SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 1-12590
GABLES RESIDENTIAL TRUST
(Exact name of Registrant as specified in its Charter)
MARYLAND 58-2077868
(State of Incorporation) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road, Suite 1450
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
(770) 436 - 4600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year,
if changed since last report)
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $0.01 PER SHARE,
19,290,022 SHARES
The number of shares outstanding of each of the
registrant's classes of common stock,
as of October 31, 1996
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 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.
(1) (X) YES ( ) NO
(2) (X) YES ( ) NO
GABLES RESIDENTIAL TRUST
FORM 10 - Q INDEX
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets of Gables Residential Trust as of
September 30, 1996 and December 31, 1995.
Consolidated Statements of Operations of Gables Residential Trust
for the three months ended September 30, 1996 and September 30, 1995.
Consolidated Statements of Operations of Gables Residential Trust
for the nine months ended September 30, 1996 and September 30, 1995.
Consolidated Statements of Cash Flows of Gables Residential Trust
for the nine months ended September 30, 1996 and September 30, 1995.
Notes to Consolidated Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
SIGNATURE
GABLES RESIDENTIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GABLES RESIDENTIAL TRUST
CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, 1996 December 31, 1996
------------------ -----------------
ASSETS:
- -------
Real estate assets (Note 7):
Land .............................................. $102,762 $ 73,848
Building .......................................... 558,231 382,174
Furniture, fixtures and equipment ................. 44,985 33,382
Construction in progress ................. ........ 51,976 96,015
Land held for future development .................. 5,213 5,814
-------- -------
Real estate assets before accumulated depreciation 763,167 591,233
Less: accumulated depreciation ................. (69,508) (57,343)
-------- -------
Net real estate assets .......................... 693,659 533,890
Cash and cash equivalents ............................ 28,645 8,529
Restricted cash ...................................... 7,390 5,296
Deferred charges, net ................................ 5,429 5,995
Other assets, net .................................... 10,651 9,117
------- -------
Total assets .................................... $745,774 $ 562,827
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
- -------------------------------------
Notes payable ........................................ $374,873 $ 286,259
Accrued interest payable ............................. 1,787 1,075
Dividend payable (Note 8) ............................ 9,450 7,288
Real estate taxes payable ............................ 9,264 5,110
Accounts payable and accrued expenses - construction . 6,521 9,027
Accounts payable and accrued expenses - operating .... 4,278 4,718
Security deposits .................................... 2,022 1,340
------- -------
Total liabilities ............................... 408,195 314,817
------- -------
Minority interest of unitholders in Operating Partnership 53,640 45,700
------- -------
Shareholders' equity:
Common shares, $0.01 par value, 100,000,000 shares
authorized, 19,286,429 and 15,183,306 shares issued
and outstanding at September 30, 1996 and December 31,
1995, respectively ................................. 193 152
Additional paid-in capital ......................... 324,577 255,228
Accumulated earnings (deficit) ..................... (40,831) (53,070)
------- -------
Total shareholders' equity ...................... 283,939 202,310
------- -------
Total liabilities and shareholders' equity ....... $ 745,774 $ 562,827
======= =======
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months
Ended September 30,
-------------------
1996 1995
------- -------
Rental revenues ........................... $ 28,315 $ 18,583
Other property revenues ..................... 1,543 912
-------- --------
Total property revenues ................ 29,858 19,495
Property management - third party ........... 966 1,068
Olympic revenues, net ....................... 670 0
Other ....................................... 274 570
-------- --------
Total revenues ......................... 31,768 21,133
-------- --------
Property operating and maintenance (exclusive
of items shown separately below) ....... 10,795 7,489
Depreciation and amortization ............... 5,076 3,186
Amortization of deferred financing costs .... 327 307
Property management - owned (Note 4) ........ 732 559
Property management - third party (Note 4) .. 681 763
General and administrative .................. 842 627
Interest .................................... 6,304 3,847
Credit enhancement fees ..................... 136 166
-------- --------
Total expenses ......................... 24,893 16,944
-------- --------
Income before equity in income of
joint ventures and interest income ..... 6,875 4,189
Equity in income of joint ventures .......... 56 14
Interest income ............................. 74 103
-------- --------
Income before minority interest ........ 7,005 4,306
Minority interest of unitholders in
Operating Partnership .................. (1,215) (1,000)
-------- --------
Net income .................................. $ 5,790 $ 3,306
======== ========
Weighted average number of shares outstanding 16,439 10,579
======== ========
Per Share Information (Note 6):
Net income .................................. $ 0.35 $ 0.31
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Nine Months
Ended September 30,
-------------------
1996 1995
-------- --------
Rental revenues ..................................... $ 75,773 $ 51,740
Other property revenues ............................. 3,873 2,355
-------- --------
Total property revenues ........................ 79,646 54,095
Property management - third party ................... 2,931 3,260
Olympic revenues, net ............................... 900 0
Other ............................................... 876 1,254
-------- --------
Total revenues ................................. 84,353 58,609
-------- --------
Property operating and maintenance (exclusive
of items shown separately below) ............... 28,108 20,372
Depreciation and amortization ....................... 13,372 8,796
Amortization of deferred financing costs ............ 994 709
Property management - owned (Note 4) ................ 2,074 1,496
Property management - third party (Note 4) .......... 2,169 2,317
General and administrative .......................... 2,419 2,122
Interest ............................................ 15,295 9,780
Credit enhancement fees ............................. 439 545
-------- --------
Total expenses ................................. 64,870 46,137
-------- --------
Income before equity in income
of joint ventures and interest income .......... 19,483 12,472
Equity in income of joint ventures .................. 164 67
Interest income ..................................... 233 268
-------- --------
Income before minority interest and
and extraordinary loss, net .................... 19,880 12,807
Minority interest of unitholders in
Operating Partnership .......................... (3,458) (2,975)
-------- --------
Income before extraordinary loss, net ............... 16,422 9,832
Extraordinary loss, net of minority interest (Note 5) (520) 0
-------- --------
Net income .......................................... $ 15,902 $ 9,832
======== ========
Weighted average number of shares outstanding ....... 15,944 10,577
======== ========
Per Share Information (Note 6):
Income before extraordinary loss, net ............... $ 1.03 $ 0.93
======== ========
Net income .......................................... $ 1.00 $ 0.93
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
GABLES RESIDENTIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Nine Months
Ended September 30,
------------------
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net income .......................................... $ 15,902 $ 9,832
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 14,366 9,505
Equity in income of joint ventures ............... (164) (67)
Minority interest of unitholders in Operating
Partnership 3,458 2,975
Extraordinary loss, net of minority interest ..... 520 0
Change in operating assets and liabilities:
Restricted cash ................................ (1,518) (548)
Other assets ................................... (595) (928)
Other liabilities .............................. 5,108 (568)
------ -------
Net cash provided by operating activities . 37,077 20,201
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchase and construction of real estate assets ..... (173,228) (116,524)
Long-term land lease payment ........................ (1,500) 0
Net proceeds from sale of real estate assets ........ 3,968 0
Distributions received from joint ventures .......... 254 234
------- --------
Net cash used in investing activities .......... (170,506) (116,290)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Proceeds from 879,068 share offering, net of
issuance costs ................................. 20,630 0
Proceeds from 1,725,000 share offering, net of
issuance costs ................................. 38,600 0
Proceeds from 1,435,000 share offering, net of
issuance costs.................................. 34,254 0
Proceeds from the exercise of share options ......... 787 0
Share Builder Plan contributions .................... 20 86
Payments of filing costs for Share Builder Plan ..... 0 (100)
Payments of deferred financing costs ................ (1,278) (1,436)
Notes payable proceeds .............................. 206,143 154,954
Notes payable repayments ............................ (117,529) (36,168)
Principal escrow deposits ........................... (576) (489)
Dividends paid ($1.44 and $1.35 per share, respectively) (22,739) (14,276)
Distributions paid ($1.44 and $1.35 per Unit, respectively) (4,767) (4,319)
------- -------
Net cash provided by financing activities ...... 153,545 98,252
------- -------
Net change in cash and cash equivalents ............. 20,116 2,163
Cash and cash equivalents, beginning of period ...... 8,529 4,056
------- -------
Cash and cash equivalents, end of period ............ $ 28,645 $ 6,219
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest ......................... $ 17,970 $ 15,544
Interest capitalized ........................... 3,387 5,767
------- -------
Cash paid for interest, net of amounts
capitalized .................................... $ 14,583 $ 9,777
======= =======
<FN>
The accompanying notes are an integral part of these statements.
</FN>
GABLES RESIDENTIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE COMPANY
- ---------------------------------------------
Gables Residential Trust is a self-administered and self-managed real estate
investment trust (a "REIT") formed in 1993 under Maryland law to continue and to
expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Gables Residential Group" as used herein refers to the
privately owned predecessor organization prior to the completion of the
Company's initial public offering on January 26, 1994 (the "IPO") and the
concurrent completion of the various transactions that occurred simultaneously
therewith (the "Formation Transactions"). The term "Company" or "Gables" as used
herein means Gables Residential Trust and its subsidiaries on a consolidated
basis (including Gables Realty Limited Partnership and its subsidiaries), or,
where the context so requires, Gables Residential Trust only, and, as the
context may require, their predecessors.
The Company currently engages in the multifamily apartment community management,
development, construction, and acquisition businesses, including the provision
of related brokerage and corporate rental housing services. Substantially all of
these businesses are conducted through Gables Realty Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"). Through its
ownership of Gables GP, Inc. ("GGPI"), a Texas corporation and wholly-owned
subsidiary of the Company that is the sole general partner of the Operating
Partnership, and its ownership of a direct limited partnership interest in the
Operating Partnership, the Company was an 84.5% economic owner of the Operating
Partnership at September 30, 1996 (this structure is commonly referred to as an
umbrella partnership REIT or "UPREIT"). The Company has had certain equity
transactions subsequent to the IPO that have resulted in changes in its
ownership interest in the Operating Partnership, which was 76.0% at the
completion of the IPO (Note 2). The Company's third party management businesses
are conducted through two subsidiaries of the Operating Partnership, Central
Apartment Management, Inc., a Texas corporation, and East Apartment Management,
Inc., a Georgia corporation (each, a "Management Company"). The Management
Companies also provide management services to the communities owned by the
Company.
As of September 30, 1996, Gables owned 46 completed multifamily apartment
communities comprising 14,581 apartment homes, of which 30 were developed and 16
were acquired by the Company, and an indirect 25% general partner interest in
two apartment communities developed by the Company comprising 663 apartment
homes. Two of these completed communities were in the lease-up stage as of
September 30, 1996. The Company owns five multifamily apartment communities,
expected to comprise 1,362 apartment homes, that are currently under
development. As of September 30, 1996, Gables owned parcels of land for the
future development of four apartment communities expected to comprise 978
apartment homes. Additionally, Gables has contracts or options to acquire
additional parcels of land for the future development of seven apartment
communities estimated to comprise approximately 2,000 apartment homes.
Pursuant to the Company's Amended and Restated Declaration of Trust, Gables is
authorized to issue 100,000,000 common shares, 10,000,000 preferred shares, and
51,000,000 excess shares, all of which have a par value of $0.01 per share. To
date, no preferred or excess shares have been issued.
At the completion of the IPO on January 26, 1994, the Company sold 9,430,000
common shares (including 1,230,000 shares as a result of the exercise of an
over-allotment option by the underwriters) at a price to the public of $22.50
per share. The net proceeds to the Company from such sale totaled approximately
$190 million. The Company issued an additional 700,555 common shares in
connection with the Formation Transactions. Also concurrently with the IPO, the
Company entered into and drew down approximately $79 million under a secured
credit facility (the "Original Credit Facility"), including approximately $45
million in the form of letters of credit. The net proceeds of the IPO and
initial draw-down under the Original Credit Facility were principally used (i)
by the Company to acquire a 76.0% economic interest in the Operating
Partnership, (ii) by the Company and the Operating Partnership to acquire
minority interests in partnerships that directly or indirectly owned the
communities acquired by Gables in connection with the IPO and Formation
Transactions (the "IPO Communities"), (iii) by the Operating Partnership to
acquire 99% of each Management Company's capital stock, with the Management
Companies in turn using such proceeds to acquire the fee management business of
the predecessor management companies of the Group (the "Predecessor Management
Companies"), (iv) to acquire certain promissory notes issued by the Predecessor
Management Companies, (v) to repay or economically defease indebtedness with
respect to the IPO Communities and the Predecessor Management Companies, (vi)
with respect to the Original Credit Facility, to provide substitute letters of
credit or replace backup security for existing credit enhancements with respect
to indebtedness associated with the IPO Communities, (vii) to purchase interest
rate protection agreements and pay deferred financing costs related to new
indebtedness, and (viii) to acquire an existing apartment community, an
apartment community that was substantially renovated in 1994 and certain
development rights.
2. OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
- -- ------------------------------------------------------
On October 7, 1994, Gables consummated a direct placement of 444,500 common
shares at $22.50 per share. The net proceeds of the offering were approximately
$9.9 million and were utilized to fund the acquisition of an apartment community
comprising 200 apartment homes and to repay outstanding indebtedness under the
Original Credit Facility.
During June, 1995, the Company filed a shelf registration statement covering the
registration of up to $200 million of debt securities, common shares, preferred
shares and warrants or other rights to purchase common shares or preferred
shares.
On October 31, 1995, Gables completed a public offering of 4,600,000 common
shares (including 600,000 shares as a result of the exercise of an
over-allotment option by the underwriters) pursuant to the $200 million shelf
registration statement at a price to the public of $21.875 per share. The net
proceeds of the offering were approximately $94 million and were utilized to
retire approximately $67 million of variable-rate construction loan indebtedness
and to pay down approximately $27 million of outstanding indebtedness under the
Original Credit Facility.
On December 5, 1995, the Company acquired a parcel of land financed in part
through the issuance of 111,074 minority units of limited partnership interest
in the Operating Partnership ("Units"). Such land acquisition was for the
development of an apartment community expected to comprise 315 apartment homes.
On March 25, 1996, Gables completed a direct placement of an aggregate of
879,068 common shares to six institutional investors pursuant to the $200
million shelf registration statement at a price of $23.95 per share. The net
proceeds of the offering were approximately $20.6 million and were utilized (i)
to reduce outstanding indebtedness under the Original Credit Facility that was
drawn during 1996 primarily to fund costs associated with the Company's
development activities and (ii) for general working capital purposes.
On July 26, 1996, the Company acquired an apartment community comprising 500
apartment homes, financed in part through the issuance of 243,787 Units.
On September 17, 1996, Gables completed an offering of 1,725,000 common shares
(including 225,000 as a result of the exercise of an over-allotment option by
the underwriters) pursuant to the $200 million shelf registration statement at a
price to the public of $23.625 per share. On September 27, 1996, Gables
completed a direct placement of 1,435,000 shares to an institutional investor
pursuant to the $200 million shelf registration statement at a price of $24.375
per share. The net proceeds of these offerings totaled approximately $72.9
million and were used to (i) reduce outstanding indebtedness under the New
Credit Facility (as defined below) that was drawn to fund costs associated with
the Company's development and acquisition activities and (ii) for general
working capital purposes including funding of future development and acquisition
activities.
During October, 1996, the Company filed a shelf registration statement covering
the registration of up to $300 million of debt securities, common shares,
preferred shares and warrants or other rights to purchase common shares or
preferred shares to replace its exhausted $200 million shelf registration
statement.
3. BASIS OF PRESENTATION
- -- ---------------------
The accompanying consolidated financial statements of Gables Residential Trust
include the consolidated accounts of Gables Residential Trust and its
subsidiaries (including Gables Realty Limited Partnership and its subsidiaries).
As a result of the structure of the business combination, certain partners and
owners of the entities in Gables Residential Group received common shares of the
Company and/or Units in the Operating Partnership. Pursuant to the terms of the
partnership agreement of the Operating Partnership, as of January 26, 1995, the
Operating Partnership became obligated to redeem Units at a unitholder's request
for cash equal to the fair market value of a common share of the Company at the
time of such redemption, provided that the Company at its option may elect to
acquire any such Units presented for redemption for one common share of the
Company. The Company intends to acquire such Units for common shares of the
Company rather than to cause the Operating Partnership to redeem such Units for
cash. Purchase accounting was applied to the acquisition of all non-controlled
interests. The acquisition of all other interests was accounted for as a
reorganization of entities under common control and, accordingly, was reflected
at historical cost in a manner similar to that in pooling of interests
accounting.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements of Gables Residential Trust
have been adjusted for the minority interest of unitholders in the Operating
Partnership. Because Units, if presented for redemption, are likely to be
exchanged for the common shares of the Company on a one-for-one basis, minority
interest of unitholders in the Operating Partnership is calculated based on the
weighted average of common shares and Units outstanding during the applicable
period.
The accompanying interim unaudited financial statements have been prepared by
the Company's management in accordance with generally accepted accounting
principles ("GAAP") for interim financial information and in conjunction with
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting only of normally recurring adjustments) considered
necessary for a fair presentation for these interim periods have been included.
The results of operations for the interim periods ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the full
year. These financial statements should be read in conjunction with the
consolidated and combined financial statements of Gables Residential Trust and
Gables Residential Group and notes thereto, included in the Gables Residential
Trust Form 10-K for the year ended December 31, 1995.
4. PROPERTY MANAGEMENT EXPENSES
- -- ----------------------------
The Company manages its owned properties, as well as properties owned by third
parties for which the Company provides management services for a fee. Property
management expenses have been allocated between owned and third party properties
in the accompanying statements of operations based on the proportionate number
of owned and third party apartment homes managed by the Company during the
applicable periods.
5. EXTRAORDINARY LOSS, NET
- -- -----------------------
Extraordinary loss, net of $520 for the nine months ended September 30, 1996
represents the write-off of unamortized deferred financing costs totaling $631
associated with the early retirement of the Company's Original Credit Facility,
net of the $111 portion of the loss attributable to the minority interest
unitholders. The Original Credit Facility that was scheduled to mature in
January, 1997, was refinanced in March, 1996 with a new $175 million unsecured
revolving credit facility (the "New Credit Facility").
6. PER SHARE INFORMATION
- ------------------------
Quarterly per share information has been computed based upon the weighted
average number of shares outstanding during the relevant period. The impact of
outstanding share options was not dilutive during these periods.
7. REAL ESTATE ASSETS
- -- ------------------
Real estate assets, before accumulated depreciation, are as follows:
September 30, 1996 December 31, 1995
Basis Units Basis Units
----- ----- ----- -----
Completed properties $705,978 14,581 $489,404 11,283
Properties under development 51,976 1,362 96,015 1,983
Land held for future development 5,213 978 5,814 865
----- --- ----- ---
Total (a) $763,167 16,921 $591,233 14,131
======== ====== ======== ======
(a) Excludes (i) costs and units attributable to Arbors of Harbortown JV and
Metropolitan Apartments JV as Gables' 25% general partner interests in
these joint ventures are accounted for on the equity method of accounting
and (ii) costs of approximately $3,700 for two prepaid long-term
land leases which are included in other assets in the accompanying
balance sheets.
The change in real estate assets from December 31, 1995 to September 30, 1996
consisted of the following:
Balance at December 31, 1995 $ 591,233
Acquisitions, including renovation expenditures 128,156
Sale of real estate assets (4,826)
Development costs incurred 42,731
Acquisition of land held for future development 3,065
Capital expenditures for operating properties 2,808
-----
Balance at September 30, 1996 $ 763,167
=========
As discussed in Note 3, purchase accounting was applied to the acquisition of
all non-controlled interests in connection with the IPO and Formation
Transactions. The increase in basis related to such acquisition was $48,090 and
was allocated to the respective property's land and building accounts. The
acquisition of all other interests was accounted for as a reorganization of
entities under common control, and accordingly was reflected at historical cost.
8. DECLARATION OF DIVIDEND
- -- -----------------------
On August 20, 1996, the Operating Partnership committed to distribute $0.49 per
Unit with respect to the period July 1, 1996 through September 30, 1996 to
unitholders of record on September 30, 1996. As a result, the Company
simultaneously declared a dividend payable to shareholders of record on
September 30, 1996 and accrued a dividend payable as of September 30, 1996 of
$0.49 per common share or $9,450. The remaining distribution from the Operating
Partnership in the amount of $1,696 was accrued to minority interest unitholders
in the Operating Partnership. The total distribution of $11,146 was paid on
October 15, 1996.
9. RECENT ACCOUNTING PRONOUNCEMENT
- -- -------------------------------
In March, 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("FAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
which becomes effective for fiscal years beginning after December 15, 1995. FAS
121 establishes standards for determining when impairment losses on long-lived
assets have occurred and how impairment losses should be measured. The Company
adopted FAS 121 effective January 1, 1996. There was no financial statement
impact as a result of this adoption.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OVERVIEW
- --------
Gables is a self-administered and self-managed real estate investment trust
("REIT") focused within the multifamily industry in the Southeastern and
Southwestern United States. Gables' operating performance relies predominantly
on net operating income from its stabilized apartment communities. The net
operating income of Gables is influenced by operating expenses and rental
revenues, which are affected by the supply and demand dynamics within Gables'
markets. Gables' performance is also affected by the general availability of
capital and by its ability to develop and to acquire additional apartment
communities with returns in excess of its cost of equity or debt capital.
Gables owns apartment communities in seven core cities in Georgia, Texas and
Tennessee. Within each city, Gables targets specific submarkets for investment.
These submarkets are generally characterized by their proximity to local
employment centers, retail and entertainment venues and traffic arteries. Gables
believes demographic trends (including job, population and household growth) in
its markets in recent years have generally led to favorable demand and supply
dynamics for multifamily communities. Occupancy levels have remained high and
portfolio wide rental rates have outpaced inflation for the last several years.
Gables expects portfolio wide rental expenses to increase at a rate slightly
ahead of inflation, but less than the increase in rental rates, for the coming
twelve months, consistent with the Company's experience during the past few
years.
As a result of the aforementioned generally favorable market conditions,
management has been successful in growing the income of the stabilized
properties as well as growing earnings via a combination of new development and
acquisition. Management's extensive experience in new development (including
site selection, zoning, construction and lease-up) and in-depth local presence
affords Gables the opportunity to acquire land and develop new Class A
multifamily communities. In select markets and in certain real estate cycles,
management believes better returns can be generated from new development than
from acquisitions of comparable properties. During other real estate cycles or
in select markets, management will pursue the acquisition of existing apartment
communities, specifically when the returns on investment and the potential for
growth in net operating income are attractive. Additionally, Gables has been
able to acquire distressed or under-managed apartment communities which, through
strategic renovation and repositioning, have generally resulted in superior
returns when compared to traditional acquisitions and new developments.
Management believes Gables' ability to compete with other companies is
significantly enhanced by its in-depth local presence and the strength of its
management, development, acquisition, and construction personnel. In certain
situations, management's evaluation of the growth prospects for a specific asset
may result in a determination to dispose of the asset. In this event, management
would intend to sell the asset and utilize the net proceeds from any such sale
to invest in new assets which are expected to have better growth prospects. The
Company maintains staffing levels sufficient to meet the existing construction,
acquisition, and leasing activities. If market conditions warrant, management
would anticipate adjusting staffing levels to avoid a negative impact on results
of operations.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements and the notes thereto.
This Report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results or developments
could differ materially from those projected in such statements as a result of
certain factors set forth in the section entitled "Certain Factors Affecting
Future Operating Results" and elsewhere in this report.
FORMATION OF GABLES AND INITIAL PUBLIC OFFERING
- -----------------------------------------------
Gables Residential Trust was formed in 1993 under Maryland law to continue and
to expand the multifamily apartment community management, development,
construction, and acquisition operations of its privately owned predecessor
organization. The term "Gables Residential Group" as used herein refers to the
privately owned predecessor organization prior to the completion of the
Company's initial public offering in January, 1994 (the "IPO"), and the
concurrent completion of the various transactions that occurred therewith (the
"Formation Transactions"). The term "Company" or "Gables" as used herein means
Gables Residential Trust and its subsidiaries on a consolidated basis (including
Gables Realty Limited Partnership and its subsidiaries), or, where the context
so requires, Gables Residential Trust only, and, as the context may require,
their predecessors. At the completion of the IPO on January 26, 1994, Gables
sold 9,430,000 common shares (including 1,230,000 shares as a result of the
exercise of an over-allotment option by the underwriters) at a price to the
public of $22.50 per share. The net proceeds to Gables from such sale totaled
approximately $190 million, the majority of which were used to reduce
indebtedness and to purchase minority interests in certain property
partnerships.
OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
- -------------------------------------------------------
On October 7, 1994, Gables consummated a direct placement of 444,500 common
shares at $22.50 per share. The net proceeds of the offering were approximately
$9.9 million and were utilized to fund the acquisition of an apartment community
comprising 200 apartment homes and to repay outstanding indebtedness under the
Original Credit Facility.
On October 31, 1995, Gables completed a public offering of 4,600,000 common
shares (including 600,000 shares as a result of the exercise of an
over-allotment option by the underwriters) at a price to the public of $21.875
per share. The net proceeds of the offering were approximately $94 million and
were utilized to retire approximately $67 million of variable-rate construction
loan indebtedness and to pay down approximately $27 million of outstanding
indebtedness under the Original Credit Facility.
On December 5, 1995, the Company acquired a parcel of land for the development
of an apartment community expected to comprise 315 apartment homes. Such
acquisition was financed in part through the issuance of 111,074 minority units
of limited partnership in the Operating Partnership ("Units").
On March 25, 1996, the Company completed a direct placement of an aggregate of
879,068 common shares to six institutional investors at a price of $23.95 per
share. The net proceeds of the offering were approximately $20.6 million and
were utilized to reduce outstanding indebtedness under the Original Credit
Facility and for general working capital purposes.
On July 26, 1996, the Company acquired an apartment community comprising 500
apartment homes, financed in part through the issuance of 243,787 Units.
On September 17, 1996, Gables completed an offering of 1,725,000 common shares
(including 225,000 as a result of the exercise of an over-allotment option by
the underwriters) pursuant to the $200 million shelf registration statement at a
price to the public of $23.625 per share. On September 27, 1996, Gables
completed a direct placement of 1,435,000 shares to an institutional investor
pursuant to the $200 million shelf registration statement at a price of $24.375
per share. The net proceeds of these offerings totaled approximately $72.9
million and were used to (i) reduce outstanding indebtedness under the New
Credit Facility that was drawn to fund costs associated with the Company's
development and acquisition activities and (ii) for general working capital
purposes including funding of future development and acquisition activities.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF OPERATING RESULTS OF THE COMPANY FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996 (THE "1996 PERIOD") TO THE THREE MONTHS ENDED SEPTEMBER 30,
1995 (THE "1995 PERIOD").
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is considered by
the Company to have achieved stabilized occupancy on the earlier to occur of (i)
attainment of 93% physical occupancy or (ii) one year after completion of
construction.
The operating performance for all of the Company's apartment communities
combined for the three months ended September 30, 1996 and 1995 is summarized as
follows:
THREE MONTHS ENDED
SEPTEMBER 30,
--------- ---------- ---------- ---------
1996 1995 $ Change % Change
--------- ---------- ---------- ---------
RENTAL AND OTHER REVENUE:
- -------------------------
Fully stabilized communities (1) ..................................................$ 17,388 $ 16,893 $ 495 2.9%
Communities stabilized during the 1996 Period, but not during the 1995 Period (2).. 6,811 2,095 4,716 225.1%
Development and lease-up communities (3) .......................................... 1,450 282 1,168 414.2%
Acquired communities (4) .......................................................... 4,209 0 4,209 --
Sold communities (5) .............................................................. 0 225 (225) (100.0%)
-------- -------- -------- -------
Total property revenues ...........................................................$ 29,858 $ 19,495 $ 10,363 53.2%
-------- -------- -------- -------
PROPERTY OPERATING AND MAINTENANCE EXPENSE (EXCLUSIVE OF DEPRECIATION AND
AMORTIZATION):
- --------------
Fully stabilized communities (1) ..................................................$ 6,545 $ 6,497 $ 48 0.7%
Communities stabilized during the 1996 Period, but not during the 1995 Period (2).. 2,139 748 1,391 186.0%
Development and lease-up communities (3) .......................................... 610 134 476 355.2%
Acquired communities (4) .......................................................... 1,501 0 1,501 --
Sold communities (5) .............................................................. 0 110 (110) (100.0%)
-------- -------- ------- -------
Total specified expenses ..........................................................$ 10,795 $ 7,489 $ 3,306 44.1%
-------- -------- -------- -------
Revenues in excess of specified expenses ..........................................$ 19,063 $ 12,006 $ 7,057 58.8%
-------- -------- -------- -------
Revenues in excess of specified expenses as a percentage of total property revenues 63.8% 61.6% -- 2.2%
======== ======== ======== =======
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1996
Period and 1995 Period.
(2) Communities which were owned and fully stabilized
during all of the 1996 Period, but were not owned and fully stabilized during
all of the 1995 Period.
(3) Communities in the development and/or lease-up phase which were not fully
stabilized during all or any of the 1996 Period.
(4) Communities which were acquired during the 1996 Period comprising: (a) Pin
Oak Green and Pin Oak Park, two communities acquired April 23, 1996,
collectively comprising 1,059 apartment homes, (b) Gables River Oaks, a
community acquired May 29, 1996, comprising 228 apartment homes, (c) Gables
Stonebridge, a community acquired July 26, 1996, comprising 500 apartment homes
and (d) Gables Turtle Creek, a community acquired August 22, 1996, comprising
150 apartment homes.
(5) Vinings at Central community comprising 132 apartment homes, which
was sold on April 10, 1996.
</FN>
Total property revenues increased $10,363, or 53.2%, from $19,495 to $29,858 due
primarily to increases in the number of apartment homes resulting from the
development and acquisition of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
Fully stabilized communities ("same store"):
Percent
Increase Increase
Number of (Decrease)in (Decrease) in Occupancy Increase
Apartment Percent Total Property Total Property During the (Decrease)in
Market Homes of Total Revenues Revenues 1996 Period Occupancy
- ------ ----- -------- -------- -------- ----------- ---------
Atlanta................................. 3,289 35% $ 275 4.7% 95.3% 0.6%
Austin ................................. 276 3% (3) (0.5%) 91.9% (0.3%)
Dallas ................................. 855 9% 28 2.0% 94.5% (1.3%)
Houston ................................ 3,512 38% 133 2.1% 96.2% 1.0%
Memphis ................................ 464 5% 33 4.2% 94.4% (0.9%)
Nashville .............................. 912 10% 29 1.7% 95.8% (1.3%)
------- ------- ------- ------- ------- -------
9,308 100% $ 495 2.9% 95.5% 0.3%
======= ======= ======= ======= ======= =======
Communities stabilized during the 1996 Period but not during the 1995 Period:
Increase
Number of In Total Occupancy
Apartment Percent Property During the
Market Homes of Total Revenues 1996 Period
------ ----- -------- -------- -----------
Atlanta 1,051 38% $1,510 95.7%
Austin 256 9% 754 97.4%
Dallas 422 15% 783 94.9%
Houston 246 9% 293 95.5%
Nashville 254 9% 650 97.1%
San Antonio 544 20% 726 91.3%
------- ------- ------- -------
2,773 100% $ 4,716 95.1%
======= ======= ======= =======
Development and lease-up communities:
Increase
Number of In Total Occupancy
Apartment Percent Property During the
Market Homes of Total Revenues 1996 Period
- ------ ----- -------- -------- -----------
Alanta 263 25% $ 598 70.3%
Dallas 300 29% 358 54.3%
Memphis 490 46% 212 21.0%
------- ------- ------- -------
1,053 100% $ 1,168 43.8%
======= ======= ======= =======
Property management revenues decreased $102, or 9.6%, from $1,068 to $966 due
primarily to a net decrease of properties managed by Gables for third parties
primarily as a result of these properties being sold by the owners.
Olympic revenues, net of $670 for the 1996 Period represent non-recurring net
revenues generated from certain corporate apartment home leases entered into in
connection with the 1996 Olympic games held in Atlanta.
Other revenues decreased $296, or 51.9%, from $570 to $274 due primarily to
decreased development and construction fees related to services provided by
Gables to third parties.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $3,306, or 44.1%, from $7,489 to $10,795 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities and an increase in property operating and maintenance
expense for same store communities of 0.7%. The same store increase in operating
expenses represents inflationary increases in expenses, offset in part by
reduced health and workers compensation insurance expenses. Gables anticipates
that property operating and maintenance expense for same store communities will
generally increase at a rate slightly ahead of inflation.
Depreciation and amortization expense increased $1,890, or 59.3%, from $3,186 to
$5,076 due primarily to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third party properties on
a combined basis increased $91, or 6.9%, from $1,322 to $1,413 due primarily to
increased personnel and administrative costs associated with an increase in the
total number of units managed, annual increases in compensation and certain
other costs. Gables allocates property management expenses to both owned
communities and third party properties based on the proportionate share of total
apartment homes and units managed.
General and administrative expense increased $215, or 34.3%, from $627 to $842
due to increased personnel and administrative costs associated primarily with
the appointment of the new Chief Operating Officer and Vice President of
Portfolio Management positions effective January 1, 1996.
Interest expense increased $2,457, or 63.9%, from $3,847 to $6,304 due to an
increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase.
Additionally, interest costs increased due to the refinancing of certain
variable rate debt to a higher fixed rate cost structure. These increases in
interest expense have been offset in part as a result of the offerings the
Company has consummated between periods, the proceeds of which have been
primarily used to reduce indebtedness.
Net income increased $2,484, or 75.1%, from $3,306 to $5,790 primarily due to
the reasons discussed above.
COMPARISON OF OPERATING RESULTS OF THE COMPANY FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 (THE "1996 PERIOD") TO THE NINE MONTHS ENDED SEPTEMBER 30,
1995 (THE "1995 PERIOD").
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is considered by
the Company to have achieved stabilized occupancy on the earlier to occur of (i)
attainment of 93% physical occupancy or (ii) one year after completion of
construction.
The operating performance for all of the Company's apartment communities
combined for the nine months ended September 30, 1996 and 1995 is summarized as
follows:
NINE MONTHS ENDED
SEPTEMBER 30,
------- ------- ------- ------
$ %
1996 1995 CHANGE CHANGE
------- ------- ------- ------
RENTAL AND OTHER REVENUE:
Fully stabilized communities (1)..................................................... $ 51,449 $49,745 $ 1,704 3.4%
Communities stabilized during the 1996 Period, but not during the 1995 Period (2).... 4,890 1,093 3,797 347.4%
Development and lease-up communities (3) ............................................ 16,736 2,593 14,143 545.4%
Acquired communities (4) ............................................................ 6,353 0 6,353 --
Sold communities (5) ................................................................ 218 664 (446) (67.2%)
------- ------- ------- -------
Total property revenues ............................................................ $ 79,646 $54,095 $ 25,551 47.2%
------- ------- ------- -------
PROPERTY OPERATING AND MAINTENANCE EXPENSE (EXCLUSIVE OF DEPRECIATION AND
AMORTIZATION):
Fully stabilized communities (1) ................................................... $ 18,900 $18,727 $ 173 0.9%
Communities stabilized during the 1996 Period, but not during the 1995 Period (2)... 1,456 408 1,048 256.9%
Development and lease-up communities (3) ........................................... 5,373 905 4,468 493.7%
Acquired communities (4) ........................................................... 2,251 0 2,251 --
Sold communities (5) ............................................................... 128 332 (204) (61.4%)
------- ------- ------- -------
Total specified expenses ........................................................... $ 28,108 $20,372 $ 7,736 38.0%
------- ------- ------- -------
Revenues in excess of specified expenses ........................................... $ 51,538 $33,723 $ 17,815 52.8%
======= ======= ======= =======
Revenues in excess of specified expenses as a percentage of total property revenues 64.7% 62.3% -- 2.4%
======= ======= ======= =======
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1996
Period and 1995 Period.
(2) Communities which were owned and fully stabilized
during all of the 1996 Period, but were not owned and fully stabilized during
all of the 1995 Period.
(3) Communities in the development and/or lease-up phase which were not fully
stabilized during all or any of the 1996 Period.
(4) Communities which were acquired during the 1996 Period comprising: (a) Pin
Oak Green and Pin Oak Park, two communities acquired April 23, 1996,
collectively comprising 1,059 apartment homes, (b) Gables River Oaks, a
community acquired May 29, 1996, comprising 228 apartment homes, (c) Gables
Stonebridge, a community acquired July 26, 1996, comprising 500 apartment homes
and (d) Gables Turtle Creek, a community acquired August 22, 1996, comprising
150 apartment homes.
(5) Vinings at Central community comprising 132 apartment homes, which was sold
on April 10, 1996.
</FN>
Total property revenues increased $25,551, or 47.2%, from $54,095 to $79,646 due
primarily to increases in the number of apartment homes resulting from the
development and acquisition of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
Fully stabilized communities ("same store"):
Increase Percent
(Decrease)in Increase
Number of Total (Decrease)in Occupancy Increase
Apartment Percent Property Total Property During the (Decrease)in
Market Homes of Total Revenues Revenues 1996 Period Occupancy
- ------ ----- -------- -------- -------- ----------- ----------
Atlanta 3,289 35% $ 919 5.3% 94.7% 0.1%
Austin 276 3% (16) (0.9%) 92.0% (0.9%)
Dallas 855 9% 110 2.6% 93.2% (1.3%)
Houston 3,512 38% 360 1.9% 95.1% 0.7%
Memphis 464 5% 134 5.8% 96.2% 2.8%
Nashville 912 10% 197 4.1% 95.9% 0.7%
------- ------- ------- ------- ------- -------
9,308 100% $ 1,704 3.4% 94.8% 0.4%
======= ======= ======= ======= ======= =======
Communities stabilized during the 1996 Period but not during the 1995 Period:
Number of Increase Occupancy
Apartment Percent In Total During the
Market Homes of Total Property Revenues 1996 Period
- ------ ----- -------- ----------------- -----------
Atlanta 356 60% $2,138 96.3%
Dallas 234 40% 1,659 95.5%
------- -------- ------- -------
590 100% $3,797 95.9%
======= ======== ======= =======
Development and lease-up communities:
Number of Increase Occupancy
Apartment Percent In Total During the
Market Homes of Total Property Revenues 1996 Period
- ------ ----- -------- ----------------- -----------
Atlanta 958 30% $4,886 82.7%
Austin 256 8% 2,036 86.7%
Dallas 488 15% 1,619 45.8%
Houston 246 7% 1,182 87.7%
Memphis 490 15% 260 12.1%
Nashville 254 8% 1,597 78.9%
San Antonio 544 17% 2,563 82.9%
--- --- ----- -----
3,236 100% $14,143 76.6%
===== ==== ======= =====
Property management revenues decreased $329, or 10.1%, from $3,260 to $2,931 due
primarily to a net decrease of properties managed by Gables for third parties
primarily as a result of these properties being sold by the owners.
Olympic revenues, net of $900 for the 1996 Period represent non-recurring net
revenues generated from certain corporate apartment home leases entered into in
connection with the 1996 Olympic games held in Atlanta.
Other revenues decreased $378, or 30.1%, from $1,254 to $876 due primarily to
decreased development and construction services provided by Gables to third
parties.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $7,736, or 38.0%, from $20,372 to $28,108 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities and an increase in property operating and maintenance
expense for same store communities of 0.9%. The same store increase in operating
expenses represents inflationary increases in expenses, offset in part by
reduced health and workers compensation insurance expenses. Gables anticipates
that property operating and maintenance expense for same store communities will
generally increase at a rate slightly ahead of inflation.
Depreciation and amortization expense increased $4,576, or 52.0%, from $8,796 to
$13,372 due primarily to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third party properties on
a combined basis increased $430, or 11.3%, from $3,813 to $4,243 due primarily
to increased personnel and administrative costs associated with an increase in
the total number of units managed, annual increases in compensation and certain
other costs. Gables allocates property management expenses to both owned
communities and third party properties based on the proportionate share of total
apartment homes and units managed.
General and administrative expense increased $297, or 14.0%, from $2,122 to
$2,419 due to increased personnel and administrative costs associated primarily
with the appointment of the new Chief Operating Officer and Vice President of
Portfolio Management positions effective January 1, 1996, offset in part by
certain non-recurring costs incurred during the 1995 Period that were not
incurred during the 1996 Period.
Interest expense increased $5,515, or 56.4%, from $9,780 to $15,295 due to an
increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase.
Additionally, interest costs increased due to the refinancing of certain
variable rate debt to a higher fixed rate cost structure. These increases in
interest expense have been offset in part as a result of the offerings the
Company has consummated between periods, the proceeds of which have been
primarily used to reduce indebtedness.
Extraordinary loss, net of $520 for the nine months ended September 30, 1996
represents the write-off of unamortized deferred financing costs totaling $631
associated with the early retirement of the Company's Original Credit Facility,
net of the $111 portion of the loss attributable to the minority interest
unitholders. The Original Credit Facility that was scheduled to mature in
January, 1997, was refinanced in March, 1996 with a new $175 million unsecured
revolving credit facility (the "New Credit Facility").
Net income increased $6,070, or 61.7%, from $9,832 to $15,902 primarily due to
the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Gables' net cash provided by operating activities increased from $20,201 for the
nine months ended September 30, 1995 to $37,077 for the nine months ended
September 30, 1996, due to (i) an increase of $11,837 in income before certain
non-cash items including depreciation, amortization, equity in income of joint
ventures, minority interest of unitholders in Operating Partnership and net
extraordinary losses and (ii) the change in other assets between periods of $333
and the change in other liabilities between periods of $5,676, offset in part by
the change in restricted cash between periods of $970.
Gables net cash used in investing activities increased from $116,290 for the
nine months ended September 30, 1995 to $170,506 for the nine months ended
September 30, 1996 primarily due to the second quarter acquisitions of three
apartment communities named Pin Oak Green, Pin Oak Park, and Gables River Oaks,
comprising 1,287 apartment homes in total ($86.7 million) and the third quarter
acquisitions of two apartment communities named Gables Stonebridge and Gables
Turtle Creek, comprising 650 apartment homes in total ($33.5 million), partially
offset by the January, 1995 acquisition of Gables over Peachtree ($11 million)
and decreased development activities in 1996 when compared to 1995. During the
nine months ended September 30, 1996, Gables expended approximately $120.2
million for the acquisition of five apartment communities toaling 1,937
apartment homes, approximately $2.3 million in renovation expenditures related
primarily to Gables over Peachtree, approximately $44.8 million related to other
development expenditures, approximately $3.1 million for the acquisition of two
land parcels for future development, and approximately $2.8 million related to
capital expenditures for operating apartment communities.
Gables' net cash provided by financing activities increased from $98,252 for the
nine months ended September 30, 1995 to $153,545 for the nine months ended
September 30, 1996, due primarily to increased acquisition cash needs. During
the nine months ended September 30, 1996, Gables had net proceeds of $20.6
million from the March, 1996 sale of 879,068 common shares, net proceeds
totaling $72.9 million from the September, 1996 sales of 3,160,000 common
shares, and net borrowings of $88.6 million which were used primarily to fund
Gables' acquisition and development activities discussed previously. These
proceeds from financing activities were offset in part by the payment of the
fourth quarter 1995, first quarter 1996, and second quarter 1996 dividends and
distributions totaling approximately $27.5 million and the payment of deferred
financing costs totaling approximately $1.3 million related primarily to the
closing of the New Credit Facility.
Gables has elected to be taxed as a REIT under Section 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with its taxable year
ended December 31, 1994. REITs are subject to a number of organization and
operational requirements, including a requirement that they currently distribute
95% of their ordinary taxable income. Provided Gables maintains its
qualification as a REIT, the Company generally will not be subject to Federal
income tax on distributed net income.
As of September 30, 1996, Gables had total indebtedness of $374,873, and cash
and cash equivalents of $28,645. Gables' indebtedness includes $206,873 in
conventional mortgage notes payable secured by individual properties, $112,200
in tax-exempt bond indebtedness and $55,800 in borrowings outstanding under the
New Credit Facility. Gables' indebtedness has an average of 7.9 years to
maturity at September 30, 1996. Excluding monthly principal amortization
payments, over the next five years Gables has the following scheduled debt
maturities for indebtedness outstanding at September 30, 1996:
1996 $0
1997 9,514
1998 0
1999 100,730
2000 0
The debt maturities in 1997 of $9,514 relate to a conventional mortgage note
payable that matures August 31, 1997. Gables expects to refinance or retire such
note payable on or prior to maturity. The debt maturities in 1999, totaling
$100,730, consist of New Credit Facility borrowings of $55,800 and $44,930 of
four variable-rate notes payables securing tax-exempt bonds. These tax-exempt
bonds are subject to mandatory redemption on the termination dates of letters of
credit securing the bonds, each of which is March, 1999. Three of the underlying
bond issues mature in December, 2007 and the fourth underlying bond issue
matures in August, 2024. Gables expects to be able to remarket such bonds on or
prior to March, 1999.
Gables' dividends through the third quarter of 1996 have been paid from cash
provided by operating activities. Gables anticipates that dividends will
continue to be paid on a quarterly basis from cash provided by operating
activities.
On March 25, 1996, the Company completed a direct placement of an aggregate of
879,068 common shares to six institutional investors pursuant to its $200
million shelf registration statement at a price of $23.95 per share. The net
proceeds of the offering were approximately $20.6 million and were utilized (i)
to reduce outstanding indebtedness under the Original Credit Facility that was
drawn during 1996 primarily to fund costs associated with the Company's
development activities and (ii) for general working capital purposes.
On April 23, 1996, the Company acquired two adjoining apartment communities
located in Houston, Texas (Pin Oak Green and Pin Oak Park) that comprise 1,059
apartment homes. The acquisition costs totaling $65.6 million were funded
primarily through borrowings under the New Credit Facility.
On April 10, 1996, Gables sold one asset (Vinings at Central, comprising 132
apartment homes) and may plan to sell additional assets during 1996 which, in
management's evaluation, may no longer meet the Company's investment
requirements. The net proceeds from the sale of Vinings at Central of $4.0
million approximated the Company's carrying value of the asset and were utilized
to fund a portion of the costs of the April 23, 1996 acquisition discussed
previously.
On May 29, 1996, the Company acquired an apartment community located in Houston,
Texas (Gables River Oaks) comprised of 228 apartment homes. The acquisition
costs totaling $21.1 million were funded primarily through borrowings under the
New Credit Facility.
On July 26, 1996, the Company acquired an apartment community located in
Memphis, Tennessee (Gables Stonebridge) comprised of 500 apartment homes. The
acquisition costs totaling $26.0 million were funded primarily through the
assumption of a $19.8 million mortgage note payable and the issuance of 243,787
Units.
On August 22, 1996, the Company acquired an apartment community located in
Dallas, Texas (Gables Turtle Creek) comprised of 150 apartment homes. The
acquisition costs totaling $13.2 million were funded primarily through
borrowings under the New Credit Facility.
On September 17, 1996, Gables completed an offering of 1,725,000 common shares
(including 225,000 as a result of the exercise of an over-allotment option by
the underwriters) pursuant to its $200 million shelf registration statement at a
price to the public of $23.625 per share. On September 27, 1996, Gables
completed a direct placement of 1,435,000 common shares to an institutional
investor pursuant to its $200 million shelf registration statement at a price of
$24.375 per share. The net proceeds of these offerings totaled approximately
$72.9 million and were used to (i) reduce outstanding indebtedness under the New
Credit Facility that was drawn to fund costs associated with the Company's
development and acquisition activities and (ii) for general working capital
purposes including funding of future development and acquisition activities.
On October 1, 1996, the Company made an investment in an apartment community
located in Dallas, Texas (the Villas of CityPlace) comprised of 232 apartment
homes. The $21.4 million investment was funded from cash on hand at September
30, 1996 which was obtained primarily through borrowings under the New Credit
Facility.
The Company has received an offer for the acquisition of one of its communities
comprising 486 apartment homes. The offer is contingent upon, among various
items, acceptance of the results of due diligence and satisfactory defeasance of
the tax-exempt indebtedness currently encumbering the community. No assurance
can be given that this transaction will be consummated.
Gables has met and expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations. Gables' net cash
provided by operations has been adequate and Gables believes that it will
continue to be adequate to meet both operating requirements and payment of
dividends in accordance with REIT requirements. The budgeted expenditures for
improvements and renovations to the communities, in addition to monthly
principal amortization payments, are also expected to be funded from net cash
provided by operations. Gables anticipates construction and development
activities and land purchases will be funded primarily through borrowings under
the New Credit Facility.
Gables expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities, repayment of short-term financing of construction and
development activities and possible property acquisitions, through long-term
secured and unsecured borrowings and the issuance of debt securities or
additional equity securities or through the disposition of assets which, in
management's evaluation, may no longer meet the Company's investment
requirements.
CREDIT FACILITY
- ---------------
In conjunction with the IPO, Gables closed a $175 million three-year revolving
credit facility (the "Original Credit Facility")which had an initial maturity of
January, 1997. Borrowings under the Original Credit Facility were recourse to
the Company and bore interest at LIBOR plus 1.90% (reduced from 2.25% in
December, 1994) or, at the Company's option, the prime rate plus 0.50%.
Additionally, fees associated with letters of credit issued thereunder for the
Company's tax-exempt variable-rate bonds were 1.25% per annum (reduced from
1.50% in July, 1995).
In March, 1996, Gables closed a new $175 million unsecured revolving credit
facility (the "New Credit Facility" or "Credit Facility") that replaced the
Original Credit Facility. The New Credit Facility has an initial term of three
years and three one-year extension options. Borrowings bear interest initially
at LIBOR plus 1.65% and letter of credit fees for the Company's tax-exempt
variable-rate bonds are 1.00% per annum. Under the New Credit Facility, up to
$50 million is available to provide credit enhancements on outstanding
tax-exempt bond issues and all remaining amounts are available for borrowings.
Gables' availability under the New Credit Facility is limited to the lesser of
the total Credit Facility commitment or the borrowing base. The borrowing base
available under the Credit Facility is based on the designated collateral value
of Gables' unsecured communities and the debt service coverage ratio of
communities pledged as collateral under other recourse loans. As of September
30, 1996, the Company had approximately $45.8 million of letters of credit
issued under the New Credit Facility and had approximately $55.8 million in
borrowings outstanding thereunder and, therefore, had $73.4 million of remaining
capacity on its $175 million facility.
The Credit Facility contains customary representations, covenants and events of
default, including covenants which restrict the ability of the Operating
Partnership to make distributions in excess of stated amounts, which in turn
restricts the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 95% of the Operating Partnership's consolidated income available for
distribution (as defined in the related agreement) exclusive of distributions of
capital gains for such year. The Credit Facility contains exceptions to these
limitations to allow the Operating Partnership to make any distributions
necessary to allow the Company to maintain its status as a REIT. The Company
does not anticipate that this provision will adversely effect the ability of the
Operating Partnership to make distributions or the Company to declare dividends,
as currently anticipated.
COMPLETED COMMUNITIES IN LEASE-UP AND DEVELOPMENT COMMUNITIES
- -------------------------------------------------------------
Gables' current developments and lease-up activities for communities that had
not reached stabilized occupancy as of September 30, 1996 are summarized below:
Actual/ Actual/ Actual/ Actual/
Estimated Total Actual Estimated Estimated Estimated
Number of Budgeted Percent Quarter Quarter Quarter Quarter of
Apartment Cost(A) Construction Percent Percent Construction of Initial Construction Stabilized
Community Homes (Millions) Complete Leased Occupied Commenced Occupancy Ended Occupancy(B)
- --------- ----- ---------- -------- ------ -------- --------- --------- ----- ---------
COMPLETED COMMUNITIES IN LEASE-UP
Atlanta, GA
- -----------
Gables Over Peachtree ......... 263 $ 20.4 100% 68% 65% 1 Q 1995 N/A 2 Q 1996 1 Q 1997
Dallas, TX
- ----------
Gables Green Oaks I ........... 300 16.5 100% 70% 64% 1 Q 1995 1 Q 1996 3 Q 1996 1 Q 1997
-------------
Totals ...................... 563 $ 36.9
-------------
DEVELOPMENT COMMUNITIES
Atlanta, GA
- -----------
Gables at Vinings ............. 315 $ 24.6 20% -- -- 2 Q 1996 1 Q 1997 4 Q 1997 4 Q 1997
Roswell Gables II ............. 284 21.7 14% -- -- 2 Q 1996 1 Q 1997 4 Q 1997 4 Q 1997
Austin, TX
- ----------
Gables Central Park ........... 273 20.6 38% -- -- 2 Q 1996 1 Q 1997 3 Q 1997 4 Q 1997
Memphis, TN
- -----------
Gables Quail Ridge ............ 238 15.8 89% 41% 35% 1 Q 1995 2 Q 1996 4 Q 1996 1 Q 1997
Gables Germantown ............. 252 18.1 90% 41% 33% 1 Q 1995 2 Q 1996 4 Q 1996 1 Q 1997
--------------
Totals ...................... 1,362 $100.8
----------------
Grand Totals ................ 1,925 $137.7
================
<FN>
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934. The projections contained in the table above that are not historical facts
are forward-looking statements. These forward-looking statements involve risks
and uncertainties and actual results may differ materially from those projected
in such statements. Risks associated with the Company's development,
construction, and lease-up activities, which could impact the forward-looking
statements made, include: development opportunities may be abandoned;
construction costs of a community may exceed original estimates, possibly making
the community uneconomical; and construction and lease-up may not be completed
on schedule, resulting in increased debt service and construction costs.
- ---------------------------------
(A)Total Budgeted Cost includes all capitalized costs incurred and projected to
be incurred to develop the respective community presented in accordance with
generally accepted accounting principles, including land acquisition costs,
construction costs, real estate taxes, interest and loan fees, permits,
professional fees, allocated development overhead, and other regulatory fees.
(B) Stabilized occupancy is defined as the earlier to occur of (i) 93% physical
occupancy or (ii) one year after completion of construction.
</FN>
STABILIZED APARTMENT COMMUNITIES
- --------------------------------
Gables' portfolio of stabilized apartment communities as of September 30, 1996
is summarized below:
Scheduled Rent Per
Number of -------------------------
Community Homes Occupancy Unit Square Foot (A)
- --------- ----- --------- ------ ---------------
ATLANTA, GA
- -----------
Briarcliff Gables 104 97% $1,226 $0.99
Buckhead Gables 162 93% 783 1.03
Club Candlewood 486 91% 597 0.49
Dunwoody Gables 311 97% 793 0.85
Gables Cinnamon Ridge 200 97% 643 0.67
Gables Cityscape 192(B) 88% 831 1.00
Gables Wood Arbor 140 97% 664 0.73
Gables Wood Crossing 268 95% 694 0.72
Gables Wood Glen 380 98% 652 0.66
Gables Wood Knoll 312 96% 687 0.69
Lakes at Indian Creek 603 94% 560 0.61
Roswell Gables I 384 96% 831 0.77
Spalding Gables 252 96% 833 0.84
Wildwood Gables 546 99% 803 0.71
------- ------- ------- -------
4,340 95% 720 0.71
HOUSTON, TX
- -----------
Baybrook Village 776 96% 507 0.63
Cityscape 252 97% 792 0.93
CityWalk/Waterford Square 317 98% 781 0.97
Edgewater 292 93% 758 0.86
Gables Bradford Place 372 95% 658 0.76
Gables Bradford Pointe 360 97% 585 0.76
Gables CityPlaza 246 98% 798 0.90
Gables Meyer Park 345 97% 787 0.91
Gables Piney Point 246 96% 832 0.90
Gables Pin Oak Green 582 96% 875 0.86
Gables Pin Oak Park 477 94% 884 0.87
Gables River Oaks 228 99% 1,313 1.08
Metropolitan Uptown (JV) 318 95% 899 0.99
Rivercrest 140 96% 682 0.81
Westhollow Park 412 96% 526 0.58
------- ------- ------- -------
5,363 96% 749 0.83
AUSTIN, TX
- ----------
Gables Great Hills 276 95% 774 0.93
Gables Town Lake 256 99% 1,024 1.10
------- ------- ------- -------
532 97% 894 1.02
DALLAS, TX
- ----------
Arborstone 536 93% 455 0.64
Gables Pearl Street 108 99% 1,206 1.11
Gables Preston 126 88% 1,021 0.93
Gables Spring Park 188 96% 902 0.86
Gables Turtle Creek 150 99% 1,123 1.12
Gables Valley Ranch 319 95% 888 0.87
------- ------- ------- -------
1,427 95% 787 0.86
NASHVILLE, TN
- -------------
Brentwood Gables 254 98% 864 1.00
Gables Hendersonville 364 98% 641 0.68
Gables Hickory Hollow I 276 97% 630 0.67
Gables Hickory Hollow II 272 96% 624 0.69
------- -------- ------- -------
1,166 97% 683 0.74
MEMPHIS, TN
- -----------
Arbors of Harbortown(JV) 345 98% 725 0.73
Gables Cordova 464 97% 635 0.68
Gables Stonebridge 500 93% 634 0.72
------- ------- ------- ------
1,309 95% 658 0.71
SAN ANTONIO, TX
- ---------------
Gables Colonnade I 312 94% 765 0.84
Gables Wall Street 232 92% 789 0.83
------- ------- ------- -------
544 93% 775 0.84
TOTALS 14,681 96% $737 $0.78
======= ======= ======= =======
(A) In the Atlanta and Tennessee markets, rentable area is typically measured
including any patio or balcony. In the Texas markets, rentable area is measured
using only the heated area.
(B) This community has 14 apartment homes which the Company did not hold
available for occupancy as of September 30, 1996. The occupancy rate of the 178
apartment homes available was 95% at September 30, 1996.
PORTFOLIO INDEBTEDNESS SUMMARY AND INTEREST RATE PROTECTION ARRANGEMENT SUMMARY
- -------------------------------------------------------------------------------
A Summary of Gables' portfolio indebtedness and interest rate protection
arrangements as of September 30, 1996 follows:
Portfolio Indebtedness Summary
- ------------------------------
Percentage Interest Total Years to
Type of Indebtedness Balance of Total Rate(A) Rate(B) Maturity
- -------------------- ------- --------- ------- ------- ---------
Conventional fixed-rate .... $206,873 55.2% 8.11% 8.11% 8.73
Tax-exempt fixed-rate ...... 67,270 17.9% 6.56% 6.73% 13.65
------- ------- ------- ------- -------
Total fixed-rate ...... $274,143 73.1% 7.73% 7.77% 9.94
------- ------- ------- ------- -------
Tax-exempt variable-rate ... $ 44,930 12.0% 3.90% 4.90% 2.50
------- ------- ------- ------- -------
Credit Facility ............ $ 55,800 14.9% 7.10% 7.10% 2.50
------- ------- ------- ------- -------
Total portfolio debt (C), (D) $374,873 100.0% 7.18% 7.33% 7.94
======= ======= ======= ======= =======
(A) Interest Rate represents the weighted average interest rate incurred on the
indebtedness, exclusive of deferred financing cost amortization and credit
enhancement fees, as applicable.
(B) Total Rate represents the Interest Rate (A)plus credit enhancement fees, as
applicable.
(C) Interest associated with construction activities is capitalized as a cost of
development and does not impact current earnings. The qualifying construction
expenditures at September 30, 1996 for purposes of interest capitalization were
$43,484.
(D) Excludes $16.4 million of tax-exempt bonds and $16.5 million of outstanding
conventional indebtedness related to joint ventures in which Gables owns a 25%
interest.
INTEREST RATE PROTECTION ARRANGEMENT SUMMARY
- --------------------------------------------
Notional Strike Effective Termination
Description of Arrangement Amount Price (E) Date Date
- -------------------------- ------ --------- ---- ----
LIBOR, 30-day - "Rate Cap" ..... $44,530 6.25% 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" .... $44,530 5.35% 08/30/96 08/30/99 (F)
LIBOR, 30-day - "Rate Cap" ..... $35,470 5.13% 01/27/94 01/30/97
LIBOR, 30-day - "Rate Cap" ..... $50,000 6.45% 01/30/97 12/31/97
(E) The 30-day LIBOR rate in effect at September 30, 1996 was 5.44%.
(F) This arrangement is a knock-out swap agreement which fixes the Company's
underlying 30-day LIBOR rate at 5.35%. The swap terminates upon the earlier to
occur of (i) the termination date or (ii) a rate reset date on which the 30-day
LIBOR rate is 6.26% or higher.
ROLLFORWARD OF PORTFOLIO INDEBTEDNESS
- -------------------------------------
A rollforward of Gables' portfolio indebtedness from December 31, 1995 to
September 30, 1996 by category follows:
Balance at Balance at
12-31-95 Advances Repayments 9-30-96
-------- -------- ---------- ---------
Conventional fixed-rate $173,944 $33,243(A) $ 314 $206,873
Tax-exempt fixed-rate 67,385 0 115 67,270
-------- ------- ------- --------
Total fixed-rate $241,329 $ 33,243 $ 429 $274,143
-------- -------- -------- --------
Tax-exempt variable-rate $ 44,930 $ 0 $ 0 $ 44,930
-------- -------- -------- --------
(A),
Credit Facility $ 0 $172,900 $117,100(B) $ 55,800
-------- -------- -------- --------
Total portfolio debt $286,259 $206,143 $117,529 $374,873
======== ======== ======== ========
<FN>
(A) During June, 1996, the Company closed on a $13.5 million mortgage note
payable; the proceeds of this financing were used to paydown outstanding
borrowings under the Credit Facility. During July, 1996, the Company acquired an
apartment community located in Memphis, Tennessee and assumed a $19.8 million
mortgage note payable in connection with that acquisition.
(B) During March, 1996, the Company completed a direct placement of 879,068
common shares which generated approximately $20.6 million in net proceeds.
During September, 1996, the Company completed two equity offerings for a total
of 3,160,000 common shares which generated approximately $72.9 million in net
proceeds. The net proceeds from these transactions were used to paydown
outstanding borrowings under the Credit Facility.
</FN>
- --------------------------------------------------------------------------------
BOOK VALUE OF ASSETS AND EQUITY
- --------------------------------------------------------------------------------
The application of historical cost accounting in accordance with GAAP for
Gables' UPREIT structure results in an understatement of total assets and equity
compared to the amounts that would be recorded via the application of purchase
accounting in accordance with GAAP had Gables not been organized as an UPREIT.
Management believes it is imperative to understand this difference when
evaluating the book value of assets and equity. The understatement of basis
related to this difference in organizational structure is $119,582, exclusive of
the effect of depreciation. Accordingly, on a pro forma basis, the real estate
assets before accumulated depreciation, total assets and total equity plus
minority interest as of September 30, 1996 would be $882,749, $865,356, and
$457,161, respectively, if such $119,582 value was reflected.
INFLATION
- ---------
Substantially all of the leases at the communities are for a term of one year or
less, which may enable Gables to seek increased rents upon renewal of existing
leases or commencement of new leases. The short-term nature of these leases
generally serves to reduce the risk to Gables of the adverse effects of
inflation.
RECENT ACCOUNTING PRONOUNCEMENT
- -------------------------------
In March, 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("FAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
which becomes effective for fiscal years beginning after December 15, 1995. FAS
121 establishes standards for determining when impairment losses on long-lived
assets have occurred and how impairment losses should be measured. The Company
adopted FAS 121 effective January 1, 1996. There was no financial statement
impact as a result of this adoption.
OTHER
- -----
In October, 1996, Perry M. Parrott, Jr., a senior vice president of Gables,
tendered his resignation from the Company and the Board of Trustees.
CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS
- --------------------------------------------------
This Report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results or developments
could differ materially from those projected in such statements. Certain factors
that might cause such a difference include, but are not limited to, the
following: development opportunities may be abandoned; construction costs of a
community may exceed original estimates; construction and lease-up may not be
completed on schedule, resulting in increased debt service expense and
construction costs and reduced rental revenues; occupancy rates and rents may be
adversely affected by local economic and market conditions; financing may not be
available on favorable terms; the Company's cash flow may be insufficient to
meet required payments of principal and interest; and existing indebtedness may
not be able to be refinanced or the terms of such refinancing may not be as
favorable as the terms of existing indebtedness.
SUPPLEMENTAL DISCUSSION -
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
- --------------------------------------------------------------
Gables considers funds from operations ("FFO") to be a useful performance
measure of the operating performance of an equity REIT because, together with
net income and cash flows, FFO provides investors with an additional basis to
evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures. Gables believes that in order to
facilitate a clear understanding of its operating results, FFO should be
examined in conjunction with net income as presented in the financial statements
and data included elsewhere in this report. FFO was previously defined as net
income before minority interest and extraordinary items plus certain non-cash
items, primarily depreciation and amortization (the "old definition"). In early
1995, the National Association of Real Estate Investment Trusts adopted a White
Paper recommending certain changes to the calculation of FFO. FFO, as revised,
is defined as net income before minority interest and extraordinary items, plus
real estate depreciation (the "revised definition"). Adjusted funds from
operations ("AFFO") is defined as FFO under the revised defined less capital
expenditures funded by operations. FFO and AFFO should not be considered as an
alternative to net income as an indicator of Gables' operating performance or as
an alternative to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all of Gables' cash needs including
principal amortization, capital expenditures, and distributions to shareholders.
Additionally, FFO does not represent cash flows from operating, investing or
financing activities as defined by GAAP. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a discussion of Gables' cash needs and cash flows.
RECONCILIATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
- --------------------------------------------------------------------------
A reconciliation of funds from operations (using the revised definition) and
adjusted funds from operations follows:
For the three months ended For the nine months ended
September 30 September 30
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ------------ -----------
RECONCILIATIONS:
Income before minority interest and extraordinary
loss, net ..................................... $ 7,005 $ 4,306 $19,880 $12,807
Real estate asset depreciation:
Wholly-owned real estate assets .............. 4,976 3,109 13,071 8,549
Joint venture real estate assets ............. 55 62 163 142
------- ------- ------- -------
Total ................................. 5,031 3,171 13,234 8,691
------- ------- ------- -------
Funds from operations (revised definition) (A) . $12,036 $ 7,477 $33,114 $21,498
------- ------- ------- -------
Capital expenditures for operating apartments:
Carpet ........................................ 359 249 867 713
Roofing ....................................... 69 0 184 21
Exterior painting ............................. 25 22 111 65
Appliances .................................... 34 31 84 96
Other additions/improvements .................. 508 286 1,562 1,232
------- ------- ------ -------
Total ....................................... 995 588 2,808 2,127
------- ------- ------ -------
Adjusted funds from operations .................. $11,041 $ 6,889 $30,306 $19,371
======= ======= ======= =======
<FN>
(A) Funds from operations (revised definition) is calculated in accordance with
the White Paper that was adopted by the National Association of Real Estate
Investment Trusts in the first quarter of 1995.
</FN>
PART II - OTHER INFORMATION
Item 1: Legal Proceedings
- ------- -----------------
None
Item 2: Changes in Securities
- ------- ---------------------
In response to a change in Maryland law, during October, 1996, the
Board of Trustees of the Company adopted an amendment to Section 1.04 of
the Company's Amended and Restated Bylaws (the "Bylaws"). The Bylaws, as
amended, provide that special meetings of shareholders shall be called by
the Secretary of the Company upon the written request of the holders of
shares representing at least a majority of the votes entitled to be cast at
such meeting.
Item 3: Defaults Upon Senior Securities
- ------- -------------------------------
None
Item 4: Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
None
Item 5: Other Information
- ------- -----------------
None
Item 6: Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
3 Second Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on Form
8-A/A-2, filed with the Securities and Exchange Commission on November 12,
1996).
27 Financial Data Schedule.
(b) Reports on Form 8-K
(i) A Form 8-K/A dated April 23, 1996 was filed with the Securities
and Exchange Commission with the required financial information regarding
the reported acquisition of two partnerships.
(ii) A Form 8-K dated July 26, 1996 was filed with the Securities and
Exchange Commission. This filing reported the acquisition of an apartment
community located in Memphis, Tennessee, comprising 500 apartment homes.
(iii) A Form 8-K dated September 11, 1996 was filed with the
Securities and Exchange Commission with the underwriting agreement executed
in connection with the Company's common share offering that closed
September 17, 1996.
SIGNATURE
---------
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.
Date: November 13, 1996 GABLES RESIDENTIAL TRUST
/s/ Marvin R. Banks, Jr.
------------------------
Marvin R. Banks, Jr.
Vice President and Chief
Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)