10 Fair Value Measurements and Disclosures, in relation to the valuation
of real estate assets recorded at fair value, to its impairment valuation analysis of real estate
assets (see Note 4) and to its disclosure of the fair value of financial instruments, principally
indebtedness (see Note 12) and notes receivable (see above). The disclosure of estimated fair
values was determined by management using available market information, considering market
participant assumptions and appropriate valuation methodologies available to management at
September 30, 2010. Considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, there can be no assurance that the estimates presented below,
using Level 2 and 3 inputs, are indicative of the amounts CRLP could realize on disposition of the
real estate assets or financial instruments. The use of different market assumptions and/or
estimation methodologies could have material effect on the estimated fair value amounts.
The following table presents CRLPs real estate assets reported at fair market value and the
related level in the fair value hierarchy as defined by ASC 820 used to measure those assets,
liabilities and disclosures:
(in thousands) | Fair value measurements as of September 30, 2010 | |||||||||||||||
Assets (Liabilities) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Real estate assets held
for sale, net |
$ | 27,365 | $ | | $ | | $ | 27,365 |
Real estate assets, including land held for sale, were valued using sales activity for similar
assets, current contracts and other inputs management believes are consistent with those that
market participants would use. The fair values of these assets are determined using widely
accepted valuation techniques, including (i) discounted cash flow analysis, which considers, among
other things, unit sales assumptions, leasing assumptions, cost structure, growth rates, discount
rates and terminal capitalization rates, (ii) income capitalization approach, which considers
prevailing market capitalization rates and (iii) comparable sales activity. The valuation technique
and related inputs vary with the specific facts and circumstances of each project.
At September 30, 2010, the estimated fair value of fixed rate debt was approximately $1.4
billion (carrying value of $1.39 billion) and the estimated fair value of CRLPs variable rate
debt, including CRLPs unsecured credit facility, is consistent with the carrying value of $314.5
million.
The estimated fair value of CRLPs notes receivable at September 30, 2010 and December 31,
2009 was approximately $43.8 million and $22.2 million, respectively, based on market rates and
similar financing arrangements.
Accounting Pronouncements
Pronouncements Recently Adopted
In June 2009, the FASB issued Statement of Accounting Standards (SFAS) No. 167, Amendments
to FASB Interpretation No. FIN 46(R), now known as ASC 810-10-30, Initial Measurement. ASC
810-10-30 amends the manner in which entities evaluate whether consolidation is required for
variable interest entities (VIEs). A company must first perform a qualitative analysis in
determining whether it must consolidate a VIE, and if the qualitative analysis is not
determinative, must
perform a quantitative analysis. Further, ASC 810-10-30 requires that companies continually
evaluate VIEs for consolidation, rather than assessing based upon the occurrence of triggering
events. ASC 810-10-30 also requires enhanced disclosures about how a companys involvement with a
VIE affects its financial statements and exposure to risks. ASC 810-10-30 is effective for fiscal
years and interim periods beginning after November 15, 2009. The adoption of ASC 810-10-30 did not
have a material impact on CRLPs consolidated condensed financial statements.
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In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06, an update to ASC
820, Fair Value Measurements and Disclosures. ASU 2010-06 provides an update specifically to
Subtopic 820-10 that requires new disclosures including (i) details of significant transfers in and
out of Level 1 and Level 2 measurements and the reasons for the transfers, (ii) the reasons for any
transfers in or out of Level 3 and (iii) and a gross presentation of activity within the Level 3
roll forward, presenting separately information about purchases, sales, issuances, and settlements.
ASU 2010-06 was effective for the first interim or annual reporting period beginning after December
15, 2009, except for the gross presentation of the Level 3 roll forward, which is required for
interim and annual reporting periods beginning after December 15, 2010. The adoption of ASU 2010-06
did not have a material impact on CRLPs consolidated condensed financial statements.
Loss Contingencies
CRLP is subject to various claims, disputes and legal proceedings, including those described
under Liquidity and Capital Resources Contingencies and Off-Balance Sheet Arrangements, the
outcomes of which are subject to significant uncertainty. CRLP records an accrual for loss
contingencies when a loss is probable and the amount of the loss can be reasonably estimated. CRLP
reviews these accruals quarterly and makes revisions based on changes in facts and circumstances.
During the three months ended September 30, 2010, CRLP increased its loss contingency accrual by
$1.5 million, to $2.6 million in the aggregate.
Note 3 Restructuring Charges
CRLP did not incur restructuring charges during the three or nine months ended September 30,
2010.
As a result of CRLPs 2009 initiative to improve efficiencies with respect to management of
its properties and operation of CRLPs portfolio, including reducing overhead and postponing or
phasing future development activities, during the first and third quarters of 2009, CRLP reduced
its workforce by 30 and 24 employees, respectively, through the elimination of certain positions
resulting in the incurrence of an aggregate of $0.8 million and $0.6 million, respectively, in
termination benefits and severance related charges. Of the $1.4 million in restructuring charges
recorded in 2009, approximately $0.5 million was associated with CRLPs multifamily segment,
including $0.2 million associated with development personnel, $0.8 million was associated with
CRLPs commercial segment, including $0.3 million associated with development personnel, and $0.1
million were non-divisional charges.
The expenses of CRLPs reduction in workforce and other termination costs, as described above,
are included in Restructuring charges in the Consolidated Condensed Statements of Operations for
the three and nine months ended September 30, 2009.
Note 4 Impairment and other losses
During the three months ended September 30, 2010, CRLP recorded $0.1 million in non-cash
impairment charges resulting from additional costs related to the sale of the remaining units at
one of CRLPs for-sale residential projects. In addition, during the nine months ended September
30, 2010, CRLP recorded $0.8 million as a result of casualty losses at three multifamily apartment
communities. The losses at two of these communities were a result of fire damage and the loss at
the other community was a result of carport structural damage caused by inclement weather. These
charges are included in Impairment and other losses in the Consolidated Condensed Statement of
Operations for the nine months ended September 30, 2010.
During the three months ended September 30, 2009, CRLP recorded $0.5 million in non-cash
impairment charges. Of these charges, $0.2 million was attributable to Colonial Grand at Traditions
and $0.3 million was related to the bulk sale of the remaining units at Portofino at Jensen Beach.
In September 2009, CRLP determined that it was probable that CRLP will have to fund a $3.5
million partial loan repayment guarantee provided on the original construction loan for Colonial
Grand at Traditions, a 324-unit apartment community located in Gulf Shores, Alabama. Accordingly,
CRLP recognized a charge to earnings of $3.5 million in the third quarter of 2009 for this expected
payment, which is included in Loss from partially-owned investments in CRLPs Consolidated
Statements of Operations. In addition, CRLP determined that its 35% joint venture interest was
impaired and that this impairment was other than temporary. The impairment charge was calculated as
the difference between the estimated fair value of CRLPs joint venture interest and the current
book value of CRLPs joint venture interest. As a result, CRLP recognized a non-cash impairment
charge of $0.2 million in third quarter of 2009 for this other-than-temporary impairment, which is
included in Impairment and other losses in the Consolidated Condensed Statement of Operations.
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As a result of the bulk sale of the remaining units at Portofino at Jensen Beach, during the
third quarter of 2009, CRLP recorded an additional non-cash impairment charge of $0.3 million as a
result of the sales price versus the net book value of the asset. The $0.3 million charge is
included in (Loss) income from discontinued operations on CRLPs Consolidated Condensed Statement
of Operations.
CRLP recorded an aggregate of $3.9 million of non-cash impairment charges during the nine
months ended September 30, 2009. Of the $1.8 million reflected in Impairment and other losses in
the Consolidated Condensed Statements of Operations for the nine months ended September 30, 2009,
$0.7 million was recorded for Colonial Pinnacle Craft Farms, $0.5 million was recorded for Grander,
$0.3 million was recorded for Regents Park, $0.2 million was recorded for Colonial Grand at
Traditions and $0.1 million is related to three outparcels at Colonial Promenade at Tannehill. Of
the $2.1 million included in (Loss) income from discontinued operations in the Consolidated
Condensed Statements of Operations, $1.2 million was recorded for Murano at Delray Beach and $0.9
million for Portofino at Jensen Beach.
CRLPs determination of fair value is based on inputs management believes are consistent with
those that market participants would use. CRLP estimates the fair value of each property and
development project evaluated for impairment based on current market conditions and assumptions
made by management, which may differ materially from actual results if market conditions continue
to deteriorate or improve. The fair value of these assets are determined using widely accepted
valuation techniques, including (i) discounted cash flow analysis, which considers, among other
things, unit sales assumptions, leasing assumptions, cost structure, growth rates, discount rates
and terminal capitalization rates, (ii) income capitalization approach, which considers prevailing
market capitalization rates and (iii) comparable sales activity. CRLP will continue to monitor the
specific facts and circumstances at CRLPs for-sale properties and development projects. Existing
economic and market uncertainties may impact the number of projects CRLP can sell, the timing of
the sales and/or the prices at which CRLP can sell them in future periods, and may result in
additional impairment charges in connection with sales. If CRLP is unable to sell projects, CRLP
may incur additional impairment charges on projects previously impaired as well as on projects not
currently impaired but for which indicators of impairment may exist, which would decrease the value
of CRLPs assets as reflected on the balance sheet and adversely affect net income and equity.
There can be no assurances of the amount or pace of future property sales and closings,
particularly given current economic and market conditions. In particular, the recent oil spill in
the Gulf of Mexico has negatively impacted the current economic conditions in Gulf Shores, Alabama,
where CRLP owns several assets. If economic conditions in the Gulf Shores area do not improve,
CRLPs current basis in such assets could become impaired.
Note 5 Acquisition and Disposition Activity
During the second quarter of 2010, CRLP exited two single-asset multifamily joint ventures
with DRA Advisors LLC, transferring its 20% ownership interest in Colonial Village at Cary, located
in Raleigh, North Carolina, and making a net cash payment of $2.7 million in exchange for the
remaining 80% ownership interest in Colonial Grand at Riverchase Trails, located in Birmingham,
Alabama (see Note 11).
Net income and gain on disposition of real estate for properties sold in which CRLP does not
maintain continuing involvement are reflected in the Consolidated Condensed Statements of
Operations as Discontinued Operations for all periods presented. All of the operating properties
sold during 2009 in which CRLP did not maintain a continuing interest were classified as
discontinued operations. The following are the properties CRLP disposed of in 2009 that are
classified as discontinued operations:
Units/Square | |||||||
Property | Location | Date Sold | Feet | ||||
Multifamiy |
|||||||
Portofino at Jensen Beach |
Port St. Lucie, FL | September 2009 | 118 | ||||
Murano at Delray Beach |
West Palm Beach, FL | September 2009 | 93 | ||||
Commercial |
|||||||
Colonial Promenade Winter Haven |
Orlando, FL | December 2009 | 286,297 |
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Additionally, CRLP classifies real estate assets as held for sale only after CRLP has
received approval by its internal investment committee, CRLP has commenced an active program to
sell the assets, CRLP does not intend to retain a continuing interest in the property, and in the
opinion of CRLPs management, it is probable the assets will sell within the next 12 months. As of
September 30, 2010, CRLP had classified four for-sale developments as held for sale. These real
estate assets are reflected in the accompanying Consolidated Condensed Balance Sheet at $29.8
million as of September 30, 2010, which represents the lower of depreciated cost or fair value less
costs to sell. There was no mortgage debt associated with these properties as of September 30,
2010.
As of September 30, 2010, there were no operating properties classified as held for sale.
During the three months ended March 31, 2010, CRLP transferred one commercial development and two
for-sale developments from assets held for sale to assets held for investment as CRLP decided
it will hold this land for a longer term. In addition, CRLP reallocated the commercial portion of
two mixed-use development sites from assets held for sale to assets held for investment.
The operating results of properties (excluding condominium conversion properties not
previously operated) designated as held for sale or sold, are included in discontinued operations
in the Consolidated Condensed Statements of Operations for all periods presented. The reserves, if
any, to write down the carrying value of the real estate assets designated and classified as held
for sale are also included in discontinued operations (excluding condominium conversion properties
not previously operated).
Below is a summary of the operations of the properties classified as discontinued operations
during the three and nine months ended September 30, 2010 and 2009:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Property revenues: |
||||||||||||||||
Minimum rent |
$ | | $ | 834 | $ | | $ | 3,064 | ||||||||
Tenant recoveries |
| 41 | | 158 | ||||||||||||
Other revenue |
| 116 | | 340 | ||||||||||||
Total revenues |
| 991 | | 3,562 | ||||||||||||
Property operating and adminstrative expenses |
11 | 506 | 59 | 1,892 | ||||||||||||
Impairment |
| 251 | | 2,051 | ||||||||||||
Depreciation and amortization |
| | | 131 | ||||||||||||
Total expenses |
11 | 757 | 59 | 4,074 | ||||||||||||
(Loss) income from discontinued operations before net gain
on disposition of dicontinued operations |
(11 | ) | 234 | (59 | ) | (512 | ) | |||||||||
Net (loss) gain on dispostion of discontinued operations, net of income taxes |
(347 | ) | (5 | ) | (396 | ) | 7 | |||||||||
Noncontrolling interest in CRLP from discontinued operations |
32 | (53 | ) | 45 | (14 | ) | ||||||||||
Noncontrolling interest to limited partners |
| 155 | (5 | ) | 597 | |||||||||||
(Loss) income from discontinued operations attributable to parent company |
$ | (326 | ) | $ | 331 | $ | (415 | ) | $ | 78 | ||||||
Note 6 For-Sale Activities
The total number of units sold for condominium conversion properties, for-sale residential
properties and lots for the three and nine months ended September 30, 2010 and 2009 are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
For-Sale Residential |
15 | 53 | 24 | 112 | ||||||||||||
Condominium Conversion |
| 211 | | 238 | ||||||||||||
15 | 264 | 24 | 350 | |||||||||||||
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Table of Contents
The following is a summary of revenues and costs of condominium conversion and for-sale
residential activities (including activities in continuing and discontinued operations) for the
three and nine months ended September 30, 2010 and 2009:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Condominium revenues |
$ | | $ | 15,730 | $ | | $ | 16,851 | ||||||||
Condominium costs |
(350 | ) | (15,714 | ) | (350 | ) | (16,592 | ) | ||||||||
(Losses) gains on condominium sales, before income taxes |
(350 | ) | 16 | (350 | ) | 259 | ||||||||||
For-sale residential revenues |
4,782 | 8,855 | 7,416 | 33,553 | ||||||||||||
For-sale residential costs |
(4,906 | ) | (8,260 | ) | (7,594 | ) | (33,083 | ) | ||||||||
(Losses) gains on for-sale residential sales, before income taxes |
(124 | ) | 595 | (178 | ) | 470 | ||||||||||
Provisions for income taxes |
| | | (70 | ) | |||||||||||
(Losses) gains on condominium conversions and for-sale
residential sales, net of income taxes |
$ | (474 | ) | $ | 611 | $ | (528 | ) | $ | 659 | ||||||
The net gains on condominium conversion sales are classified in discontinued operations
if the related condominium property was previously operated by CRLP as an apartment community.
During the three and nine months ended September 30, 2010, CRLP recorded $0.4 million for HOA
settlement costs related to infrastructure repairs with respect to a previously sold condominium
conversion property. For the three and nine months ended September 30, 2009, net gains on
condominium conversion sales, net of income taxes, of approximately $16,000 and $189,000 are
included in discontinued operations, respectively. As of December 31, 2009, the Company had sold
all remaining condominium conversion properties.
For cash flow statement purposes, CRLP classifies capital expenditures for newly developed
for-sale residential communities and for other condominium conversion communities in investing
activities. Likewise, the proceeds from the sales of condominium units and other residential sales
are also included in investing activities.
Note 7 Undeveloped Land and Construction in Progress
During the second quarter of 2010, CRLP placed into service Colonial Promenade Craft Farms,
located in Gulf Shores, Alabama, adding 68,000 square feet to CRLPs commercial portfolio.
CRLP currently has one active development project, as outlined in the table below. In 2009,
CRLP decided to postpone development activities associated with the projects listed under Future
Developments in the table below until it determines that the current economic environment has
sufficiently improved.
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Table of Contents
Costs | ||||||||||
Total Units/ | Capitalized to | |||||||||
Square Feet (1) | Date | |||||||||
Location | (unaudited) | (in thousands) | ||||||||
Active Developments: |
||||||||||
Commercial Projects: |
||||||||||
Colonial Promenade Nord du Lac (Phase I) (2) |
Covington, LA | 174 | $ | 22,703 | ||||||
174 | 22,703 | |||||||||
Future Developments: |
||||||||||
Multifamily Projects: |
||||||||||
Colonial Grand at Sweetwater |
Phoenix, AZ | 195 | 7,280 | |||||||
Colonial Grand at Thunderbird |
Phoenix, AZ | 244 | 8,379 | |||||||
Colonial Grand at Randal Park (3) |
Orlando, FL | 750 | 19,171 | |||||||
Colonial Grand at Hampton Preserve |
Tampa, FL | 486 | 15,412 | |||||||
Colonial Grand at South End |
Charlotte, NC | 353 | 12,988 | |||||||
Colonial Grand at Azure |
Las Vegas, NV | 188 | 7,804 | |||||||
Colonial Grand at Cityway |
Austin, TX | 320 | 5,140 | |||||||
2,536 | 76,174 | |||||||||
Commercial Projects: |
||||||||||
Colonial Promenade Huntsville |
Huntsville, AL | 111 | 9,751 | |||||||
Colonial Promenade Nord du Lac (2) |
Covington, LA | | 30,508 | |||||||
111 | 40,259 | |||||||||
Other Projects and Undeveloped Land |
||||||||||
Multifamily |
3,292 | |||||||||
Commercial |
55,835 | |||||||||
Commercial Outparcels/Pads |
15,223 | |||||||||
For-Sale Residential Land (4) |
69,996 | |||||||||
144,346 | ||||||||||
Consolidated Construction in Progress |
$ | 283,482 | ||||||||
(1) | Square footage is presented in thousands. Square footage for the retail assets excludes anchor owned square footage. | |
(2) | CRLP intends to develop this project in phases over time. Costs capitalized to date for this development, including costs for Phase I, are presented net of an aggregate of $25.8 million of non-cash impairment charges recorded during 2009 and 2008. | |
(3) | This project is part of a mixed-use development. CRLP is still evaluating plans for a multifamily apartment community. Therefore, costs attributable to this phase of development are subject to change. | |
(4) | These costs are presented net of a $24.6 million non-cash impairment charge recorded on two of the projects in 2009, 2008 and 2007. |
Interest capitalized on construction in progress during the three months ended September
30, 2010 and 2009 was $0.3 million and $0.5 million, respectively. Interest capitalized on
construction in progress during the nine months ended September 30, 2010 and 2009 was $1.0 million
and $3.5 million, respectively.
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Table of Contents
Note 8 Net (Loss) Income Per Unit
For the three and nine months ended September 30, 2010 and 2009, a reconciliation of the
numerator and denominator used in the basic and diluted income from continuing operations per
common unit is as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(amounts in table in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Numerator: |
||||||||||||||||
(Loss) income from continuing operations |
$ | (11,121 | ) | $ | (630 | ) | $ | (30,402 | ) | $ | 22,565 | |||||
Less: |
||||||||||||||||
Income allocated to participating securities |
(89 | ) | (41 | ) | (277 | ) | (152 | ) | ||||||||
Noncontrolling interest of limited partners continuing operations |
(1 | ) | | 110 | (999 | ) | ||||||||||
Distributions to limited partner preferred unitholders |
(1,813 | ) | (1,813 | ) | (5,438 | ) | (5,438 | ) | ||||||||
Distributions to general partner preferred unitholders |
(1,582 | ) | (1,998 | ) | (5,649 | ) | (6,108 | ) | ||||||||
Preferred unit issuance costs, net of discount |
(3,550 | ) | 30 | (3,550 | ) | 25 | ||||||||||
(Loss) income from continuing operations available to common unitholders |
$ | (18,156 | ) | $ | (4,452 | ) | $ | (45,206 | ) | $ | 9,893 | |||||
Denominator: |
||||||||||||||||
Denominator for basic net income per unit weighted average units |
81,782 | 59,112 | 77,879 | 57,858 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Trustee and employee stock options, treasury method |
| | | | ||||||||||||
Denominator for diluted net income per unit adjusted weighted average units |
81,782 | 59,112 | 77,879 | 57,858 | ||||||||||||
For the three months ended September 30, 2010 and 2009, CRLP reported a net loss from
continuing operations, and as such, 82,584 and 1,669 dilutive share equivalents, respectively, have
been excluded from the computation of diluted net income per unit because including such share
equivalents would be anti-dilutive. For the three months ended September 30, 2010 and 2009,
1,160,917 and 1,354,335 outstanding share options (and a corresponding number of units),
respectively, were excluded from the computation of diluted net income per unit because the grant
date prices were greater than the average market price of the common shares/units and, therefore,
the effect would be anti-dilutive. For the nine months ended September 30, 2010, CRLP reported a
net loss from continuing operations, and as such, 20,969 dilutive share equivalents have been
excluded from the computation of diluted net income per unit because including such share
equivalents would be anti-dilutive. For the nine months ended September 30, 2010, 1,205,917
outstanding share options (and a corresponding number of units) were excluded from the computation
of diluted net income per unit because the grant date prices were greater than the average market
price of the common shares/units and, therefore, the effect would be anti-dilutive. For the nine
months ended September 30, 2009, 1,331,467 outstanding share options were excluded from the
computation of diluted net income per unit because the grant date prices were greater than the
average market price of the common shares/units, and therefore, the effect
would be anti-dilutive.
Note 9 Capital Structure
At September 30, 2010, the Trust controlled CRLP as CRLPs sole general partner and as the
holder of approximately 91.4% interest in CRLP. The limited partners of CRLP who hold redeemable
common units are those persons (including certain officers and trustees of the Trust) who, at the
time of the Trusts initial public offering, elected to hold all or a portion of their interest in
the form of units rather than receiving common shares of the Trust, or individuals from whom CRLP
acquired certain properties who elected to receive units in exchange for the properties.
Redeemable units represent the number of outstanding limited partnership units as of the date of
the applicable balance sheet, valued at the greater of the closing market value of the Trusts
common shares or the aggregate value of the individual partners capital balances. Each redeemable
unit may be redeemed by the holder thereof for either cash equal to the fair market value of one
common share of the Trust at the time of such redemption or, at the option of the Trust, one common
share of the Trust. Additionally, CRLP has outstanding $100.0 million of Series B Preferred Units
issued in a private placement, that are exchangeable for 7.25% Series B Cumulative Redeemable
Perpetual Preferred Shares of the Trust in whole or in part at anytime on or after January 1, 2014
at the option of the holders of the Series B Preferred Units.
The Board of Trustees of the Trust manages CRLP by directing the affairs of CRLP. The Trusts
interest in CRLP entitles the Trust to share in cash distributions from, and in the profits and
losses of, CRLP in proportion to the Trusts percentage interest therein and entitle the Trust to
vote on all matters requiring a vote of the limited partners.
40
Table of Contents
At-the-Market Equity Offering Programs
On February 22, 2010, the Trusts Board of Trustees approved the issuance of up to $50.0
million of the Trusts common shares under an at-the-market equity offering program, which the
Trust launched on March 4, 2010. During the six months ended June 30, 2010, the Trust issued
3,602,348 common shares at a weighted average issue price of $13.88 per share generating net
proceeds of approximately $49.0 million, exhausting its full $50.0 million authorization under this
at-the-market equity offering program. Pursuant to the CRLP partnership agreement, each time the
Trust issues common shares CRLP issues to the Trust an equal number of units for the same price at
which the common shares were sold. Accordingly, CRLP issued 3,602,348 common units to the Trust, at
a weighted average issue price of $13,88 per unit, for the common shares issued by the Trust in the
equity offering program.
On July 21, 2010, the Trusts Board of Trustees approved the issuance of up to $100.0 million
of the Trusts common shares under a new at-the-market equity offering program which the Trust
launched on July 30, 2010. On August 2, 2010, the Trust completed the new at-the-market equity
offering program, which resulted in the sale of 6,329,026 common shares of the Trust generating net
proceeds of approximately $99.0 million, at an average price of $15.80 per share. This exhausted
the approved issuance of up to $100.0 million of common shares under this at-the-market equity
offering program.
As of September 30, 2010, the Trust had issued an aggregate of 9,931,374 common shares at a
weighted average issue price of $15.10 per share generating net proceeds of approximately $148.0
million. Accordingly, CRLP had issued 9,931,374 common units to the Trust, at a weighted average
issue price of $15.10 per unit, for the common shares issued by the Trust. These proceeds were
used to redeem all of the Trusts outstanding Series D preferred depositary shares (the Series D
Preferred Depositary Shares), each representing 1/10th of an 8 1/8 percent Series D
Cumulative Redeemable Preferred Share of the Trust (the Series D Preferred Shares) and all of the
corresponding Series D Preferred Units of CRLP, to repay a portion of the outstanding balance under
CRLPs unsecured credit facility and to fund general corporate purposes.
Repurchases of Series D Preferred Depositary Shares and Series D Preferred Units
In October 2008, the Trusts Board of Trustees authorized a repurchase program which allowed
the Trust to repurchase up to an additional $25.0 million of its outstanding Series D Preferred
Depositary Shares over a 12 month period. The Board of Trustees of the Trust, as general partner of
CRLP, also authorized the repurchase of a corresponding amount of Series D Preferred Units of CRLP.
During 2009, the Trust repurchased 6,515 Series D Preferred Depositary Shares (and CRLP repurchased
a corresponding amount of Series D Preferred Units) in open market transactions for a purchase
price of $126,761, or $19.46 per Series D Preferred Depositary Share. The Company received a 22.2%
discount on the repurchase to the liquidation preference price of $25.00 per depositary share and
wrote off a nominal amount of issuance costs. In the aggregate, the Trust repurchased $24.1 million
of its outstanding Series D Preferred Depositary Shares (and CRLP has repurchased a corresponding
amount of Series D Preferred Units) under this program, which expired in late October 2009.
In August 2010, the Board of Trustees of the Trust authorized the redemption of all of the
outstanding 4,004,735 Series D Preferred Depositary Shares and a corresponding amount of Series D
Preferred Units. The Series D Preferred Depositary Shares were redeemed by the Trust (and CRLP
repurchased all of the Series D Preferred Units) on September 10, 2010 for a purchase price of
$25.00 per Series D Preferred Depositary Share, plus accrued and unpaid dividends for the period
from August 1, 2010 through and including the redemption date, for an aggregate redemption price
per Series D Preferred Depositary Share of $25.2257, or $100.1 million in the aggregate. After the
redemption date, dividends on the Series D Preferred Depositary Shares ceased to be accrued, the
Series D Preferred Depositary Shares were no longer deemed outstanding, and all rights of the
holders of the Series D Preferred Depositary Shares ceased. The redemption price was paid by CRLP
from the proceeds from the Trusts $100.0 million at-the-market program in August 2010. As a
result of the redemption of the Series D Preferred Depositary Shares, CRLP recorded a charge of
approximately $3.6 million during the three months ended September 30, 2010, related to the
original preferred share issuance costs.
41
Table of Contents
Note 10 Segment Information
CRLP currently manages its business based on the performance of two operating segments:
multifamily and commercial. The multifamily and commercial segments have separate management teams
that are responsible for acquiring, developing, managing and leasing properties within each
respective segment.
Multifamily management is responsible for all aspects of CRLPs multifamily property
operations, including the management and leasing services for 110 multifamily apartment
communities, as well as third-party management services for multifamily apartment communities in
which CRLP does not have an ownership interest. Additionally, the multifamily
management team is responsible for all aspects of for-sale developments, including disposition
activities. The multifamily segment includes the operations and assets of the for-sale developments
due to the insignificance of these operations in the periods presented. Commercial management is
responsible for all aspects of CRLPs commercial property operations, including the management and
leasing services for 45 commercial properties, as well as third-party management services for
commercial properties in which CRLP does not have an ownership interest and for brokerage services
in other commercial property transactions.
The pro-rata portion of the revenues and net operating income (NOI) of the partially-owned
unconsolidated entities in which CRLP has an interest are included in the applicable segment
information. Additionally, the revenues and NOI of properties sold that are classified as
discontinued operations are also included in the applicable segment information. In reconciling the
segment information presented below to total revenues, income from continuing operations, and total
assets, investments in partially-owned unconsolidated entities are eliminated as equity investments
and their related activity are reflected in the consolidated financial statements as investments
accounted for under the equity method, and discontinued operations are reported separately.
Management evaluates the performance of its multifamily and commercial segments and allocates
resources to them based on segment NOI. Segment NOI is defined as total property revenues less
total property operating expenses (such items as repairs and maintenance, payroll, utilities,
property taxes, insurance and advertising ), and includes revenues/expenses from unconsolidated
partnerships and joint ventures. Presented below is segment information, for the multifamily and
commercial segments, including the reconciliation of total segment revenues to total revenues and
total segment NOI to income from continuing operations before noncontrolling interest for the three
and nine months ended September 30, 2010 and 2009, and total segment assets to total assets as of
September 30, 2010 and December 31, 2009.
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Table of Contents
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues: |
||||||||||||||||
Segment Revenues: |
||||||||||||||||
Multifamily |
$ | 77,579 | $ | 76,566 | $ | 230,490 | $ | 231,330 | ||||||||
Commercial |
19,477 | 22,470 | 60,789 | 68,980 | ||||||||||||
Total Segment Revenues |
97,056 | 99,036 | 291,279 | 300,310 | ||||||||||||
Partially-owned unconsolidated entities Multifamily |
(662 | ) | (1,485 | ) | (2,573 | ) | (5,527 | ) | ||||||||
Partially-owned unconsolidated entities Commercial |
(7,866 | ) | (15,814 | ) | (24,050 | ) | (48,418 | ) | ||||||||
Other non-property related revenues |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Discontinued operations property revenues |
(3 | ) | (991 | ) | | (3,562 | ) | |||||||||
Total Consolidated Revenues |
91,139 | 84,733 | 273,568 | 254,205 | ||||||||||||
NOI: |
||||||||||||||||
Segment NOI: |
||||||||||||||||
Multifamily |
43,087 | 43,578 | 129,260 | 133,112 | ||||||||||||
Commercial |
12,832 | 14,233 | 41,155 | 44,049 | ||||||||||||
Total Segment NOI |
55,919 | 57,811 | 170,415 | 177,161 | ||||||||||||
Partially-owned unconsolidated entities Multifamily |
(283 | ) | (719 | ) | (1,161 | ) | (2,792 | ) | ||||||||
Partially-owned unconsolidated entities Commercial |
(5,203 | ) | (9,862 | ) | (16,155 | ) | (30,546 | ) | ||||||||
Other non-property related revenues |
2,614 | 3,987 | 8,912 | 11,402 | ||||||||||||
Discontinued operations property NOI |
11 | (234 | ) | 59 | 381 | |||||||||||
Impairment charge discontinued operations (1) |
| (251 | ) | | (2,051 | ) | ||||||||||
Property management expenses |
(2,323 | ) | (1,728 | ) | (6,008 | ) | (5,329 | ) | ||||||||
General and administrative expenses |
(3,757 | ) | (4,073 | ) | (14,022 | ) | (12,982 | ) | ||||||||
Management fee and other expenses |
(2,001 | ) | (3,340 | ) | (7,259 | ) | (11,131 | ) | ||||||||
Restructuring charges |
| (588 | ) | | (1,400 | ) | ||||||||||
Investment and development (2) |
(9 | ) | (100 | ) | (42 | ) | (1,585 | ) | ||||||||
Depreciation |
(30,554 | ) | (28,070 | ) | (91,075 | ) | (84,130 | ) | ||||||||
Amortization |
(2,299 | ) | (864 | ) | (6,693 | ) | (2,936 | ) | ||||||||
Impairment and other losses (1) |
(131 | ) | (221 | ) | (914 | ) | (1,839 | ) | ||||||||
Income from operations |
11,984 | 11,748 | 36,057 | 32,223 | ||||||||||||
Total other income (expense), net (3) |
(23,105 | ) | (12,378 | ) | (66,459 | ) | (9,658 | ) | ||||||||
(Loss) income from continuing operations |
$ | (11,121 | ) | $ | (630 | ) | $ | (30,402 | ) | $ | 22,565 | |||||
September 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Assets |
||||||||
Segment Assets: |
||||||||
Multifamily |
$ | 2,465,957 | $ | 2,502,772 | ||||
Commercial |
558,030 | 538,046 | ||||||
Total Segment Assets |
3,023,987 | 3,040,818 | ||||||
Unallocated corporate assets (4) |
154,961 | 131,142 | ||||||
$ | 3,178,948 | $ | 3,171,960 | |||||
(1) | See Note 4 Impairment and other losses for description of charges. | |
(2) | Reflects costs incurred related to potential mergers, acquisitions and abandoned pursuits. These costs are volatile and, therefore, may vary between periods. | |
(3) | For-sale residential activities, including net gain on sales and income tax expense (benefit), are included in the line item Total other income (expense). See Note 6 related to for-sale activities. | |
(4) | Includes CRLPs investment in partially-owned entities of $38,052 as of September 30, 2010 and net investment of $17,422 as of December 31, 2009. As of September 30, 2010, investments in partially-owned entities of $23.1 million, for which CRLPs basis is a negative balance (i.e., credit balance), have been classified as a liability. |
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Note 11 Investment in Partially-Owned Entities
During the second quarter of 2010, CRLP exited two single-asset multifamily joint ventures
with DRA Advisors LLC (DRA) totaling 664 units, in each of which CRLP had a 20% ownership
interest. Pursuant to the transaction, CRLP transferred its 20% ownership interest in Colonial
Village at Cary to DRA and made a net cash payment of $2.7 million in exchange for DRAs 80%
ownership in the 345-unit Colonial Grand at Riverchase Trails located in Birmingham, Alabama.
Additionally, CRLP paid off the $19.3 million loan securing Colonial Grand at Riverchase Trails,
which was set to mature in October 2010. CRLP now owns 100% of Colonial Grand at Riverchase Trails
and DRA owns 100% of Colonial Village at Cary, with respect to which DRA assumed the existing
secured mortgage. As of September 30, 2010, CRLP no longer manages Colonial Village at Cary. The
transaction was funded by borrowings from CRLPs unsecured credit facility and proceeds from
issuances of common shares through the Trusts at-the-market equity offering programs.
Investments in Consolidated Partially-Owned Entities
CRLP has one partially-owned investment, the CMS/Colonial Canyon Creek joint venture, which is
consolidated in its financial statements. As a result of a preferred equity contribution of $11.5
million made by CRLP to the joint venture in September 2009 in connection with a construction loan
refinancing, CRLP began consolidating the CMS/Colonial Canyon Creek joint venture in its financial
statements beginning with the third quarter of 2009. This joint venture is a variable interest
entity and CRLPs $11.5 million preferred equity contribution constituted a reconsideration event.
With the preferred equity contribution, CRLP became the primary beneficiary, as it will absorb the
majority of the variability in the joint ventures operating results.
In assessing whether or not CRLP was the primary beneficiary under FASB ASU 2009-17, CRLP
considered the significant economic activities of this variable interest entity to consist of:
(1) | the sale of the single apartment community owned by the partnership, | ||
(2) | the financing arrangements with banks or other creditors, | ||
(3) | the capital improvements or significant repairs, and | ||
(4) | the pricing of apartment units for rent. |
CRLP concluded that it has the power to direct these activities and that CRLP has the obligation to
absorb losses and right to receive benefits from the joint venture that could be significant to the
joint venture. Therefore, CRLP believes the consolidation of the CMS/Canyon Creek joint venture is
appropriate.
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Investments in Unconsolidated Partially-Owned Entities
CRLP accounts for the following investments in unconsolidated partially-owned entities using
the equity method. The following table summarizes the investments in partially-owned entities as of
September 30, 2010 and December 31, 2009:
(in thousands) | ||||||||||||
Percent | September 30, | December 31, | ||||||||||
Owned | 2010 | 2009 | ||||||||||
Mulitfamily: |
||||||||||||
Belterra, Ft. Worth, TX |
10.00 | % | $ | 459 | $ | 525 | ||||||
Regents Park (Phase II), Atlanta, GA |
40.00 | %(1) | 3,369 | 3,387 | ||||||||
CG at Huntcliff, Atlanta, GA |
20.00 | % | 1,511 | 1,646 | ||||||||
CG at McKinney, Dallas, TX |
25.00 | %(1) | 1,721 | 1,721 | ||||||||
CG at Research Park, Raleigh, NC |
20.00 | % | 819 | 914 | ||||||||
DRA CV at Cary, Raleigh, NC |
20.00 | % | | 1,440 | ||||||||
DRA The Groves at Riverchase, Birmingham, AL |
20.00 | % | | 1,133 | ||||||||
Total Multifamily |
$ | 7,879 | $ | 10,766 | ||||||||
Commercial: |
||||||||||||
600 Building Partnership, Birmingham, AL |
33.33 | % | 189 | 154 | ||||||||
Colonial Promenade Alabaster II/Tutwiler II, Birmingham, AL |
5.00 | % | 41 | (190 | ) | |||||||
Colonial Promenade Madison, Huntsville, AL |
25.00 | % | 2,101 | 2,119 | ||||||||
Colonial Promenade Smyrna, Smyrna, TN |
50.00 | % | 2,183 | 2,174 | ||||||||
DRA/CLP JV |
15.00 | %(2) | (17,877 | ) | (15,321 | ) | ||||||
Highway 150, LLC, Birmingham, AL |
10.00 | % | 55 | 59 | ||||||||
Bluerock, Huntsville, AL |
10.00 | %(3) | (5,195 | ) | (4,617 | ) | ||||||
Parkside Drive LLC I, Knoxville, TN |
50.00 | % | 1,809 | 3,073 | ||||||||
Parkside Drive LLC II, Knoxville, TN |
50.00 | % | 7,085 | 7,210 | ||||||||
Parkway Place Limited Partnership, Huntsville, AL |
50.00 | % | 14,943 | 10,168 | ||||||||
Total Commercial |
$ | 5,334 | $ | 4,829 | ||||||||
Other |
||||||||||||
Colonial/Polar-BEK Management Company, Birmingham, AL |
50.00 | % | 17 | 35 | ||||||||
Heathrow, Orlando, FL |
50.00 | %(1) | 1,749 | 1,792 | ||||||||
$ | 1,766 | $ | 1,827 | |||||||||
$ | 14,979 | $ | 17,422 | |||||||||
(1) | These joint ventures consist of undeveloped land. | |
(2) | As of September 30, 2010, this joint venture included 16 office properties and two retail properties located in Birmingham, Alabama; Orlando and Tampa, Florida; Atlanta, Georgia; Charlotte, North Carolina; and Austin, Texas. Equity investment includes the value of the Companys investment of approximately $13.8 million, offset by the excess basis difference on the June 2007 joint venture transaction of approximately ($31.7) million, which is being amortized over the life of the properties. This joint venture is presented under Liabilities on CRLPs Consolidated Condensed Balance Sheet as of September 30, 2010. | |
(3) | Equity investment includes CRLPs investment of approximately $1.9 million, offset by the excess basis difference on the transaction of approximately ($7.1) million, which is being amortized over the life of the properties. This joint venture is presented under Liabilities on CRLPs Consolidated Condensed Balance Sheet as of September 30, 2010. |
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Combined financial information for CRLPs investments in unconsolidated partially-owned
entities since the date of CRLPs acquisitions is as follows:
As of | As of | |||||||
September 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Balance Sheet |
||||||||
Assets |
||||||||
Land, building, & equipment, net |
$ | 1,320,546 | $ | 1,416,526 | ||||
Construction in progress |
27,121 | 19,695 | ||||||
Other assets |
113,469 | 118,095 | ||||||
Total assets |
$ | 1,461,136 | $ | 1,554,316 | ||||
Liabilities and Partners Equity |
||||||||
Notes payable (1) |
$ | 1,158,333 | $ | 1,211,927 | ||||
Other liabilities |
110,970 | 108,277 | ||||||
Partners equity |
191,833 | 234,112 | ||||||
Total liabilities and partners capital |
$ | 1,461,136 | $ | 1,554,316 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Statement of Operations |
||||||||||||||||
Revenues |
$ | 44,472 | $ | 99,958 | $ | 136,996 | $ | 311,953 | ||||||||
Operating expenses |
(16,623 | ) | (39,962 | ) | (49,864 | ) | (121,915 | ) | ||||||||
Interest expense |
(18,476 | ) | (35,218 | ) | (54,453 | ) | (111,117 | ) | ||||||||
Depreciation, amortization and other |
(18,818 | ) | (41,926 | ) | (57,020 | ) | (123,241 | ) | ||||||||
Net loss (2) |
$ | (9,445 | ) | $ | (17,148 | ) | $ | (24,341 | ) | $ | (44,320 | ) | ||||
(1) | CRLPs pro-rata share of indebtedness, as calculated based on ownership percentage, at September 30, 2010 and December 31, 2009 was $224.9 million and $239.1 million, respectively. | |
(2) | In addition to CRLPs pro-rata share of income (loss) from partially-owned unconsolidated entities, Loss from partially-owned investments of ($0.7) million and ($3.3) million for the three months ended September 30, 2010 and 2009, respectively, and ($23,000) and ($4.6) million for the nine months ended September 30, 2010 and 2009, respectively, includes gains on CRLPs dispositions of joint-venture interests and amortization of basis differences which are not reflected in the table above. |
Investments in Variable Interest Entities
CRLP evaluates all transactions and relationships with variable interest entities (VIEs) to
determine whether CRLP is the primary beneficiary.
Based on CRLPs evaluation, as of September 30, 2010, CRLP did not have a controlling interest
in, nor is CRLP the primary beneficiary of any VIEs for which there is a significant variable
interest except for, as discussed above in Investments in Consolidated Partially-Owned Entities,
CMS/Colonial Canyon Creek, which CRLP began consolidating in September 2009.
Unconsolidated Variable Interest Entities
As of September 30, 2010, CRLP had an interest in one VIE with significant variable interests
for which CRLP is not the primary beneficiary.
With respect to the Colonial Grand at Traditions joint venture, CRLP and its joint venture
partner each committed to a partial loan repayment guarantee of $3.5 million of the principal
amount of a $34.1 million construction loan obtained by the joint venture, for a total guarantee of
$7.0 million of the principal amount. CRLP and its joint venture partner each committed to provide
50% of the guarantee, which is different from the relative voting and economic interests of the
parties in the joint venture. As a result, this investment qualifies as a VIE, but CRLP has
determined that it would not absorb a majority of the expected losses for this joint venture and,
therefore, does not consolidate the joint venture. In September 2009, CRLP determined that it was
probable that it would have to fund its partial loan repayment guarantee provided on the original
construction loan and recognized a $3.5 million charge to earnings. In addition, CRLP determined
that is 35% noncontrolling joint venture interest was impaired and that this impairment was other
than temporary. As a result, CRLP wrote-off its entire investment in the joint venture by recording
a non-cash impairment charge of $0.2 million during the quarter ended September 30, 2009. The
construction loan matured on April 15, 2010, but has not been repaid by the joint venture (see Note
12 Unconsolidated Joint Venture Financing Activity).
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Note 12 Financing Activities
In the second quarter of 2010, CRLP closed on $73.2 million of secured financing originated by
Berkadia Commercial Mortgage LLC for repurchase by Fannie Mae. The financing has a 10-year term,
carries a fixed interest rate of 5.02% and is secured by three multifamily properties. The proceeds
from this financing were used to repay a portion of outstanding balance on CRLPs unsecured credit
facility.
During 2009, CRLP, together with the Trust, obtained the following secured financing from
Fannie Mae:
| In the first quarter of 2009, CRLP, together with the Trust, closed on a $350.0 million collateralized credit facility (collateralized with 19 of CRLPs multifamily apartment communities totaling 6,565 units). Of the $350.0 million, $259.0 million bears interest at a fixed interest rate equal to 6.07% and $91.0 million bears interest at a fixed interest rate of 5.96%. The weighted average interest rate for this credit facility is 6.04%, and it matures on March 1, 2019; and | ||
| In the second quarter of 2009, CRLP, together with the Trust, closed on a $156.4 million collateralized credit facility (collateralized by eight of CRLPs multifamily apartment communities totaling 2,816 units). Of the $156.4 million, $145.2 million bears interest at a fixed interest rate equal to 5.27% and $11.2 million bears interest at a fixed interest rate of 5.57%. The weighted average interest rate for this credit facility is 5.31%, and it matures on June 1, 2019. |
Under both facilities, accrued interest is required to be paid monthly with no scheduled principal
payments required prior to the maturity date. The proceeds from these financings were used to repay
a portion of the outstanding borrowings under CRLPs unsecured credit facility.
As of September 30, 2010, CRLP, with the Trust as guarantor, had a $675.0 million unsecured
credit facility (as amended, the Credit Facility) with Wells Fargo Bank, National Association
(Wells Fargo), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Citicorp
North America, Inc. and Regions Bank, as Co-Documentation Agents, and U.S. Bank National
Association and PNC Bank, National Association, as Co-Senior Managing Agents and other lenders
named therein. The Credit Facility has a maturity date of June 21, 2012. In addition to the Credit
Facility, CRLP has a $35.0 million cash management line provided by Wells Fargo that will expire on
June 21, 2010.
Base rate loans and revolving loans are available under the Credit Facility. The Credit
Facility also includes a competitive bid feature that allows CRLP to convert up to $337.5 million
under the Credit Facility to a fixed rate and for a fixed term not to exceed 90 days. Generally,
base rate loans bear interest at Wells Fargos designated base rate, plus a base rate margin
ranging up to 0.25% based on CRLPs unsecured debt ratings from time to time. Revolving loans bear
interest at LIBOR plus a margin ranging from 0.325% to 1.05% based on CRLPs unsecured debt
ratings. Competitive bid loans bear interest at LIBOR plus a margin, as specified by the
participating lenders. Based on CRLPs current unsecured debt rating, the revolving loans
currently bear interest at a rate of LIBOR plus 105 basis points.
The Credit Facility and the cash management line, which primarily are used by CRLP to finance
property acquisitions and developments and more recently, to also fund repurchases of CRLP senior
notes and Series D preferred depositary shares, had an outstanding balance at September 30, 2010 of
$301.4 million, including $11.4 million outstanding on the cash management line. The weighted
average interest rate of the Credit Facility (including the cash management line) was 1.31% at
September 30, 2010 and 2009.
The Credit Facility contains various restrictions, representations, covenants and events of
default that could preclude future borrowings (including future issuances of letters of credit) or
trigger early repayment obligations, including, but not limited to the following: nonpayment;
violation or breach of certain covenants; failure to perform certain covenants beyond a cure
period; failure to satisfy certain financial ratios; a material adverse change in the consolidated
financial condition, results of operations, business or prospects of CRLP; and generally not paying
CRLPs debts as they become due. At September 30, 2010, CRLP was in compliance with these
covenants. However, given the downturn in the economy and continued uncertainty in the stock and
credit markets, there can be no assurance that CRLP will be able to maintain compliance with these
ratios and other debt covenants in the future.
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Many of the recent disruptions in the financial markets have been brought about in large part
by failures in the U.S. banking system. If Wells Fargo or any of the other financial institutions
that have extended credit commitments to CRLP under the Credit Facility or otherwise are adversely
affected by the conditions of the financial markets, these financial institutions may become unable
to fund borrowings under credit commitments to CRLP under the Credit Facility, the cash
management line or otherwise. If these lenders become unable to fund CRLPs borrowings pursuant to
the financial institutions commitments, CRLP may need to obtain replacement financings, and such
financing, if available, may not be on commercially attractive terms.
Unsecured Senior Notes Repurchases
In January 2010, the Trusts Board of Trustees authorized a new unsecured notes repurchase
program, which allows CRLP to repurchase up to $100.0 million of its outstanding unsecured senior
notes. This new repurchase program runs through December 31, 2010. Under this program, senior
notes may be repurchased from time to time in open market transactions or privately negotiated
transactions, subject to applicable legal requirements, market conditions and other factors. The
repurchase program does not obligate the repurchase of any specific amounts of senior notes, and
repurchases pursuant to the program may be suspended or resumed at any time from time to time
without further notice or announcement. CRLP will continue to monitor the debt markets and
repurchase certain senior notes that meet CRLPs required criteria, as funds are available. CRLP
anticipates funding potential repurchases from borrowings under its existing Credit Facility,
proceeds from property sales and/or other available funds.
Repurchases of the outstanding unsecured senior notes of CRLP during 2010 are as follows:
Yield-to- | Net | |||||||||||||||
(in millions) | Amount | Discount | Maturity | Gain (1) | ||||||||||||
1st Quarter |
$ | 8.7 | 1.0 | % | 6.5 | % | $ | | ||||||||
2nd Quarter |
29.0 | 4.3 | % | 6.8 | % | 0.8 | ||||||||||
3rd Quarter |
| | | | ||||||||||||
YTD 10 |
$ | 37.7 | 3.5 | % | 6.7 | % | $ | 0.8 |
(1) | Gains are presented net of the loss on hedging activities of $0.3 million recorded during the nine months ended September 30, 2010 as the result of a reclassification of amounts in Accumulated Other Comprehensive Loss in connection with CRLPs conclusion that it is probable that CRLP will not make interest payments associated with previously hedged debt as a result of the repurchases under the senior note repurchase program. |
During 2009, CRLP repurchased an aggregate of $181.0 million of its outstanding unsecured
senior notes in separate transactions. In addition to the shares repurchased pursuant to the
senior note repurchase, during 2009, CRLP completed two separate cash tender offers for outstanding
unsecured notes of CRLP. In April 2009, CRLP completed a cash tender offer for $250.0 million in
aggregate principal amount of outstanding notes maturing in 2010 and 2011, and in September 2009,
CRLP completed an additional cash tender offer for $148.2 million in aggregate principal amount of
outstanding notes maturing in 2014, 2015 and 2016. The prior senior note repurchase program and
both tender offers were approved by the Trusts Board of Trustees before they were commenced. As a
result, during 2009, CRLP repurchased an aggregate of $579.2 million of its outstanding unsecured
senior notes at an aggregate average of 10.6% discount to par value, which represents an 8.1% yield
to maturity. As a result of the repurchases, during 2009, CRLP recognized net gains of
approximately $54.7 million, which is included in Gains on retirement of debt on CRLPs
Consolidated Statements of Operations.
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Repurchases of the outstanding unsecured senior notes of CRLP during 2009 are as follows:
Yield-to- | Net | |||||||||||||||
(in millions) | Amount | Discount | Maturity | Gain (1) | ||||||||||||
1st Quarter |
$ | 96.9 | 27.1 | % | 12.6 | % | $ | 24.2 | ||||||||
2nd Quarter (2) |
315.5 | 5.9 | % | 6.8 | % | 16.2 | ||||||||||
3rd Quarter (3) |
166.8 | 10.0 | % | 7.9 | % | 14.3 | ||||||||||
4th Quarter |
| | | | ||||||||||||
YE 09 |
$ | 579.2 | 10.6 | % | 8.1 | % | $ | 54.7 |
(1) | Gains are presented net of the loss on hedging activities of $1.1 million recorded during the three months ended March 31, 2009 and $0.6 million recorded during the three months ended September 30, 2009 as the result of a reclassification of amounts in Accumulated Other Comprehensive Loss in connection with the conclusion that it is probable that CRLP will not make interest payments associated with previously hedged debt as a result of the repurchases under the senior note repurchase program. | |
(2) | Repurchases include $250.0 million repurchased pursuant to CRLPs tender offer that closed on May 4, 2009, which was conducted outside of the senior note repurchase program. | |
(3) | Repurchases include $148.2 million repurchased pursuant to CRLPs tender offer that closed on August 31, 2009, which was conducted outside of the senior note repurchase program. |
Unconsolidated Joint Venture Financing Activity
During April 2007, CRLP and its joint venture partner each guaranteed up to $3.5 million, for
an aggregate of up to $7.0 million, of a $34.1 million construction loan obtained by the Colonial
Grand at Traditions joint venture. Construction at this site is complete as the project was placed
into service during 2008. On September 25, 2009, CRLP determined it was probable that it would
have to fund the partial loan repayment guarantee provided on the original construction loan.
Accordingly, on September 30, 2009, $3.5 million was recorded for the guarantee. As of September
30, 2010, the joint venture had drawn $33.4 million on the construction loan, which matured by its
terms on April 15, 2010. The estimated fair market value of the property in the joint venture is
significantly less than the principal amount due on the construction loan. The lender has made a
demand on the joint venture for the outstanding balance under the loan. The lender has also made a
demand on CRLP for the $3.5 million guarantee payment, together with outstanding interest on the
loan (which as of September 30, 2010, was approximately $1.1 million). On October 26, 2010, the
lender placed the property in receivership, which allowed the lender to replace CRLP as property
manager and take control of the propertys cash flow. To date, discussions among CRLP, its joint
venture partner and the lender to reach a mutually acceptable arrangement with respect to the
outstanding loan have been unsuccessful. However, no assurance can be given that the joint venture
or CRLP will be able to reach a mutually satisfactory resolution of this situation.
In November 2006, CRLP and its joint venture partner each committed to guarantee up to $8.7
million, for an aggregate of up to $17.3 million, of a $34.6 million construction loan obtained by
the Colonial Promenade Smyrna joint venture. CRLP and its joint venture partner each committed to
provide 50% of the $17.3 million guarantee, as each partner has a 50% ownership interest in the
joint venture. Construction at this site was completed in 2008. The guarantee provided, among
other things, for a reduction in the guarantee amount in the event the property achieves and
maintains a 1.15 debt service charge. Accordingly, the guarantee has been reduced to $4.3 million.
On May 3, 2010, CRLP acquired from the lender at par the outstanding construction loan originally
obtained by the Colonial Promenade Smyrna joint venture. This note, which had an original
principal amount of $34.6 million and matured by its terms in December 2009, had not been repaid
and had an outstanding balance of $28.3 million as of the date of purchase. The note has an
interest rate of one-month LIBOR plus 1.20%. CRLP has agreed with its joint venture partner to
extend the maturity date of the note consistent with the original extension terms of the note,
which provided for an option to extend maturity for two additional consecutive one year periods.
Accordingly, the maturity date of the note has been extended to December 2010 with an option to
extend for one additional year. As a result of this transaction, the Companys guarantee on this
note was terminated, but the joint venture partners guarantee remains in place.
On June 7, 2010, one of CRLPs joint ventures, Parkway Place Limited Partnership, completed
the refinancing of a $51.0 outstanding mortgage loan associated with the joint ventures Parkway
Place retail shopping center, located in Huntsville, Alabama, which was set to mature in June 2010.
The joint venture, of which CRLP has a 50% ownership interest, obtained a new ten-year $42.0
million mortgage loan that bears interest at a fixed rate of 6.5% per annum. Each of CRLP and its
joint venture partner contributed its pro-rata portion of the existing mortgage debt shortfall in
cash to the joint venture, which was used to pay off the balance on the existing mortgage debt.
CRLPs pro-rata portion of the cash payment, $5.4
million, was funded from CRLPs unsecured credit facility. See Note 15 Subsequent Events for
additional details regarding this joint venture.
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On June 30, 2010, upon CRLP completing its exit from two single-asset multifamily joint
ventures (discussed above in Note 11), CRLP paid off the $19.3 million loan securing Colonial Grand
at Riverchase Trails, in which CRLP now has 100% interest. The loan was originally set to mature
in October 2010.
There can be no assurance that CRLPs joint ventures will be successful in refinancing and/or
replacing existing debt at maturity or otherwise. If the joint ventures are unable to obtain
additional financing, pay off the existing loans that are maturing, or renegotiating suitable terms
with the existing lenders, the lenders generally would have the right to foreclose on the
properties in question and, accordingly, the joint ventures will lose their interests in the
assets. The failure to refinance and/or replace such debt and other factors with respect to CRLPs
joint venture interests (discussed in Item 1A: Risk Factors in CRLPs 2009 Annual Report on Form
10-K) may materially adversely impact the value of CRLPs joint venture interests, which, in turn,
could have a material adverse effect on CRLPs financial condition and results of operations.
Note 13 Derivatives and Hedging
CRLP is exposed to certain risks arising from both its business operations and economic
conditions. CRLP principally manages its exposures to a wide variety of business and operational
risks through management of its core business activities. CRLP manages economic risks, including
interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of
its debt funding and the use of derivative financial instruments. Specifically, CRLP enters into
derivative financial instruments to manage exposures that arise from business activities that
result in the receipt or payment of future known and uncertain cash amounts, the value of which is
determined by interest rates. CRLPs derivative financial instruments are used to manage
differences in the amount, timing and duration of CRLPs known or expected cash receipts and its
known or expected cash payments principally related to CRLPs investments and borrowings.
CRLPs objectives in using interest rate derivatives are to add stability to interest expense
and to manage its exposure to interest rate movements. To accomplish this objective, CRLP
primarily uses interest rate swaps and caps as part of its interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts
from a counterparty in exchange for CRLP making fixed-rate payments over the life of the agreements
without exchange of the underlying notional amount. Interest rate caps designated as cash flow
hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise
above the strike rate on the contract in exchange for an upfront premium.
At September 30, 2010, CRLP had $2.4 million in Accumulated other comprehensive loss related
to settled or terminated derivatives. Amounts reported in Accumulated other comprehensive loss
related to derivatives will be reclassified to Interest expense as interest payments are made on
CRLPs variable-rate debt or to Loss on hedging activities at such time that the interest
payments on the hedged debt become probable of not occurring as a result of CRLPs senior note
repurchase programs. The changes in Accumulated other comprehensive loss for reclassifications
to Interest expense tied to interest payments on the hedged debt were immaterial for all periods
presented. The changes in Accumulated other comprehensive loss for reclassification to Loss on
hedging activities related to interest payments on the hedged debt that have been deemed no longer
probable to occur as a result of CRLPs senior note repurchase program was $0.6 million for the
three months ended September 30, 2009, and $0.3 million and $1.7 million for the nine months ended
September 30, 2010 and 2009, respectively. CRLP did not reclassify amounts to Loss on hedging
activities for the three months ended September 30, 2010.
Note 14 Contingencies and Guarantees
Contingencies
CRLP is involved in a contract dispute with a general contractor in connection with
construction costs and cost overruns with respect to certain of its for-sale projects, which were
developed in a joint venture in which CRLP is a majority owner. The contractor is affiliated with
CRLPs joint venture partner.
| In connection with the dispute, in January 2008, the contractor filed a lawsuit against CRLP alleging, among other things, breach of contract, enforcement of a lien against real property, misrepresentation, conversion, declaratory judgment and accounting of costs, and is seeking $10.3 million in damages, plus consequential and punitive damages. | ||
| Certain of the subcontractors, vendors and other parties, involved in the projects, including purchasers of units, have also made claims in the form of lien claims, general claims or lawsuits. CRLP has been sued by purchasers of certain condominium units alleging breach of contract, fraud, construction deficiencies and misleading sales practices. Both compensatory and punitive damages are sought in these actions. Some of these claims have been resolved by negotiations and mediations, and others may also be similarly resolved. Some of these claims will likely be arbitrated or litigated to conclusion. |
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CRLP is continuing to evaluate its options and investigate certain of these claims, including
possible claims against the contractor and other parties. CRLP intends to vigorously defend itself
against these claims. However, no prediction of the likelihood, or amount, of any resulting loss
or recovery can be made at this time and no assurance can be given that the matter will be resolved
favorably.
Approximately 60 purchasers of condominium units at CRLPs Mira Vista at James Island property
in Charleston, South Carolina, a condominium conversion property in which all units were sold in 2006, have filed lawsuits against CRLP seeking damages resulting from, among other
things, alleged construction deficiencies and misleading sales practices. There were a total of
230 units built at this condominium conversion property. CRLP anticipates that additional
purchasers of these units also may file lawsuits. CRLP is currently investigating the matter and
evaluating its options, and CRLP intends to vigorously defend itself against these claims.
However, no prediction of the likelihood, or amount, of any resulting loss or recovery can be made
at this time. Further, no assurance can be given that the matter will be resolved favorably to
CRLP.
During the three and nine months ended September 30, 2010, CRLP accrued $0.3 million and $1.1
million, respectively, for certain contingent liabilities related to mitigation of structural
settlement at Colonial Promenade Alabaster II and additional infrastructure cost at Colonial
Promenade Fultondale. Both of these properties were sold by CPSI in previous years, and therefore
are expensed as additional development costs in (Loss) gain from sales of property in CRLPs
Consolidated Condensed Statements of Operations.
As a result of transactions executed in 2007, CRLP implemented its strategic initiative to
become a multifamily focused REIT, which included two significant joint venture transactions
whereby the majority of CRLPs wholly-owned commercial properties were transferred into separate
joint ventures. In December 2009, CRLP disposed of its interest in one of these joint ventures but
continues to retain its interest in the other joint venture. In connection with the 2007 joint
venture transactions, CRLP assumed certain contingent obligations for a total of $15.7 million, of
which $5.9 million remains outstanding as of September 30, 2010.
As of September 30, 2010, CRLP is self-insured up to $0.8 million, $1.0 million and $1.8
million for general liability, workers compensation and property insurance, respectively. CRLP is
also self-insured for health insurance and responsible for amounts up to $135,000 per claim and up
to $2.0 million per person.
CRLP is a party to various other legal proceedings incidental to its business. In the opinion
of management, after consultation with legal counsel, the ultimate liability, if any, with respect
to those proceedings is not presently expected to materially affect the financial position, results
of operations or cash flows of CRLP.
Guarantees and Other Arrangements
With respect to the Colonial Grand at Traditions joint venture, CRLP and its joint venture
partner each committed to guarantee $3.5 million, for a total of $7.0 million, of a $34.1 million
construction loan obtained by the joint venture. As of September 30, 2010, the joint venture had
drawn $33.4 million on the construction loan, which matured by its terms on April 15, 2010 (see
Note 12).
With respect to the Colonial Promenade Smyrna joint venture, CRLP and its joint venture
partner each committed to guarantee up to $8.7 million, for an aggregate of up to $17.3 million, of
a $34.6 million construction loan obtained by the Colonial Promenade Smyrna joint venture. The
guarantee provided, among other things, for a reduction in the guarantee amount in the event the
property achieves and maintains a 1.15 debt service charge. Accordingly, CRLPs committed portion
of the guarantee was reduced to $4.3 million. On May 3, 2010, CRLP acquired the outstanding
Colonial Promenade Smyrna joint venture construction note from the lender at par (see Note 12). As
a result of this transaction, CRLPs guarantee on this note was terminated, but the joint venture
partners guarantee remains in place.
In connection with the formation of Highway 150 LLC in 2002, CRLP executed a guarantee,
pursuant to which CRLP serves as a guarantor of $1.0 million of the debt related to the joint
venture, which is collateralized by the Colonial Promenade Hoover retail property. CRLPs maximum
guarantee of $1.0 million may be requested by the lender only after all of the rights and remedies
available under the associated note and security agreements have been exercised and exhausted. At
September
30, 2010, the total amount of debt of the joint venture was approximately $15.8 million and the
debt matures in December 2012. At September 30, 2010, no liability was recorded for the guarantee.
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In connection with certain retail developments, CRLP has received funding from municipalities
for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily
from sales tax revenues generated from the tenants at each respective development. CRLP has
guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds.
The total amount outstanding on these bonds is approximately $13.5 million at September 30, 2010
and December 31, 2009. At September 30, 2010, no liability was recorded for these guarantees.
In connection with the contribution of certain assets to CRLP, certain partners of CRLP have
guaranteed indebtedness of CRLP totaling $21.2 million at September 30, 2010. The guarantees are
held in order for the contributing partners to maintain their tax deferred status on the
contributed assets. These individuals have not been indemnified by CRLP.
The fair value of the above guarantees could change in the near term if the markets in which
these properties are located deteriorate or if there are other negative indicators.
Note 15 Subsequent Events
Acquisition Activity
On October 22, 2010, CRLP acquired the Villas at Brier Creek, a 364-unit Class A apartment
community located in Raleigh, North Carolina, for $37.9 million. The apartment community was built
in 2009 and is currently 94% occupied. The apartment community is unencumbered, and the acquisition
was funded through CRLPs unsecured Credit Facility.
Disposition Activity
On October 4, 2010, CRLP completed the sale of its remaining 50% interest in Parkway Place
Mall in Huntsville, Alabama to joint venture partner CBL & Associates Properties, Inc. (CBL). The
total consideration was $38.8 million, comprised of $17.9 million in cash paid by CBL and CBLs
assumption of CRLPs pro rata share of the joint ventures existing loan, which was $20.9 million.
Proceeds from the sale were used to repay a portion of the outstanding balance on CRLPs unsecured
Credit Facility.
Distribution
On October 27, 2010, a cash distribution was declared to shareholders of the Trust and
partners of CRLP in the amount of $0.15 per common share and per unit, totaling approximately $12.7
million. The distribution was declared to shareholders and partners of record as of November 8,
2010 and will be paid on November 15, 2010.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion analyzes the financial condition and results of operations of both
Colonial Properties Trust (the Trust), and Colonial Realty Limited Partnership (CRLP), of which
the Trust is the sole general partner and in which the Trust owned a 91.4% limited partner interest
as of September 30, 2010. The Trust conducts all of its properties through CRLP and CRLPs various
subsidiaries. Except as otherwise required by the context, the Company, Colonial, we, us
and our refer to the Trust and CRLP together, as well as CRLPs subsidiaries, including Colonial
Properties Services Limited Partnership (CPSLP), Colonial Properties Services, Inc. (CPSI) and
CLNL Acquisition Sub, LLC.
The following discussion and analysis of the consolidated condensed financial condition and
consolidated results of operations should be read together with the consolidated financial
statements of the Trust and CRLP and the notes thereto contained in this Form 10-Q. This Quarterly
Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. In some cases, you can identify forward-looking statements by terms such as may,
will, should, expects, plans, anticipates, estimates, predicts, potential, or the
negative of these terms or comparable terminology. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause our and our affiliates, or the
industrys actual results, performance, achievements or transactions to be materially different
from any future results, performance, achievements or transactions expressed or implied by such
forward-looking statements including, but not limited to, the risks described under the caption
Risk Factors in the Trusts and CRLPs Annual Report on Form 10-K for the year ended December 31,
2009 (the 2009 Form 10-K). Such factors include, among others, the following:
| the deterioration of the economy and high unemployment in the U.S., together with the downturn in the overall U.S. housing market resulting in weakness in the multifamily market; | ||
| national and local economic, business and real estate conditions generally, including, but not limited to, the effect on demand for multifamily units and commercial rental space from the creation of new multifamily and commercial developments, the extent, strength and duration of the current recession or recovery, the availability and creditworthiness of tenants, and the level of lease rents, and the availability of financing for both tenants and us; | ||
| adverse changes in real estate markets, including, but not limited to, the extent of tenant bankruptcies, financial difficulties and defaults, the extent of future demand for multifamily units and commercial space in our core markets and barriers of entry into new markets which we may seek to enter in the future, the extent of decreases in rental rates, competition, our ability to identify and consummate attractive acquisitions on favorable terms, our ability to reinvest sale proceeds in a manner that generates favorable terms; | ||
| exposure, as a multifamily focused real estate investment trust (REIT), to risks inherent in investments in a single industry; | ||
| risks associated with having to perform under various financial guarantees that we have provided with respect to certain of our joint ventures and developments; | ||
| ability to obtain financing at commercially attractive rates, if at all; | ||
| actions, strategies and performance of affiliates that we may not control or companies, including joint ventures, in which we have made investments; | ||
| changes in operating costs, including real estate taxes, utilities and insurance; | ||
| higher than expected construction costs; | ||
| uncertainties associated with our ability to sell our existing inventory of condominium and for-sale residential assets, including timing, volume and terms of sales; | ||
| uncertainties associated with the timing and amount of real estate dispositions and the resulting gains/losses associated with such dispositions; | ||
| legislative or other regulatory decisions, including tax legislation, government approvals, actions and initiatives, including the need for compliance with environmental and safety requirements, and changes in laws and regulations or the interpretation thereof; |
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| the Trusts ability to continue to satisfy complex rules in order for it to maintain its status as a REIT for federal income tax purposes, the ability of CRLP to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of certain of our subsidiaries to maintain their status as taxable REIT subsidiaries for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules; | ||
| price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on availability of financing; | ||
| effect of any rating agency actions on the cost and availability of new debt financing; | ||
| level and volatility of interest or capitalization rates or capital market conditions; | ||
| effect of any terrorist activity or other heightened geopolitical crisis; and | ||
| other risks identified in the 2009 Form 10-K and, from time to time, in other reports we file with the Securities and Exchange Commission (the SEC) or in other documents that we publicly disseminate. |
We undertake no obligation to publicly update or revise these forward-looking statements to
reflect events, circumstances or changes in expectations after the date of this report.
General
We are a multifamily-focused self-administered equity REIT that owns, develops and operates
multifamily apartment communities primarily located in the Sunbelt region of the United States.
Also, we create additional value for our shareholders by managing commercial assets through joint
venture investments and pursuing development opportunities. We are a fully-integrated real estate
company, which means that we are engaged in the acquisition, development, ownership, management and
leasing of multifamily apartment communities and other commercial real estate properties. Our
activities include full or partial ownership of 155 properties as of September 30, 2010, located in
Alabama, Arizona, Florida, Georgia, Louisiana, Nevada, North Carolina, South Carolina, Tennessee,
Texas and Virginia, development of new properties, acquisition of existing properties,
build-to-suit development and the provision of management, leasing and brokerage services for
commercial real estate.
As of September 30, 2010, we owned or maintained a partial ownership in:
Consolidated | Unconsolidated | Total | Total | |||||||||||||||||||||
Properties | Units/Sq. Feet (1) | Properties | Units/Sq. Feet (1) | Properties | Units/Sq. Feet (1) | |||||||||||||||||||
Multifamily apartment communities |
106 | (2) | 31,865 | 4 | 1,340 | 110 | 33,205 | |||||||||||||||||
Commercial properties |
9 | 2,387,000 | 36 | 8,377,000 | 45 | 10,764,000 |
(1) | For multifamily apartment communities, represents number of units. For commercial properties, represents total square feet, excluding anchor-owned square-feet. | |
(2) | Includes one property partially-owned through a joint venture entity. |
In addition, we own certain parcels of land adjacent to or near these properties (the land).
The multifamily apartment communities, the commercial properties and the land are referred to
herein collectively as the properties. As of September 30, 2010, consolidated multifamily
apartment communities and commercial properties that had achieved stabilized occupancy (which we
have defined as having occurred once the property has attained 93% physical occupancy) were 96.5%
and 83.8% leased, respectively.
The Trust is the general partner of CRLP and, as of September 30, 2010, held approximately
91.4% of the interests in CRLP. We conduct all of our business through CRLP, CPSLP, which provides
management services for our properties, and CPSI, which provides management services for properties
owned by third parties, including unconsolidated joint venture entities. We perform all of our
for-sale residential activities through CPSI.
As a lessor, the majority of our revenue is derived from residents and tenants under existing
leases at our properties. Therefore, our operating cash flow is dependent upon the rents that we
are able to charge our residents and tenants, and the ability of these residents and tenants to
make their rental payments. We also receive third-party management fees generated from third-party
management agreements related to management of properties held in joint ventures.
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The Trust was formed in Maryland on July 9, 1993. The Trust was reorganized as an Alabama
real estate investment trust in 1995. Our executive offices are located at 2101 Sixth Avenue
North, Suite 750, Birmingham, Alabama, 35203 and our telephone number is (205) 250-8700.
Business Strategy and Outlook
Since mid-2008, we have experienced a global financial and economic downturn, which included,
among other things, significant reductions and disruptions in available capital and liquidity from
banks and other providers of credit, substantial reductions and/or volatility in equity values
worldwide, significant job losses in the U.S., and a slowdown in the overall U.S. housing market.
In response to the economic crisis, during 2009, we made significant progress in implementing each
of the following strategic initiatives:
| Strengthen the balance sheet; | ||
| Improve liquidity; | ||
| Address near-term maturities; | ||
| Reduce overhead; and | ||
| Postpone/phase future developments. |
For 2010, we have established the following strategic initiatives:
| Simplify our business; | ||
| Improve operating margins; | ||
| Strengthen the balance sheet; and | ||
| Grow the company. |
Our first strategic initiative for 2010 is to simplify the business. Our primary focus will
continue to be on multifamily operations with a goal of increasing operating income generated from
our multifamily portfolio to greater than 90% of our total operating income. In addition, we plan
to continue looking for opportunities to exit from existing joint ventures and continue refining
our corporate operations, including streamlining our processes, procedures and organizational
structure to create efficiencies and reduce associated overhead. In furtherance of this
initiative, during the nine months ended September 30, 2010, we exited two single-asset multifamily
joint ventures, totaling 664 units in each of which we had a 20% ownership interest. Subsequent to
September 30, 2010, we sold our remaining 50% interest in Parkway Place Mall, a 621,000 square-foot
retail asset, which includes 348,000 of anchor-owned square-footage.
Our second strategic initiative for 2010 is to improve our operating margins. We expect that
property-level margins will continue to be under pressure for the remainder of 2010; therefore, we
will continue to look to improve our overall corporate operating margins through the selective sale
of non-income producing assets and through additional efforts to control expenses. During the nine
months ended September 30, 2010, we disposed of 24 condominium units for total sales proceeds of
$7.4 million. In addition, our property revenues increased during such period, primarily from
acquisitions completed since the third quarter of 2009, and our corporate overhead decreased during
such period when compared to the same period in the prior year. We anticipate that 2010 net income
from multifamily operations will remain under pressure from lack of job growth in the economy and
the corresponding adverse effect of unemployment on rental revenue. Despite recent signs of
economic stabilization in our markets, we believe it is still too early to determine if there will
be sustainable job growth, which is a key driver of income growth in multifamily real estate.
Our third strategic initiative for 2010 is to maintain our focus on strengthening the balance
sheet. During the nine months ended September 30, 2010, CRLP closed on $73.2 million of secured
financing with a 10-year term and a fixed interest rate of 5.02% that is secured by three
multifamily properties. In addition, the Trust issued 9,931,374 common shares under its
at-the-market equity offering programs at an average issue price of $15.10 per share, which
resulted in net proceeds of approximately $148.0 million. We used these proceeds generated from
these transactions to redeem all of the Trusts outstanding Series D preferred depositary shares
(the Series D Preferred Depositary Shares), each representing 1/10th of an 8 1/8
percent Series D Cumulative Redeemable Preferred Share of the Trust (the Series D Preferred
Shares), to fund the Colonial Promenade Nord du Lac development, to repay a portion of the
outstanding balance under our unsecured credit facility and for general corporate purposes. In
addition, during the nine months ended September 30, 2010, CRLP repurchased $37.7 million of
unsecured senior notes of CRLP under our existing note repurchase program, recognizing net gains of
$0.8 million. As of September 30, 2010, we have $20.0 million and $56.9 million of consolidated
debt maturing in 2010 and 2011,
respectively, with $408.6 million of availability under our unsecured credit facility and cash
management line. Through these actions, we are continuing to build on the progress that we made in
2009 to strengthen the balance sheet.
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Our fourth strategic initiative is to grow the company. We intend to grow the company through
focusing on restoring earnings growth in our existing multifamily portfolio to at least
pre-recession levels, as well as through continuing to explore new acquisition opportunities. In
addition, if we continue to see fundamental improvement in our markets, we anticipate pursing
growth opportunities through development efforts on multifamily land that we currently own. We
expect to fund any such potential transactions/developments with proceeds from asset dispositions,
availability under our unsecured Credit Facility (as defined below) and with potential proceeds
from future issuances of common shares. Subsequent to September 30, 2010, we acquired the Villas
at Brier Creek, a 364-unit Class A apartment community located in Raleigh, North Carolina. In
addition, we opened Phase I of Colonial Promenade Nord du Lac, located in Covington, Louisiana,
adding 247,000-square-feet to our retail portfolio.
We expect the remainder of 2010 to continue to be challenging despite recent indications of
stabilizing economic conditions, including higher occupancy rates, downward trends for turnovers
and a limited supply of apartment units. As long as job growth continues to lag, we expect
continued pressure on revenue. We believe, however, that a sustained increase in employment
levels, among other things, will facilitate the successful execution of our 2010 strategic
initiatives, which should position us for improvement into 2011 and 2012.
Executive Summary of Results of Operations
The following discussion of results of operations for the three and nine months ended
September 30, 2010 and 2009 should be read in conjunction with the Consolidated Condensed
Statements of Operations of the Trust and CRLP and related notes thereto included in Item 1 of this
Form 10-Q.
For the three months ended September 30, 2010, the Trust reported a net loss available to
common shareholders of $16.8 million, compared with net loss available to common shareholders of
$3.5 million for the comparable prior year period. For the three months ended September 30, 2010,
CRLP reported a net loss available to common unitholders of $18.4 million, compared with a net loss
available to common unitholders of $4.0 million for the comparable prior year period.
For the nine months ended September 30, 2010, the Trust reported a net loss available to
common shareholders of $40.9 million, compared with net income available to common shareholders of
$8.6 million for the comparable prior year period. For the nine months ended September 30, 2010,
CRLP reported a net loss available to common unitholders of $45.4 million, compared with a net
income available to common unitholders of $10.1 million for the comparable prior year period.
Results of Operation
Comparison of the Three Months Ended September 30, 2010 and 2009
Property-related revenue
Total property-related revenues, which consist of minimum rent, tenant recoveries and other
property related revenue, were $88.5 million for the three months ended September 30, 2010,
compared to $80.7 million for the same period in 2009. The components of property-related revenues
for the three months ended September 30, 2010 and 2009 are:
Three Months Ended | Three Months Ended | |||||||||||||||||||
September 30, 2010 | September 30, 2009 | % Change | ||||||||||||||||||
% of Total | % of Total | from 2009 | ||||||||||||||||||
(in thousands) | Revenues | Revenues | Revenues | Revenues | to 2010 | |||||||||||||||
Minimum rent |
$ | 73,751 | 83 | % | $ | 69,028 | 85 | % | 7 | % | ||||||||||
Tenant recoveries |
2,416 | 3 | % | 848 | 1 | % | 185 | % | ||||||||||||
Other property related revenue |
12,358 | 14 | % | 10,870 | 13 | % | 14 | % | ||||||||||||
Total property-related revenues |
$ | 88,525 | 100 | % | $ | 80,746 | 100 | % | 10 | % | ||||||||||
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The increase in total property-related revenues of $7.8 million for the three months
ended September 30, 2010, as compared to the same period in 2009, was primarily attributable to
properties acquired and developments placed into service since September 30, 2009, as follows:
Three Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
69,779 | 69,691 | $ | 88 | ||||||||
Acquisitions: |
||||||||||||
Multifamily (2) |
1,717 | 277 | 1,440 | |||||||||
Commercial |
4,850 | | 4,850 | |||||||||
Developments: |
||||||||||||
Multifamily |
1,838 | 1,156 | 682 | |||||||||
Commercial |
1,211 | 986 | 225 | |||||||||
Other (3) |
9,130 | 8,636 | 494 | |||||||||
$ | 88,525 | $ | 80,746 | $ | 7,779 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Monthly market rental rates for our stabilized multifamily communities for the three
months ended September 30, 2010 decreased 4.9% to $712 per unit from $749 per unit in the three
months ended September 30, 2009. The decrease in rental rates was offset by increased physical
occupancy levels, which was 96.5% for the three months ended September 30, 2010 compared to 94.4%
for the same period in 2009.
The $1.6 million increase in Tenant recoveries is primarily attributable to the two
commercial assets acquired since September 30, 2009, which are included in
Acquisitions/Commercial in the table above.
Other non-property related revenue
Other non-property-related revenues, which consist primarily of management fees, developments
fees and other miscellaneous fees, were $2.6 million for the three months ended September 30, 2010,
compared to $4.0 million for the same period in 2009. Of the $1.4 million decrease, $1.0 million
is attributable to the termination of management contracts in connection with the disposition of
our interest in certain joint ventures since September 30, 2009 and the remaining decrease is a
result of a reduction in leasing commissions.
Property-related expenses
Total property-related expenses, which consist of property operating expenses and taxes,
licenses and insurance, were $38.1 million for the three months ended September 30, 2010, compared
to $34.0 million for the same period in 2009. The components of property-related expenses for the
three months ended September 30, 2010 and 2009 are:
Three Months Ended | Three Months Ended | |||||||||||||||||||
September 30, 2010 | September 30, 2009 | % Change | ||||||||||||||||||
% of Total | % of Total | from 2009 | ||||||||||||||||||
(in thousands) | Expenses | Expenses | Expenses | Expenses | to 2010 | |||||||||||||||
Property operating expenses |
$ | 28,255 | 74 | % | $ | 25,615 | 75 | % | 10 | % | ||||||||||
Taxes, licenses and insurance |
9,826 | 26 | % | 8,386 | 25 | % | 17 | % | ||||||||||||
Total property-related expenses |
$ | 38,081 | 100 | % | $ | 34,001 | 100 | % | 12 | % | ||||||||||
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The increase in total property-related expenses of $4.1 million for the three months
ended September 30, 2010, as compared to the same period in 2009, was primarily attributable to an
increase in expenses for stabilized multifamily communities and properties acquired since September
30, 2009, as follows:
Three Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
$ | 30,593 | 29,166 | $ | 1,427 | |||||||
Acquisitions: |
||||||||||||
Multifamily (2) |
830 | 162 | 668 | |||||||||
Commercial |
1,845 | | 1,845 | |||||||||
Developments: |
||||||||||||
Multifamily |
716 | 594 | 122 | |||||||||
Commercial |
352 | 229 | 123 | |||||||||
Other (3) |
3,745 | 3,850 | (105 | ) | ||||||||
$ | 38,081 | $ | 34,001 | $ | 4,080 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Of the $1.4 million increase in expenses for stabilized multifamily communities, $0.9
million is due to increases in repairs and maintenance, primarily as a result of a higher occupancy
levels and improving curb appeal in anticipation of future rental rate increases. The remaining
increase is attributable to water usage from higher occupancy, most of which is a recoverable
expense.
Property management expenses
Property management expenses consist of regional supervision and accounting costs related to
consolidated property operations. These expenses were $2.3 million for the three months ended
September 30, 2010, compared to $1.7 million for the same period in 2009. The increase was
primarily attributable to general overhead expenses resulting from the consolidation/acquisition of
assets since the third quarter of 2009. The increase in expenses was partially offset by a $0.4
million annual expense adjustment of self-insurance reserves, which is based on an actuarial study
of claims history.
General and administrative expenses
General and administrative expenses were $3.8 million for the three months ended September 30,
2010, compared to $4.1 million for the same period in 2009. The $0.3 million reduction in expenses
is primarily attributable to a $2.2 million decrease resulting from an adjustment of our
self-insurance accruals, which was partially offset by an increase in the accrual for legal
contingencies recorded during quarter.
Management fee and other expenses
Management fee and other expenses consist of property management and other services provided
to third parties. The $1.3 million reduction in management fee and other expenses was attributable
to the termination of management contracts in connection with the disposition of our interest in
certain joint ventures since September 30, 2009.
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Depreciation and amortization
Depreciation and amortization expenses were $32.9 million for the three months ended September
30, 2010, compared to $28.9 million for the same period in 2009. The total increase in
depreciation and amortization of $3.9 million for the three months ended September 30, 2010, as
compared to the same period in 2009, was primarily attributable to properties acquired since
September 30, 2009, as follows:
Three Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
$ | 22,443 | $ | 22,113 | $ | 330 | ||||||
Acquisitions: |
||||||||||||
Multifamily (2) |
805 | 118 | 687 | |||||||||
Commercial |
2,733 | | 2,733 | |||||||||
Developments: |
||||||||||||
Multifamily |
871 | 730 | 141 | |||||||||
Commercial |
473 | 361 | 112 | |||||||||
Other (3) |
5,528 | 5,612 | (84 | ) | ||||||||
$ | 32,853 | $ | 28,934 | $ | 3,919 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Interest expense
Interest expense was $21.2 million for the three months ended September 30, 2010, compared to
$22.6 million for the same period in 2009. The $1.4 million decrease is primarily attributable to
a lower weighted average interest rate on our total consolidated debt when compared to the prior
year period, partially resulting from our repurchase of unsecured senior notes of CRLP having
relatively higher interest rates and the closing of our new 10-year secured financings having a
relatively lower interest rate.
Gains on retirement of debt, net of write-off
Gains on retirement of debt, net of write-off, were $14.3 million for the three months ended
September 30, 2009 compared with zero for the three months ended September 30, 2010. Total gains
of $14.9 million during the three months ended September 30, 2009 were recognized from the
repurchase of $166.8 million of outstanding unsecured senior notes of CRLP at an average 10.0%
discount to par value. As a result of the repurchases, we recognized a loss of $0.6 million
presented in Loss on hedging activities as a result of a reclassification of amounts in
Accumulated Other Comprehensive Loss in connection with our conclusion that it is probable that
we will not make interest payments associated with previously hedged debt.
Loss from partially-owned investments
Loss from partially-owned investments was $3.3 million for the three months ended September
30, 2009 primarily due to a $3.5 million charge based on our conclusion that it is probable that we
will have to fund the partial loan repayment guarantee on the original construction loan for
Colonial Grand at Traditions, a property in which we have a 35% noncontrolling interest. The loss
of $0.7 million for the three months ended September 30, 2010 is attributable to our pro-rata share
of the results of operations from our unconsolidated entities.
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Comparison of the Nine Months Ended September 30, 2010 and 2009
Property-related revenue
Total property-related revenues were $264.7 million for the nine months ended September 30,
2010, compared to $242.8 million for the same period in 2009. The components of property-related
revenues for the nine months ended September 30, 2010 and 2009 are:
Nine Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, 2010 | September 30, 2009 | % Change | ||||||||||||||||||
% of Total | % of Total | from 2009 | ||||||||||||||||||
(in thousands) | Revenues | Revenues | Revenues | Revenues | to 2010 | |||||||||||||||
Minimum rent |
$ | 220,842 | 83 | % | $ | 209,475 | 86 | % | 5 | % | ||||||||||
Tenant recoveries |
7,798 | 3 | % | 2,823 | 1 | % | 176 | % | ||||||||||||
Other property related revenue |
36,016 | 14 | % | 30,505 | 13 | % | 18 | % | ||||||||||||
Total property-related revenues |
$ | 264,656 | 100 | % | $ | 242,803 | 100 | % | 9 | % | ||||||||||
The increase in total property-related revenues of $21.9 million for the nine months
ended September 30, 2010, as compared to the same period in 2009, was primarily attributable to
properties acquired and developments placed into service since September 30, 2009, as follows:
Nine Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
$ | 208,461 | $ | 211,381 | $ | (2,920 | ) | |||||
Acquisitions |
||||||||||||
Multifamily (2) |
3,456 | 277 | 3,179 | |||||||||
Commercial |
15,826 | | 15,826 | |||||||||
Developments: |
||||||||||||
Multifamily |
5,278 | 2,278 | 3,000 | |||||||||
Commercial |
3,662 | 2,942 | 720 | |||||||||
Other (3) |
27,973 | 25,925 | 2,048 | |||||||||
$ | 264,656 | $ | 242,803 | $ | 21,853 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Monthly market rental rates for our stabilized multifamily communities for the nine
months ended September 30, 2010 decreased 6.2% to $714 per unit from $761 per unit for the nine
months ended September 30, 2009. The resulting $6.7 million decrease in rental income was
partially offset by a $3.7 million increase in ancillary income derived primarily from the cable
revenue program and an increase in physical occupancy levels.
The $5.0 million increase in Tenant recoveries is primarily attributable to the two
commercial assets acquired since September 30, 2009, which are included in
Acquisitions/Commercial in the table above.
Other non-property related revenue
Other non-property-related revenues were $8.9 million for the nine months ended September 30,
2010, compared to $11.4 million for the same period in 2009. The $2.5 million decrease in other
non-property related revenue is attributable to the termination of management contracts in
connection with the disposition of our interest in certain joint ventures since September 30, 2009.
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Property-related expenses
Total property-related expenses were $111.5 million for the nine months ended September 30,
2010, compared to $100.7 million for the same period in 2009. The components of property-related
expenses for the nine months ended September 30, 2010 and 2009 are:
Nine Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, 2010 | September 30, 2009 | % Change | ||||||||||||||||||
% of Total | % of Total | from 2009 | ||||||||||||||||||
(in thousands) | Expenses | Expenses | Expenses | Expenses | to 2010 | |||||||||||||||
Property operating expenses |
$ | 79,632 | 71 | % | $ | 70,976 | 71 | % | 12 | % | ||||||||||
Taxes, licenses and insurance |
31,866 | 29 | % | 29,674 | 29 | % | 7 | % | ||||||||||||
Total property-related expenses |
$ | 111,498 | 100 | % | $ | 100,650 | 100 | % | 11 | % | ||||||||||
The increase in total property-related expenses of $10.8 million for the nine months
ended September 30, 2010, as compared to the same period in 2009, was primarily attributable to an
increase in expenses for stabilized multifamily communities and properties acquired since September
30, 2009, as follows:
Nine Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
$ | 90,098 | $ | 85,729 | $ | 4,369 | ||||||
Acquisitions |
||||||||||||
Multifamily (2) |
1,740 | 162 | 1,578 | |||||||||
Commercial |
5,547 | | 5,547 | |||||||||
Developments: |
||||||||||||
Multifamily |
2,193 | 1,795 | 398 | |||||||||
Commercial |
967 | 693 | 274 | |||||||||
Other (3) |
10,953 | 12,271 | (1,318 | ) | ||||||||
$ | 111,498 | $ | 100,650 | $ | 10,848 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Of the $4.4 million increase in expenses for stabilized multifamily communities, $3.5
million is due to increases in repairs and maintenance, primarily as a result of a higher occupancy
levels and improving curb appeal in anticipation of future rental rate increases. The remaining
increase is attributable to water usage from higher occupancy, most of which is a recoverable
expense.
Property management expenses
These expenses were $6.0 million for the nine months ended September 30, 2010, compared to
$5.3 million for the same period in 2009. The increase was primarily attributable to general
overhead expenses resulting from the consolidation/acquisition of assets since the third quarter of
2009. The increase in expenses was partially offset by a $0.4 million annual expense adjustment of
self-insurance reserves, which is based on an actuarial study of claims history.
General and administrative expenses
General and administrative expenses were $14.0 million for the nine months ended September 30,
2010, compared to $13.0 million for the same period in 2009. The $1.0 million increase is
primarily due to higher incentive compensation expenses and an increase in the accrual for legal
contingencies recorded during the period, which was partially offset by a $2.2 million adjustment
of our self-insurance accruals.
Management fee and other expenses
The $3.9 million reduction in management fee and other expenses was attributable to the
termination of management contracts in connection with the disposition of our interest in certain
joint ventures since September 30, 2009.
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Depreciation and amortization
Depreciation and amortization expenses were $97.8 million for the nine months ended September
30, 2010, compared to $87.1 million for the same period in 2009. The total increase in
depreciation and amortization of $10.7 million for the nine months ended September 30, 2010, as
compared to the same period in 2009, was primarily attributable to properties acquired since
September 30, 2009, as follows:
Nine Months Ended | Change | |||||||||||
September 30, | from 2009 | |||||||||||
(in thousands) | 2010 | 2009 | to 2010 | |||||||||
Stabilized multifamily communities (1) |
$ | 67,115 | $ | 66,345 | $ | 770 | ||||||
Acquisitions: |
||||||||||||
Multifamily (2) |
1,519 | 118 | 1,401 | |||||||||
Commercial |
8,299 | | 8,299 | |||||||||
Developments: |
||||||||||||
Multifamily |
2,614 | 1,498 | 1,116 | |||||||||
Commercial |
1,341 | 1,114 | 227 | |||||||||
Other (3) |
16,880 | 17,991 | (1,111 | ) | ||||||||
$ | 97,768 | $ | 87,066 | $ | 10,702 | |||||||
(1) | We define stabilized multifamily communities as properties owned in the current year, which were also owned for the 12 calendar months of the prior year, regardless of occupancy levels; stabilized communities may be restated during the year to account for disposition activity. | |
(2) | Includes the consolidation of one multifamily apartment community held in a joint venture beginning in September 2009. | |
(3) | Includes all commercial properties and all non-stabilized multifamily communities. |
Impairment and other losses
Impairment and other losses was $0.9 million for the nine months ended September 30, 2010,
compared to $1.8 million for the same period in 2009. During the nine months ended September 30,
2010, we recorded $0.1 million in non-cash impairment charges resulting from additional costs
related to the sale of the remaining units at one of our for-sale residential projects and $0.8
million as a result of casualty losses at three multifamily apartment communities. The losses at
two of these communities were a result of fire damage and the loss at the other community was a
result of carport structural damage caused by inclement weather. These charges are included in
Impairment and other losses. During the nine months ended September 30, 2009, we recorded an
aggregate of $3.9 million of non-cash impairment charges. Of the $1.8 million reflected in
Impairment and other losses, $0.7 million was recorded for Colonial Pinnacle Craft Farms, $0.5
million was recorded for Grander, $0.3 million was recorded for Regents Park, $0.2 million was
recorded for Colonial Grand at Traditions and $0.1 million is related to the sale of three
outparcels at Colonial Promenade at Tannehill. Of the $2.1 million included in (Loss) income from
discontinued operations, $1.2 million was recorded for Murano at Delray Beach and $0.9 million for
Portofino at Jensen Beach. See Note 4 to the Notes to Consolidated Condensed Financial Statements
of the Trust and CRLP included in this Form 10-Q for additional details.
Interest expense
Interest expense was $63.0 million for the nine months ended September 30, 2010, compared to
$65.8 million for the same period in 2009. The $2.8 million decrease is primarily attributable to
a lower weighted average interest rate on our total consolidated debt when compared to the prior
year period, partially resulting from our repurchase of unsecured senior notes of CRLP having
relatively higher interest rates and the closing of our new 10-year secured financings having a
relatively lower interest rate.
Gains on retirement of debt, net of write-off
Gains on retirement of debt, net of write-off, were $0.8 million and $54.8 million for the
nine months ended September 30, 2010 and 2009, respectively. Total gains of $1.0 million were
recognized for the nine months ended September 30, 2010 from the repurchase of $37.7 million of
outstanding unsecured senior notes of CRLP at an average 3.5% discount to par value. Total gains
of $56.5 million were recognized for the nine months ended September 30, 2009 from the repurchase
of $579.2 million of outstanding unsecured notes of CRLP at an average 10.6% discount to par value.
As a result of the repurchases, we recognized a loss of $0.3 million and $1.7 million for the nine
months ended September 30, 2010 and 2009,
respectively, presented in Loss on hedging activities as a result of a reclassification of
amounts in Accumulated Other Comprehensive Loss in connection with our conclusion that it is
probable that we will not make interest payments associated with previously hedged debt.
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Loss from partially-owned investments
Loss from partially-owned investments was $4.6 million for the nine months ended September 30,
2009 primarily due to a $3.5 million charge based on our conclusion that it is probable that we
will have to fund the partial loan repayment guarantee on the original construction loan for
Colonial Grand at Traditions, a property in which we have a 35% noncontrolling interest.
Liquidity and Capital Resources
As noted above, except as otherwise required by the context, references to the Company,
we, us and our refer to the Trust and CRLP together, as well as CRLPs subsidiaries. Unless
otherwise specified below, the following discussion of liquidity and capital resources applies to
both the Trust and CRLP.
Short-Term Liquidity Needs
We believe our principal short-term liquidity needs are to fund:
| operating expenses directly associated with our portfolio of properties (including regular maintenance items); | ||
| capital expenditures incurred to lease our multifamily apartment communities and commercial space (e.g., tenant improvements and leasing commissions); | ||
| interest expense and scheduled principal payments on our outstanding debt; and | ||
| quarterly distributions that we pay to the Trusts common and preferred shareholders and holders of partnership units in CRLP. |
Given our limited debt maturities in 2010, we believe that cash generated operations, dispositions
of assets, borrowings under our Credit Facility and net proceeds from equity offerings will be
sufficient to allow us to execute our previously discussed 2010 strategic initiatives and meet our
short-term liquidity requirements. However, factors described below and elsewhere herein may have
a material adverse effect on our future cash flow.
Our cash flows from operations, financing activities and investing activities (including
dispositions) as well as general economic and market conditions, are the principal factors
affecting our liquidity and capital resources. Changes in cash due to operating, investing and
financing activities are:
Operating activities net cash provided by operating activities increased to $97.8 million
for the nine months ended September 30, 2010 from $74.5 million for the nine months ended
September 30, 2009. The change was primarily driven by the receipt of $17.4 million in tax
refunds in 2010 and changes in our working capital accounts, primarily in accounts payable
and accrued expenses. For the remainder of 2010, we expect cash flows from operating
activities to be slightly higher than in 2009 due to acquisitions in 2009 and 2010,
including the consolidation of one multifamily apartment community, and developments placed
into service since the third quarter of 2009.
Investing activities net cash used in investing activities was $79.4 million for the nine
months ended September 30, 2010 as compared to net cash provided of $15.5 million for the
comparable prior year period. The change is primarily the result of a significantly reduced
level of disposition activity, resulting in a decrease in proceeds from property sales when
compared to the comparable prior year period, as well as the acquisition of the outstanding
$26.4 million construction loan originally obtained by the Colonial Promenade Smyrna joint
venture from the lender at par, partially offset by reduced investing costs due to our
decision to postpone most of our development activity, as previously discussed. In
addition, we had a $9.0 million increase in capital expenditures, the majority of which was
attributable to our multifamily apartment communities. As we explore growth through
potential acquisitions and development expenditures, our cash flow used for investing
activities could increase.
Financing activities net cash used in financing activities totaled $15.3 million for the
nine months ended September 30, 2010 compared to $95.3 million in the comparable prior year
period. The change is primarily attributable to increased cash from new secured financings
of $73.2 million and the issuance of $150.0 million of the Trusts
common shares under the Trusts at-the-market equity offering programs, as well as a
reduction in debt payments associated with repurchases of $37.7 million of unsecured senior
notes of CRLP. The increase in proceeds from financing activities was partially offset by
the use of funds to redeem the Series D Preferred Depositary Shares, as described further
below.
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The majority of our revenue is derived from residents and tenants under existing leases,
primarily at our multifamily apartment communities. Therefore, our operating cash flow is
dependent upon (i) the number of multifamily apartment communities in our portfolio, (ii) rental
rates, (iii) occupancy rates, (iv) operating expenses associated with these apartment communities
and (v) the ability of residents to make their rental payments. Persistent weakness in the economy
and job market in the U.S. has adversely affected rents we are able to charge and thereby adversely
affected our operating cash flows. However, in the third quarter of 2010, revenues from our
stabilized multifamily communities were positive when compared to the same period in 2009. This is
the first time since the end of 2008 that our revenues have been positive over the prior year
period. We are seeing some improvements in the multifamily fundamentals, such as higher occupancy
rates, positive new and renewal lease rates over the expiring leases, a declining homeownership
rate and a decline in turnover, which all are positive developments for the multifamily industry.
We have made an election to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the Code), commencing with our taxable year ending December
31,1993. If we qualify for taxation as a REIT, we generally will not be subject to Federal income
tax to the extent we distribute at least 90% of our REIT taxable income to the Trusts
shareholders. Even if we qualify for taxation as a REIT, we may be subject to certain state and
local taxes on our income and property and to federal income and excise taxes on our undistributed
income.
Long-Term Liquidity Needs
We believe our principal long-term liquidity needs are to fund:
| the principal amount of our long-term debt as it matures; | ||
| significant capital expenditures that need to be made at our properties; | ||
| development projects that we undertake; and | ||
| costs associated with acquisitions of properties that we pursue. |
Historically, we have satisfied these requirements principally through the most advantageous source
of capital at the time, which has included the incurrence of new debt through borrowings by CRLP
(through public offerings of unsecured debt and private incurrence of collateralized and unsecured
debt), sales of common shares of the Trust (including through at-the-market equity offering
programs), sales of preferred shares of the Trust, capital raised through the disposition of assets
and joint venture capital transactions.
The Trust has filed a registration statement with the SEC allowing us to offer, from time to
time, equity securities of the Trust (including common or preferred shares) for an aggregate public
offering price of up to $500 million on an as-needed basis subject to our ability to affect
offerings on satisfactory terms based on prevailing conditions. During 2010, the Trusts Board of
Trustees authorized two separate at-the-market equity offering programs under this registration
statement: a $50.0 million program in March 2010 and a $100.0 million program in August 2010. As
of September 30, 2010, we had exhausted our full authorizations under the above-mentioned
at-the-market equity offering programs. The March 2010 program resulted in the issuance of
3,602,348 common shares of the Trust at an average price of $13.88 per share, generating aggregate
net proceeds of $49.0 million. The August 2010 program resulted in the issuance of 6,329,026
common shares of the Trust common shares at an average price of $15.80 per share, generating
aggregate net proceeds of approximately $99.0 million.
Pursuant to CRLPs Third Amended and Restated Agreement of Limited Partnership, each time the
Trust issues common shares pursuant to the foregoing programs or other equity offerings, CRLP
issues to the Trust, its general partner, an equal number of units for the same price at which the
common shares were sold and the Trust contributes the net proceeds of such offerings to CRLP.
The aggregate net proceeds of $148.0 million from the above described at-the-market equity
offering programs were used to redeem $100.0 million of the Trusts outstanding Series D Preferred
Depositary Shares, to repay a portion of outstanding borrowings on our unsecured credit facility
and to fund general corporate purposes.
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Our ability to raise funds through sales of common shares and preferred shares of the Trust in
the future is dependent on, among other things, general market conditions for REITs, market
perceptions about our company and the current trading
price of the Trusts common shares. The persistent weakness in the economy and deterioration in
the stock and credit markets since mid-2008 have resulted in significant price volatility, which
have caused market prices of many stocks, including the price of the Trusts common shares, to
fluctuate substantially. With respect to both debt and equity, a prolonged downturn in the
financial markets may cause us to seek alternative sources of potentially less attractive
financing, and may require us to adjust our business plan accordingly. These events also may make
it more difficult or costly for us to raise capital through the issuance of the Trusts common or
preferred shares, through subordinated notes of CRLP or through private financings. We will
continue to analyze which source of capital is most advantageous to us at any particular point in
time, but the equity and credit markets may not be consistently available on terms that are
attractive or at all.
Our ability to incur additional debt is dependent upon a number of factors, including our
credit ratings, the value of our assets, our degree of leverage and borrowing restrictions imposed
by our current lenders. In September 2010, Moodys Investor Service (Moodys) reaffirmed our
rating of Ba1 and Standard & Poors and Fitch reaffirmed our rating of BB+. In March 2009, Moodys
and Standard & Poors lowered their credit ratings on our senior unsecured debt, resulting in an
increase in the pricing under our credit facility to LIBOR plus 105 points from LIBOR plus 75
points. These credit rating downgrades have reduced the likelihood that we would be able to access
the unsecured public debt market on terms advantageous to us. We will continue to monitor the
unsecured and secured debt markets, including Fannie Mae and/or Freddie Mac (from whom we have
obtained secured financing in 2009 and 2010, as described below), and as market conditions permit,
access borrowings that are advantageous to us.
Our ability to generate cash from asset sales is limited by market conditions and certain
rules applicable to REITs. In the current market, our ability to sell commercial properties to
raise cash is challenging. For example, we may not be able to sell a property or properties as
quickly as we have in the past or on terms as favorable as we have previously received. During the
nine months ended September 30, 2010, we sold assets for aggregate proceeds of approximately $10.9
million ($9.2 million from the sale of consolidated assets and $1.7 million, which is our pro-rata
share, from the sale of an unconsolidated land parcel). The proceeds from the asset sales were
used to repay a portion of outstanding borrowings under our unsecured Credit Facility.
At September 30, 2010, our total outstanding debt balance was $1.71 billion. The outstanding
balance includes fixed-rate debt of $1.39 billion, or 81.6% of the total debt balance, and
floating-rate debt of $314.5 million, or 18.4% of the total debt balance. As further discussed
below, at September 30, 2010, we had an unsecured revolving Credit Facility providing for total
borrowings of up to $675.0 million and a cash management line providing for borrowings up to $35.0
million.
Distributions
On October 27, 2010, a cash distribution was declared to shareholders of the Trust and
partners of CRLP in the amount of $0.15 per common share and per common unit, totaling
approximately $12.7 million. The distribution was declared to shareholders and partners of record
as of November 8, 2010 and will be paid on November 15, 2010. We also pay regular quarterly
distributions on preferred shares in the Trust and on preferred units in CRLP. The maintenance of
these distributions is subject to various factors, including the discretion of the Trusts Board of
Trustees, the Trusts ability to pay dividends under Alabama law, the availability of cash to make
the necessary dividend payments and the effect of REIT distribution requirements, which require at
least 90% of the Trusts taxable income to be distributed to the Trusts shareholders (excluding
net capital gains).
Unsecured Revolving Credit Facility
As of September 30, 2010, CRLP, with the Trust as a guarantor, had a $675.0 million unsecured
credit facility (as amended, the Credit Facility) with Wells Fargo Bank, National Association
(Wells Fargo), as Agent for the lenders, Bank of America, N.A. as Syndication Agent, Citicorp
North America, Inc. and Regions Bank, as Co-Documentation Agents, and U.S. Bank National
Association and PNC Bank, National Association, as Co-Senior Managing Agents and other lenders
named therein. The Credit Facility has a maturity date of June 21, 2012. In addition to the
Credit Facility, we have a $35.0 million cash management line provided by Wells Fargo that will
expire on June 21, 2012.
Base rate loans and revolving loans are available under the Credit Facility. The Credit
Facility also includes a competitive bid feature that allows us to convert up to $337.5 million
under the Credit Facility to a fixed rate and for a fixed term not to exceed 90 days. Generally,
base rate loans bear interest at Wells Fargos designated base rate, plus a base rate margin
ranging up to 0.25% based on our unsecured debt ratings from time to time. Revolving loans bear
interest at LIBOR plus a margin ranging from 0.325% to 1.05% based on our unsecured debt ratings.
Competitive bid loans bear interest at LIBOR plus a margin, as specified by the participating
lenders. Based on CRLPs current unsecured debt rating, the revolving loans currently bear
interest at a rate of LIBOR plus 105 basis points.
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The Credit Facility and cash management line, which are primarily used to finance property
acquisitions and developments and more recently to fund repurchases of CRLP senior notes, had an
aggregate outstanding balance at September 30, 2010 of $301.4 million, including $11.4 million
outstanding on our cash management line. The weighted average interest rate of the Credit
Facility, including the cash management line, was 1.31% at September 30, 2010.
The Credit Facility contains various ratios and covenants that are more fully described in
Note 12 to the Notes to Consolidated Condensed Financial Statements of the Trust and CRLP,
respectively, included in this Form 10-Q. The economic downturn and continued uncertainty in the
stock and credit markets may negatively impact our ability to generate earnings sufficient to
maintain compliance with these ratios and other debt covenants in the future. We expect to be able
to comply with these ratios and covenants in 2010, but no assurance can be given that we will be
able to maintain compliance with these ratios and other debt covenants, particularly if economic
conditions worsen.
Many of the recent disruptions in the financial markets since 2008 have been brought about in
large part by failures in the U.S. banking system. If Wells Fargo or any of the other financial
institutions that have extended credit commitments to us under the Credit Facility or otherwise are
adversely affected by the conditions of the financial markets, they may become unable to fund
borrowings under their credit commitments to us under the Credit Facility, the cash management line
or otherwise. If our lenders become unable to fund our borrowings pursuant to their commitments to
us, we may need to obtain replacement financing, and such financing, if available, may not be
available on commercially attractive terms.
Collateralized Credit Facilities
In the second quarter of 2010, CRLP closed on a $73.2 million of secured financing originated
by Berkadia Commercial Mortgage LLC for repurchase by Fannie Mae. The financing has a 10-year
term, carries a fixed interest rate of 5.02% and is secured by three multifamily properties. The
proceeds from this financing were used to repay a portion of the outstanding balance on our
unsecured Credit Facility.
During 2009, CRLP obtained the following secured financing from Fannie Mae:
| In the first quarter of 2009, we closed on a $350.0 million collateralized credit facility (collateralized with 19 of CRLPs multifamily apartment communities totaling 6,565 units), with a weighted average interest rate of 6.04%, and which matures on March 1, 2019; and | ||
| In the second quarter of 2009, we closed on a $156.4 million (collateralized credit facility collateralized by eight of CRLPs multifamily apartment communities totaling 2,816 units), with a weighted average interest rate of 5.31%, and which matures on June 1, 2019. |
Under both facilities, accrued interest is required to be paid monthly with no scheduled principal
payments required prior to the maturity date. The proceeds from these financings were used to
repay a portion of the outstanding borrowings under our Credit Facility.
Equity Repurchases
In August, 2010, the Trusts Board of Trustees authorized the redemption of all of our
outstanding 4,004,735 Series D Preferred Shares. The Series D Preferred Depositary Shares were
redeemed by the Trust (and CRLP repurchased a corresponding amount of Series D Preferred Units) on
September 10, 2010 for a purchase price of $25.00 per Series D Preferred Depositary Share, plus
accrued and unpaid dividends for the period from August 1, 2010 through and including the
redemption date, for an aggregate redemption price per Series D Preferred Depositary Share of
$25.2257, or $100.1 million in the aggregate. After the redemption date, dividends on the Series D
Preferred Depositary Shares ceased to be accrued, the Series D Preferred Depositary Shares (as well
as the Series D Preferred Shares of the Trust and Series D Preferred Units of CRLP) were no longer
deemed outstanding, and all rights of the holders of the Series D Preferred Depositary Shares (as
well as the Series D Preferred Shares of the Trust and Series D Preferred Units of CRLP) ceased.
The redemption price was funded by proceeds from the Trusts $100.0 million at-the-market equity
offering program, described above. As a result of the redemption, during the three months ended
September 30, 2010, we recognized a $3.6 million charge associated with the write-off of the
original preferred share issuance costs.
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Unsecured Senior Note Repurchases
On January 27, 2010, the Trusts Board of Trustees authorized a new unsecured notes repurchase
program which allows for the repurchase of up to $100.0 million of outstanding unsecured senior
notes of CRLP. This new repurchase program runs through December 31, 2010. Under this program,
senior notes may be repurchased from time to time in open market transactions or privately
negotiated transactions, subject to applicable legal requirements, market conditions and other
factors. The repurchase program does not obligate the repurchase of any specific amounts of senior
notes, and repurchases pursuant to the program may be suspended or resumed at any time from time to
time without further notice or announcement. We will continue to monitor the debt markets and
repurchase certain senior notes that meet our required criteria, as funds are available. We
anticipate funding potential repurchases from borrowings under our existing Credit Facility,
proceeds from property sales and/or other available funds.
We did not repurchase any unsecured senior notes during the three months ended September 30,
2010. During the nine months ended September 30, 2010, we repurchased $37.7 million in unsecured
senior notes of CRLP, at a 3.5% discount to par value, which represents a 6.7% yield to maturity
and resulted in the recognition of $0.8 million in net gains.
Contingencies
We are involved in a contract dispute with a general contractor in connection with
construction costs and cost overruns with respect to certain of our for-sale projects, which were
being developed in a joint venture in which we were a majority owner. The contractor is affiliated
with our joint venture partner.
| In connection with the dispute, in January 2008, the contractor filed a lawsuit against us alleging, among other things, breach of contract, enforcement of a lien against real property, misrepresentation, conversion, declaratory judgment and an accounting of costs, and is seeking $10.3 million in damages, plus consequential and punitive damages. | ||
| Certain of the subcontractors, vendors and other parties, involved in the projects, including purchasers of units, have also made claims in the form of lien claims, general claims or lawsuits. We have been sued by purchasers of certain condominium units alleging breach of contract, fraud, construction deficiencies and misleading sales practices. Both compensatory and punitive damages are sought in these actions. Some of these claims have been resolved by negotiations and mediations, and others may also be similarly resolved. Some of these claims will likely be arbitrated or litigated to conclusion. |
We are continuing to evaluate our options and investigate certain of these claims, including
possible claims against the contractor and other parties. We intend to vigorously defend ourselves
against these claims. However, no prediction of the likelihood, or amount, of any resulting loss
or recovery can be made at this time and no assurance can be given that the matter will be resolved
favorably.
Approximately 60 purchasers of condominium units at our Mira Vista at James Island property in
Charleston, South Carolina, a condominium conversion property in which all units were sold in 2006, have filed lawsuits against us seeking damages resulting from, among other
things, alleged construction deficiencies and misleading sales practices. There were a total of
230 units built at this condominium conversion property. We anticipate that additional purchasers
of these units also may file lawsuits. We are currently investigating the matter and evaluating
our options, and we intend to vigorously defend our self against these claims. However, no
prediction of the likelihood, or amount, of any resulting loss or recovery can be made at this
time. Further, no assurance can be given that the matter will be resolved favorably to us.
During the three and nine months ended September 30, 2010, we accrued $0.3 million and $1.1
million, respectively, for certain contingent liabilities related to mitigation of structural
settlement at Colonial Promenade Alabaster II and additional infrastructure cost at Colonial
Promenade Fultondale. Both of the properties were sold by CPSI in previous years, and therefore
are expensed as additional development cost in (Loss) Gain on Sales of Property in our
Consolidated Condensed Statements of Operations.
As a result of transactions executed in 2007, we implemented our strategic initiative to
become a multifamily focused REIT, which included two significant joint venture transactions
whereby the majority of our wholly-owned commercial properties were transferred into separate joint
ventures. In December 2009, we disposed of our interest in one of these joint
ventures but continue to retain an interest in the other joint venture. In connection with the
2007 joint venture transactions, we assumed certain contingent obligations for a total of $15.7
million, of which $5.9 million remains outstanding as of September 30, 2010.
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As of September 30, 2010, we are self-insured up to $0.8 million, $1.0 million and $1.8
million for general liability, workers compensation and property insurance, respectively. We are
also self insured for health insurance and responsible for amounts up to $135,000 per claim and up
to $2.0 million per person.
In addition to the claims, disputes and legal proceedings discussed above and the claims and
disputes below under Off-Balance Sheet Arrangements, we are a party to various other legal
proceedings incidental to our business. In the opinion of management, after consultation with
legal counsel, the ultimate liability, if any, with respect to those claims, disputes and legal
proceedings in not presently expected to materially affect our financial position or results of
operations or cash flows.
Guarantees and Other Arrangements
With respect to the Colonial Grand at Traditions joint venture, we and our joint venture
partner each committed to a partial loan repayment guarantee of $3.5 million of the principal
amount of a $34.1 million construction loan obtained by the joint venture, for a total guarantee of
$7.0 million of the principal amount. As further described below under Off-Balance Sheet
Arrangements, the loan matured on April 15, 2010, but has not been repaid by the joint venture.
With respect to the Colonial Promenade Smyrna joint venture, we and our joint venture partner
each committed to guarantee up to $8.7 million, for an aggregate of up to $17.3 million, of a $34.6
million construction loan obtained by the Colonial Promenade Smyrna joint venture. The guarantee
provided, among other things, for a reduction in the guarantee amount in the event the property
achieves and maintains a 1.15 debt service charge. Accordingly, our obligations under the
guarantee were reduced to $4.3 million. On May 3, 2010, we acquired the outstanding Colonial
Promenade Smyrna joint venture construction note from the lender at par (see below under
Off-Balance Sheet Arrangements). As a result of this transaction, our guarantee of this loan was
terminated, but our joint venture partners guarantee remains in place.
In connection with the formation of Highway 150 LLC in 2002, we executed a guarantee, pursuant
to which we serve as a guarantor of $1.0 million of the debt related to the joint venture, which is
collateralized by the Colonial Promenade Hoover retail property. Our maximum guarantee of $1.0
million may be requested by the lender only after all of the rights and remedies available under
the associated note and security agreements have been exercised and exhausted. At September 30,
2010, the total amount of debt of the joint venture was approximately $15.8 million and the debt
matures in December 2012. At September 30, 2010, no liability was recorded for the guarantee.
In connection with certain retail developments, we have received funding from municipalities
for infrastructure costs. In most cases, the municipalities issue bonds that are repaid primarily
from sales tax revenues generated from the tenants at each respective development. We have
guaranteed the shortfall, if any, of tax revenues to the debt service requirements on the bonds.
The total amount outstanding on these bonds is approximately $13.5 million at September 30, 2010.
At September 30, 2010, no liability was recorded for these guarantees.
In connection with the contribution of certain assets to CRLP, certain partners of CRLP have
guaranteed indebtedness totaling $21.2 million at September 30, 2010. The guarantees are held in
order for the contributing partners to maintain their tax deferred status on the contributed
assets. These individuals have not been indemnified by us.
The fair value of the above guarantees could change in the near term if the markets in which
these properties are located deteriorate or if there are other negative indicators.
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Off-Balance Sheet Arrangements
At September 30, 2010, our pro-rata share of mortgage debt of unconsolidated joint ventures
was $224.9 million. The aggregate maturities of this mortgage debt are as follows:
(in millions) | ||||
2010 |
$ | 11.7 | ||
2011 |
20.0 | |||
2012 |
2.0 | |||
2013 |
6.0 | |||
2014 |
116.4 | |||
Thereafter |
68.8 | |||
$ | 224.9 | |||
Of this debt, $6.3 million and $2.0 million maturing in 2011 and 2012, respectively, include
options for at least a one-year extension. We intend to cooperate with our joint venture partners
in connection with their efforts to refinance and/or replace debt, which cooperation may include
additional capital contributions from time to time in connection therewith.
During April 2007, we and our joint venture partner each committed to a partial loan repayment
guarantee of $3.5 million of the principal amount of a $34.1 million construction loan obtained by
the Colonial Grand at Traditions joint venture, for a total guarantee of $7.0 million of the
principal amount. Construction at this site has been completed and the project was placed into
service during 2008. In late September 2009, we determined it was probable that we would have to
fund the partial loan repayment guarantee provided on the original construction loan. Accordingly,
on September 30, 2009, $3.5 million was recorded for the guarantee. As of September 30, 2010, the
joint venture had drawn $33.4 million on the construction loan, which matured by its terms on April
15, 2010. The estimated fair market value of the property in the joint venture is significantly
less than the principal amount outstanding on this loan. To date, the joint venture has not repaid
the outstanding principal amount due on the construction loan. The lender has made a demand on the
joint venture for the outstanding balance under the loan. The lender has also made a demand on us
for the $3.5 million guarantee payment, together with outstanding interest on the loan (which as of
September 30, 2010, was approximately $1.1 million). On October 26, 2010, the lender placed the
property in receivership, which allowed the lender to replace us as property manager and take
control of the propertys cash flow. To date, discussions among us, our joint venture partner and
the lender to reach a mutually acceptable arrangement with respect to the outstanding loan have
been unsuccessful. However, no assurance can be given that we or the joint venture will be able to
reach a mutually satisfactory resolution of this situation.
In November 2006, we and our joint venture partner each committed to guarantee up to $8.7
million, for an aggregate of up to $17.3 million, of a $34.6 million construction loan obtained by
the Colonial Promenade Smyrna joint venture. We and our joint venture partner each committed to
provide 50% of the $17.3 million guarantee, as each partner has a 50% ownership interest in the
joint venture. Construction at this site was completed in 2008. The guarantee provided, among
other things, for a reduction in the guarantee amount in the event the property achieves and
maintains a 1.15 debt service charge. Accordingly, our obligations under the guarantee were
reduced to $4.3 million. On May 3, 2010, we acquired from the lender at par the outstanding
construction loan originally obtained by the Colonial Promenade Smyrna joint venture. This note,
which had an original principal amount of $34.6 million and matured by its terms in December 2009,
had not been repaid and had an outstanding balance of $28.3 million as of the date of our purchase.
The note has an interest rate of one-month LIBOR plus 1.20%. We agreed with our joint venture
partner to extend the maturity date of the note in accordance with the original extension terms of
the note, which provided for an optional extension of maturity for two additional consecutive one
year periods. Accordingly, the maturity date of the note has been extended to December 2010 with
an additional option to extend for one additional year. As a result of this transaction, our
guarantee of this loan was terminated, but our joint venture partners guarantee remains in place.
On June 7, 2010, one of our joint ventures, Parkway Place Limited Partnership, completed the
refinancing of a $51.0 million outstanding mortgage loan associated with the joint ventures
Parkway Place retail shopping center, located in Huntsville, Alabama, which was set to mature in
June 2010. The joint venture, of which we have a 50% ownership interest, obtained a new ten-year
$42.0 million mortgage loan that bears interest at a fixed rate of 6.5% per annum. We, along with
our joint venture partner, each contributed our pro-rata portion of the existing mortgage debt
shortfall in cash to the joint venture, which was used to pay off the balance on the existing
mortgage debt. Our pro-rata portion of the cash payment, $5.4 million, was funded from our
unsecured line of credit. On October 4, 2010, we sold our remaining 50% interest in this joint
venture for a total consideration of $38.8 million, which was comprised of $17.9 million in cash
and our joint venture partners assumption of our $20.9 million share of the existing loan.
Proceeds from the sale of our interest were used to repay a portion of the outstanding balance on
our unsecured line of credit.
On June 30, 2010, upon completing our exit from two single-asset multifamily joint ventures,
we paid off the $19.3 million loan securing Colonial Grand at Riverchase Trails, in which we now
have a 100% ownership interest. The loan was originally set to mature in October 2010.
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There can be no assurance that our joint ventures will be successful in refinancing and/or
replacing existing debt at maturity or otherwise. If the joint ventures are unable to obtain
additional financing, payoff the existing loans that are maturing, or renegotiate suitable terms
with the existing lenders, the lenders generally would have the right to foreclose on the
properties in question and, accordingly, the joint ventures will lose their interests in the
assets. The failure to refinance and/or replace such debt and other factors with respect to our
joint venture interests discussed in Item 1A: Risk Factors included in the 2009 Form 10-K may
materially adversely impact the value of our joint venture interests, which, in turn, could have a
material adverse effect on our financial condition and results of operations.
Under our various unconsolidated joint venture non-recourse mortgage loans, we could, under
certain circumstances, be responsible for portions of the mortgage indebtedness in connection with
the certain customary non-recourse carve-out provisions, such as environmental conditions, misuse
of funds, and material misrepresentations. In addition, as more fully described above, we have
made certain guarantees in connection with our investment in unconsolidated joint ventures. We do
not have any other off-balance sheet arrangements with any unconsolidated investments or joint
ventures that we believe have or are reasonably likely to have a material effect on our financial
condition, results of operations, liquidity or capital resources.
Critical Accounting Policies and Estimates
Please refer to the 2009 Form 10-K for discussions of the Trusts and CRLPs critical
accounting policies, which include principles of consolidation; land, buildings and equipment
(including impairment); acquisition of real estate assets; undeveloped land and construction in
progress; valuation of receivables; notes receivable; deferred debt and lease costs; derivative
instruments; share-based compensation; revenue recognition; segment reporting; investments in joint
ventures; investment and development expenses; assets and liabilities at fair value; and recent
accounting pronouncements. During the three months ended September 30, 2010, there were no
material changes to these policies.
The Company is subject to various claims, disputes and legal proceedings, including those
described under Liquidity and Capital Resources Contingencies and Off-Balance Sheet
Arrangements, the outcomes of which are subject to significant uncertainty. The Company records
an accrual for loss contingencies when a loss is probable and the amount of the loss can be
reasonably estimated. The Company reviews these accruals quarterly and makes revisions based on
changes in facts and circumstances.
The adoption of ASC 810-10-30, Initial Measurement, which amends the manner in which entities
evaluate whether consolidation is required for variable interest entities (VIEs), did not have a
material impact on our consolidated condensed financial statements. See Note 2 to the Notes to
Consolidated Financial Statements of the Trust and CRLP, respectively, included in this Form 10-Q
for additional details.
Derivatives and Hedging
Our objectives in using interest rate derivatives are to add stability to interest expense and
to manage our exposure to interest rate movements. To accomplish this objective, we primarily use
interest rate swaps and caps as part of our interest rate risk management strategy. Interest rate
swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a
counterparty in exchange for us making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges
involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the
strike rate on the contract in exchange for an upfront premium.
At September 30, 2010, we had $2.4 million in Accumulated other comprehensive loss related
to settled or terminated derivatives. Amounts reported in Accumulated other comprehensive loss
related to derivatives will be reclassified to Interest expense as interest payments are made on
our variable-rate debt or to Loss on hedging activities at such time that the interest payments
on the hedged debt become probable of not occurring as a result of our senior note repurchase
programs. The changes in Accumulated other comprehensive loss for reclassification to Loss on
hedging activities related to interest payments on the hedged debt that have been deemed no longer
probable to occur as a result of our senior note repurchase program was $0.6 million for the three
months ended September 30, 2009, and $0.3 million and $1.7 million for the nine months ended
September 30, 2010 and 2009, respectively. We did not reclassify amount to Loss on hedging
activities for the three months ended September 30, 2010.
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Inflation
Leases at the multifamily properties generally provide for an initial term of six months to
one year and allow for rent adjustments at the time of renewal. Leases at the office properties
typically provide for rent adjustments and the pass-through of certain operating expenses during
the term of the lease. Substantially all of the leases at the retail properties provide for the
pass-through to tenants of certain operating costs, including real estate taxes, common area
maintenance expenses, and insurance. All of these provisions permit us to increase rental rates or
other charges to tenants in response to rising prices and, therefore, serve to minimize our
exposure to the adverse effects of inflation.
An increase in general price levels may immediately precede, or accompany, an increase in
interest rates. At September 30, 2010, our exposure to rising interest rates was mitigated by our
high percentage of consolidated fixed rate debt of 81.6%. As it relates to the short-term, an
increase in interest expense resulting from increasing inflation is anticipated to be less than
future increases in income before interest.
Funds From Operations
Funds from Operations (FFO), as defined by the National Association of Real Estate
Investment Trusts (NAREIT), means income (loss) before noncontrolling interest (determined in
accordance with GAAP), excluding sales of depreciated property, plus real estate depreciation and
after adjustments for unconsolidated partnerships and joint ventures. FFO is presented to assist
investors in analyzing our performance. We believe that FFO is useful to investors because it
provides an additional indicator of our financial and operating performance. This is because, by
excluding the effect of real estate depreciation and gains (or losses) from sales of properties
(all of which are based on historical costs which may be of limited relevance in evaluating current
performance), FFO can facilitate comparison of operating performance among equity REITs. FFO is a
widely recognized measure in our industry. We believe that the line item on our consolidated
statement of operations entitled Net (loss) income available to common shareholders is the most
directly comparable GAAP measure to FFO. Historical cost accounting for real estate assets
implicitly assumes that the value of real estate assets diminishes predictably over time. Since
real estate values instead have historically risen or fallen with market conditions, many industry
investors and analysts have considered presentation of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves. Thus, NAREIT created FFO as
a supplemental measure of REIT operating performance that excludes historical cost depreciation,
among other items, from GAAP net income. Management believes that the use of FFO, combined with
the required primary GAAP presentations, has been fundamentally beneficial, improving the
understanding of operating results of REITs among the investing public and making comparisons of
REIT operating results more meaningful. In addition to company management evaluating the operating
performance of our reportable segments based on FFO results, management uses FFO and FFO per share,
along with other measures, to assess performance in connection with evaluating and granting
incentive compensation to key employees. Our method of calculating FFO may be different from
methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO
should not be considered (1) as an alternative to net income (determined in accordance with GAAP),
(2) as an indicator of financial performance, (3) as cash flow from operating activities
(determined in accordance with GAAP) or (4) as a measure of liquidity nor is it indicative of
sufficient cash flow to fund all of our needs, including our ability to make distributions.
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The following information is provided to reconcile net income available to common shareholders
of the Trust, the most comparable GAAP measure, to FFO, and to show the items included in our FFO
for the periods indicated.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(in thousands, except per share and unit data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net (loss) income available to common shareholders |
$ | (16,778 | ) | $ | (3,464 | ) | $ | (40,914 | ) | $ | 8,631 | |||||
Noncontrolling interest in CRLP |
(1,647 | ) | (563 | ) | (4,475 | ) | 1,505 | |||||||||
Noncontrolling interest in gain on sale of undepreciated property |
| | | 992 | ||||||||||||
Total |
$ | (18,425 | ) | $ | (4,027 | ) | $ | (45,389 | ) | $ | 11,128 | |||||
Adjustments (consolidated): |
||||||||||||||||
Real estate depreciation |
30,156 | 27,567 | 89,779 | 82,753 | ||||||||||||
Real estate amortization |
1,888 | 288 | 5,370 | 1,016 | ||||||||||||
Losses / (gains) from sales of property, net of income tax and
noncontrolling interest |
633 | (503 | ) | 1,343 | (5,753 | ) | ||||||||||
(Losses) / gains from sales of undepreciated property, net of income
tax and noncontrolling interest (1) |
(635 | ) | 589 | (1,276 | ) | 4,133 | ||||||||||
Adjustments (unconsolidated subsidiaries): |
||||||||||||||||
Real estate depreciation |
2,070 | 5,016 | 6,193 | 14,250 | ||||||||||||
Real estate amortization |
739 | 1,700 | 2,185 | 5,152 | ||||||||||||
Gains from sales of property |
(23 | ) | (1,787 | ) | (117 | ) | (1,736 | ) | ||||||||
Funds from operations (2) |
$ | 16,403 | $ | 28,843 | $ | 58,088 | $ | 110,943 | ||||||||
Income allocated to participating securities |
(125 | ) | (136 | ) | (465 | ) | (534 | ) | ||||||||
Funds from operations available to common shareholders and
unitholders |
$ | 16,278 | $ | 28,707 | $ | 57,623 | $ | 110,409 | ||||||||
FFO per share (2) |
||||||||||||||||
Basic |
$ | 0.20 | $ | 0.49 | $ | 0.74 | $ | 1.91 | ||||||||
Diluted |
$ | 0.20 | $ | 0.49 | $ | 0.74 | $ | 1.91 | ||||||||
Weighted average common shares outstanding basic |
74,411 | 50,787 | 70,157 | 49,222 | ||||||||||||
Weighted average partnership units outstanding basic (3) |
7,371 | 8,325 | 7,722 | 8,636 | ||||||||||||
Weighted average shares and units oustanding basic |
81,782 | 59,112 | 77,879 | 57,858 | ||||||||||||
Effect of diluted securities |
| | | | ||||||||||||
Weighted average shares and units outstanding diluted |
81,782 | 59,112 | 77,879 | 57,858 | ||||||||||||
(1) | We recognize incremental gains on condominium sales in FFO, net of provision for income taxes, to the extent that net sales proceeds, less costs of sales, from the sale of condominium units exceeds the greater of their fair value or net book value as of the date the property is acquired by our taxable REIT subsidiary. | |
(2) | FFO for the three and nine months ended September 30, 2009 includes $0.5 million and $3.9 million of non-cash impairment charges, respectively, which is equivalent to $0.01 and $0.07 per basic and diluted share, respectively. | |
(3) | Represents the weighted average of outstanding units of noncontrolling interest in Colonial Realty Limited Partnership. |
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2010, we had approximately $314.5 million of outstanding variable rate debt.
We do not believe that the interest rate risk represented by our variable rate debt is material in
relation to our $1.7 billion of outstanding total debt and our $3.2 billion of total assets at
September 30, 2010.
If market rates of interest on our variable rate debt increase by 1%, the increase in annual
interest expense on our variable rate debt would decrease annual future earnings and cash flows by
approximately $3.1 million. If market rates of interest on our variable rate debt decrease by 1%,
the decrease in interest expense on our variable rate debt would increase future earnings and cash
flows by approximately $3.1 million. This assumes that the amount outstanding under our variable
rate debt remains approximately $314.5 million, which was the outstanding principal balance at
September 30, 2010.
At September 30, 2010, we had no material exposure to market risk (including foreign currency
exchange risk, commodity price risk or equity price risk).
Item 4. Controls and Procedures
Controls and Procedures with respect to the Trust
(a) Disclosure controls and procedures.
The Trust has evaluated the effectiveness of the design and operation of its disclosure
controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q.
An evaluation was performed under the supervision and with the participation of management,
including the Trusts chief executive officer and chief financial officer, of the effectiveness as
of September 30, 2010 of the design and operation of the Trusts disclosure controls and procedures
as defined in Exchange Act Rule 13a-15. Based on the evaluation, the Trusts chief executive
officer and the Trusts chief financial officer concluded that the design and operation of these
disclosure controls and procedures were effective as of the end of the period covered by this
report.
(b) Changes in internal control over financial reporting.
There were no changes in the Trusts internal control over financial reporting (as defined in
Exchange Act Rule 13a-15) that occurred during the quarter ended September 30, 2010 that have
materially affected, or are reasonably likely to materially affect, the Trusts internal control
over financial reporting.
Controls and Procedures with respect to CRLP
(a) Disclosure controls and procedures.
CRLP has evaluated the effectiveness of the design and operation of its disclosure controls
and procedures as of the end of the period covered by this quarterly report on Form 10-Q. An
evaluation was performed under the supervision and with the participation of management, including
the Trusts chief executive officer and chief financial officer, on behalf of the Trust in its
capacity as the general partner of CRLP, of the effectiveness as of September 30, 2010 of the
design and operation of CRLPs disclosure controls and procedures as defined in Exchange Act Rule
13a-15. Based on the evaluation, the Trusts chief executive officer and chief financial officer,
on behalf of the Trust in its capacity as the general partner of CRLP, concluded that the design
and operation of CRLPs disclosure controls and procedures were effective as of the end of the
period covered by this report.
(b) Changes in internal control over financial reporting.
There were no changes in CRLPs internal control over financial reporting (as defined in
Exchange Act Rule 13a-15) that occurred during the quarter ended September 30, 2010 that have
materially affected, or are reasonably likely to materially affect, CRLPs internal control over
financial reporting.
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PART II OTHER INFORMATION
Item 1A. Risk Factors
You should carefully consider the risk factors discussed below and contained in the 2009 Form
10-K and the descriptions included in our consolidated financial statements and accompanying notes
before making an investment decision regarding our Company. The risks and uncertainties described
herein and in the 2009 Form 10-K are not the only ones facing us and there may be additional risks
that we do not presently know of or that we currently consider not likely to have a significant
impact. All of these risks could adversely affect our business, financial condition, results of
operations and cash flows. In addition to the risks identified in the 2009 Form 10-K, we are also
subject to the following additional risk:
A large number of shares available for future sale could adversely affect the market price of
our common shares and may be dilutive to current shareholders.
The sales of a substantial number of our common shares, or the perception that such sales
could occur, could adversely affect prevailing market prices for our common shares. As of September
30, 2010 there were 125,000,000 common shares authorized under our Declaration of Trust, as
amended, of which 77,654,753 were outstanding as of September 30, 2010. Our Board of Trustees may
authorize the issuance of additional authorized but unissued common shares or other authorized but
unissued securities at any time, including pursuant to share option and share purchase plans. In
addition to issuances of shares pursuant to share option and share purchase plans, as of September
30, 2010, we may issue up to 7,317,125 common shares upon redemption of currently outstanding units
of our operating partnership. We also have filed a registration statement with the Securities and
Exchange Commission allowing us to offer, from time to time, equity securities (including common or
preferred shares) for an aggregate initial public offering price of up to $500 million on an
as-needed basis and subject to our ability to affect offerings on satisfactory terms based on
prevailing conditions. As of September 30, 2010, we had issued an aggregate of $308.6 million in
common shares under this registration statement. Our ability to execute our business strategy
depends on our access to an appropriate blend of debt financing, including unsecured lines of
credit and other forms of secured and unsecured debt, and equity financing, including issuances of
common and preferred equity. No prediction can be made about the effect that future distribution or
sales of our common shares will have on the market price of our common shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
A summary of repurchases by the Trust of common shares of the Trust for the three months ended
September 30, 2010 is as follows:
Shares Purchased as | Maximum Number of | |||||||||||||||
Total | Average | Part of Publicly | Shares that may yet be | |||||||||||||
Number of Shares | Price Paid | Announced Plans | Purchased Under | |||||||||||||
Purchased (1) | per Share | or Programs | the Plans | |||||||||||||
July 1 July 31, 2010 |
1,588 | 15.59 | | | ||||||||||||
August 1 August 31, 2010 |
393 | 15.52 | | | ||||||||||||
September 1 September 30, 2010 |
43 | 16.24 | | | ||||||||||||
Total |
2,024 | 15.59 | | | ||||||||||||
(1) | Represents the number of shares acquired by us from employees as payment of applicable statutory minimum withholding taxes owed upon vesting of restricted stock granted under our Third amended and Restated Share Option and Restricted Share Plan or our 2008 Omnibus Incentive Plan. Whenever the Trust purchases or redeems its preferred and common shares, CRLP purchases, redeems or cancels an equivalent number of preferred or common units. Accordingly, during the three months ended September 30, 2010, CRLP acquired an equal number of common units corresponding to the number of common shares listed in the table above. |
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The Trust from time to time issues common shares pursuant to its Direct Investment Program,
its Non-Employee Trustee Share Option Plan, its Non-Employee Trustee Share Plan, its Employee Share
Option and Restricted Share Plan, and its 2008 Omnibus Incentive Plane in transactions that are
registered under the Securities Act of 1933, as amended (the Act). Pursuant to CRLPs Third
Amended and Restated Agreement of Limited Partnership, as amended (the Partnership Agreement),
each time the Trust issues common shares pursuant to the foregoing plans, CRLP issues to the Trust,
its general partner, an equal number of units for the same price at which the common shares were
sold, in transactions that are not registered under the Act in reliance on Section 4(2) of the Act
due to the fact that units were issued only to the Trust and therefore, did not involve a public
offering. During the three months ended September 30, 2010, CRLP issued 29,210 common units to the
Trust for direct investments and other issuances under employee and nonemployee plans for an
aggregate of approximately $0.4 million.
During the quarter ended September 30, 2010, the Trust also issued common shares under its
$100.0 million at-the-market equity offering program that were registered under the Act.
Pursuant to the Partnership Agreement, each time the Trust issued common shares pursuant to this
program, CRLP issued to the Trust an equal number of units for the same price at which the common
shares were sold, in transactions that are not registered under the Act in reliance on Section 4(2)
of the Act due to the fact that units were issued only to the Trust and therefore, did not involve
a public offering. During the three months ended September 30, 2010, CRLP issued 6,329,026 common
units to the Trust for shares issued under the above-mentioned at-the-market equity offering
program of the Trust for an aggregate of approximately $99.0 million of net proceeds.
Item 6. Exhibits
The exhibits required by this Item are set forth on the Index of Exhibits attached hereto.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants
has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
COLONIAL PROPERTIES TRUST | ||||||||
Date: November 5, 2010 | By: | /s/ C. Reynolds Thompson, III | ||||||
C. Reynolds Thompson, III | ||||||||
President and Chief Financial Officer | ||||||||
Date: November 5, 2010 | By: | /s/ Bradley P. Sandidge | ||||||
Bradley P. Sandidge | ||||||||
Executive Vice President, Accounting | ||||||||
COLONIAL REALTY LIMITED PARTNERSHIP, A Delaware limited partnership |
||||||||
By: | Colonial Properties Trust | |||||||
Its General Partner | ||||||||
Date: November 5, 2010 | By: | /s/ C. Reynolds Thompson, III | ||||||
C. Reynolds Thompson, III | ||||||||
President and Chief Financial Officer | ||||||||
Date: November 5, 2010 | By: | /s/ Bradley P. Sandidge | ||||||
Bradley P. Sandidge | ||||||||
Executive Vice President, Accounting |
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Index of Exhibits
3.1 | Declaration of Trust of the Trust, as amended
|
Filed herewith | Page | |||||
10.1 | Equity Distribution Agreement, dated July 30, 2010, by and
Among the Trust, the Operating Partnership and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Agent
|
Incorporated by reference to Exhibit 1.1 to the Companys Current Report on Form 8-K filed with the SEC on July 30, 2010 | ||||||
10.2 | Equity Distribution Agreement, dated July 30, 2010, by and
Among the Trust, the Operating Partnership and Wells
Fargo Securities, LLC, as Agent
|
Incorporated by reference to Exhibit 1.2 to the Companys Current Report on Form 8-K filed with the SEC on July 30, 2010 | ||||||
12.1 | Computation of Ratio of Earnings to Fixed Charges and to
Combined Fixed Charges and Preferred Share Distributions
for the Trust
|
Filed herewith | ||||||
12.2 | Computation of Ratio of Earnings to Fixed Charges for
CRLP
|
Filed herewith | ||||||
31.1 | Certification of the Chief Executive Officer of the Trust
required by Rule 13a-14(a) under the Securities Exchange
Act of 1934
|
Filed herewith | ||||||
31.2 | Certification of the Chief Financial Officer of the Trust
required by Rule 13a-14(a) under the Securities Exchange
Act of 1934
|
Filed herewith | ||||||
31.3 | Certification of the Chief Executive Officer of the Trust, in
its capacity as general partner of CRLP, required by
Rule 13a-14(a) under the Securities Exchange Act of 1934
|
Filed herewith | ||||||
31.4 | Certification of the Chief Financial Officer of the Trust, in
its capacity as general partner of CRLP, required by
Rule 13a-14(a) under the Securities Exchange Act of 1934
|
Filed herewith | ||||||
32.1 | Certification of the Chief Executive Officer of the Trust
required by Rule 13a-14(b) under the Securities Exchange
Act of 1934 and 18 U.S.C. Section 1350
|
Filed herewith | ||||||
32.2 | Certification of the Chief Financial Officer of the Trust
required by Rule 13a-14(b) under the Securities Exchange
Act of 1934 and 18 U.S.C. Section 1350
|
Filed herewith | ||||||
32.3 | Certification of the Chief Executive Officer of the Trust, in
its capacity as general partner of CRLP, required by
Rule 13a-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Section 1350
|
Filed herewith | ||||||
32.4 | Certification of the Chief Financial Officer of the Trust, in
its capacity as general partner of CRLP, required by
Rule 13a-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Section 1350
|
Filed herewith |
77