FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 20002001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-12252
EQUITY RESIDENTIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 13-3675988
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 474-1300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ------- ----
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At August 9, 2000, 131,240,8801, 2001, 134,631,445 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
2001 2000
1999
------------ --------------------------- ---------------
ASSETS
Investment in real estate
Land $ 1,534,8121,772,184 $ 1,550,3781,770,019
Depreciable property 10,462,309 10,670,55010,732,614 10,782,311
Construction in progress 28,755 18,035
------------ ------------
12,025,876 12,238,96360,971 39,130
--------------- ---------------
12,565,769 12,591,460
Accumulated depreciation (1,208,331) (1,070,487)
------------ ------------(1,535,333) (1,352,236)
--------------- ---------------
Investment in real estate, net of accumulated depreciation 10,817,545 11,168,47611,030,436 11,239,224
Real estate held for disposition 55,997 12,86838,741 51,637
Cash and cash equivalents 237,066 29,11726,614 23,772
Investment in mortgage notes, net 81,777 84,97773,765 77,184
Investments in unconsolidated entities 328,231 316,540
Rents receivable 1,408 1,7312,497 1,801
Deposits - restricted 150,579 111,270235,619 231,639
Escrow deposits - mortgage 73,008 75,32872,287 70,470
Deferred financing costs, net 31,784 33,96829,177 29,706
Rental furniture, net 54,366 60,183
Property and equipment, net 7,989 7,620
Goodwill, net 75,288 67,589
Other assets 297,579 197,954
------------ ------------
TOTAL ASSETS102,726 86,601
--------------- ---------------
Total assets $ 11,746,74312,077,736 $ 11,715,689
============ ============12,263,966
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 2,987,9213,040,281 $ 2,883,5833,230,611
Notes, net 2,289,680 2,290,285
Line2,417,307 2,120,079
Lines of credit -- 300,000133,000 355,462
Accounts payable and accrued expenses 119,214 102,955108,415 107,818
Accrued interest payable 47,182 44,25763,503 51,877
Rents received in advance and other liabilities 71,509 74,19668,896 100,819
Security deposits 39,077 39,68746,775 46,272
Distributions payable 127,594 18,813
------------ ------------
TOTAL LIABILITIES 5,682,177 5,753,776
------------ ------------136,511 18,863
--------------- ---------------
Total liabilities 6,014,688 6,031,801
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
Minority Interests:
Operating Partnership 533,990 456,979638,107 609,734
Partially Owned Properties 2,891 --
------------ ------------2,457 2,884
--------------- ---------------
Total Minority Interests 536,881 456,979
------------ ------------640,564 612,618
--------------- ---------------
Shareholders' equity:
Preferred Shares of beneficial interest, $.01 par value;
100,000,000 shares authorized; 20,397,12411,457,518 shares issued and
outstanding as of June 30, 20002001 and 25,085,65220,003,166 shares
issued and outstanding as of December 31, 1999 1,193,053 1,310,2662000 969,495 1,183,136
Common Shares of beneficial interest, $.01 par value;
350,000,000 shares authorized; 131,180,186134,393,787 shares issued and
outstanding as of June 30, 20002001 and 127,450,798132,616,375 shares
issued and outstanding as of December 31, 1999 1,312 1,2752000 1,344 1,326
Paid in capital 4,662,432 4,523,9194,802,073 4,739,782
Employee notes (4,551) (4,670)(4,201) (4,346)
Distributions in excess of accumulated earnings (324,561) (325,856)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 5,527,685 5,504,934
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY(337,723) (300,351)
Accumulated other comprehensive income (8,504) -
--------------- ---------------
Total shareholders' equity 5,422,484 5,619,547
--------------- ---------------
Total liabilities and shareholders' equity $ 11,746,74312,077,736 $ 11,715,689
============ ============12,263,966
=============== ===============
SEE ACCOMPANYING NOTESSee accompanying notes
2
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
JUNE 30,
----------------------------- ------------------------------------------------------- --------------------------------
2001 2000 19992001 2000
1999
----------------------------- ------------------------------------------------------- --------------------------------
REVENUES
Rental income $ 1,027,671 $ 952,740 $ 819,178515,860 $ 479,193 $ 413,116
Fee and asset management 2,632 2,414 1,334 1,1804,140 2,835 2,168 1,435
Interest income - investment in mortgage notes 8,763 5,499 5,6446,019 2,737 2,749
Interest and other income 17,652 11,123 9,849 5,177
------------ ------------ ------------ ------------11,711 8,385 5,209 4,907
Furniture income 30,027 -- 15,155 --
----------- ----------- ----------- -----------
Total revenues 978,523 838,359 493,113 422,222
------------ ------------ ------------ ------------1,082,312 969,459 544,411 488,272
----------- ----------- ----------- -----------
EXPENSES
Property and maintenance 280,783 227,845 196,865143,746 113,977 99,818
Real estate taxes and insurance 96,775 95,001 84,51548,754 46,667 42,467
Property management 36,364 37,760 27,97317,686 18,846 13,772
Fee and asset management 3,648 2,102 1,6241,764 1,036
757
Depreciation 225,878 224,512 197,134113,350 112,626 100,233
Interest:
Expense incurred 190,383 190,263 158,49995,107 95,152 79,302
Amortization of deferred financing costs 2,810 2,703 1,6611,413 1,362 816
General and administrative 14,079 13,216 10,7147,325 6,518
4,947
------------ ------------ ------------ ------------Furniture expenses 30,496 -- 15,668 --
Amortization of goodwill 1,924 -- 991 --
----------- ----------- ----------- -----------
Total expenses 883,140 793,402 678,985445,804 396,184
342,112
------------ ------------ ------------ ----------------------- ----------- ----------- -----------
Income before gain on disposition of properties, net,
extraordinary item and allocation to Minority Interests, 185,121 159,374 96,929 80,110
Gainincome from
investments in unconsolidated entities, net gain on dispositionsales of
properties, net 87,652 45,807 67,654 24,391
Loss on early extinguishmentreal estate, extraordinary items and cumulative effect of
debt -- (451) -- (451)change in accounting principle 199,172 176,057 98,607 92,088
Allocation to Minority Interests:
Operating Partnership (16,474) (19,132) (14,514)(6,678) (12,036) (7,388)
Partially Owned Properties (238) 157 (133) 112
Income from investments in unconsolidated entities 10,350 9,064 6,553 4,841
Net gain on sales of real estate 46,565 87,652 4,787 67,654
----------- ----------- ----------- -----------
Income before extraordinary items and cumulative effect of
change in accounting principle 239,375 253,798 103,136 152,659
Extraordinary items 106 -- 112(205) --
------------ ------------ ------------ ------------Cumulative effect of change in accounting principle (1,270) -- -- --
----------- ----------- ----------- -----------
Net income 238,211 253,798 190,216102,931 152,659 96,662
Preferred distributions (57,419) (55,654) (57,111)(28,893) (27,266)
(27,734)
------------ ------------ ------------ ----------------------- ----------- ----------- -----------
Net income available to Common Shares $ 180,792 $ 198,144 $ 133,10574,038 $ 125,393
=========== =========== =========== ===========
Net income per share - basic $ 68,928
============ ============ ============ ============1.36 $ 1.54 $ 0.56 $ 0.97
=========== =========== =========== ===========
Net income per share - diluted $ 1.34 $ 1.54 $ 0.55 $ 0.96
=========== =========== =========== ===========
Weighted average Common Shares outstanding - basic 132,890 128,435 119,762133,179 129,072
120,558
============ ============ ============ ============
Net income per share - basic $ 1.54 $ 1.11 $ 0.97 $ 0.57
============ ============ ============ ============
Net income per share=========== =========== =========== ===========
Weighted average Common Shares outstanding - diluted $ 1.54 $ 1.11 $ 0.96 $ 0.57
============ ============ ============ ============146,909 141,633 146,970 146,510
=========== =========== =========== ===========
Distributions declared per Common Share outstanding $ 1.63 $ 1.52 $ 1.420.815 $ 0.76
$ 0.71
============ ============ ============ ======================= =========== =========== ===========
SEE ACCOMPANYING NOTESSee accompanying notes
3
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------
2001 2000
1999
----------------------------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 253,798238,211 $ 190,216253,798
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Allocation to Minority Interests -ALLOCATION TO MINORITY INTERESTS:
Operating Partnership 16,474 19,132 14,514
Allocation to Minority Interests -
Partially Owned Properties 238 (157)
Cumulative effect of change in accounting principle 1,270 --
Depreciation 230,805 224,512 197,134
Amortization of deferred financing costs 2,810 2,703
1,661Amortization of discount on investment in mortgage notes (2,256) --
Amortization of goodwill 1,924 --
Amortization of discounts and premiums on debt (1,007) (1,153) (1,172)
Amortization of deferred settlements on interest rate protection agreements 317 246
513
GainIncome from investments in unconsolidated entities (10,350) (9,064)
Net gain on dispositionsales of properties, netreal estate (46,565) (87,652)
(45,807)Extraordinary items (106) --
Unrealized gain on interest rate protection agreements (132) --
Book value of furniture sales and rental buy outs 5,497 --
Compensation paid with Company Common Shares 6,741 2,845 --
CHANGES IN ASSETS AND LIABILITIES:
Decrease(Increase) decrease in rents receivable (705) 535 3,428
(Increase) in deposits - restricted (12,574) (3,510)
(4,342)Additions to rental furniture (14,532) --
(Increase) decrease in other assets (15,585) (1,808) 51,052
Increase in accounts payable and accrued expenses 597 16,769
6,936
Increase (decrease) in accrued interest payable 11,626 818
(1,176)
(Decrease) increase in rents received in advance and other liabilities (4) (5,378)
6,411
(Decrease)Increase (decrease) in security deposits 522 (803)
(1,577)
------------ --------------------- ---------
Net cash provided by operating activities 420,897 417,791
------------ ------------413,216 411,833
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate net(218,531) (143,680) (200,613)
Improvements to real estate (63,269) (58,360) (55,783)
Additions to non-real estate property (3,520) (2,399) (3,640)
Interest capitalized for real estate under construction (1,408) (480) (943)
Proceeds from disposition of real estate, net 345,039 219,409
125,150Investment in property and equipment (1,626) --
Principal receipts on investment in mortgage notes 5,675 3,200
2,159
(Increase) decreaseInvestments in unconsolidated entities (43,167) (87,105)
Distributions from unconsolidated entities 16,711 9,845
Proceeds from refinancing of unconsolidated entities 4,450 1,000
Proceeds from disposition of unconsolidated entities 359 4,400
Decrease (increase) in deposits on real estate acquisitions, net 8,594 (35,854)
2,961
Decrease(Increase) decrease in mortgage deposits (2,344) 2,461 131
Investment in joint ventures, net (84,875) (44,314)
Investment in limited partnerships and other, net (449) --
Proceeds from disposition of Unconsolidated Properties, net 4,400 --
Purchase of management contract rights -- (779)
(285)
Costs related to MergersBusiness combinations, net of cash acquired (7,603) (4,261) (4,002)
Other investing activities, net (15) (11,827)
603
------------ --------------------- ---------
Net cash provided by (used for) investing activities (113,494) (178,576)
------------ ------------39,345 (104,430)
--------- ---------
SEE ACCOMPANYING NOTESSee accompanying notes
4
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
---------------------------------------------------
2001 2000
1999
-------------------------------------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs $ (2,005)(3,948) $ (2,055)(2,005)
MORTGAGE NOTES PAYABLE:
Proceeds, net 45,118 378,318 62,885
Lump sum payoffs (237,040) (104,484) (54,231)
Scheduled principal paymentsrepayments (16,367) (14,126)
(8,400)Prepayment premiums (202) --
NOTES, NET:
Proceeds, net 299,316 --
298,014
PayoffsScheduled principal repayments (147) -- (125,000)
LINES OF CREDIT:
Proceeds 316,491 162,000
689,000
Repayments (538,953) (462,000)
(894,000)
Loss on early extinguishment of debt -- 451
Proceeds(Payments) proceeds from settlement of interest rate protection agreements (7,360) 7,055 --
Proceeds from sale of Common Shares 5,383 4,575 5,661
Proceeds from sale of Preferred Shares/Units net 84,825 --48,500 87,000
Proceeds from exercise of options 29,468 9,473
24,254Redemption of Preferred Shares (210,500) --
Payment of offering costs (65) (296)(1,317) (2,240)
DISTRIBUTIONS:
Common Shares (109,189) (97,486) (84,672)
Preferred Shares/Units (58,503) (55,444) (57,111)
Minority Interests - Operating Partnership (9,949) (9,592) (9,654)
Minority Interests - Partially Owned Properties (665) (617) --
Principal receipts on employee notes, net 145 119
95
Principal receipts on other notes receivable, net -- 7,375
------------ --------------------- ---------
Net cash (used for) financing activities (449,719) (99,454)
(147,684)
------------ --------------------- ---------
Net increase in cash and cash equivalents 2,842 207,949 91,531
Cash and cash equivalents, beginning of period 23,772 29,117
3,965
------------ --------------------- ---------
Cash and cash equivalents, end of period $ 26,614 $ 237,066
$ 95,496
============ ===================== =========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 187,195 $ 190,854
$ 161,277
============ ============
Transfers to========= =========
Mortgage loans assumed through real estate held for dispositionacquisitions $ 55,99745,918 $ 32,844
============ ============--
========= =========
Net real estate contributed in exchange for OP Units or
Preference Units $ 636 $ 14,183
============ ============
Mortgage loans assumed and/or entered into through acquisitions of real estatepreference units $ -- $ 58,320
============ ============636
========= =========
Mortgage loans assumed(assumed) by purchaser in real estate dispositions $ (220,000)(27,358) $(220,000)
========= =========
Transfers to real estate held for disposition $ --
============ ============
Refinancing38,741 $ 55,997
========= =========
Mortgage loans recorded as a result of mortgage notes payable in favorconsolidation of notes, netpreviously
Unconsolidated Properties $ -- $ 75,790
============ ============
Mortgage loans assumed through65,095
========= =========
Net liabilities recorded as a result of consolidation of Partially Ownedpreviously
Unconsolidated Properties $ 65,095 $ --
============ ============
Net liabilities assumed through consolidation of
Partially Owned Properties $ 792
$ --
============ ===================== =========
SEE ACCOMPANYING NOTESSee accompanying notes
5
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DEFINITION OF SPECIAL TERMS:
Capitalized terms used but not defined in this Quarterly Report on
Form 10-Q are as defined in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 ("Form 10-K").
1. BUSINESS
Equity Residential Properties Trust, formed in March 1993 ("EQR"), is a
self-administered and self-managed equity real estate investment trust ("REIT").
As used herein, the term "Company" means EQR, and its subsidiaries, as the
survivor of the mergers between EQR and each of Wellsford Residential Property
Trust, ("Wellsford") (the "Wellsford Merger"), Evans Withycombe Residential, Inc. ("EWR") (the "EWR Merger"), Merry Land & Investment Company, Inc.
("MRY") (the "MRY Merger") and Lexford Residential Trust (collectively, the "Mergers"). The Company also
includes the businesses formerly operated by Globe Business Resources, Inc.
("LFT"Globe"), Temporary Quarters, Inc. ("TQ") and Grove Property Trust ("the LFT Merger"Grove").
The Company has elected to be taxed as a REIT under Section 856(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
The Company is engaged in the acquisition, disposition, ownership,
management and operation of multifamily properties. As of June 30, 2000,2001, the
Company owned or had interests in a portfolio of 1,0531,086 multifamily properties
containing 224,383226,150 apartment units (individually a "Property" and collectively
the "Properties") consisting of the following:
Number of Number of
Properties Units
---------------------------------------------------------------------------- -----------------
Wholly Owned Properties 951 206,783968 202,501
Partially Owned Properties 14 2,99515 3,067
Unconsolidated Properties 88 14,605
----------------------------------103 20,582
---------------- -----------------
Total Properties 1,053 224,383
==================================1,086 226,150
================ =================
The "Partially Owned Properties" are controlled and partially owned
by the Company but have partners with minority interests (see further
discussion in Notes 3 and 4). The "Unconsolidated Properties" are partially
owned but not controlled by the Company and consist of investments in
partnership interests and/or subordinated mortgages. The Properties are
located in 35 states throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The balance sheet and statements of operations and cash flows as of
and for the six months and quarter ended June 30, 2000 represent theaccompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the Companyinformation and its subsidiaries.
Due tofootnotes required by accounting principles generally
accepted in the Company's ability as general partner to control either
through ownership or by contractUnited States for complete financial statements. In the Operating Partnership, a seriesopinion
of management, limited partnerships and companies (collectively, the "Management
Partnerships" or the "Management Companies"), the Financing Partnerships, the
LLC's,all adjustments (consisting of normal recurring accruals) and
certain other entities, each such entity hasreclassifications considered necessary for a fair presentation have been
consolidated
with the Company for financial reporting purposes. In regard to the
Management Companies, the Company does not have legal control; however, these
entities are consolidated for financial reporting purposes, the effects of
which are immaterial.included. Certain reclassifications have been made to the prior year'speriod financial
statements in order to conform to the current year presentation. These unaudited Consolidated Financial StatementsOperating
results for the six months ended June 30, 2001 are not necessarily indicative of
the Company
haveresults that may be expected for the year ended December 31, 2001.
The balance sheet at December 31, 2000 has been prepared pursuantderived from the
audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.
For further information, including definitions for capitalized terms,
refer to the Securitiesconsolidated financial statements and Exchange Commission ("SEC")
rules and regulations and should be read in conjunction with the Financial
Statements and Notesfootnotes thereto included in
the Company's Annual Reportannual report on Form 10-K for the year ended December 31, 2000.
6
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Form 10-K. The following Notes to Consolidated Financial Statements highlight
significant changesDERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, the Company is exposed to the noteseffect
of interest rate changes. The Company limits these risks by following
established risk management policies and procedures including the use of
derivatives.
The Company has a policy of only entering into contracts with major
financial institutions based upon their credit ratings and other factors. When
viewed in conjunction with the underlying and offsetting exposure that the
derivatives are designed to hedge, the Company has not sustained a material loss
from those instruments nor does it anticipate any material adverse effect on its
net income or financial position in the future from the use of derivatives.
On January 1, 2001, the Company adopted SFAS No. 133/138, which
requires an entity to recognize all derivatives as either assets or liabilities
in the statement of financial position and to measure those instruments at fair
value. Additionally, the fair value adjustments will affect either shareholders'
equity or net income depending on whether the derivative instruments qualify as
a hedge for accounting purposes and, if so, the nature of the hedging activity.
When the terms of an underlying transaction are modified, or when the underlying
transaction is terminated or completed, all changes in the fair value of the
instrument are marked-to-market with changes in value included in net income
each period until the Form 10-Kinstrument matures. Any derivative instrument used for
risk management that does not meet the hedging criteria is marked-to-market each
period.
As of January 1, 2001, the adoption of the new standard resulted in
derivative instruments reported on the balance sheet as liabilities of
approximately $6.6 million; an adjustment of approximately $5.3 million to
"Accumulated Other Comprehensive Income", which are gains and present
interim disclosures as required by the SEC. The accompanying Consolidated
Financial Statements reflect,losses not
affecting retained earnings in the opinionConsolidated Statement of management, all adjustments
necessary forShareholders'
Equity; and a charge of approximately $1.3 million as a cumulative effect of
change in accounting principle in the Consolidated Statement of Operations.
The Company employs derivative financial instruments to hedge
qualifying anticipated transactions. Gains and losses are deferred and
recognized in net income in the same period that the underlying transaction
occurs, expires or is otherwise terminated. As of June 30, 2001, there were
approximately $8.5 million in deferred losses, net, included in accumulated
other comprehensive income.
As of June 30, 2001, the Company has entered into swaps which have been
designated as cash flow hedges with an aggregate notional amount of $927.9
million at interest rates ranging from 3.65125% to 6.74% maturing at various
dates ranging from 2001 to 2007 with a net liability fair presentationvalue of $7.6 million;
and swaps which have been designated as fair value hedges with an aggregate
notional amount of $296.4 million at interest rates ranging from 4.458% to 7.25%
maturing at various dates ranging from 2003 to 2005 with a net asset fair value
of $3.9 million.
On June 30, 2001, the interim financial statements. All
such adjustments arenet derivative instruments were reported at their
fair value as other liabilities of a normal and recurring nature.approximately $3.7 million. Within the next
twelve months the Company expects to recognize an estimated $3.9 million of
accumulated other comprehensive income as additional interest expense.
7
3. SHAREHOLDERS' EQUITY AND MINORITY INTERESTS
The following table presents the changes in the Company's issued and
outstanding Common Shares for the six months ended June 30, 2000:2001:
-----------------------------------------------------------------------
2000
-----------------------------------------------------------------------2001
------------------------------------------------------ ----------------
Common Shares outstanding at January 1, 127,450,798132,616,375
COMMON SHARES ISSUED:
--------------------
Conversion of Series E Preferred Shares 2,33367,764
Conversion of Series H Preferred Shares 61,628
Conversion of Series J Preferred Shares 2,822,0122,745
Employee Share Purchase Plan 110,373106,441
Dividend Reinvestment - DRIP Plan 9,9177,804
Share Purchase - DRIP Plan 7,7786,415
Exercise of options 240,886749,653
Restricted share grants, net 232,161332,177
Conversion of OP Units 242,300
-----------------------------------------------------------------------504,413
------------------------------------------------------ ----------------
Common Shares outstanding at June 30, 131,180,186
=======================================================================134,393,787
------------------------------------------------------ ----------------
The equity positions of various individuals and entities that
contributed their properties to the Operating Partnership in exchange for a
partnership interest are collectively referred to as the "Minority Interests -
-OperatingOperating Partnership". As of June 30, 2000,2001, the Minority Interests - Operating
Partnership held 12,258,53012,002,294 OP Units. As a result, the Minority Interests -
Operating Partnership had an 8.55%8.20% interest in the Operating Partnership at June
30, 2000.2001. Assuming conversion of all OP Units into Common Shares, total Common
Shares outstanding at June 30, 20002001 would have been 143,438,716.146,396,081.
Net proceeds from the Company's Common Share and Preferred Share
offerings are contributed by the Company to the Operating Partnership in return
for an increased ownership percentage and are treated as capital transactions in
the Company's Consolidated Financial Statements. As a result, the net offering
proceeds from Common Shares are allocated between shareholders' equity and
Minority Interests - Operating Partnership to account for the change in their
respective percentage ownership of the underlying equity of the Operating
Partnership.
The Guilford portfolio properties (see further discussion in Note 4)
are controlled and partially owned byDuring the six months ended June 30, 2001, the Company, but have partners with
minority interests. Effective January 1, 2000, the Company has included 100%
of the financial condition and results of operations of these Partially Owned
Properties in the Consolidated Financial Statements due to an increased
ownership interest in these properties. The equity interests of the
unaffiliated partners are reflected as Minority Interests - Partially Owned
Properties.
On March 3, 2000, Lexford Properties, L.P.,through a
subsidiary of the Operating Partnership, issued 1.1preference units with an equity
value of $48.5 million, unitsreceiving net proceeds of 8.50%$47.3 million:
O 510,000 7.875% Series BG Cumulative
Convertible Redeemable Preference Units (collectively known(known
as "Preference Interests") with an equity value of $55.0$25.5 million. Lexford Properties, L.P.
received $53.6
7
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
million in net proceeds from this transaction. The
liquidation value of these units is $50 per unit. The 1.1 million510,000 units are
exchangeable into 1.1
million510,000 shares of 8.50%7.875% Series M-1M-4 Cumulative
Redeemable Preferred Shares of Beneficial Interest of the Company.
Dividends for the Series BG Preference Interests or the Series M-1M-4
Preferred Shares are payable quarterly at the rate of $4.25$3.9375 per
unit/share per year.
On March 23, 2000, Lexford Properties, L.P., a subsidiary of the
Operating Partnership, issued 220,000 units of 8.50%O 190,000 7.625% Series CH Cumulative Convertible Redeemable Preference
Units with an equity value of $11.0$9.5 million. Lexford Properties, L.P. received $10.7 million in net proceeds from
this transaction. The liquidation value of
these units is $50 per unit. The 220,000190,000 units are exchangeable into
220,000190,000 shares of 8.50%7.625% Series M-1M-5 Convertible Cumulative Redeemable
Preferred Shares of Beneficial Interest of the Company.Company or 143,526
Common Shares beginning March 2011. Dividends for the Series CH
Preference Interests or the Series M-1M-5 Preferred Shares are payable
quarterly at the rate of $4.25$3.8125 per unit/share per year.
On May 1, 2000, Lexford Properties, L.P., a subsidiary of the
Operating Partnership, issued 420,000 units of 8.375%O 270,000 7.625% Series DI Cumulative Convertible Redeemable Preference
Units with an equity value of $21.0$13.5 million. Lexford Properties, L.P. received $20.5 million in net proceeds from
this transaction. The liquidation value of
these units is $50 per unit. The 420,000270,000 units are exchangeable into
420,000270,000 shares of 8.375%7.625% Series M-2M-6 Convertible Cumulative
8
Redeemable Preferred Shares of Beneficial Interest of the Company.Company or
196,317 Common Shares beginning June 2011. Dividends for the Series DI
Preference Interests or the Series M-2M-6 Preferred Shares are payable
quarterly at the rate of $4.1875$3.8125 per unit/share per year.
The value of thesethe Preference Interests are included in Minority
Interests - Operating Partnership in the Consolidated Balance Sheets and the
distributions incurred are included in preferred distributions in the
Consolidated Statements of Operations. The Series M-1 and M-2M-4 Preferred Shares are not
convertible into EQR Common Shares. The Series H Preference Interests and the
Series M-5 Preferred Shares are convertible into EQR Common Shares at a
conversion price ratio of 0.7554 common shares (equal to a conversion price of
$66.19 per share) beginning in March 2011. The Series I Preference Interests and
the Series M-6 Preferred Shares are convertible into EQR Common Shares at a
conversion price ratio of 0.7271 common shares (equal to a conversion price of
$68.76 per share) beginning in June 2011.
The following table presents the Company's issued and outstanding
Preferred Shares as of June 30, 20002001 and December 31, 1999:
8
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)2000:
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AMOUNTS ARE IN THOUSANDS
---------------------------------------------------------
ANNUAL
DIVIDEND
RATE PER JUNE DECEMBER
SHARE (1) 30, 2001 31, 2000
31, 1999
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Preferred Shares of beneficial interest, $.01 par value;
100,000,000 shares authorized:
9 3/8% Series A Cumulative Redeemable Preferred; liquidation $2.34375(2) $ 153,000- $ 153,000
value $25 per share; 0 and 6,120,000 shares issued and
outstanding at June 30, 20002001 and December 31, 19992000,
respectively
9 1/8% Series B Cumulative Redeemable Preferred; liquidation $22.81252 125,000 125,000
value $250 per share; 500,000 shares issued and outstanding
at June 30, 20002001 and December 31, 19992000
9 1/8% Series C Cumulative Redeemable Preferred; liquidation $22.81252 115,000 115,000
value $250 per share; 460,000 shares issued and outstanding
at June 30, 20002001 and December 31, 19992000
8.60% Series D Cumulative Redeemable Preferred; liquidation $21.50000 175,000 175,000
value $250 per share; 700,000 shares issued and outstanding
at June 30, 20002001 and December 31, 19992000
Series E Cumulative Convertible Preferred; liquidation value $1.75000 99,745 99,85086,944 89,990
$25 per share; 3,989,8003,477,765 and 3,994,0003,599,615 shares issued and
outstanding at June 30, 20002001 and December 31, 1999,2000, respectively
9.65% Series F Cumulative Redeemable Preferred; liquidation $2.41250 57,500(2) - 57,500
value $25 per share; 0 and 2,300,000 shares issued and
outstanding at June 30, 20002001 and December 31, 19992000, respectively
7 1/4% Series G Convertible Cumulative Preferred; liquidation $18.12500 316,250 316,250316,175 316,175
value $250 per share; 1,265,0001,264,700 shares issued and
outstanding at June 30, 20002001 and December 31, 19992000
7.00% Series H Cumulative Convertible Preferred; liquidation $1.75000 1,558 3,6861,376 1,471
value $25 per share; 62,32455,053 and 147,45258,851 shares issued and
outstanding at June 30, 20002001 and December 31, 1999,2000, respectively
8.60% Series J Cumulative Convertible Preferred; liquidation $2.15000 - 114,980
value $25 per share; 0 and 4,599,200 shares issued and
outstanding at June 30, 2000 and December 31, 1999,
respectively (2)
8.29% Series K Cumulative Redeemable Preferred; liquidation $4.14500 50,000 50,000
value $50 per share; 1,000,000 shares issued and outstanding
at June 30, 20002001 and December 31, 19992000
7.625% Series L Cumulative Redeemable Preferred; liquidation $1.90625 100,000 100,000
value $25 per share; 4,000,000 shares issued and outstanding
at June 30, 20002001 and December 31, 19992000
- -----------------------------------------------------------------------------------------------------------------
$1,193,053 $1,310,266-------------------------------------------------------------------- -----------------------------------------
$ 969,495 $ 1,183,136
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -----------------------------------------
9
(1) Dividends on all series of Preferred Shares are payable quarterly at
various pay dates. Dividend rates listed for Series B, C, D and G are
Preferred Share rates and the equivalent Depositary Share annual dividend
rates are $2.281252, $2.281252, $2.15 and $1.8125, respectively.
9
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(2) On June 2, 2000,25, 2001, the Company redeemed all of its remaining
issued and outstanding Series JA and
F Cumulative ConvertibleRedeemable Preferred Shares at their liquidation values for
cash consideration of Beneficial Interest. The preferred shares were redeemed
for such number of common shares that were issuable at a
conversion rate of 0.6136 of a common share of EQR for each
Series J Preferred Share.$210.5 million.
4. Real Estate AcquisitionsREAL ESTATE ACQUISITIONS
During the six months ended June 30, 2000,2001, the Company acquired the
three Propertieseight properties listed below from unaffiliated parties. The cash portionparties for a total purchase
price of these transactions was funded from proceeds received from the disposition of
properties and working capital.$232.1 million.
- ------------------------------------------------------------------------------------------------------------------
PURCHASE-----------------------------------------------------------------------------------------------------------------
ACQUISITION
NUMBER PRICE
DATE NUMBER OF PRICE ACQUIRED PROPERTY LOCATION OF UNITS (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------------- --------------------------------------- -------------------------- ------------ -----------------
01/19/00 Windmont Atlanta, GA 17804/01 Suerte San Diego, CA 272 $ 10,310
04/05/00 Alborada Fremont,37,500
02/08/01 Westside Villas VI Los Angeles, CA 442 83,500
06/30/00 Jefferson18 4,550
02/15/01 Riverview Norwalk, CT 92 9,600
03/15/01 Grand Reserve at Wyndham Lakes Coral Springs,Eagle Valley Woodbury, MN 394 54,250
03/22/01 Legends at Preston Morrisville, NC 382 30,200
03/30/01 Mission Hills Oceanside, CA 282 26,750
03/30/01 River Oaks Oceanside, CA 280 26,250
05/18/01 Promenade at Aventura Aventura, FL 332 33,340
- ------------------------------------------------------------------------------------------------------------------
952 $127,150
==================================================================================================================296 43,000
--------------- --------------------------------------- -------------------------- ------------ -----------------
2,016 $ 232,100
--------------- --------------------------------------- -------------------------- ------------ -----------------
On January 19, 2000, the Company paid $1.25 million to acquire an
additional ownership interest in LFT's Guilford portfolio (14 properties
containing 2,995 units located in four states). The transaction was effective
on January 1, 2000. Prior to January 1, 2000, the Company accounted for this
portfolio under the equity method of accounting. As a result of this
additional ownership acquisition, the Company acquired a controlling
interest, and as such, now consolidates these properties for financial
reporting purposes. The Company recorded additional investments in real
estate totaling $69.4 million in connection with this transaction.
5. REAL ESTATE DISPOSITIONS
During the six months ended June 30, 2000,2001, the Company disposed of the
fourteentwenty-seven properties listed below to unaffiliated parties. TheWhen combined with
gains from the joint venture, unconsolidated property sale and land sales
discussed below, the Company recognized a net gain for financial reporting purposes of approximately $38.1
million.$46.6
million on these sales.
10
- --------------------------------------------------------------------------------------------------------------------- ---------------------------------- -------------------------- ------------ -----------------
DISPOSITION
DATE NUMBER PRICE
DATE DISPOSED PROPERTY LOCATION OF UNITS (IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------- ---------------------------------- -------------------------- ------------ -----------------
02/04/00 Lakeridge at the Moors Miami, FL 17501/17/01 Meadowood II Indianapolis, IN 74 $ 10,0001,300
01/31/01 Concorde Bridge Overland Park, KS 248 15,600
02/09/00 Sonnet Cove01/01 Springs of Country Woods Salt Lake City, UT 590 31,000
02/22/01 Riverview Estates Napoleon, OH 90 1,750
02/26/01 Chelsea Court Sandusky, OH 62 1,600
02/27/01 Concord Square Lawrenceburg, IN 48 1,200
02/28/01 Canyon Creek Tucson, AZ 242 9,220
03/06/01 Gentian Oaks Columbus, GA 62 1,620
03/06/01 Holly Park Columbus, GA 66 1,730
03/06/01 Stratford Lane I & II Lexington, KY 331 12,300
02/25/00 YumaColumbus, GA 67 1,750
03/07/01 Estate on Quarry Lake Austin, TX 302 25,232
03/08/01 Meadowood Crawfordsville, IN 64 1,300
03/14/01 Mill Run Statesboro, GA 88 2,350
03/15/01 Laurel Court Colorado Springs, CO 40 2,350
02/25/00 Indigo Plantation Daytona Beach, FL 304 14,200
02/25/00 The Oaks of Lakebridge Ormond Beach, FL 170 7,800Fremont, OH 69 1,450
03/23/00 Tanglewood Lake Oswego, OR 158 10,750
03/30/00 Preston Lake Tucker, GA 320 17,325
03/31/00 Cypress Cove Melbourne, FL 326 18,800
04/20/00 Village of Sycamore Ridge Memphis, TN 114 5,200
04/28/00 Towne Centre III & IV Laurel, MD 562 29,244
05/11/00 3000 Grand15/01 Regency Woods West Des Moines, IA 186 9,625200 9,350
04/16/01 Rosewood Tampa, FL 66 1,650
04/25/01 Parkcrest Southfield, MI 210 12,950
04/27/01 Westwood Newark, OH 14 222
04/30/01 Desert Park Las Vegas, NV 368 9,900
05/15/01 Carleton Court Erie, PA 60 1,461
05/16/01 River Oak Louisville, KY 268 14,650
06/07/01 Willowood Milledgeville, GA 61 1,550
06/14/00 Villa Madeira Scottsdale, AZ 332 17,500
- ------------------------------------------------------------------------------------------------------
3,108 $155,094
======================================================================================================01 Quail Cove Salt Lake City, UT 420 20,000
06/15/01 Beckford Place Wapakoneta, OH 40 830
06/27/01 The Birches Lima, OH 58 1,120
06/28/01 Pelican Pointe I and II Jacksonville, FL 160 4,150
06/28/01 Camden Way I and II Kingsland, GA 118 2,000
--------------- ---------------------------------- -------------------------- ------------ -----------------
4,115 $ 176,935
--------------- ---------------------------------- -------------------------- ------------ -----------------
10
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Also, on June 30, 2000,On February 23, 2001, the Company entered into two separatea joint venturesventure with an
unaffiliated party.joint venture partner ("JVP"). At closing, the Company sold and/or
contributed twenty-oneeleven wholly owned properties containing 5,2113,011 units in
eight states valued at
$303.4$202.5 million to the joint venturesventure encumbered with $220$20.2 million in mortgage
loans obtained on June 26, 2000 (see further
discussionFebruary 16, 2001. An additional $123.6 million of mortgage
loans was obtained by the joint venture. The JVP contributed cash in Note 8).an amount
equal to 75% of the equity in the joint venture, which was then distributed to
the Company. The unaffiliated party acquiredCompany retained a 75%25% interest in the joint ventures while the Company retained a 25% interestventure along with
the right to manage the properties. In accordance with the respective joint
venture organization documents, the Company and the JVP both shall have the
right, but not the obligation, to infuse additional cash into the joint venture.
There are no other agreements that require the Company or the JVP to infuse cash
into each joint venture. In addition, the Company and the JVP have not
guaranteed the mortgage indebtedness of the joint venture. As a result, the
Company recognized 75% of the gain on the sales and/or contributions of property
to the joint venture, which totaled approximately $36.4 million. The Company will account forhas
classified its initial $3.4 million 25% interest in the joint venturesventure (at
carryover basis) as investments in unconsolidated entities and accounted for it
under the equity method of accounting. The Company
recognized a net gain for financial reporting purposes of approximately $49.6
million.
In addition, during the six months ended June 30, 2000,2001, the Company
sold its entire interest in twoone Unconsolidated PropertiesProperty containing 33874 units for
approximately $4.4 million.$0.4 million and sold vacant parcels of land in Richmond, VA and
Jacksonville, FL for $11.2 million and $0.2 million, respectively.
6. COMMITMENTS TO ACQUIRE/DISPOSE OF REAL ESTATE
As of June 30, 2000, in addition to2001, the Properties that were
subsequently acquired as discussed in Note 14 of the Notes to Consolidated
Financial Statements, the Company had entered into separate agreements
to acquire twoeight multifamily properties containing 5602,922 units from unaffiliated
parties. The Company expects a combined
11
purchase price of approximately $35.3$360.1 million, including the assumption of
mortgage indebtedness of approximately $27.1$44.8 million.
As of June 30, 2000,2001, in addition to the Properties that were
subsequently disposed of as discussed in Note 1415 of the Notes to Consolidated
Financial Statements, the Company had entered into separate agreements to
dispose of eighteenfifteen multifamily properties containing 4,4142,995 units to unaffiliated
parties. The Company expects a combined disposition price of approximately
$222.5$137.0 million.
The closings of these pending transactions are subject to certain
contingencies and conditions; therefore, there can be no assurance that these
transactions will be consummated or that the final terms thereof will not differ
in material respects from those summarized in the preceding paragraphs.
7. INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company has entered into two separate joint venture agreements with
third party development companies whereby the Company contributes 25% to 30% of
the development cost to the joint venture in return for preferential returns of
9.0% per annum. The basis of the Company's equity investments in these two joint
ventures was $273.8 million and $235.9 million as of June 30, 2001 and December
31, 2000, respectively.
The Company also has various other investments in unconsolidated
entities with ownership interests ranging from 1.5% to 50.0%. The basis of these
equity investments was $54.4 million and $80.6 million as of June 30, 2001 and
December 31, 2000, respectively.
These investments are accounted for under the equity method of
accounting.
8. DEPOSITS - RESTRICTED
Deposits-restricted as of June 30, 20002001 primarily included the
following:
-O deposits in the amount of $29.5$49.5 million held in third party
escrow accounts to provide collateral for third party
construction financing in connection with two separate joint venture
agreements;
-O approximately $76.0$151.6 million held in third party escrow
accounts, representing proceeds received in connection with
the Company's disposition of sixteen propertiestax-deferred (1031) exchange
proceeds; and
earnest
money deposits made for nine additional acquisitions;
-O approximately $32.9$34.5 million for tenant security, utility, deposits, and
other deposits for certain of the Company's
Properties; and
- approximately $12.2 million of other deposits.
8.9. MORTGAGE NOTES PAYABLE
As of June 30, 2000,2001, the Company had outstanding mortgage indebtedness
of approximately $3.0 billion encumbering 514 of the Properties.
The carrying value of such Properties (net of accumulated depreciation of
$525.9 million) was approximately $4.7 billion. The mortgage notes payables
are generally due in monthly installments of principal and interest.
11
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
During the six months ended June 30, 20002001 the Company:
- recorded additional third-partyO repaid $237.0 million of mortgages due at or prior to maturity
and/or at the disposition date of the respective Property;
O assumed $45.9 million of mortgage debt totaling $65.1on four properties in
connection with their acquisitions;
O disposed of $27.4 million of mortgage debt assumed by the
purchaser in connection with the consolidationdisposition of the Guilford
portfolio on January 1, 2000 (see Note 4);
- repaid the outstanding mortgage balances on fifty-six
Properties in the aggregate amountcertain
properties;
O obtained $26.0 million of $104.5 million;
- obtained new mortgage financingdebt on eleven previously
unencumbered propertiesproperties; and
O received $19.1 million in the amount of $148.3 millionconstruction loan draw proceeds on
March 20, 2000;
- settled on a $100 million forward starting swap and received
$7.1 million. This amount is being amortized over the life of
the financing for the eleven previously unencumbered
Properties that occurred in March 2000; and
- obtained new mortgage financings on twenty-one previously
unencumbered properties in the amount of $220 million on June
26, 2000. These mortgage loans were assumed by the joint
ventures that closed on June 30, 2000 (see Note 5).two properties.
12
As of June 30, 2000,2001, scheduled maturities for the Company's outstanding
mortgage indebtedness are at various dates through October 1, 2033. The interest
rate range on the Company's mortgage debt was 4.00%2.5% to 10.67%12.465% at June 30, 2000.2001.
During the six months ended June 30, 2000,2001, the weighted average interest rate on
the Company's mortgage debt was 7.33%6.64%.
9.10. NOTES
The following tables summarize the Company's unsecured note balances
and certain interest rate and maturity date information as of and for the six
months ended June 30, 2000:
Weighted
June 30, 2000 Net Principal Interest Rate Average Maturity
(AMOUNTS ARE IN THOUSANDS) Balance Ranges Interest Rate Date Ranges
- ------------------------------------------------------------------------------------------------------------------
Fixed Rate Public Notes $ 2,062,118 6.150% - 9.375% 7.07% 2000 - 2026
Floating Rate Public Notes 99,782 (1) 7.09% 2003
Fixed Rate Tax-Exempt Bonds 127,780 4.750% - 5.200% 5.10% 2024 - 2029
------------ ------------
Totals $ 2,289,680 6.97%
============ ============
(1)
As of June 30, 2000, floating rate public notes consisted of
one note. The interest rate on this note was LIBOR (reset
quarterly) plus a spread equal to 0.75% at June 30, 2000
(reset annually in August).
As of June 30, 2000,2001, the Company had outstanding unsecured notes of
approximately $2.3 billion$2.4 billion.
During the six months ended June 30, 2001, the Company issued $300.0
million of ten-year 6.95% fixed-rate public unsecured notes and received net
proceeds of a $4.1 million discount and including a
$6.0 million premium.$297.4 million.
As of June 30, 2000,2001, scheduled maturities for the remaining unamortized balance of deferred
settlement receipts and payments from treasury locks andCompany's outstanding
notes are at various dates through 2029. The interest rate protection agreementsrange on the
Company's notes was $9.1 million and $2.9 million, respectively.
10. LINE4.75% to 9.375% at June 30, 2001. During the six months
ended June 30, 2001, the weighted average interest rate on the Company's notes
was 6.99%.
11. LINES OF CREDIT
The Company has a revolving credit facility with Bank of America
Securities LLC and Chase Securities Inc. acting as joint lead arrangers to provide the Operating
Partnership with potential borrowings of up to $700$700.0 million. As of June 30,
2000 no amounts were2001, $133.0 million was outstanding under this facility 12
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
and $51.4$60.9 million was
restricted on the line of credit.
In connection with the Globe acquisition, the Company assumed a
revolving credit facility with potential borrowings of up to $55.0 million. On
May 31, 2001, this credit facility was terminated.
During the six months ended June 30, 2000,2001, the weighted average
interest rate on the Company's linelines of credit was 6.58%6.59%.
11.13
12. CALCULATION OF NET INCOME PER WEIGHTED AVERAGE COMMON SHARE
The following tables set forth the computation of net income per share
- - basic and net income per share - diluted.
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
----------------------------- ----------------------------------------------------------------------------------------------
2001 2000 19992001 2000
1999
----------------------------- ----------------------------------------------------------------------------------------------
(amounts in thousands except per share amounts)
NUMERATOR:
Income before allocation to Minority Interests, income from
investments in unconsolidated entities, net gain on sales
of real estate, extraordinary items, cumulative effect
of change in accounting principle and preferred
distributions $ 199,172 $ 176,057 $98,607 $ 92,088
Allocation to Minority Interests:
Operating Partnership (16,474) (19,132) (6,678) (12,036)
Partially Owned Properties (238) 157 (133) 112
Income from investments in unconsolidated entities 10,350 9,064 6,553 4,841
Preferred distributions (57,419) (55,654) (28,893) (27,266)
------------------------------------------------------------
Income before net gain on sales of real estate,
extraordinary items and cumulative effect of change in
accounting principle 135,391 110,492 69,456 57,739
Net gain on sales of real estate 46,565 87,652 4,787 67,654
Extraordinary items 106 - (205) -
Cumulative effect of change in accounting principle (1,270) - - -
------------------------------------------------------------
Numerator for net income per share - basic 180,792 198,144 74,038 125,393
Effect of dilutive securities:
Allocation to Minority Interests -
Operating Partnership 16,474 19,132 6,678 12,036
Distributions on convertible preferred shares/units 242 267 - 3,526
------------------------------------------------------------
Numerator for net income per share - diluted $197,508 $217,543 $80,716 $ 140,955
============================================================
DENOMINATOR:
Denominator for net income per share - basic 132,890 128,435 133,179 129,072
Effect of dilutive securities:
OP Units 12,153 12,415 12,076 12,364
Convertible preferred shares/units 185 204 - 4,304
Share options/restricted shares 1,681 579 1,715 770
------------------------------------------------------------
Denominator for net income per share - diluted 146,909 141,633 146,970 146,510
============================================================
Net income per share - basic $ 1.36 $ 1.54 $ 0.56 $ 0.97
============================================================
Net income per share - diluted $ 1.34 $ 1.54 $ 0.55 $ 0.96
============================================================
14
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
---------------------------------------------------------------
2001 2000 2001 2000
---------------------------------------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Numerator:NET INCOME PER SHARE - BASIC:
Income before net gain on dispositionsales of properties, net,real estate, extraordinary
item, allocation to Minority
Interestsitems and preferred distributions $ 185,121 $ 159,374 $ 96,929 $ 80,110
Allocation to Minority Interests:
Operating Partnership (19,132) (14,514) (12,036) (7,388)
Partially Owned Properties 157 -- 112 --
Distributions to preferred shareholders (55,654) (57,111) (27,266) (27,734)
----------------------------- -----------------------------
Income before gain on dispositioncumulative effect of properties, net
and extraordinary item 110,492 87,749 57,739 44,988
Gain on disposition of properties, net 87,652 45,807 67,654 24,391
Loss on early extinguishment of debt -- (451) -- (451)
----------------------------- -----------------------------
Numerator for net incomechange in accounting
principle per share - basic 198,144 133,105 125,393 68,928
Effect$ 1.05 $ 0.92 $ 0.53 $ 0.49
Net gain on sales of dilutive securities:
Allocation to Minority Interestsreal estate 0.32 0.62 0.03 0.48
Extraordinary items - Operating Partnership 19,132 14,514 12,036 7,388
Distributions to convertible preferred shareholders 267 -- 3,526 --
----------------------------- -----------------------------
Numerator for net income per share - diluted $ 217,543 $ 147,619 $ 140,955 $ 76,316
============================= =============================
Denominator:
Denominator for net income per share - basic 128,435 119,762 129,072 120,558
Effect-
Cumulative effect of dilutive securities:
Dilution for assumed exercise of stock options 579 742 770 908
OP Units 12,415 13,064 12,364 12,920
Convertible preferred shares 204 -- 4,304 --
----------------------------- -----------------------------
Denominator for net income per sharechange in accounting principle (0.01) - diluted 141,633 133,568 146,510 134,386
============================= =============================- -
---------------------------------------------------------------
Net income per share - basic $ 1.36 $ 1.54 $ 1.110.56 $ 0.97
===============================================================
NET INCOME PER SHARE - DILUTED:
Income before net gain on sales of real estate, extraordinary
items and cumulative effect of change in accounting
principle per share - diluted $ 0.57
============================= =============================1.03 $ 0.92 $ 0.52 $ 0.50
Net gain on sales of real estate 0.32 0.62 0.03 0.46
Extraordinary items - - - -
Cumulative effect of change in accounting principle (0.01) - - -
---------------------------------------------------------------
Net income per share - diluted $ 1.54 $ 1.11 $ 0.96 $ 0.57
============================= =============================
13
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
-------------- ------------- -------------- -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Net income per share - basic:
Income before gain on disposition of properties, net
and extraordinary item per share - basic $ 0.92 $ 0.77 $ 0.49 $ 0.39
Gain on disposition of properties, net 0.62 0.34 0.48 0.18
Loss on early extinguishment of debt -- -- -- --
-------------- ------------- -------------- -------------
Net income per share - basic1.34 $ 1.54 $ 1.11 $ 0.97 $ 0.57
============== ============= ============== =============
Net income per share - diluted:
Income before gain on disposition of properties, net
and extraordinary item per share - diluted $ 0.92 $ 0.77 $ 0.50 $ 0.39
Gain on disposition of properties, net 0.62 0.34 0.46 0.18
Loss on early extinguishment of debt -- -- -- --
-------------- ------------- -------------- -------------
Net income per share - diluted $ 1.54 $ 1.110.55 $ 0.96
$ 0.57
============== ============= ============== ============================================================================
CONVERTIBLE PREFERRED SHARES AND JUNIOR CONVERTIBLE PREFERENCE SHARES/UNITS THAT COULD BE CONVERTED INTO 7,460,692 AND
9,970,878 AND 12,761,757 WEIGHTED AVERAGE COMMON SHARES FOR THE SIX MONTHS ENDED JUNE 30, 20002001
AND 1999,2000, RESPECTIVELY, AND 7,689,955 AND 5,402,779 AND
12,404,422 WEIGHTED AVERAGE COMMON
SHARES FOR THE QUARTERS ENDED JUNE 30, 20002001 AND 1999,JUNE 30, 2000, RESPECTIVELY,
WERE OUTSTANDING BUT WERE NOT INCLUDED IN THE COMPUTATION OF DILUTED EARNINGS
PER SHARE BECAUSE THE EFFECTS WOULD BE ANTI-DILUTIVE.
12.13. COMMITMENTS AND CONTINGENCIES
The Company, as an owner of real estate, is subject to various
environmental laws of Federal and local governments. Compliance by the Company
with existing laws has not had a material adverse effect on the Company's
financial condition and results of operations. However, the Company cannot
predict the impact of new or changed laws or regulations on its current
Properties or on properties that it may acquire in the future.
The Company does not believe there is any litigation threatened against
the Company other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the consolidated
financial statements of the Company.
In regards to the funding of Properties in the development and/or
earnout stage and the joint venture agreements with two multifamily residential
real estate developers, the Company funded a total of $91.7$71.4 million during the
six months ended June 30, 2000.2001. During the remainder of 2000,2001, the Company
expects to fund approximately $63.8$66.0 million in connection with these Properties.
In connection with one joint venture agreement, the Company has an obligation to
fund up to an additional $17.5$12.5 million to guarantee third party construction
financing. Pursuant to the termsAs of a Stock Purchase Agreement with Wellsford
Real Properties, Inc. ("WRP Newco"), the Company had agreed to purchase up to
1,000,000 shares of WRP Newco Series A Preferred at $25.00 per share on a
standby basis over a three-year period ending on MayJune 30, 2000. This
14
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
agreement was terminated on May 5, 2000, and, as such,2001, the Company has no
further obligations20 projects under this agreement.development
with estimated completion dates ranging from September 30, 2001 through June 30,
2003. At any time following the completion of construction of any development
property, the Company's joint venture partners have the right to cause the
Company to acquire their respective interests in the completed projects at a
mutually agreeable price. If the Company and the joint venture
15
partner are unable to agree on a price, appraisals will be obtained by both
parties. If the appraised values vary by more than 10%, both the Company and the
joint venture partner will agree on a third appraiser to determine which
original appraisal is closest to its determination of value.
In connection with the Wellsford Merger, the Company provided a
$14.8 million credit
enhancement with respect to certain tax-exempt bonds issued to finance certain
public improvements at a multifamily development project. As of June 30, 2000,2001,
this enhancement was still in effect.
13.effect at a commitment amount of $12.7 million.
14. REPORTABLE SEGMENTS
The following tables set forth the reconciliation of net income and
total assets for the Company's reportable segments for the six months and
quarter ended June 30, 20002001 and net income for the six months and quarter ended
June 30, 1999.2000.
SIX MONTHS ENDED JUNE 30, 2000 RENTAL REAL CORPORATE/
JUNE 30, 2001 (AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rental income $ 1,027,671 $ -- $ 1,027,671
Fee and asset management income -- 4,140 4,140
Furniture income -- 30,027 30,027
Property and maintenance expense (280,783) -- (280,783)
Real estate tax and insurance expense (96,775) -- (96,775)
Property management expense (36,364) -- (36,364)
Fee and asset management expense -- (3,648) (3,648)
Furniture expenses -- (30,496) (30,496)
--------------------------------------------
Net operating income 613,749 23 613,772
Interest income - investment in mortgage notes -- 8,763 8,763
Interest and other income -- 11,711 11,711
Depreciation expense on non-real estate assets -- (3,980) (3,980)
Interest expense:
Expense incurred -- (190,383) (190,383)
Amortization of deferred financing costs -- (2,810) (2,810)
General and administrative expense -- (14,079) (14,079)
Allocation to Minority Interests - Partially
Owned Properties -- (238) (238)
Income from investments in unconsolidated entities -- 10,350 10,350
Preferred distributions -- (57,419) (57,419)
Adjustment for loss on investment in
technology segment -- 6,775 6,775
Adjustment for depreciation expense related
to Unconsolidated and Partially Owned Properties -- 4,729 4,729
--------------------------------------------
Funds from operations available to Common Shares
and OP Units 613,749 (226,558) 387,191
Depreciation/amortization (221,898) (1,924) (223,822)
Net gain on sales of real estate 46,565 -- 46,565
Extraordinary items -- 106 106
Cumulative effect of change in accounting principle -- (1,270) (1,270)
Allocation to Minority Interests - Operating Partnership -- (16,474) (16,474)
Adjustment for loss on investment in
technology segment -- (6,775) (6,775)
Adjustment for depreciation expense related
to Unconsolidated and Partially Owned Properties -- (4,729) (4,729)
--------------------------------------------
Net income available to Common Shares $ 438,416 $ (257,624) $ 180,792
============================================
Investment in real estate, net of accumulated depreciation $ 11,014,139 $ 16,297 $ 11,030,436
============================================
Total assets $ 11,052,880 $ 1,024,856 $ 12,077,736
============================================
16
SIX MONTHS ENDED RENTAL REAL CORPORATE/
JUNE 30, 2000 (AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
- -------------------------------------------------------------------------------------------------------
Rental income $ 952,740 $ -- $ 952,740
Fee and asset management income -- 2,835 2,835
Property and maintenance expense (227,845) -- (227,845)
Real estate tax and insurance expense (95,001) -- (95,001)
Property management expense (37,760) -- (37,760)
----------------------------------------------Fee and asset management expense -- (2,102) (2,102)
--------------------------------------------
Net operating income 592,134 -- 592,134
Fee and asset management income -- 2,632 2,632733 592,867
Interest income - investment in mortgage notes -- 5,499 5,499
Interest and other income -- 17,652 17,652
Fee and asset management expense -- (2,102) (2,102)8,385 8,385
Depreciation expense on non-real estate assets -- (3,157) (3,157)
Interest expense:
Expense incurred -- (190,263) (190,263)
Amortization of deferred financing costs -- (2,703) (2,703)
General and administrative expense -- (13,216) (13,216)
Preferred distributions -- (55,654) (55,654)
Allocation to Minority Interests - Partially Owned
Properties -- 157 157
Income from investments in unconsolidated entities -- 9,064 9,064
Preferred distributions -- (55,654) (55,654)
Adjustment for depreciation expense related to
Unconsolidated and Partially Owned Properties -- (491) (491)
------------------------------------------------------------------------------------------
Funds from operations available to Common Shares and OP
Units 592,134 (241,646) 350,488
Depreciation expense on real estate assets (221,355) -- (221,355)
GainNet gain on dispositionsales of properties, netreal estate 87,652 -- 87,652
Allocation to Minority Interests - Operating Partnership -- (19,132) (19,132)
Adjustment for depreciation expense related to
Unconsolidated and Partially Owned Properties -- 491 491
------------------------------------------------------------------------------------------
Net income available to Common Shares $ 458,431 $ (260,287) $ 198,144
==============================================
Investment in real estate, net of accumulated
depreciation $ 10,801,004 $ 16,541 $ 10,817,545
==============================================
Total assets $ 10,857,001 $ 889,742 $ 11,746,743
==========================================================================================
1517
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
SIX MONTHSRENTAL REAL CORPORATE/
QUARTER ENDED JUNE 30, 1999 RENTAL REAL CORPORATE/2001 (AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rental income $ 819,178515,860 $ -- $ 819,178515,860
Fee and asset management income -- 2,168 2,168
Furniture income -- 15,155 15,155
Property and maintenance expense (196,865) (196,865)(143,746) -- (143,746)
Real estate tax and insurance expense (84,515) (84,515)(48,754) -- (48,754)
Property management expense (27,973) (27,973)
----------------------------------------------
Net operating income 509,825(17,686) -- 509,825(17,686)
Fee and asset management expense -- (1,764) (1,764)
Furniture expenses -- (15,668) (15,668)
--------------------------------------------
Net operating income -- 2,414 2,414305,674 (109) 305,565
Interest income - investment in mortgage notes -- 5,644 5,6446,019 6,019
Interest and other income -- 11,123 11,123
Fee and asset management expense -- (1,624) (1,624)5,209 5,209
Depreciation expense on non-real estate assets -- (3,423) (3,423)(1,998) (1,998)
Interest expense:
Expense incurred -- (158,499) (158,499)(95,107) (95,107)
Amortization of deferred financing costs -- (1,661) (1,661)(1,413) (1,413)
General and administrative expense -- (10,714) (10,714)(7,325) (7,325)
Allocation to Minority Interests - Partially Owned
Properties -- (133) (133)
Income from investments in unconsolidated entities -- 6,553 6,553
Preferred distributions -- (57,111) (57,111)(28,893) (28,893)
Adjustment for loss on investment in
technology segment -- 3,772 3,772
Adjustment for depreciation expense related to
Unconsolidated and Partially Owned Properties -- 551 551
----------------------------------------------2,734 2,734
--------------------------------------------
Funds from operations available to Common Shares and
OP Units 509,825 (213,300) 296,525
Depreciation expense305,674 (110,691) 194,983
Depreciation/amortization (111,352) (991) (112,343)
Net gain on sales of real estate assets (193,711)4,787 -- (193,711)
Gain on disposition of properties, net 45,8074,787
Extraordinary items -- 45,807
Loss on early extinguishment of debt -- (451) (451)(205) (205)
Allocation to Minority Interests - Operating Partnership -- (14,514) (14,514)(6,678) (6,678)
Adjustment for loss on investment in
technology segment -- (3,772) (3,772)
Adjustment for depreciation expense related
to Unconsolidated and Partially Owned Properties -- (551) (551)
----------------------------------------------(2,734) (2,734)
--------------------------------------------
Net income available to Common Shares $ 361,921199,109 $ (228,816)(125,071) $ 133,105
==============================================74,038
============================================
1618
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
RENTAL REAL CORPORATE/
QUARTER ENDED JUNE 30, 2000 RENTAL REAL CORPORATE/ (AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
-
------------------------------------------------------------------------------------------------------
Rental income $ 479,193 $ -- $ 479,193
Fee and asset management income -- 1,435 1,435
Property and maintenance expense (113,977) -- (113,977)
Real estate tax and insurance expense (46,667) -- (46,667)
Property management expense (18,846) -- (18,846)
----------------------------------------------Fee and asset management expense -- (1,036) (1,036)
--------------------------------------------
Net operating income 299,703 -- 299,703
Fee and asset management income -- 1,334 1,334399 300,102
Interest income - investment in mortgage notes -- 2,737 2,737
Interest and other income -- 9,849 9,849
Fee and asset management expense -- (1,036) (1,036)4,907 4,907
Depreciation expense on non-real estate assets -- (1,590) (1,590)
Interest expense:
Expense incurred -- (95,152) (95,152)
Amortization of deferred financing costs -- (1,362) (1,362)
General and administrative expense -- (6,518) (6,518)
Preferred distributions -- (27,266) (27,266)
Allocation to Minority Interests - Partially Owned
Properties -- 112 112
Income from investments in unconsolidated entities -- 4,841 4,841
Preferred distributions -- (27,266) (27,266)
Adjustment for depreciation expense related to
Unconsolidated and Partially Owned Properties -- (253) (253)
------------------------------------------------------------------------------------------
Funds from operations available to Common Shares and OP
Units 299,703 (119,145) 180,558
Depreciation expense on real estate assets (111,036) -- (111,036)
GainNet gain on dispositionsales of properties, netreal estate 67,654 -- 67,654
Allocation to Minority Interests - Operating Partnership -- (12,036) (12,036)
Adjustment for depreciation expense related to
Unconsolidated and Partially Owned Properties -- 253 253
------------------------------------------------------------------------------------------
Net income available to Common Shares $ 256,321 $ (130,928) $ 125,393
==========================================================================================
17
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
QUARTER ENDED JUNE 30, 1999 RENTAL REAL CORPORATE/
(AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------
Rental income $ 413,116 $ -- $ 413,116
Property and maintenance expense (99,818) -- (99,818)
Real estate tax and insurance expense (42,467) -- (42,467)
Property management expense (13,772) -- (13,772)
----------------------------------------------
Net operating income 257,059 -- 257,059
Fee and asset management income -- 1,180 1,180
Interest income - investment in mortgage notes -- 2,749 2,749
Interest and other income -- 5,177 5,177
Fee and asset management expense -- (757) (757)
Depreciation expense on non-real estate assets -- (1,719) (1,719)
Interest expense:
Expense incurred -- (79,302) (79,302)
Amortization of deferred financing costs -- (816) (816)
General and administrative expense -- (4,947) (4,947)
Preferred distributions -- (27,734) (27,734)
Adjustment for depreciation expense related to
Unconsolidated Properties -- 276 276
----------------------------------------------
Funds from operations available to Common Shares
and OP Units 257,059 (105,893) 151,166
Depreciation expense on real estate assets (98,514) -- (98,514)
Gain on disposition of properties, net 24,391 -- 24,391
Loss on early extinguishment of debt -- (451) (451)
Allocation to Minority Interests - Operating Partnership -- (7,388) (7,388)
Adjustment for depreciation expense related to
Unconsolidated Properties -- (276) (276)
----------------------------------------------
Net income available to Common Shares $ 182,936 $ (114,008) $ 68,928
==============================================
(1) The Company has one primary reportable business segment, which consists
of investment in rental real estate. The Company's primary business is owning, managing, and operating
multifamily residential properties which includes the generation of rental
and other related income through the leasing of apartment units to tenants.
(2) The Company has a segment for corporate level activity including such items
as fee and asset management activity, furniture rental/sales activity,
interest income earned on short-term investments interest
income earned onand investment in mortgage
notes, investment in technology entities, income earned from investments in
unconsolidated entities, general and administrative expenses, and interest
expense on mortgage notes payable, and unsecured note issuances. In addition, the Company has a segment for third partyissuances and lines of
credit. The Company's fee and asset management activity that isand furniture
rental/sales activities are immaterial and doesdo not meet the threshold
requirements of a reportable segment as provided for in StatementSFAS No. 131.
Interest expense on debt is not allocated to individual Properties, even if
the Properties secure such debt. Further, income allocated to Minority
Interests is not allocated to the Properties.
1819
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
14.15. SUBSEQUENT EVENTS
On July 11, 2000,Subsequent to June 30, 2001 and through August 8, 2001, the Company closed on its acquisition, in an all
cash and debt transaction, of Globe Business Resources, Inc. ("Globe"), one
of the nation's largest providers of temporary corporate housing and
furniture rental. Shareholders of Globe received $13.00 per share, which
approximated $58.7 million in cash based on the Globe shares outstanding. In
addition, the Company assumed approximately $70.8 million in debt.
On July 6, 2000, the CompanyCompany:
O disposed of Idlewood Apartments, a
320-unit multifamily property located in Indianapolis, IN, to an unaffiliated
party for a total sales priceseven Properties consisting of $15.6 million.
On July 11, 2000, the Company repaid the outstanding mortgage
balance on one Property totaling $5.9 million.
On July 12, 2000, the Company acquired Ambergate Villas Apartments,
a 72-unit multifamily property located in West Palm Beach, FL, from an
unaffiliated party for a total purchase price of approximately $2.4 million,
which included the issuance of approximately $0.4 million of OP Units.
On July 12, 2000, the Company acquired Greengate Villas Apartments,
a 120-unit multifamily property located in West Palm Beach, FL, from an
unaffiliated party for a total purchase price of approximately $4.0 million,
which included the assumption of mortgage indebtedness of approximately $2.7
million and the issuance of approximately $1.2 million of OP Units.
On July 12, 2000, the Company acquired Jupiter Sound Villas
Apartments, a 61-unit multifamily property located in Juno Beach, FL, from an
unaffiliated party for a total purchase price of approximately $1.7 million,
which included the assumption of mortgage indebtedness of approximately $1.6
million and the issuance of approximately $10,000 of OP Units.
On July 12, 2000, the Company acquired Oakland Hills Apartments, a
189-unit multifamily property located in Margate, FL, from an unaffiliated
party for a total purchase price of approximately $7.8 million, which
included the assumption of mortgage indebtedness of approximately $5.0
million and the issuance of approximately $2.4 million of OP Units.
On July 12, 2000, the Company acquired Summit Center Apartments, a
87-unit multifamily property located in West Palm Beach, FL, from an
unaffiliated party for a total purchase price of approximately $2.4 million,
which included the assumption of mortgage indebtedness of approximately $2.3
million and the issuance of approximately $10,000 of OP Units.
On July 12, 2000, the Company acquired Whispering Pines Apartments,
a 64-unit multifamily property located in Fort Pierce, FL, from an
unaffiliated party for a total purchase price of approximately $1.0 million,
which included the issuance of approximately $0.1 million of OP Units.
On July 17, 2000, the Company announced that it has entered into a
definitive agreement and plan of merger with Grove Property Trust ("Grove").
Grove's portfolio of 60 properties contains 7,296 units located in three New
England states. The transaction values Grove at approximately $461 million,
including the assumption of approximately $244 million in debt. This merger
is expected to close during the fourth quarter of 2000 and does not require
EQR shareholder approval.
19
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On July 25, 2000, the Company acquired Harbour Town Apartments, a
392-unit multifamily property located in Boca Raton, FL, from an unaffiliated
party for a total purchase price of approximately $31.9 million.
On July 25, 2000, the Company disposed of Sabal Palms Apartments, a
416-unit multifamily property located in Pompano Beach, FL, to an
unaffiliated party for a total sales price of $27.2 million.
On July 27, 2000, the Company disposed of Lake in the Woods
Apartments, a 1,028-unit multifamily property located in Ypsilanti, MI, to an
unaffiliated party for a total sales price of $57.0 million.
On July 28, 2000, the Company disposed of Lamplight Court
Apartments, a 53-unit multifamily property located in London, OH, to an
unaffiliated party for a total sales price of $0.7 million.
On July 28, 2000, the Company disposed of Cheyenne Crest Apartments,
a 208-unit multifamily property located in Colorado Springs, CO, to an
unaffiliated party for a total sales price of $12.3 million.
On July 28, 2000, the Company disposed of Windmill Apartments, a
304-unit multifamily property located in Colorado Springs, CO, to an
unaffiliated party for a total sales price of $12.4 million.
On July 28, 2000, the Company sold its entire interest in an
Unconsolidated Property containing 391,081 units for
approximately $0.2 million.$54.0 million;
O repaid $9.4 million of mortgage debt at maturity on one property;
O obtained $301.5 million in new first mortgage financing on twenty-one
Unconsolidated Properties, of which $55.7 million of the refinancing
proceeds was used to repay principal on the Company's investment in
mortgage notes;
O funded $11.7 million related to the development, earnout and joint
venture agreements; and
O announced a two-for-one split of its Common Shares and OP Units to be
effective September 21, 2001.
20
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion and analysis of the results of operations
and financial condition of the Company should be read in connection with the
Consolidated Financial Statements and Notes thereto. DueFor further information including definitions for capitalized terms,
refer to the Company's
ability to control the Operating Partnership, the Management Partnershipsconsolidated financial statements and Management Companies, the Financing Partnerships, the LLC's and certain other
entities, each entity has been consolidated with the Company for financial
reporting purposes. Capitalized terms used herein and not defined, are as
definedfootnotes thereto included in
the Company's Annual Reportannual report on Form 10-K for the year ended December 31, 1999.2000.
Forward-looking statements in this report are intended to be made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The words "believes", "expects" and "anticipates" and other
similar expressions which are predictions of or indicate future events and
trends and which do not relate solely to historical matters identify
forward-looking statements. Such forward-looking statements are subject to risks
and uncertainties, which could cause actual results, performance, or
achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following:
-o alternative sources of capital to the Company are highermore expensive than
anticipated;
-o occupancy levels and market rents may be adversely affected by local
economic and market conditions, which are beyond the Company's control;
and
-o additional factors as discussed in Part I of the Annual Report on
Form 10-K.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakesassumes no obligation to publicly releaseupdate or correct any revisions toof these forward-looking
statements, which may be made to reflectin light of events or circumstances arising or existing after the
date hereof or to reflect the occurrence of
unanticipated events.hereof.
RESULTS OF OPERATIONS
The acquired properties are presented in the Consolidated Financial
Statements of the Company from the date of each acquisition or the closing dates
of the Mergers.
The following table summarizes the number of Wholly Owned
Acquired and Disposed Properties and related
units for the periods presented:
PORTFOLIO SUMMARY
ACQUISITIONS DISPOSITIONS
------------------------------------------------------------------
Number of Number of Number of Number of
YEAR Properties Units Properties Units
----------------------------------------------------------------------------------------------SIX MONTHS ENDED JUNE 30,
------------------------------------------------
2001 2000
---- ----
PROPERTIES UNITS PROPERTIES UNITS
---------- -------- ---------- --------
1999 366 35,450 36 7,886
2000Beginning of period 1,104 227,704 1,064 226,317
Acquisitions 8 2,017 3 952
35 8,229Dispositions (28) (4,189) (16) (3,356)
Completed Developments 2 618 2 470
-------- -------- -------- --------
End of period 1,086 226,150 1,053 224,383
======== ======== ======== ========
In addition, the Company sold and/or contributed eleven wholly owned
Properties containing 3,011 units to a joint venture entity during the six
months ended June 30, 2000, the2001. The Company sold its entireand/or contributed 21 wholly owned
properties containing 5,211 units to two joint venture entities during the six
months ended June 30, 2000. The Company retained a 25% interest in two Unconsolidated Properties containing 338
units for approximately $4.4 million.along with the
rights to manage these joint venture Properties.
21
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company's overall results of operations for the six months and
quarters ended June 30, 20002001 and 19992000 have been significantly impacted by the
Company's acquisition and disposition activity. The significant changes in
rental
revenues property and maintenance expenses real estate taxes and insurance,
depreciation expense, property management and interest expense can all primarily be attributed to the acquisition of Globe as
well as the 1999 Acquired Properties2001 and the 2000 Acquired Properties, partially offset by the
disposition of the 1999 Disposed Properties2001 and the 2000 Disposed Properties. TheThis impact of the
1999 Acquired Properties and the 2000 Acquired Properties, the 1999 Disposed
Properties and the 2000 Disposed Properties areis
discussed in greater detail in the following paragraphs.
Properties that the Company owned for all of both the six-monthsix month
periods ended June 30, 20002001 and June 30, 19992000 (the "Six-Month 20002001 Same Store
Properties"), which represented 167,210186,443 units, also impacted the Company's
results of operations.and Properties that the
Company owned for all of both the quarters ended June 30, 20002001 and June 30,
19992000 (the "Second-Quarter 20002001 Same Store Properties"), which represented
168,634186,777 units, also impacted the Company's results of operations. Both the
Six-Month 20002001 Same Store Properties and Second-Quarter 20002001 Same Store
Properties are discussed in the following paragraphs.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 20002001 TO SIX MONTHS ENDED
JUNE 30, 19992000
For the six months ended June 30, 2000,2001, income before gain on
disposition of properties, net, extraordinary item and allocation to
Minority Interests, income from investments in unconsolidated entities, net gain
on sales of real estate, extraordinary items and cumulative effect of change in
accounting principle increased by approximately $25.7$23.1 million when compared to
the six months ended June 30, 1999. This increase was primarily due to the
acquisition of the 1999 Acquired Properties as well as increases in rental
revenues net of increases in property and maintenance expenses, real estate
taxes and insurance, property management expenses, depreciation expense,
interest expense and general and administrative expenses.
In regard to2000.
Rental income from the Six-Month 20002001 Same Store Properties total
revenues increased
by approximately $29.0$44.7 million to $770.5$880.0 million or 3.92%5.4% primarily as a result
of higher rental rates charged to new tenants and tenant renewals and an
increase in income from billing tenants for their share of utility costs as well
as other ancillary services provided to tenants. Overall, propertyFor the remainder of 2001, the
Company expects to achieve rental income increases of 4.75% to 5.0% from Same
Store Properties. These estimated increases are subject to certain risks and
uncertainties including, but not limited to, maintaining an overall average
occupancy rate of 94.5%.
Property operating expenses from the Six-Month 2001 Same Store
Properties, which include property and maintenance, real estate taxes and
insurance and an allocation of property management expenses, increased
approximately $5.3$14.6 million or 1.96%4.8%. ThisThe increase wasin "same store" expenses is
primarily attributable to a $4.9 million, or 10.3%, increase in utilities and a
$4.5 million, or 6.0% increase in payroll costs. For the remainder of 2001, the
Company expects to maintain expense growth at no more than 4.0% to 4.5% for the
Same Store Properties.
Rental income from properties other than Six-Month 2001 Same Store
Properties increased by approximately $30.2 million primarily as a result of
higher expenses for on-site compensation
costsrevenue from the Company's corporate housing business and an increasethe acquisition of
Properties during the periods presented. The Company expects similar trends in
real estate taxesthe future subject to certain risks and uncertainties including that any new
acquisitions perform at the Company's pro forma expectations.
Interest income-investment in mortgage notes increased by approximately
$3.3 million as a result of receiving deferred interest income on certain of the
mortgage notes. The payment of this deferred interest income was triggered by
the refinancing of these mortgage notes subsequent to quarter-end. In addition,
a portion of the proceeds from the refinancing were used to partially repay the
Company's investment in mortgage notes. As a result, the Company anticipates
that the interest income recognized on mortgage notes will decline in future
quarters.
Interest and other income increased by approximately $3.3 million,
primarily as a result of carrying larger balances in various tax deferred 1031
exchange accounts. These proceeds are invested in money market investments and
earn interest income until the Company purchases additional multi-family
properties but was
partially offset by lower leasing and advertising, administrative,
maintenance, building and insurance costs.or the period to reinvest such exchange proceeds expires.
22
Property management representsexpenses included off-site expenses associated with
the self-management of the Company's Properties. These expenses increaseddecreased by
approximately $9.8 million$1.4 million. This decrease is primarily due to the operationsresult of managing
fewer of the propertyCompany's properties and managing more properties that were either
sold and/or contributed to various unconsolidated joint ventures. In addition,
the Company continues to acquire properties in major metropolitan areas and
dispose of assets in smaller multi-family rental markets where the Company does
not have a significant management business obtained throughpresence. As a result, the LFT Merger and a current year
compensation charge associated with the issuanceCompany is able to
achieve economies of restricted shares to our
propertyscale by not increasing off-site management personnel.expenses as it
acquires additional properties.
Fee and asset management revenues and fee and asset management expenses
increased as a result of the Company continuing to manage Properties that were
sold and/or contributed to various unconsolidated joint venture entities. As of
June 30, 2001 and 2000, the Company managed 19,844 and 18,361 units,
respectively, for third parties and the unconsolidated joint venture entities.
Furniture income and furniture expenses are associated with the
managementoperation of properties not owned by the Company that are managed for affiliates. These revenuesfurniture rental business assumed in connection with the Globe
acquisition, which occurred in July 2000. Furniture expenses include a
depreciation charge on furniture held in inventory and expenses
increased slightly.property and equipment
directly related to the furniture business.
Interest expense, including amortization of deferred financing costs,
increased by approximately $32.8$0.2 million. This increase was primarily
the result of a $719.2 million increase in the Company's average indebtedness
outstanding. The effective interest cost on all of the
Company's indebtedness for the six months ending June 30, 20002001 was 7.26%7.07% as
compared to 6.98%7.27% for the six months ended June 30, 1999.
22
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)2000. For the remainder of
2001, the Company expects interest rates to decrease slightly due to lower
variable rates. In connection with the scheduled maturity of $150 million of
indebtedness due in November 2001, the Company anticipates to refinance this
indebtedness for a similar amount and to incur interest costs approximating
7.0% per annum.
General and administrative expenses, which include corporate operating
expenses, increased approximately $2.5$0.9 million between the periods under
comparison. This increase was primarily due to recordingthe addition of corporate
personnel and higher overall compensation expenses including a current year
expense associated with the issuanceawarding of restricted shares. These
expensesshares to key employees in
2001.
Net gain on sales of real estate decreased approximately $41.1 million
between the periods under comparison. This decrease is primarily the result of a
fewer number of units sold during the six months ended June 30, 2001 (7,200
units including the joint venture properties) as a percentage of total revenues were 1.35% forcompared to the six months
ended June 30, 2000 compared to 1.28% of total revenues for(8,567 units including the joint venture properties). In
addition, the Company sold older and more fully depreciated properties during
the six months ended June 30, 1999.2000 as compared to the six months ended June 30,
2001.
COMPARISON OF QUARTER ENDED JUNE 30, 20002001 TO QUARTER ENDED
JUNE 30, 19992000
For the quarter ended June 30, 2000,2001, income before gain on
disposition of properties, net, extraordinary item and allocation to
Minority Interests, income from investments in unconsolidated entities, net gain
on sales of real estate, extraordinary items and cumulative effect of change in
accounting principle increased by approximately $16.8$6.5 million when compared to
the quarter ended June 30, 1999. This increase was primarily due to the
acquisition of the 1999 Acquired Properties as well as increases in rental
revenues net of increases in property and maintenance expenses, real estate
taxes and insurance, property management expenses, depreciation expense,
interest expense and general and administrative expenses.
In regard to2000.
Rental income from the Second-Quarter 20002001 Same Store Properties
total
revenues increased by approximately $15.3$21.7 million to $443.9 million or 4.08%5.1% primarily as
a result of higher rental rates charged to new tenants and tenant renewals and
an increase in income from billing tenants for their share of utility costs as
well as other ancillary services provided to tenants. Overall, propertyFor the remainder of 2001,
the Company expects to achieve rental income increases of 4.75% to 5.0% from
Same Store Properties. These estimated increases are subject to certain risks
and uncertainties including, but not limited to, maintaining an overall average
occupancy rate of 94.5%.
23
Property operating expenses from the Second-Quarter 2001 Same Store
Properties, which include property and maintenance, real estate taxes and
insurance and an allocation of property management expenses, increased
approximately $3.1$5.9 million or 2.24%3.8%. ThisThe increase wasin "same store" expenses is
primarily attributable to a $1.2 million, or 4.9%, increase in utilities and a
$2.4 million, or 6.4% increase in payroll costs. For the remainder of 2001, the
Company expects to maintain expense growth at no more than 4.0% to 4.5% for the
Same Store Properties.
Rental income from properties other than Second-Quarter 2001 Same Store
Properties increased by approximately $15.0 million primarily as a result of
higher expenses for on-site compensation costsrevenue from the Company's corporate housing business and an increasethe acquisition of
properties during the periods presented. The Company expects similar trends in
real
estate taxesthe future subject to certain risks and uncertainties including that any new
acquisitions perform at the Company's pro forma expectations.
Interest income-investment in mortgage notes increased by approximately
$3.3 million as a result of receiving deferred interest income on certain of the
mortgage notes. The payment of this deferred interest income was triggered by
the refinancing of these mortgage notes subsequent to quarter-end. In addition,
a portion of the proceeds from the refinancing were used to partially repay the
Company's investment in mortgage notes. As a result, the Company anticipates
that the interest income recognized on mortgage notes will decline in future
quarters.
Interest and other income increased by approximately $0.3 million,
primarily as a result of carrying larger balances in various tax deferred 1031
exchange accounts. These proceeds are invested in money market investments and
earn interest income until the Company purchases additional multi-family
properties but was partially offset by lower
administrative, building and insurance costs.or the period to reinvest such exchange proceeds expires.
Property management representsexpenses included off-site expenses associated with
the self-management of the Company's Properties. These expenses increaseddecreased by
approximately $5.1 million$1.4 million. This decrease is primarily due to the operationsresult of managing
fewer of the propertyCompany's properties and managing more properties that were either
sold and/or contributed to various unconsolidated joint ventures. In addition,
the Company continues to acquire properties in major metropolitan areas and
dispose of assets in smaller multi-family rental markets where the Company does
not have a significant management business obtained throughpresence. As a result, the LFT Merger and a current year
compensation charge associated with the issuanceCompany is able to
achieve economies of restricted shares to our
propertyscale by not increasing off-site management personnel.expenses as it
acquires additional properties.
Fee and asset management revenues and fee and asset management expenses
increased slightly as a result of the Company continuing to manage Properties
that were sold and/or contributed to various unconsolidated joint venture
entities.
Furniture income and furniture expenses are associated with the
managementoperation of properties not owned by the Company that are managed for affiliates. These revenuesfurniture rental business assumed in connection with the Globe
acquisition, which occurred in July 2000. Furniture expenses include a
depreciation charge on furniture held in inventory and expenses
increased slightly.property and equipment
directly related to the furniture business.
Interest expense, including amortization of deferred financing costs,
increased by approximately $16.4 million. This increase was primarily
the result of a $625.0 million increase in the Company's average indebtedness
outstanding.slightly. The effective interest cost on all of the Company's
indebtedness for the quarter ending June 30, 20002001 was 7.37%7.07% as compared to 6.92%7.39%
for the quarter ended June 30, 1999.2000. For the remainder of 2001, the Company
expects interest rates to decrease slightly due to lower variable rates.
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.6$0.8 million between the periods under
comparison. This increase was primarily due to recordingthe addition of corporate
personnel and higher overall compensation expenses including a current year
expense associated with the issuanceawarding of restricted shares. These
expenses as a percentageshares to key employees in
2001.
24
Net gain on sales of total revenues were 1.32% forreal estate decreased approximately $62.9 million
between the periods under comparison. This decrease is primarily the result of
fewer units sold during the quarter ended June 30, 20002001, which included 1,917
wholly owned units, 74 unconsolidated units and one land sale as compared to
1.17% of total revenues for1,194 wholly owned units and 5,211 joint venture units (75% gain recognition)
sold in the quarter ended June 30, 1999.2000.
LIQUIDITY AND CAPITAL RESOURCES
As of January 1, 2000,2001, the Company had approximately $29.1$23.8 million of
cash and cash equivalents and the amountamounts available on the Company's linelines of
credit was $400were $399.5 million, of which $65.8$53.5 million was restricted. After taking
into effect the various transactions discussed in the following 23
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
paragraphs, the
Company's cash and cash equivalents balance at June 30, 20002001 was approximately
$237.1$26.6 million and the amount available on the Company's line of credit was
$700$567.0 million, of which $51.4$60.9 million was restricted. The
following discussion also explains the changes in net cash provided by
operating activities, net cash (used for) investing activities and net cash
(used for) financing activities, all of which are presented in the Company's
Statements of Cash Flows.
Part of the Company's strategy in funding the purchase of multifamily
properties, funding its Properties in the development and/or earnout stage and
the funding of the Company's investment in two joint ventures with multifamily
real estate developers is to utilize its linelines of credit and to subsequently
repay the linelines of credit from the disposition of Properties or the issuance of
additional equity or debt securities. UtilizingContinuing to utilize this strategy during
the first six months of 2000,2001, the Company:
- obtained new mortgage financing on eleven previously
unencumberedo disposed of twenty-eight properties (including one Unconsolidated
Property) and two vacant parcels of land and received net proceeds of
$147.7$177.8 million;
- disposedo issued $300.0 million of sixteenunsecured debt receiving net proceeds of
$297.4 million;
o sold and/or contributed eleven properties (including the sale of the
Company's entire interest in two Unconsolidated Properties)to a joint venture and
received net proceeds of $159.5$167.6 million;
- sold and/or contributed twenty-one properties to two separate
joint ventureso issued $48.5 million of three new series of Preference Interests and
received net proceeds of $60.5 million;
- issued approximately 0.4 million Common Shares and received
net proceeds of $14.1 million;
- issued the Series B, C and D Cumulative Convertible Redeemable
Preference Units and received net proceeds of $84.8$47.3 million; and
-o obtained $45.1 million in new mortgage financing on twenty-one previously
unencumbered properties and received net proceeds of $217.2
million.
All of these proceeds were utilized to either:
- repay the line of credit;
- repay mortgage indebtedness on certain Properties;
- provide funding for properties in the development and/or
earnout stage including the joint venture agreements; and/or
- purchase additional properties.financing.
During the six months ended June 30, 2000,2001, the Company:
-O reduced its line of credit borrowings by approximately $222.5 million;
O funded $210.5 million to redeem all of its Series A and F Preferred
Shares;
O repaid approximately $104.5$237.0 million of mortgage indebtedness
on fifty-six Properties;
- settled on a $100 million interest rate protection agreement
and received approximately $7.1 million in connection
therewith. This amount is being amortized over the life of the
financing for the eleven previously unencumbered Properties
that occurred in March 2000;
-indebtedness;
O funded $91.7$71.4 million related to the development, earnout and joint
venture agreements; - purchased three Properties for a total purchase price of
approximately $127.2 million;
- funded $1.25 million to acquire an additional ownership
interest in LFT's Guilford portfolio; and
-O acquired $25.0$232.1 million of 8.25% preferred securitiesadditional properties ($45.9 million of
WRP
Convertible Trust I, an affiliatemortgage assumptions and $186.2 million of WRP Newco.
Ascash).
25
The Company's total debt summary, as of June 30, 2000, the Company had total indebtedness of
approximately $5.3 billion, which included mortgage indebtedness of $3.0
billion (including premiums of $2.9 million), of which $837.1 million
represented tax-exempt bond indebtedness, and unsecured debt of $2.3 billion
(including net discounts and premiums in the amount of $1.9 million), of
which $127.8 million represented tax-exempt bond indebtedness.
24
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS2001, included:
- -------------------------------------------------------------------------------
DEBT SUMMARY AS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)6/30/01
- -------------------------------------------------------------------------------
Weighted
$ Millions Average Rate
--------------------- ------------------
Secured 3,040 6.71%
Unsecured 2,550 6.83%
--------------------- ------------------
Total 5,590 6.77%
Fixed Rate 4,860 7.01%
Floating Rate 730 5.15%
--------------------- ------------------
Total 5,590 6.77%
ABOVE TOTALS INCLUDE:
Total Tax Exempt 959 4.96%
Unsecured Revolving Credit Facility
133 4.49%
- -------------------------------------- --------------------- ------------------
Subsequent to June 30, 20002001 and through August 9, 2000,8, 2001, the Company:
- repaid the outstanding mortgage balance on one Property
totaling approximately $5.9 million;
-O disposed of seven properties (including the saleProperties consisting of 1,081 units for
approximately $54.0 million;
O repaid $9.4 million of mortgage debt at maturity on one property;
O obtained $301.5 million in new mortgage financing on twenty-one
Unconsolidated Properties, of which $55.7 million of the refinancing
proceeds was used to repay principal on the Company's entire interestinvestment in
one Unconsolidated Property) formortgage notes;
O funded $11.7 million related to the development, earnout, and joint
venture agreements; and
O announced a total sales pricetwo-for-one split of $125.4 million;
- acquired seven properties containing 985 units for a total
purchase price of approximately $51.1 million, including the
assumption of mortgage indebtedness of approximately $11.5
millionits Common Shares and the issuance of OP Units with a value of
approximately $4.1 million; and
- acquired Globe Business Resources, Inc. ("Globe") for cash of
approximately $58.7 million, plus the assumption of mortgage
indebtedness of approximately $70.8 million.to be
effective September 21, 2001.
During the remainder of 2000,2001, the Company expects to fund $63.8approximately
$66.0 million related to the development, earnout and joint venture agreements.
In connection with one joint venture agreement, the Company has an obligation to
fund up to an additional $17.5$12.5 million to guarantee third party construction
financing. As of June 30, 2001, the Company has 20 projects under development
with estimated completion dates ranging from September 30, 2001 through June 30,
2003. At any time following the completion of construction of any development
property, the Company's joint venture partners have the right to cause the
Company to acquire their respective interests in the completed projects at a
mutually agreeable price. If the Company and the joint venture partner are
unable to agree on a price, appraisals will be obtained by both parties. If the
appraised values vary by more than 10%, both the Company and the joint venture
partner will agree on a third appraiser to determine which original appraisal is
closest to its determination of value.
During the six months ended June 30, 2001, the Company's total
improvements to real estate approximated $63.3 million. Replacements, which
includes new carpeting, appliances, mechanical equipment, fixtures, vinyl floors
and blinds inside the unit approximated $25.2 million, or $123 per unit.
Building improvements for the 1999, 2000 and 2001 Acquired Properties
approximated $11.9 million, or $232 per unit. Building improvements for all of
the Company's pre-1999 Acquired Properties approximated $22.9 million or $150
per unit. In addition, duringapproximately $2.2 million was spent on five specific
assets related to major renovations and repositioning of these assets. Also
included in total improvements to real estate was approximately $1.1 million on
commercial/other assets and Partially Owned Properties. Such improvements to
real estate were primarily funded from net cash provided by operating
activities. Total improvements to real estate budgeted for the remainder of 2000,2001
are estimated to be approximately $75.0 million.
26
During the Company expectssix months ended June 30, 2001, the Company's total non-real
estate capital additions, such as computer software, computer equipment, and
furniture and fixtures and leasehold improvements to fund the:
- repaymentthe Company's property
management offices and its corporate offices, was approximately $3.5 million.
Such additions to non-real estate property were funded from net cash provided by
operating activities. Total additions to non-real estate property budgeted for
the remainder of total indebtedness related2001 are estimated to scheduled
unsecured note and mortgage note maturities in the amount
ofbe approximately $215.0 million; and
- acquisition of Grove Property Trust for cash of
approximately $210.0$2.5 million.
The Company, through its Globe subsidiary, has a policy of capitalizing
expenditures made for rental furniture and property and equipment. Globe
purchases furniture to replace furniture that has been sold and to maintain
adequate levels of rental furniture to meet existing and new assets, including newly acquired properties and the costs associated with
placing these assets into service.customer needs.
Expenditures for improvementsproperty and renovationsequipment that significantly enhance the value of
existing assets or substantially extend the useful life of an asset are also
capitalized. Expenditures for in-the-unit replacement-type items such as appliances,
draperies, carpeting and floor coverings, mechanical equipment and certain
furniture and fixtures are also capitalized. Expenditures for ordinary maintenance and repairs related to
property and equipment are expensed to operations as incurred. With respect
to acquired properties, the Company has determined that it generally spends
$1,000 per unit during its first three years of ownership to fully improve
and enhance these properties to meet the Company's standards. In regard to
replacement-type items described above, the Company generally expects to
spend $250 per unit on an annual recurring basis.
DuringFor the six months ended June
30, 2000,2001, total capital
expendituresadditions to rental furniture approximated $14.5 million and
property and equipment approximated $1.6 million. Total additions to rental
furniture and property and equipment budgeted for the Company approximated $60.7 million. Of this amount,
approximately $12.5 million, or $137 per unit, related to capital
improvements and major repairs for the 1998, 1999 and 2000 Acquired
Properties. Capital improvements and major repairs for allremainder of the Company's
pre-EQR IPO properties and 1993, 1994, 1995, 1996 and 1997 Acquired
Properties approximated $14.7 million, or $122 per unit. Capital spent for
replacement-type items approximated $25.4 million, or $119 per unit. In
addition, approximately $4.4 million was spent on nine specific assets
related to major renovations and repositioning of these assets. Also included
in total capital expenditures was approximately $2.4 million expended for
non-real estate additions such as computer software, computer equipment, and
furniture and fixtures and leasehold improvements for the Company's property
management offices and its corporate headquarters, $0.4 million spent on
commercial/other assets, $0.8 million spent on the Partially Owned Properties
and $0.1 million was spent on properties that were sold prior to 2000. Such
capital expenditures were primarily funded from working capital reserves and
from net cash provided by operating activities. Total capital expenditures
for the remaining portion of 20002001 are
estimated to be approximately $61.3$8.9 million. As of June 30, 2001, the Company
recorded a $7.2 million reduction to rental furniture based on a review of the
inventory on hand in its warehouses and the market value of such used furniture.
Correspondingly, the Company recorded an increase in goodwill associated with
the original acquisition of Globe.
Minority Interests as of June 30, 20002001 increased by $79.9$27.9 million when
compared to December 31, 1999.2000. The primary factors that impacted this account
during the six monthsquarter were:
-o distributions declared to Minority Interests, which amounted to
$18.8$19.7 million for the six months ended June 30, 2001 (excluding
preference unit/interest distributions);
-o the allocation of income from operations in the amount of
$19.1$16.5 million;
-o the allocation of Minority Interests from Partially Owned Properties in
the amount of $2.9$0.2 million;
25
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
-o the conversion of OP Units into Common Shares; and
-o the issuance of Common Shares, OP Units and Preference Interests during
the six months ended June 30, 2000.2001.
Total distributions paid in July 20002001 amounted to approximately $130.4$138.7
million, which included distributions declared for the quarter ended June 30,
2000.2001.
The Company expects to meet its short-term liquidity requirements,
including capital expenditures related to maintaining its existing Properties
and certain scheduled unsecured note and mortgage note repayments, generally
through its working capital, net cash provided by operating activities and
borrowings under its line of credit. The Company considers its cash provided by
operating activities to be adequate to meet operating requirements and payments
of distributions. The Company also expects to meet its long-term liquidity
requirements, such as scheduled unsecured note and mortgage debt maturities,
property acquisitions, financing of construction and development activities and
capital improvements through undistributed FFO and proceeds
received from the disposition of certain Properties and/or through the issuance of unsecured notes and equity
securities including additional OP Units.Units and proceeds received from the
disposition of certain Properties. In addition, the Company has certain
uncollateralized Properties available forto secure additional mortgage borrowings
in the event that the public capital markets are unavailable to the Company or
the cost of alternative sources of capital to the Company is too high.
The Company has a revolving credit facility with Bank of America
Securities LLC and Chase Securities Inc. acting as joint lead arrangers to
provide the Operating Partnership with potential borrowings of up to $700
million. As of August 9, 2000,8, 2001, no amounts were outstanding under this facility.
27
In connection with the Globe merger,acquisition, the Company assumed a
revolving credit facility with Fifth Third Bank with potential borrowings of up
to $55.0 million. This lineAs of credit matures on May 31, 2003. As of August 9,
2000, $40.3 million2001, this credit facility was outstanding under this facility.terminated.
In connection with the Wellsford Merger, the Company provided a
$14.8 million credit
enhancement with respect to certain tax-exempt bonds issued to finance certain
public improvements at a multifamily development project. As of August 9, 2000,8, 2001,
this enhancement was still in effect.
Pursuant to the termseffect at a commitment amount of a Stock Purchase Agreement with Wellsford
Real Properties, Inc. ("WRP Newco"), the Company had agreed to purchase up to
1,000,000 shares of WRP Newco Series A Preferred at $25.00 per share on a
standby basis over a three-year period ending on May 30, 2000. This agreement
was terminated on May 5, 2000, and, as such, the Company has no further
obligations under this agreement.
On May 5, 2000, the Company acquired $25.0 million of 8.25%
preferred securities of WRP Convertible Trust I, an affiliate of WRP Newco.
These preferred securities are indirectly convertible into WRP Newco common
shares under certain circumstances.
FUNDS FROM OPERATIONS
Funds from Operations ("FFO") represents net income (loss) (computed
in accordance with accounting principles generally accepted in the United
States ("GAAP")), excluding gains or losses from sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures will be calculated to reflect funds from operations on the
same basis. This definition of FFO is in accordance with the National
Association of Real Estate Investment Trust's ("NAREIT") recommended
definition. NAREIT modified this definition effective January 1, 2000. However,
as a result of this modification, no changes were
26
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
required to the Company's calculation of FFO for either the current or prior
periods presented.
The Company believes that FFO is helpful to investors as a
supplemental measure of the operating performance of a real estate company
because, along with cash flows from operating activities, financing
activities and investing activities, it provides investors an understanding
of the ability of the Company to incur and service debt and to make capital
expenditures. FFO in and of itself does not represent cash generated from
operating activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indication of the Company's
performance or to net cash flows from operating activities as determined by
GAAP as a measure of liquidity and is not necessarily indicative of cash
available to fund cash needs. The Company's calculation of FFO may differ
from the methodology for calculating FFO utilized by other real estate
companies and may differ as a result of differences between the Company's and
other real estate company's accounting policies for replacement type items
and, accordingly, may not be comparable to such other real estate companies.
FFO per share and OP Unit is presented giving affect to the
Statement of Financial Accounting Standards No. 128 "Earnings Per Share".
For the six months ended June 30, 2000, FFO available to Common
Shares and OP Units increased by $54.0 million, or 18.2%, and FFO per share
and OP Unit - diluted increased by $0.25, or 11.4%, when compared to the six
months ended June 30, 1999.
For the quarter ended June 30, 2000, FFO available to Common Shares
and OP Units increased by $29.4 million, or 19.4%, and FFO per share and OP
Unit -diluted increased by $0.14, or 12.6%, when compared to the quarter
ended June 30, 1999.
The following is a reconciliation of net income to FFO available to
Common Shares and OP Units for the six months and quarters ended June 30,
2000 and 1999:
27
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------------------------- -----------------------------
(Amounts in thousands, except per share and OP Unit amounts)
STATEMENTS OF FUNDS FROM OPERATIONS
Net income $ 253,798 $ 190,216 $ 152,659 $ 96,662
Adjustments:
Allocation to Minority Interests - Operating Partnership 19,132 14,514 12,036 7,388
Depreciation on real estate assets* 220,864 194,262 110,783 98,790
Loss on early extinguishment of debt -- 451 -- 451
Gain on disposition of properties, net (87,652) (45,807) (67,654) (24,391)
------------ ------------ ------------ ------------
FFO 406,142 353,636 207,824 178,900
Preferred distributions (55,654) (57,111) (27,266) (27,734)
------------ ------------ ------------ ------------
FFO available to Common Shares and OP Units $ 350,488 $ 296,525 $ 180,558 $ 151,166
============ ============ ============ ============
Weighted average Common Shares and
OP Units outstanding - basic 140,850 132,825 141,436 133,478
============ ============ ============ ============
FFO per share and OP Unit - basic $ 2.49 $ 2.23 $ 1.28 $ 1.13
============ ============ ============ ============
FFO per share and OP Unit - diluted $ 2.44 $ 2.19 $ 1.25 $ 1.11
============ ============ ============ ============
* INCLUDES $210,000 AND $551,000 FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
1999, RESPECTIVELY, AND $105,000 AND $276,000 FOR THE QUARTERS ENDED JUNE 30,
2000 AND 1999, RESPECTIVELY, RELATED TO THE COMPANY'S SHARE OF DEPRECIATION
FROM UNCONSOLIDATED PROPERTIES. EXCLUDES $701,000 FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND $358,000 FOR THE QUARTER ENDED JUNE 30, 2000 RELATED TO THE
MINORITY INTERESTS' SHARE OF DEPRECIATION FROM PARTIALLY OWNED PROPERTIES.
28
$12.7 million.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new or significant developments related to the legal
proceedings that were discussed in Part I, Item III of the Company's Form 10-K
for the year ended December 31, 1999.2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In connection with the Annual Meeting of Shareholders of the Company
held on May 15, 2001, the proposal to elect the five nominees for trustee
passed. At the meeting, proxies representing 117,520,271 Common Shares or 88.5%
of the total outstanding shares voted in the following manner:
TOTAL VOTE FOR EACH TRUSTEE* TOTAL VOTE WITHHELD FROM EACH TRUSTEE*
---------------------------- --------------------------------------
Douglas Crocker II 93.00% 7.00%
James D Harper, Jr. 93.42% 6.58%
Sheli Z. Rosenberg 93.10% 6.90%
Gerald A. Spector 92.99% 7.01%
Michael N. Thompson 92.99% 7.01%
* This percentage represents the number of shares voting in this manner out of
the total number of shares voted at the meeting, not out of the total shares
outstanding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(B) Reports on Form 8-K:
None.
29None
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITY RESIDENTIAL PROPERTIES TRUST
Date: AUGUST 10, 200013, 2001 By: /s/ BRUCE C. STROHM
--------------- ---------------------------------------------------------------------------------------------
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Date: AUGUST 10, 200013, 2001 By: /s/ MICHAEL J. McHUGH
--------------- ---------------------------------------------MCHUGH
------------------------------------------------
Michael J. McHugh
Executive Vice President, Chief Accounting
Officer and Treasurer
3029