As filed with the Securities and Exchange Commission on September 10, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
September 10, 1997
(Date of report)
EQUITY RESIDENTIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Charter)
1-12252
(Commission File No.)
Maryland 13-3675988
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 474-1300
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
ITEM 5. Other Events
On August 27, 1997, Equity Residential Properties Trust, a Maryland real
estate investment trust (EQR"), and Evans Withycombe Residential, Inc., a
Maryland corporation ("EWR"), entered into an Agreement and Plan of Merger dated
as of August 27, 1997 pursuant to which EWR will merge with and into EQR (the
"Merger"). EWR and its subsidiaries own and operate 55 multifamily properties
containing 15,932 units in the Phoenix and Tucson, Arizona metropolitan areas
and Southern California. Pursuant to the Merger, the shares of common stock of
EWR issued and outstanding immediately prior to the Merger will be converted
into 0.50 of a common share of beneficial interest of EQR. EQR is filing the
information contained herein in order to provide investors with additional
information relating to the Merger. The Merger is subject to approval of the
shareholders of EQR and EWR and, therefore, completion of the Merger is
conditioned upon such approval and certain other closing conditions. Upon
completion of the Merger, Mr. Stephen O. Evans, the Chairman of the Board of
EWR, will become a trustee of EQR.
In connection with the Merger, EQR is hereby filing additional
information contained in EWR's Annual Report on Form 10-K for the year ended
December 31, 1996 and Quarterly Report on Form 10-Q for the period ended June
30, 1997 regarding the business and properties of EWR to be acquired in the
Merger as follows:
General
Evans Withycombe Residential, Inc. was formed in August 1994 as a self-
managed and self-administered real estate investment trust to continue and
expand the multifamily apartment operations of Evans Withycombe. Unless the
context otherwise requires, references to the "Company" shall include EWR, its
predecessor, Evans Withycombe, Inc., and its affiliates, predecessors and
partners (collectively, "Evans Withycombe"), Evans Withycombe Residential, L.P.,
Evans Withycombe Finance Partnership, L.P., Evans Withycombe Finance, Inc. and
Evans Withycombe Management, Inc. The Company is regionally focused in Arizona
and Southern California.
The Company's portfolio consists of stabilized communities and
communities under construction and in lease-up:
. Stabilized Communities. At December 31, 1996, the Company owned and managed
49 stabilized apartment communities (a property is considered stabilized
when it reaches 93 percent occupancy) located in metro Phoenix, Arizona;
metro Tucson, Arizona; and Riverside/San Bernardino, California. The
stabilized portfolio increased 2,852 units or 25.8 percent from 11,053
units at December 31, 1995 to 13,905 units at December 31, 1996.
. Communities Under Construction And In Lease-Up. At December 31, 1996, the
Company owned five apartment communities under construction and in lease-up
with a total of 1,078 apartments. Three of these communities were new
developments and two were expansions of existing communities owned by the
Company.
Company Formation
The Company was incorporated on May 24, 1994 to develop, acquire, own and
manage upscale multifamily apartment communities. On August 17, 1994, the
Company completed an initial public offering (the "Initial Public Offering") and
engaged in various formation transactions designed to transfer ownership of the
communities and other assets of the predecessor company to Evans Withycombe
Residential, L. P. (the "Operating Partnership") or Evans Withycombe Finance
Partnership, L.P. (the "Financing Partnership"). The Company is the sole
general partner of and owned a 79.7 percent interest in the Operating
Partnership at December 31, 1996. The Operating Partnership owns 99 percent of
the Financing Partnership. The remaining one percent interest in the Financing
Partnership is owned by Evans Withycombe Finance, Inc., a wholly owned
subsidiary of the Company. The Company also holds a noncontrolling interest in
Evans Withycombe Management, Inc. (the "Management Company").
2
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EVANS WITHYCOMBE
RESIDENTIAL, INC.
-----------------------------------------------------------------------------------------------------------
| | Other |
| | ------------------- |
| | | |
| | | |
| | | |
General partner Limited partner Limited partner 100%
interest interest interest common stock
1% 78.7% 20.3% |
| | | |
| | | |
| | | |
---------------------------------------------------------------------------- --------------------------------------
Evans Withycombe Evans Withycombe
Residential, L.P. Finance, Inc.
[Operating Partnership]
---------------------------------------------------------------------------- --------------------------------------
| | |
| | |
| | |
| | |
Current and former | | |
members of senior | | |
management | | |
- ------------------- | | |
| 100% Non-voting common stock 99% 1%
| 1% Voting common stock Limited partner General partner interest
| (99% of economic interest) interest
| | | |
| | | |
99% Voting common stock | | |
(1% economic interest) | | |
| | | |
| | | |
| ----------------------------------------------- --------------------------------------
| Evans Withycombe Evans Withycombe
-------- Management, Inc. Finance Partnership, L.P.
[Management Company] [Financing Partnership]
----------------------------------------------- --------------------------------------
3
The Company elected to be taxed as a real estate investment trust
("REIT") for Federal income tax purposes. A corporate REIT is a legal entity
which holds real estate interests and, through payments of dividends to
shareholders, is permitted to reduce or avoid the payment of federal income
taxes at the corporate level. The Company was incorporated under the laws of
the State of Maryland in May 1994. The Company's principal executive offices
are located at 6991 East Camelback Road, Suite A-200, Scottsdale, Arizona 85251
and its telephone number is (602) 840-1040. To maintain the Company's
qualifications as a REIT while realizing income from its fee management and
related service business, the Company's management operations are conducted
through the Management Company pursuant to the terms of a management agreement.
Competition
The Communities are located in areas that include other apartment
communities and that may include new apartment communities that are under
construction. The number of competitive communities in a particular area could
have an effect on the Company's ability to lease apartments at the Communities
or at any newly developed or acquired properties and on the rents charged by the
Company. In addition, other forms of housing, such as single family homes,
townhomes and condominiums provide alternatives to potential residents of high
quality apartment complexes like the Communities.
Environmental Matters
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and clean-
up costs incurred by such parties in connection with the contamination.
The Company believes that the Communities are in compliance in all
material respects with all federal, state and local laws, ordinances and
regulations regarding hazardous or toxic substances or petroleum products. The
Company has not been notified by any governmental authority, and is not
otherwise aware, of any material noncompliance, liability or claim relating to
hazardous or toxic substances or petroleum products in connection with any of
its present properties.
Employees
As of January 15, 1997, the Company, primarily through the Management
Company, employed 583 persons. The Management Company and/or the Operating
Partnership employ substantially all of the professional employees that are
currently engaged in the residential property management, development,
acquisition and construction businesses of the Company. The Company believes
that its relations with its employees are good.
Regulation
Apartment communities are subject to various laws, ordinances and
regulations, including laws, ordinances and regulations related to fair housing,
Americans with disabilities and building safety. The Company believes that each
Community has the necessary permits and approvals to operate its business and
that each Community is in material compliance with present laws, ordinances and
regulations.
Seasonality
The fall and winter months in the Company's Arizona markets generally
experience somewhat higher seasonal occupancies.
4
PROPERTIES
Stabilized Properties
The following sets forth certain information regarding the current
Stabilized Communities. All of the Communities are owned 100 percent in fee by
the Company (indirectly through the Operating Partnership or the Financing
Partnership). For a description of liens on certain of the Communities listed
below, see Schedule III - Real Estate Investments and Accumulated Depreciation
on page 25.
Physical
Average Average Occupancy
Year Unit Physical as of
Developed Size Occupancy December
Number of Developed/ or (Square During 31,
Stabilized Communities City Apartments Acquired Acquired Feet) 1996(1) 1996 (1)
- ---------------------- ------------ ---------- ----------- --------------- ------ ------- -------
Arizona:
- -------
Phoenix:
Acacia Creek Scottsdale 508 Acquired 1995 910 97% 98%
Bayside at the Islands Gilbert 272 Developed 1988 870 93% 94%
Country Brook (4) Chandler 396 Acq/Dev 1991/1993/1996 961 93% 92%
Deer Creek Village Phoenix 308 Acquired 1991 819 97% 92%
Gateway Villas Scottsdale 180 Developed 1995 998 96% 97%
Greenwood Village Tempe 270 Acquired 1993 884 96% 93%
Heritage Point Mesa 148 Acquired 1994 773 95% 91%
La Mariposa Mesa 222 Acquired 1990 928 95% 93%
La Valencia Mesa 361 Acquired 1990 950 92% 87%
Ladera Phoenix 248 Developed 1996 1,012 95% 98%
Little Cottonwoods Tempe 379 Acq/Acq/Dev 1989/89/90 1,023 91% 85%
Los Arboles (2) Chandler 232 Developed 1985 851 95% 92%
Mirador Phoenix 316 Developed 1996 987 85% 94%
Miramonte Scottsdale 151 Developed 1983 782 98% 99%
Morningside Scottsdale 160 Acquired 1992 1,019 95% 99%
Mountain Park Ranch Phoenix 240 Developed 1995 961 93% 93%
Park Meadow (4) Gilbert 224 Acq/Dev 1992/1996 880 96% 93%
Preserve at Squaw Peak Phoenix 108 Acquired 1991 952 96% 90%
Promontory Pointe (3) Phoenix 304 Acquired 1988 986 91% 83%
Rancho Murietta Tempe 292 Acquired 1995 866 97% 87%
Scottsdale Courtyards Scottsdale 274 Developed 1993 1,044 97% 100%
Scottsdale Meadows Scottsdale 168 Developed 1984 888 95% 99%
Shadow Brook Phoenix 224 Acquired 1993 1,010 97% 98%
Shores at Andersen Springs Chandler 299 Developed 1989/1993 889 97% 97%
Silver Creek Phoenix 174 Acquired 1991 775 98% 97%
Sonoran Phoenix 429 Developed 1995 965 93% 89%
Sun Creek Glendale 175 Acquired 1993 762 98% 98%
Superstition Vista Mesa 316 Acquired 1995 950 97% 96%
The Enclave Tempe 204 Developed 1995 952 97% 100%
The Heritage Phoenix 204 Developed 1995 973 93% 92%
The Ingleside Phoenix 120 Developed 1995 987 96% 94%
The Meadows Mesa 306 Acquired 1987 809 94% 92%
The Palms Phoenix 132 Developed 1990 1,026 93% 96%
The Pines Mesa 194 Acquired 1992 887 96% 94%
Towne Square (4) Chandler 584 Acq/Dev 1992/1995/1996 960 92% 90%
Villa Encanto Phoenix 382 Developed 1983 810 99% 99%
Village at Lakewood Phoenix 240 Developed 1988 857 94% 98%
------
9,744
------
5
Physical
Average Average Occupancy
Year Unit Physical as of
Developed Size Occupancy December
Number of Developed/ or (Square During 31,
City Apartments Acquired Acquired Feet) 1996(1) 1996 (1)
------------ ---------- ----------- --------------- ------ ------- -------
Tucson:
Harrison Park (3) Tucson 172 Acquired 1991/1996 809 87% 85%
La Reserve Oro Valley 240 Developed 1988 900 91% 92%
Orange Grove Village (4) Tucson 400 Acq/Dev 1991/1996 714 93% 87%
Suntree Village Oro Valley 424 Acquired 1992 831 91% 93%
The Arboretum Tucson 496 Acq/Dev 1992/1995 886 93% 89%
The Legends Tucson 312 Developed 1995 1,041 94% 94%
Village at Tanque Verde Tucson 217 Acq/Dev 1990/1995 694 90% 83%
------
2,261
------
Total Arizona 12,005
California:
- -----------
The Ashton Corona Hills 492 Acquired 1995 850 94% 92%
Canyon Crest Views (5) Riverside 178 Acquired 1996 1,193 97% 96%
Portofino (6) Chino Hills 176 Acquired 1996 873 99% 98%
Parkview Terrace (6) Redlands 558 Acquired 1996 801 96% 95%
Redlands Lawn & Tennis (7) Redlands 496 Acquired 1996 795 89% 89%
------ ------
Total California 1,900
======
Total 13,905 44,343
====== ======
Weighted 283 905
Average ====== ======
- --------------------
(1) Physical occupancy is defined as apartments occupied or leased (including
models and employee apartments) divided by the total number of leasable
apartments within the Community, expressed as a percentage.
(2) The Company owns approximately a 10 percent interest in the joint venture
that owns Los Arboles II, as well as two promissory notes with an
outstanding balance of approximately $760,000, secured by subordinated
liens on such property. Los Arboles II contains 200 apartments, was
developed in 1987, has an average unit size of 843 square feet and had
average physical occupancy during 1996 of 95 percent and physical occupancy
as of December 31, 1996 of 92 percent.
(3) Another phase of this community is currently under development. See
"Development and Construction Activity" below.
(4) A new phase of this community was completed and reached stabilized
occupancy in 1996.
(5) Property was acquired June 1996.
(6) Property was acquired July 1996.
(7) Property was acquired December 1996.
Of the current Stabilized Communities included in the table, 37 are
located in the greater Phoenix area, seven are located in the Tucson area and
five are located in California. All of the Stabilized Communities are managed
and operated by the Company and have an average size of 283 units. The
Stabilized Communities are primarily oriented to upscale residents seeking high
levels of amenities, such as clubhouses, exercise rooms, tennis courts, swimming
pools, therapy pools and covered parking. The average unit size of the
Stabilized and Communities under Construction combined is 905 square feet. All
have fully-equipped kitchens with upgraded cabinets, individual utility
metering, dishwashers, microwave ovens, separate dining areas, individual
storage, spacious patios and balconies, and ceramic tile entries. Most have
washers/dryers; and many offer high ceilings, fireplaces, and alarm system
prewiring.
6
Development and Construction Activity
The apartment Communities under Construction and in Lease-Up are listed below:
Actual Actual or
Average Estimated Date of Estimated Estimated
Unit Construction Construction Commence- Date of
Total Size Cost Commence- ment of Stabilized
Name City Units (Sq. Ft.) (Millions) ment Lease-Up Occupancy
- ------------------------------------------------------------------------------------------------------------------------------
Quarter
----------------------------------------
Phoenix
- -------
The Hawthorne Phoenix 276 904 $17 4:95 3:96 3:97
The Isle at Arrowhead Ranch Glendale 256 940 17 2:96 4:96 4:97
Promontory Pointe II
Expansion Phoenix 120 1,013 8 4:95 3:96 2:97
------- ----------
652 42
Tucson
- ------
Bear Canyon Tucson 238 973 15 3:95 2:96 2:97
Harrison Park II Expansion Tucson 188 974 10 3:95 2:96 2:97
------- ----------
426 25
------- ----------
Total 1,078 $67
======= ==========
The Company owns sites in the Phoenix area intended for the development
of four additional multifamily apartment communities, which, if completed, are
expected to contain approximately 1115 apartment units. In February 1997, the
Company began the construction at one of the sites of the first phase of The
Retreat, which will contain 240 apartment units. The Company currently
anticipates that the first phase of the Retreat will achieve stabilized
occupancy in the third quarter of 1998. The Company currently anticipates that
it will develop three additional communities in the Phoenix area (with
approximately an aggregate of 635 units) and the second phase of the Retreat
(with an additional 240 units) over the course of the next two years. The
Company currently estimates that such developments, if completed, would reach
stabilized occupancy during the latter part of 1998 through the end of 1999.
There can be no assurance that the Company will succeed in obtaining any
necessary governmental approvals or any financing required to develop the
remaining sites or the completion of phase II of the Retreat, or that the
Company will decide to develop any particular project.
The forward-looking information set forth in the table and paragraph
above is based upon a number of estimates and assumptions that are inherently
subject to business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control. The actual development cost,
completion date and stabilization date of any project will be dependent upon a
variety of factors beyond the control of the Company including, for example,
labor and other personnel costs, material costs, weather conditions, government
fees and leasing rates.
7
ITEM 7. Financial Statements, Pro forma Financial Information and Exhibits
(a) Financial Statements of Business to be Acquired
FINANCIAL STATEMENTS OF EVANS WITHYCOMBE RESIDENTIAL, INC.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Evans Withycombe Residential, Inc.
We have audited the accompanying consolidated balance sheets of Evans
Withycombe Residential, Inc. and subsidiaries (the Company) as of December 31,
1996 and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule. These
financial statements and the schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects the information set forth therein.
Ernst & Young LLP
Phoenix, Arizona
January 31, 1997
8
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for number of shares)
December 31, 1996 December 31, 1995
----------------- -----------------
ASSETS
Real Estate:
Land....................................................... $121,915 $ 95,908
Buildings and improvements................................. 543,839 389,846
Furniture and fixtures..................................... 29,567 23,736
Construction-in-progress................................... 66,229 77,693
-------- --------
761,550 587,183
Less accumulated depreciation.............................. (38,331) (17,511)
-------- --------
723,219 569,672
Cash and cash equivalents.................................... 2,568 3,634
Restricted cash.............................................. 1,622 522
Accounts and notes receivable................................ 3,500 2,065
Deferred costs, net of accumulated amortization
of $1,265 and $507 at December 31, 1996
and 1995, respectively..................................... 3,838 2,946
Other assets................................................. 1,587 1,656
-------- --------
Total assets................................................. $736,334 $580,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and notes payable................................... $436,172 $297,456
Accounts payable and other liabilities....................... 7,833 9,379
Dividends payable............................................ - 6,127
Accrued interest............................................. 1,417 605
Accrued property taxes....................................... 2,912 2,358
Resident security deposits................................... 1,818 1,497
Prepaid rent................................................. 585 438
-------- --------
Total liabilities............................................ 450,737 317,860
Minority interest............................................ 56,592 64,487
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, issued and outstanding - none................ - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 18,366,902 and 16,123,279 issued
and outstanding at December 31, 1996 and
1995, respectively....................................... 184 161
Additional paid-in capital................................. 253,425 209,344
Unamortized employee restricted stock compensation......... (465) (698)
Distributions in excess of net income...................... (24,139) (10,659)
-------- --------
Total stockholders' equity................................... 229,005 198,148
-------- --------
Total liabilities and stockholders' equity................... $736,334 $580,495
======== ========
See Notes to Consolidated Financial Statements
9
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for number of shares and per share amounts)
Evans
Evans Evans Withycombe
Withycombe Withycombe Residential,
Residential, Residential, Inc.
Inc. Inc. and Group
------------ ------------ ------------
Year Ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
Revenues:
Rental...................................... $ 94,350 $ 68,864 $ 51,097
Third party management fees................. 1,157 1,268 1,668
Interest and other.......................... 6,195 4,478 4,424
----------- ----------- -----------
Total revenues............................ 101,702 74,610 57,189
Expenses:
Repairs and maintenance..................... 11,607 8,293 6,288
Property operating.......................... 12,713 8,699 7,834
Advertising................................. 1,864 1,244 966
Real estate taxes........................... 6,915 4,723 3,204
Property management......................... 3,225 2,825 2,505
General and administrative.................. 1,698 1,588 1,409
Interest.................................... 24,225 12,650 7,836
Depreciation and amortization............... 20,885 13,762 10,333
Other....................................... -- -- 5,233
----------- ----------- -----------
Total expenses............................ 83,132 53,784 45,608
----------- ----------- -----------
Income before minority interest............... 18,570 20,826 11,581
Minority interest............................. (4,010) (4,594) (1,548)
----------- ----------- -----------
Net income.................................... $ 14,560 $ 16,232 $ 10,033
=========== =========== ===========
Earnings per share............................ $ 0.84 $ 1.01
=========== ===========
Earnings per share, period from
August 17 to December 31, 1994.............. $ 0.38
===========
Weighted average shares outstanding........... 17,409,897 16,053,453 15,967,432
=========== =========== ===========
See Notes to Consolidated Financial Statements
10
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except for number of shares and per share amounts)
Additional Unamortized
Paid-in Employee
Capital Restricted Distributions
Number of Common (Owners' Stock in Excess of
Shares Stock Equity) Compensation Net Income Total
--------- ------ ------- ------------ ------------- --------
Owners' equity, December 31, 1993............... - $ - $142,886 $ - $ - $142,886
Capital contributions......................... - - 9,660 - - 9,660
Distributions................................. - - (15,204) - - (15,204)
Net income, January 1 to August 16, 1994...... - - 4,012 - - 4,012
----------- ------ -------- ------------- -------- --------
- - 141,354 - - 141,354
The Offering and formation of the Company..... 16,021,078 160 119,287 - - 119,447
Minority interest of unitholders in
Operating Partnership at date of Offering... - - (53,343) - - (53,343)
Net Income, August 17 to December 31, 1994.... - - - - 6,021 6,021
Dividends on common stock ($.55 per share).... - - - - (8,812) (8,812)
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1994......... 16,021,078 160 207,298 - (2,791) 204,667
Net income.................................... - - - - 16,232 16,232
Dividends on common stock ($1.50 per share)... - - - - (24,100) (24,100)
Conversion of units to common stock........... 19,399 - 390 - - 390
Issuance of restricted common stock for
executive deferred compensation............. 82,802 1 1,656 (1,657) - -
Amortization of deferred compensation......... - - - 959 - 959
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1995......... 16,123,279 161 209,344 (698) (10,659) 198,148
Net income.................................... - - - - 14,560 14,560
Dividends on common stock ($1.58 per
share)........................................ - - - - (28,040) (28,040)
Proceeds of second offering, net of
underwriting discount and offering costs of
$3,237...................................... 2,088,889 21 40,870 - - 40,891
Conversion of units to common stock........... 132,793 2 2,581 - - 2,583
Exercise of stock options..................... 19,500 - 390 - - 390
Issuance of restricted stock.................. 10,895 - 240 (240) - -
Forfeiture of restricted stock................ (8,454) - - - - -
Amortization of deferred compensation......... - - - 473 - 473
----------- ------ -------- ------------- -------- --------
Stockholders' equity, December 31, 1996......... 18,366,902 $184 $253,425 $ (465) $(24,139) $229,005
=========== ====== ======== ============= ======== ========
See Notes to Consolidated Financial Statements
11
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Evans Evans Evans
Withycombe Withycombe Withycombe
Residential, Residential, Residential,
Inc. Inc. Inc.
---- ---- and Group
---------
Year Ended December 31,
--------------------------------------------------
1996 1995 1994
---------- --------- ---------
Cash flows from operating activities
Net income............................................. $ 14,560 $ 16,232 $ 10,033
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 21,578 14,420 10,703
Amortization of executive deferred comp............ 390 693 267
Minority interest.................................. 4,010 4,594 1,548
Write-off of development and acquisition
costs............................................. 227 - -
Write-off of deferred loan costs................... - 172 -
Decrease (increase) in assets
Restricted cash.................................... (1,100) 561 (129)
Accounts and notes receivable...................... (1,435) (758) (1,111)
Other assets....................................... 69 (1,104) 3,136
(Decrease) increase in liabilities
Accounts payable and other liabilities............. (1,546) 153 4,444
Due to related parties and owners.................. - - (6,482)
Accrued interest................................... 812 505 (818)
Accrued property taxes............................. 554 825 62
Resident security deposits......................... 321 500 54
Prepaid rent....................................... 147 (262) (98)
--------- --------- ---------
Net cash provided by operating activities.............. 38,587 36,531 21,609
Cash flows from investing activities
Purchase of real estate assets......................... (127,811) (116,716) (207,978)
Payment for organization and loan costs................ (1,650) (1,345) (3,673)
--------- --------- ---------
Net cash (used) in investing activities................ (129,461) (118,061) (211,651)
Cash flows from financing activities
Proceeds from Public Offering, net of expenses......... 40,891 - 181,262
Proceeds from exercise of options...................... 390 - -
Proceeds from mortgage notes and
credit facility...................................... 269,778 315,653 122,522
Principal payments on mortgage notes................... (177,762) (202,477) (101,280)
Dividends paid......................................... (34,167) (23,901) (2,884)
Minority interest distributions........................ (9,322) (6,550) (2,265)
Distributions to owners................................ - - (17,012)
Capital contributions.................................. - - 9,660
--------- --------- ---------
Net cash provided by financing activities.............. 89,808 82,725 190,003
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.......................................... (1,066) 1,195 (39)
Cash and cash equivalents, beginning of year........... 3,634 2,439 2,478
--------- --------- ---------
Cash and cash equivalents, end of year................. $ 2,568 $ 3,634 $ 2,439
========= ========= =========
Supplemental information
Cash paid during the year for interest................. $ 22,648 $ 11,487 $ 8,284
========= ========= =========
12
Supplemental disclosure of non-cash activity
Assumption of debt related to the acquisition of
apartment communities $46,700 $56,493 $ -
======= ======= ====
Acquisition of apartment communities through
issuance of units in the Operating Partnership $ - $14,207 $ -
======= ======= ====
Issuance of stock under restricted stock
incentive plan $ 83 $ 959 $ -
======= ======= ====
Conversion of units to common stock $ 2,583 $ 390 $ -
======= ======= ====
See Notes to Consolidated Financial Statements
13
EVANS WITHYCOMBE RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(Amounts in thousands, except for number of shares or units and per share
amounts)
1. Organization and Formation of the Company
Evans Withycombe Residential, Inc. (the "Company") is one of the largest
developers and managers of upscale apartment communities in Arizona and is
expanding its operation into selected sub-markets in Southern California. The
Company owns and manages 49 stabilized multifamily apartment communities
containing 13,905 units, of which 44 stabilized multifamily apartment
communities are located in Phoenix and Tucson, Arizona, containing a total of
12,005 units and five stabilized multifamily apartment communities are located
in the Riverside/San Bernardino, California market containing a total of 1,900
units. The Company considers an apartment community stabilized when it reaches
93 percent physical occupancy. The Company is also in the process of developing
or expanding five multifamily apartment communities comprising 1,078 units in
its Arizona markets. The Company is fully integrated with expertise in
development, acquisitions, construction and management of apartment communities.
The Company had approximately 580 employees at December 31, 1996.
The Company was incorporated on May 24, 1994 to develop, acquire, own and
manage upscale multifamily apartment communities. On August 17, 1994, the
Company completed an initial public offering and engaged in various formation
transactions designed to transfer ownership of the communities and other assets
of the predecessor company to Evans Withycombe Residential, L. P. (the
"Operating Partnership") or Evans Withycombe Finance Partnership, L.P. (the
"Financing Partnership"). The Company is the sole general partner of and owned a
79.7 percent, 77.02 percent and 79.50 percent interest in the Operating
Partnership at December 31, 1996, 1995 and 1994, respectively. The Company also
holds a noncontrolling interest in Evans Withycombe Management, Inc. (the
"Management Company").
In the second quarter of 1996, the Company completed the Second Offering.
The net proceeds from the Second Offering were used to repay a portion of the
Revolving Credit Facility.
The Company elected to be taxed as a real estate investment trust
("REIT") for Federal income tax purposes. A corporate REIT is a legal entity
which holds real estate interests and, through payments of dividends to
stockholders, is permitted to reduce or avoid the payment of federal income
taxes at the corporate level.
2. Basis of Presentation
The accompanying consolidated financial statements of Evans Withycombe
Residential, Inc. include the consolidated accounts of the Company, the
Operating Partnership, the Financing Partnership and the Management Company from
the date of the Offering, August 17, 1994. The accompanying financial statements
of Evans Withycombe Residential Group (the "Predecessor") prior to August 17,
1994, include the accounts of various partnerships sponsored by Evans
Withycombe. The Predecessor was a combination of affiliated entities that had
ownership in multifamily communities in the Phoenix and Tucson, Arizona area; it
was not a separate legal entity. The Predecessor accounts are presented on a
combined basis because all of the communities were managed by Evans Withycombe
which had a significant ownership interest in each of the communities and
because these communities were the subject of business combination in connection
with the formation of the Company.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
Reclassification
Certain amounts in the 1995 balance sheet and statement of stockholders'
equity have been reclassified to conform to the 1996 presentation.
3. Summary of Significant Accounting Policies
14
Real Estate Assets and Depreciation
The Company records its real estate assets in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", which
was issued by the Financial Accounting Standards Board in March 1995 and the
Company adopted in 1996. SFAS No. 121 requires that long-lived assets such as
real estate assets, be reviewed whenever events or changes in circumstances
indicate that the book value of the asset may not be recoverable. If the sum of
the estimated future net cash flows (undiscounted and without interest charges)
from an asset to be held and used is less than the book value of the asset, an
impairment loss must be recognized in the amount of the difference between book
value and fair value as opposed to the difference between book value and net
realizable value under the previous accounting standard. For long-term assets
like apartment communities, the determination of whether there is an impairment
loss is dependent primarily on the Company's estimates on occupancy, rent and
expense increases, which involves numerous assumptions and judgments as to
future events over a period of many years. At December 31, 1996 the Company does
not hold any assets that meet the impairment criteria of SFAS No. 121.
Costs related directly to the acquisition and improvement of real estate
are capitalized. Interest costs incurred during construction of a new property
are capitalized until completion of construction on a building-by-building
basis. Interest capitalized was $2,714, $5,048 and $2,724, for the years ended
December 31, 1996, 1995 and 1994, respectively.
Ordinary repairs, maintenance and costs incurred in connection with
resident turnover such as unit cleaning, painting, and carpet cleaning are
expensed as incurred; major replacements and betterments are capitalized and
depreciated over their estimated useful lives. Depreciation is computed on a
straight-line basis over the expected useful lives of depreciable property,
which ranges from 10 to 40 years for buildings and improvements and five to
eight years for furnishings and equipment.
The Company reports developments and lease-up properties as construction-
in-progress until construction on the apartment community has been completed and
the apartment community has reached stabilized occupancy.
The Company also reports land relating to construction-in-progress as
land on its balance sheet. Land associated with construction-in-progress was
$16,542 and $16,414 at December 31, 1996 and 1995, respectively.
Revenue Recognition
Rental income attributable to residential leases is recorded when due
from residents. Leases are for periods of up to one year, with rental payments
due monthly.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent
investments with original maturities of three months or less, primarily
consisting of demand deposits in banks.
Restricted Cash
Restricted cash includes restricted deposits for sinking fund accounts
related to tax exempt bonds, property taxes and escrow accounts.
Deferred Costs
Costs incurred in obtaining long-term financing are deferred. These costs
are amortized on the effective interest method over the terms of the related
debt agreements.
15
Income Taxes
The Company has made an election to be taxed as a REIT and accordingly,
no federal or state income taxes have been provided in the accompanying
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
Earnings Per Share
Earnings per share has been computed by dividing net income for the years
ended December 31, 1996 and 1995 and the period ended December 31, 1994,
respectively, by the weighted average number of shares outstanding. Historical
earnings per share data for the periods ended prior to the Offering on August
17, 1994 are not relevant since the financial information prior to such date is
comprised of combined operations of partnerships and corporations.
4. Other
Prior to the Initial Public Offering, Evans Withycombe, Inc. had in place
an Executive Incentive Deferred Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan, certain executives of Evans Withycombe, Inc.
(the "Participants") were granted unfunded, unsecured rights to receive cash
payments based on the distributions from certain partnerships in which Evans
Withycombe owned an interest. The awards would have vested over a six-year
period from the date of grant. In connection with the Initial Public Offering,
all rights of Participants under the Executive Plan were canceled, and the
participants received (a) an aggregate of approximately $2,600 in cash which was
funded by Evans Withycombe, Inc. prior to the Initial Public Offering and (b)
the right to receive an aggregate of 98,500 shares of restricted stock from the
Company one year following the Offering if they remain as employees of the
Company during such period. One third of the shares will vest on each of the
second, third and fourth anniversaries of the Offering based on an offering
price per share of $20 (See Stock Incentive Plan footnote). The $2,600 cash
payment, which represents an estimate of the executives' vested share of the
gain, was expensed by Evans Withycombe, Inc. during the third quarter of 1994
prior to the Initial Public Offering.
In connection with the repayment of existing indebtedness at the time of
the offering, prepayment penalties and lender participation (additional
interest) totaling $2,600 were paid.
16
5. Mortgage and Notes Payable
The Company's mortgage notes and notes payable consists of the following
at December 31:
1996 1995
-------- --------
Mortgage note payable at fixed interest rate of 7.2 percent, monthly principal $ - $ 5,457
and interest payments through August 18, 1996. The unpaid principal balance was
repaid on August 18, 1996.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 5,380 5,463
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 4,340 4,406
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.0 percent, monthly principal 8,951 9,063
and interest payments. The unpaid principal balance was repaid on January 9,
1997.
Mortgage note payable at fixed interest rate of 8.28 percent, monthly principal 6,225 6,339
and interest payments. The unpaid principal balance was repaid on January 31,
1997.
Mortgage note payable at fixed interest rate of 9.95 percent, monthly principal 12,065 12,184
and interest payments through September 15, 1997, remaining balance due
September 15, 1997.
Mortgage note payable at fixed interest rate of 9.3 percent, monthly principal 3,182 3,212
and interest payments through September 15, 1997, remaining balance due
September 15, 1997
$50 million securitized debt at a fixed interest rate of 7.17 percent, monthly 49,509 50,000
principal and interest payments through January 1, 2006, remaining balance due
January 1, 2006. Secured by first mortgage liens on 5 communities.
Securitized debt at a fixed stated interest rate of 7.98 percent, with an 130,520 130,439
effective interest rate of 8.05 percent, monthly interest only payments through
August 1, 2001. Secured by first mortgage liens on 22 communities. The face
amount of $131 million is due August 1, 2001. The balance is net of
unamortized discount of $480 and $561 at December 31, 1996 and 1995,
respectively.
$13 million short term note payable at a fixed interest rate of 6.0 percent. - 13,000
Interest only payments with the unpaid principal balance due January 5, 1996.
The unpaid principal balance was repaid on January 5, 1996.
$17.3 million tax exempt bonds with a floating interest rate based on the tax 17,300 17,300
exempt note rate set by the remarketing agent, or at the option of the Company
can convert to a fixed rate as determined by the remarketing agent. Secured by
a $17.5 million direct pay letter of credit agreement, interest payments only
matures December 1, 2007 (Effective interest rate of 5.16 percent at December
31, 1996).
$22.6 million tax exempt bonds with a floating interest rate based on the tax 22,650 -
exempt note rate set by the remarketing agent, interest payments only. Secured
by a $22.8 million direct pay letter of credit, matures February 1, 2016.
(Effective interest rate of 5.65 percent at December 31, 1996).
17
1996 1995
---- ----
$24.05 million tax exempt bonds with a floating interest rate based on the tax $ 24,050 $ -
exempt note rate set by the remarketing agent. Interest payments only. Secured
by a $24.4 million direct pay letter of credit agreement, matures August 1,
2005. (Effective interest rate of 6.14 percent at December 31, 1996).
$225 million unsecured Revolving Credit Facility with floating interest rate 152,000 40,593
based on LIBOR plus 1.50 percent or at the option of the Company at prime,
interest payments only. Matures September 24, 1999 (Effective interest rate
of 7.2 percent at December 31, 1996).
-------- --------
$436,172 $297,456
======== ========
Each of the mortgage loans is secured by a first mortgage on separate
communities.
Principal maturities as of December 31, 1996 are as follows:
1997 $ 40,625
1998 563
1999 152,605
2000 650
2001 131,218
Thereafter 110,511
--------
$436,172
========
18
The $225 million Revolving Credit Facility provides funding for working capital,
construction activities and acquisitions.
The Company has three direct pay letters of credit of $17,500, $22,800 and
$24,400 which serve as a credit enhancement for the tax exempt bonds. The
letters of credit are secured by a first mortgage on four apartment
communities.
On January 9, 1997, the Company extinguished the debt on three mortgages with
unpaid principal balances of approximately $18,700 with proceeds from the
Revolving Credit Facility. As a result, the Company incurred a loss from the
early extinguishment of debt of approximately $1,200. The Company prepaid the
$6,225 mortgage note on January 31, 1997 with proceeds from the Revolving
Credit Facility which resulted in an additional loss from the early
extinguishment of debt of approximately $300. The loss from early
extinguishment of debt was recorded by the Company in the first quarter 1997.
6. Distributions
On December 31, 1996, the Company paid a distribution of $.40 per share ($7,311)
to shareholders and $.40 per unit ($1,906) to unitholders of record as of
December 24, 1996. Approximately 36 percent and 30 percent of the dividends and
distributions paid during 1996 and 1995 represented return of capital to the
shareholders and unitholders.
7. Management and Development Fees
The Company performs management services for certain unaffiliated communities.
Management fees received from managed communities were $1,157, $1,268, and
$1,668 for the years ended December 31, 1996, 1995 and 1994, respectively.
Included in 1996 third party management fees is a non recurring $500 fee
received in exchange for terminating the management contract on nine apartment
communities containing 1,298 apartment units in the second quarter of 1996.
Prior to the Offering, in conjunction with development of projects, the
communities paid development fees to affiliates of $4,554 for the period ended
August 16, 1994.
8. Retirement Plan
The Company has a defined contribution wealth accumulation plan and trust (the
"Plan") covering all employees who have elected to participate in the Plan.
Each participant may make pretax contributions to the Plan up to the maximum
allowed by the IRS. The Company makes a matching contribution of 25 percent of
the participant's contribution up to 1 percent of a participant's salary,
which totaled $113, $53, and $91 for 1996, 1995, and 1994, respectively.
19
9. Commitments and Contingencies
The Company leases office space in buildings and certain equipment under
noncancelable operating leases. Future minimum payments under these leases
with initial terms of one year or more consist of the following at December
31, 1996:
1997 $358
1998 364
1999 224
2000 4
----
$950
====
Rent expense for the years ended December 31, 1996, 1995 and 1994 was $360,
$300, and $288, respectively.
10. Stock Incentive Plan
Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 1995 and 1996, respectively: risk-free interest rates of 6.5% and 6.5%;
dividend yields of 7.5% and 7.4%; volatility factors of the expected market
price of the Company's common stock of 0.18 and 0.18; and a weighted-average
expected life of the option of 5 years. Because Statement 123 is applicable
only to options granted subsequent to December 31, 1994, its pro forma effect
will not be fully reflected until 1997.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (amounts in thousands except for earnings per share
information):
1996 1995
---- ----
Pro forma net income $14,557 $16,232
Pro forma primary earnings per share $ 0.84 $ 1.01
Exercise prices for options outstanding as of December 31, 1996 ranged from
$18.25 to $22.25. The weighted-average remaining contractual life of those
options is 7.6 years.
20
Initially 1,830,000 shares of the Company's common stock were reserved for
issuance under the plan. Information with respect to stock options granted
during 1996, 1995 and 1994 is as follows:
Weighted
Average
Exercise Price
Shares Per Share
------ ---------
Options granted on August 17, 1994 685,200 $20.00
Exercised - -
Granted 16,000 19.65
Forfeited (4,840) 20.00
-------- ------
Options outstanding at December 31, 1994 696,360 19.99
Exercised - -
Granted 21,000 19.74
Forfeited (18,185) 20.00
-------- ------
Options outstanding at December 31, 1995 699,175 19.98
Exercised (19,500) 20.00
Granted 345,000 21.96
Forfeited (115,825) 20.00
-------- ------
Options outstanding at December 31, 1996 908,850 $20.63
======== ======
Options exercisable:
December 31, 1994 - -
December 31, 1995 175,300 $20.00
December 31, 1996 357,700 $19.98
Options to purchase 901,650, 1,130,825 and 1,133,640 shares of common stock
were available for grant under the plan at December 31, 1996, 1995 and 1994,
respectively.
Executive Stock Incentive Plan
Prior to the Offering, the Company's predecessor Evans Withycombe, Inc. had in
place an Executive Incentive Deferred Compensation Plan (the "Executive Plan").
Pursuant to the Executive Plan, certain executives of Evans Withycombe, Inc.
(the "Participants") were granted the right to receive an aggregate of 98,500
shares of restricted stock from the Company one year following the Offering if
they remain employees of the Company during such period. One-third of the shares
vest on each of the second, third and fourth anniversaries of the Offering based
on an offering price per share of $20. The expense is being amortized ratably
over the periods in which the shares vest and an expense of $390 and $698 and
$267 for the years ended December 31, 1996, 1995 and 1994, respectively, is
included in general and administrative expense. Information with respect to the
executive restricted stock incentive plan is as follows:
Shares
------
Restricted stock at December 31, 1994 98,500
Forfeited (15,698)
-------
Restricted stock at December 31, 1995 82,802
Forfeited (8,454)
-------
Restricted stock at December 31, 1996 74,348
=======
Number of shares vested 27,600
21
Restricted Stock Program
In 1996, the Company awarded 10,895 shares of restricted stock to certain
employees of the Company under its 1994 Stock Incentive Plan. The restricted
stock vests ratably over periods ranging from one to four years from the date
of the award and are based on the price of the stock at the award date which
ranges from $20.75 to $22.25. The related expense will be amortized ratably
over the periods in which the shares vest and an expense of $83 is included in
general and administrative expense for the year ended December 31, 1996.
11. Minority Interest
Minority interest at December 31, 1996, 1995 and 1994, respectively, is
comprised of the following:
Number
of Units Dollars
---------- -------
Minority interest of unit holders in
operating partnership at date of offering 4,119,452 $53,343
Allocation of net income - 1,548
Distributions ($.55 per unit) - (2,265)
--------- -------
Balance at December 31, 1994 4,119,452 52,626
Issuance of units to acquire apartment communities 710,550 14,207
Conversion of units to common stock (19,399) (390)
Allocation of net income - 4,594
Distributions ($1.50 per unit) - (6,550)
--------- -------
Balance at December 31, 1995 4,810,603 64,487
Conversion of units to common stock (132,793) (2,583)
Allocation of net income - 4,010
Distributions ($1.58 per unit) - (9,322)
--------- -------
Balance at December 31, 1996 4,677,810 $56,592
========= =======
The Units can be redeemed for cash or shares of common stock of the Company on
a one-for-one basis at the Company's option. Minority interest of unitholders
in the Operating Partnership is calculated based on the weighted average of
shares of common stock and Units outstanding during the period.
12. Fair Value of Financial Instruments
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
Judgment is necessary to interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize on disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
Cash equivalents, accounts receivable, accounts payable and other accruals are
carried at amounts that reasonably approximate their fair values as of December
31, 1996 and 1995. The Company's debt has an estimated aggregate fair value of
approximately $437,800 at December 31, 1996 compared to the carrying value of
$436,172. At December 31, 1995, the Company's debt had an estimated fair value
of approximately $298,800 compared to the carrying value of $297,456. Fair
values were estimated using discounted cash flow analyses, based on interest
rates currently available to the Company for issuance of debt with similar terms
and remaining maturities.
22
13. 1994 Results of Operations
The 1994 results of operations of the Company and its Predecessor are as
follows:
Evans Withycombe Evans Withycombe
Residential, Inc. Residential Group
----------------- -----------------
August 17 to January 1 to
December 31, 1994 August 16, 1994
----------------- ---------------
Revenues:
Rental............................. $20,185 $30,912
Third party management fees........ 560 1,108
Interest and other................. 1,258 3,166
------- -------
Total revenues....................... 22,003 35,186
Expenses:
Repairs and maintenance............ 2,642 3,646
Property operating................. 2,392 5,442
Advertising........................ 345 621
Real estate taxes.................. 1,251 1,953
Property management................ 1,104 1,401
General and administrative......... 644 765
Interest........................... 2,302 5,534
Depreciation and amortization...... 3,754 6,579
Other.............................. - 5,233
------- -------
Total expenses....................... 14,434 31,174
------- -------
Income before
minority interest.................. 7,569 4,012
Minority interest.................... (1,548) -
------- -------
Net income........................... $ 6,021 $ 4,012
======= =======
23
14. Selected Quarterly Financial Information (Unaudited, in thousands, except
per share amounts)
Quarter
First Second Third Fourth
----- ------ ----- ------
1996
Revenue $24,179 $24,106 $25,956 $27,461
Net operating income............ 16,858 16,308 16,742 18,695
Income before
minority interest.............. 5,283 4,682 3,927 4,678
Minority interest............... (1,212) (1,027) (812) (959)
Net income...................... 4,071 3,655 3,115 3,719
Earnings per share.............. $ .25 $ .22 $ .17 $ .20
1995
Revenue $16,300 $17,530 $19,088 $21,692
Net operating income............ 11,444 12,015 12,312 15,880
Income before
minority interest.............. 5,606 4,868 4,586 5,766
Minority interest............... (1,173) (1,095) (1,030) (1,296)
Net income...................... 4,433 3,773 3,556 4,470
Earnings per share.............. $ .28 $ .23 $ .22 $ .28
The Company defines net operating income as earnings before property management,
general and administrative expense, interest and depreciation.
24
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Subsequent
Initial Cost to Acquisition / Construction
------------------------------------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- -------------------------------------------------------------------------------------------------------
Same Store
Phoenix
Bayside at the Islands
Gilbert, AZ $ 6,589 $1,877 $6,623 $1,429 $ 3,491
Country Brook
Chandler, AZ 7,792 937 3,886 25 6,578
Deer Creek Village
Phoenix, AZ 5,116 919 5,454 506 3,465
Greenwood Village
Tempe, AZ 6,553 1,770 7,119 349 2,322
Heritage Point
Mesa, AZ - 666 5,125 - 397
La Mariposa
Mesa, AZ 4,750 1,440 3,962 608 2,620
La Valencia
Mesa, AZ 7,792 2,485 6,569 1,068 4,283
Little Cottonwoods
Tempe, AZ 9,424 2,834 6,655 216 7,161
Los Arboles
Chandler, AZ - 1,160 7,836 - 237
Miramonte
Scottsdale, AZ 4,340 1,133 3,711 - 123
Morningside
Scottsdale, AZ 4,542 533 6,316 137 2,115
Park Meadow
Gilbert, AZ 2,936 607 2,828 225 1,275
Preserve at Squaw Peak
Phoenix, AZ 3,172 377 4,252 141 1,939
Promontory Pointe
Phoenix, AZ 7,610 2,038 6,987 (379) 7,861
(9,905) *
Scottsdale Courtyards
Scottsdale, AZ 10,442 2,946 8,385 33 3,087
Scottsdale Meadows
Scottsdale, AZ 5,381 1,512 4,203 - 113
Shadow Brook
Phoenix, AZ 7,922 2,440 9,320 625 3,388
Shores at Andersen Springs
Chandler, AZ 8,196 2,095 9,682 649 3,949
* Write-down of real estate assets
Gross Amounts at Which
Carried at Close of Period
---------------------------------
Buildings and Accumulated Year Year Depreciable
Description Land Improvements Total Depreciation Developed Acquired Lives in Years
- ----------------------------------------------------------------------------------------------------------------------------
Same Store
Phoenix
Bayside at the Islands
Gilbert, AZ $3,306 $10,114 $13,420 $815 1988-1989 5 to 40 years
Country Brook
Chandler, AZ 962 10,464 11,426 954 1991 5 to 40 years
Deer Creek Village
Phoenix, AZ 1,425 8,919 10,344 912 1991 5 to 40 years
Greenwood Village
Tempe, AZ 2,119 9,441 11,560 961 1993 5 to 40 years
Heritage Point
Mesa, AZ 666 5,522 6,188 424 1994 5 to 40 years
La Mariposa
Mesa, AZ 2,048 6,582 8,630 528 1990 5 to 40 years
La Valencia
Mesa, AZ 3,553 10,852 14,405 829 1990 5 to 40 years
Little Cottonwoods
Tempe, AZ 3,050 13,816 16,866 939 1989 5 to 40 years
Los Arboles
Chandler, AZ 1,160 8,073 9,233 895 1993 5 to 40 years
Miramonte
Scottsdale, AZ 1,133 3,834 4,967 481 1993 5 to 40 years
Morningside
Scottsdale, AZ 670 8,431 9,101 731 1992 5 to 40 years
Park Meadow
Gilbert, AZ 832 4,103 4,935 450 1992 5 to 40 years
Preserve at Squaw Peak
Phoenix, AZ 518 6,191 6,709 500 1991 5 to 40 years
Promontory Pointe
Phoenix, AZ 1,659 4,943 6,602 392 1988 5 to 40 years
Scottsdale Courtyards
Scottsdale, AZ 2,979 11,472 14,451 1,035 1993 5 to 40 years
Scottsdale Meadows
Scottsdale, AZ 1,512 4,316 5,828 539 1993 5 to 40 years
Shadow Brook
Phoenix, AZ 3,065 12,708 15,773 1,157 1993 5 to 40 years
Shores at Andersen Springs
Chandler, AZ 2,744 13,631 16,375 1,078 1993 5 to 40 years
25
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Gross Amounts
Subsequent to at Which Carried
Initial Cost Acquisition/Construction at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
Same Store (continued)
Silver Creek
Phoenix, AZ $3,211 $484 $3,157 $228 $2,429 $712 $5,586 $6,298
Sun Creek
Glendale, AZ 3,811 715 3,950 182 1,648 897 5,598 6,495
The Meadows
Mesa, AZ - 650 4,797 - 2,795 650 6,231 6,881
(1,361)*
The Palms
Phoenix, AZ 4,895 2,152 4,455 1,133 2,764 3,285 7,219 10,504
The Pines
Mesa, AZ 3,707 577 3,725 351 2,559 928 6,284 7,212
Towne Square
Chandler, AZ - 1,042 8,413 277 3,614 1,319 12,027 13,346
Villa Encanto
Phoenix, AZ 8,951 2,884 8,558 - 844 2,884 9,402 12,286
Village at Lakewood
Phoenix, AZ 8,317 1,652 5,776 1,514 5,897 3,166 11,673 14,839
Tucson
Harrison Park
Tucson, AZ 3,315 516 3,511 - 743 516 4,254 4,770
La Reserve
Oro, Valley 6,409 2,309 6,356 956 3,656 3,265 10,012 13,277
Orange Grove Village
Tucson, AZ 3,786 814 3,233 906 2,575 1,720 5,808 7,528
Suntree Village
Oro, Valley 8,550 1,246 8,862 326 3,713 1,572 12,575 14,147
The Arboretum
Tucson, AZ 16,684 1,014 8,323 1,526 3,349 2,540 11,6 72 14,212
Village at Tanque Verde
Tucson, AZ 6,436 690 1,280 745 4,895 1,435 6,175 7,610
-----------------------------------------------------------------------------------------------
Subtotal Same Store 180,629 44,514 183,309 13,776 84,619 58,290 267,928 326,218
Communities Stabilized Less Than
Two Years
Phoenix
Gateway Villas
Phoenix, AZ - 1,431 11,238 - (50) 1,431 11,188 12,619
Accumulated Year Year Depreciable
Depreciation Developed Acquired Lives in Years
-----------------------------------------------------
Same Store (continued)
Silver Creek
Phoenix, AZ $546 1991 5 to 40 years
Sun Creek
Glendale, AZ 624 1993 5 to 40 years
The Meadows
Mesa, AZ 532 1987 5 to 40 years
The Palms
Phoenix, AZ 512 1990 5 to 40 years
The Pines
Mesa, AZ 679 1992 5 to 40 years
Towne Square
Chandler, AZ 1,607 1992 5 to 40 years
Villa Encanto
Phoenix, AZ 983 1991 5 to 40 years
Village at Lakewood
Phoenix, AZ 915 1991 5 to 40 years
Tucson
Harrison Park
Tucson, AZ 393 1991 5 to 40 years
La Reserve
Oro, Valley 732 1988 5 to 40 years
Orange Grove Village
Tucson, AZ 605 1991 5 to 40 years
Suntree Village
Oro, Valley 1,348 1992 5 to 40 years
The Arboretum
Tucson, AZ 1,584 1992 5 to 40 years
Village at Tanque Verde
Tucson, AZ 589 1990 5 to 40 years
-------
Subtotal Same Store 25,269
Communities Stabilized Less Than
Two Years
Phoenix
Gateway Villas
Phoenix, AZ 561 1994-1995 5 to 40 years
* Write-down of real estate assets
26
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Subsequent Gross Amounts at Which
Initial Cost to Acquisition / Construction Carried at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
Communities Stabilized Less Than
Two Years (continued)
Mountain Park Ranch
Phoenix, AZ $ 9,704 $1,662 $12,540 $- $ 28 $1,662 $12,568
Sonoran
Phoenix, AZ - 2,362 20,802 - 17 2,362 20,819
The Enclave
Tempe, AZ 8,367 1,500 10,527 - 26 1,500 10,553
The Heritage
Phoenix, AZ - 1,211 12,370 - (13) 1,211 12,357
Towne Square Expansion Phase II
Chandler, AZ - - 6,061 - - - 6,061
Tucson
Arboretum Expansion Phase II
Tucson, AZ - 914 8,383 - - 914 8,383
-----------------------------------------------------------------------------------------
Subtotal Communities Stabilized
Less than Two Years 18,071 9,080 81,921 - 8 9,080 81,929
Developments and Lease-Up Properties
Phoenix
Country Brook Expansion Phase III
Chandler, AZ - 543 6,779 - - 543 6,779
The Hawthorne
Phoenix, AZ - 2,695 14,087 - - 2,695 14,087
Ingleside
Phoenix, AZ - 1,204 6,242 - - 1,204 6,242
The Isle at Arrowhead Ranch
Glendale, AZ - 1,652 9,806 - - 1,652 9,806
Ladera
Phoenix, AZ - 2,979 14,884 - - 2,979 14,884
Mirador
Phoenix, AZ - 2,597 20,885 - - 2,597 20,885
Park Meadow Expansion Phase II
Gilbert, AZ - 4 3,998 - - 4 3,998
Promontory Pointe Expansion Phase II
Phoenix, AZ - 665 8,141 - - 665 8,141
Towne Square Expansion Phase III
Chandler, AZ - 605 6,092 - - 605 6,092
Accumulated Year Year Depreciable
Total Depreciation Developed Acquired Lives in Years
- -------------------------------------------------------------------------------------------------------
Communities Stabilized Less Than
Two Years (continued)
Mountain Park Ranch
Phoenix, AZ $14,230 $1,032 1994-1995 5 to 40 years
Sonoran
Phoenix, AZ 23,181 1,142 1994-1995 5 to 40 years
The Enclave
Tempe, AZ 12,053 860 1994-1995 5 to 40 years
The Heritage
Phoenix, AZ 13,568 769 1994-1995 5 to 40 years
Towne Square Expansion Phase II
Chandler, AZ 6,061 - 1994-1995 5 to 40 years
Tucson
Arboretum Expansion Phase II
Tucson, AZ 9,297 - 1994-1995 5 to 40 years
---------------------
Subtotal Communities Stabilized
Less than Two Years 91,009 4,364
Developments and Lease-Up Properties
Phoenix
Country Brook Expansion Phase III
Chandler, AZ 7,322 136 1995 5 to 40 years
The Hawthorne
Phoenix, AZ 16,782 122 1995 5 to 40 years
Ingleside
Phoenix, AZ 7,446 386 1995 5 to 40 years
The Isle at Arrowhead Ranch
Glendale, AZ 11,458 3 1996 5 to 40 years
Ladera
Phoenix, AZ 17,863 727 1994-1995 5 to 40 years
Mirador
Phoenix, AZ 23,482 921 1994-1995 5 to 40 years
Park Meadow Expansion Phase II
Gilbert, AZ 4,002 100 1995 5 to 40 years
Promontory Pointe Expansion Phase II
Phoenix, AZ 8,806 68 1995 5 to 40 years
Towne Square Expansion Phase III
Chandler, AZ 6,697 177 1995 5 to 40 years
27
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Subsequent Gross Amounts at Which
Initial Cost to Acquisition / Construction Carried at Close of Period
-------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
Developments and Lease-Up
Properties (continued)
The Retreat (1)
Phoenix, AZ $ - $ 3,477 $ 2,578 $ - $ - $ 3,477 $ 2,578 $ 6,055
Scottsdale & Mountain View (1)
Scottsdale, AZ - 3,456 508 - - 3,456 508 3,964
Vista Grove (1)
Mesa, AZ - 1,343 1,897 - - 1,343 1,897 3,240
The Gates Project (2)
Various Locations - - 551 - - - 551 551
Laguna at Arrowhead (1)
Glendale, AZ - 879 592 - - 879 592 1,471
Tucson
Bear Canyon
Tucson, AZ - 1,645 12,926 - - 1,645 12,926 14,571
Harrison Park Expansion Phase II
Tucson, AZ - 749 8,912 - - 749 8,912 9,661
The Legends
Tucson, AZ - 2,728 17,893 - - 2,728 17,893 20,621
Orange Grove Expansion Phase II
Tucson, AZ - 93 7,213 - - 93 7,213 7,306
------------------------------------------------------------------------------------------------
Subtotal Developments and
Lease-Up Properties - 27,314 143,984 - - 27,314 143,984 171,298
Acquisitions
Phoenix
Acacia Creek
Scottsdale, AZ 15,247 6,122 24,382 - 599 6,122 24,981 31,103
Rancho Murietta
Tempe, AZ 6,225 1,766 10,208 - 993 1,766 11,201 12,967
Superstition Vista
Mesa, AZ - 1,641 12,272 - 1,512 1,641 13,784 15,425
Accumulated Year Year Depreciable
Description Depreciation Developed Acquired Lives in Years
- ------------------------------------------------------------------------------------
Developments and Lease-Up
Properties (continued)
The Retreat (1)
Phoenix, AZ $ - 1997 5 to 40 years
Scottsdale & Mountain View (1)
Scottsdale, AZ - 1997 5 to 40 years
Vista Grove (1)
Mesa, AZ - 1997 5 to 40 years
The Gates Project (2)
Various Locations - Various 5 to 40 years
Laguna at Arrowhead (1)
Glendale, AZ - 1997 5 to 40 years
Tucson
Bear Canyon
Tucson, AZ 237 1995 5 to 40 years
Harrison Park Expansion Phase II
Tucson, AZ 235 1995 5 to 40 years
The Legends
Tucson, AZ 1,235 1994-1995 5 to 40 years
Orange Grove Expansion Phase II
Tucson, AZ 297 1995 5 to 40 years
------
Subtotal Developments and
Lease-Up Properties 4,644
Acquisitions
Phoenix
Acacia Creek
Scottsdale, AZ 1,486 1995 5 to 40 years
Rancho Murietta
Tempe, AZ 698 1995 5 to 40 years
Superstition Vista
Mesa, AZ 480 1995 5 to 40 years
28
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1996
(Amounts in thousands)
Costs Capitalized Gross Amounts
Subsequent to at Which Carried
Initial Cost Acquisition/Construction at Close of Period
------------------------------------------------------------------------------------
Buildings and Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisitions (continued)
California
Canyon Crest Views
Riverside, CA $-- $ 1,745 $ 12,163 $ -- $ -- $ 1,745 $ 12,163 $ 13,908
The Ashton
Corona Hills, CA 17,300 2,594 18,679 -- 2,185 2,594 20,864 23,458
Portofino
Chino Hills, CA -- 3,572 9,031 -- -- 3,572 9,031 12,603
Parkview Terrace Club
Redlands, CA 22,650 4,969 28,301 -- -- 4,969 28,301 33,270
Redlands Lawn and Tennis
Club Redlands, CA 24,050 4,822 24,045 -- -- 4,822 24,045 28,867
--------------------------------------------------------------------------------------------------
Subtotal Acquisitions 85,472 27,231 139,081 -- 5,289 27,231 144,370 171,601
Corporate Office
Scottsdale, AZ -- -- 325 -- 1,099 -- 1,424 1,424
--------------------------------------------------------------------------------------------------
Total $284,172 $108,139 $548,620 $13,776 $91,015 $121,915 $639,635 $761,550
==================================================================================================
Accumulated Year Year Depreciable
Depreciation Developed Acquired Lives in Years
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisitions (continued)
CaliforniaCanyon Crest Views
Riverside, CA $141 1996 5 to 40 years
The Ashton
Corona Hills, CA 510 1995 5 to 40 years
Portofino
Chino Hills, CA 91 1996 5 to 40 years
Parkview Terrace Club
Redlands, CA 286 1996 5 to 40 years
Redlands Lawn and Tennis
Club Redlands, CA 50 1996 5 to 40 years
--------------------------------------------------------------------------------------------------
Subtotal Acquisitions 3,742
Corporate Office
Scottsdale, AZ 312 1994 5 to 8 years
--------------------------------------------------------------------------------------------------
Total $38,331
==================================================================================================
(1) Projects are currently in the early planning stage and preliminary site
work.
(2) The Gates Project represents the costs associated with the Company's
investment in constructing security gate systems at all its apartment
communities.
29
EVANS WITHYCOMBE RESIDENTIAL, INC.
SCHEDULE III - REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
A summary of activity for real estate investments and accumulated depreciation
is as follows:
Years Ended December 31,
1996 1995 1994
--------- --------- ----------
(Amounts in thousands)
Balance at beginning of period $587,183 $399,987 $ 292,513
Acquisitions 88,648 77,895 5,849
Improvements, including construction costs 85,719 109,301 66,604
Elimination of accumulated depreciation
at date of acquisition - - (38,360) (1)
Fair value adjustment - - 73,381
--------- --------- ----------
Balance at close of period $761,550 $587,183 $ 399,987
========== ========= ==========
Accumulated depreciation
Balance at beginning of period $ 17,511 $ 3,749 $ 32,065
Depreciation 20,885 13,762 10,333
Accumulated depreciation on disposals (65) - (289)
Elimination of accumulated depreciation
at date of acquisition - - (38,360)
--------- --------- ----------
Balance at close of period $ 38,331 $ 17,511 $ 3,749
========= ========= ==========
Amount represents decrease in basis due to acquiring real estate at net
book value at the time of the Offering.
30
EVANS WITHYCOMBE RESIDENTIAL, INC.
UNAUDITED FINANCIAL STATEMENTS
AS OF JUNE 30, 1997
31
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for number of shares)
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS (Unaudited)
Real Estate:
Land................................................. $130,490 $121,915
Buildings and improvements........................... 598,421 543,839
Furniture and fixtures............................... 31,728 29,567
Construction-in-progress............................. 43,265 66,229
-------- --------
803,904 761,550
Less accumulated depreciation........................ (48,925) (38,331)
-------- --------
754,979 723,219
Cash and cash equivalents.............................. 1,051 2,568
Restricted cash........................................ 8,518 1,622
Accounts and notes receivable.......................... 2,886 3,500
Mortgage notes receivable.............................. 15,120 --
Deferred costs, net of accumulated amortization
of $1,555 and $1,265 at June 30, 1997 and
December 31, 1996, respectively....................... 4,489 3,838
Other assets........................................... 1,906 1,587
-------- --------
Total assets........................................... $788,949 $736,334
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and notes payable............................. $ 445,441 $436,172
Accounts payable and other liabilities................. 10,106 7,833
Dividends payable...................................... 8,235 -
Accrued interest....................................... 2,860 1,417
Accrued property taxes................................. 3,241 2,912
Resident security deposits............................. 2,408 1,818
Prepaid rent........................................... 870 585
-------- --------
Total liabilities...................................... 473,161 450,737
Minority interest...................................... 54,610 56,592
Stockholders' Equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, issued and outstanding - none.......... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 20,334,743 and 18,366,902 issued
and outstanding at June 30, 1997 and
December 31, 1996, respectively.................... 204 184
Additional paid-in capital............................ 292,253 253,425
Unamortized employee restricted stock compensation.... (1,104) (465)
Distributions in excess of net income................. (30,175) (24,139)
-------- --------
Total stockholders' equity............................. 261,178 229,005
-------- --------
Total liabilities and stockholders' equity............. $788,949 $736,334
======== ========
See Notes to Consolidated Financial Statements
32
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for number of shares and per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
Revenues:
Rental............................................... $ 27,713 $ 22,078 $ 54,865 $ 44,214
Third party management fees.......................... 120 664 230 951
Interest and other................................... 1,770 1,364 3,529 3,120
------------- ------------- ------------- -------------
Total revenues..................................... 29,603 24,106 58,624 48,285
Expenses:
Repairs and maintenance.............................. 2,637 2,719 5,578 5,275
Property operating................................... 4,237 2,865 8,437 5,548
Advertising.......................................... 542 599 956 1,032
Real estate taxes.................................... 2,079 1,615 4,198 3,264
Property management.................................. 633 824 1,540 1,708
General and administrative........................... 356 463 867 960
Interest............................................. 8,013 5,469 15,402 10,893
Depreciation and amortization........................ 6,459 4,870 12,637 9,640
------------- ------------- ------------- -------------
Total expenses......................................... 24,956 19,424 49,615 38,320
------------- ------------- ------------- -------------
Income before minority interest, gain on sale of
real estate assets and extraordinary item............ 4,647 4,682 9,009 9,965
Gain on sale of real estate assets..................... 5,253 -- 5,253 --
Minority interest...................................... (1,828) (1,027) (2,664) (2,239)
------------- ------------- ------------- -------------
Income before extraordinary items...................... 8,072 3,655 11,598 7,726
Extraordinary item-
loss on early extinguishment of debt
net of minority interest of $300.................... -- -- (1,200) --
------------- ------------- ------------- -------------
Net income............................................. $ 8,072 $ 3,655 $ 10,398 $ 7,726
============= ============= ============= =============
Earnings per share before extraordinary item........... $ 0.40 $ 0.22 $ 0.59 $ 0.47
============= ============= ============= =============
Earnings per share..................................... $ 0.40 $ 0.22 $ 0.52 $ 0.47
============= ============= ============= =============
Weighted average shares outstanding.................... 20,257,173 16,933,771 19,809,734 16,535,454
============= ============= ============= =============
See Notes to Consolidated Financial Statements
33
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except for number of shares and per share amounts)
(Unaudited)
Unamortized
Employee
Additional Restricted Distributions
Number of Common Paid-in Stock in Excess of
Shares Stock Capital Compensation Net Income Total
---------- ------ --------- ------------ ------------- ---------
Stockholders' equity, December 31, 1996............ 18,366,902 $184 $253,425 $ (465) $(24,139) $229,005
Net income....................................... - - - - 10,398 10,398
Dividends on common stock
($0.81 per share).............................. - - - - (16,434) (16,434)
Proceeds of third offering, net of underwriting
discount and offering costs of $406............ 1,800,000 18 35,397 - - 35,415
Conversion of units to common stock.............. 126,387 2 2,480 - - 2,482
Exercise of stock options........................ 7,500 - 207 - - 207
Issuance of restricted stock..................... 36,130 - 744 (744) - -
Forfeiture of restricted stock................... (2,176) - - - - -
Amortization of deferred compensation............ - - - 105 - 105
---------- ---- -------- ------- -------- --------
Stockholders' equity, June 30 1997................. 20,334,743 $204 $292,253 $(1,104) $(30,175) $261,178
========== ==== ======== ======= ======== ========
See Notes to Consolidated Financial Statements
34
EVANS WITHYCOMBE RESIDENTIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months ended June 30,
-------------------------
1997 1996
---- ----
Cash flows from operating activities
Net income.............................................................. $ 10,398 $ 7,726
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................................... 13,183 9,960
Amortization of deferred comp......................................... 81 350
Minority interest..................................................... 2,364 2,239
Net gain on sale of real estate assets................................ (5,253) -
Write-off of development and acquisition costs........................ 402 39
Write-off of deferred loan costs...................................... 294 -
Decrease (increase) in assets:
Restricted cash....................................................... (6,896) (437)
Accounts and notes receivable......................................... 614 (441)
Other assets.......................................................... (319) 206
(Decrease) increase in liabilities:
Accounts payable and other liabilities................................ 2,273 (883)
Accrued interest...................................................... 1,443 (64)
Accrued property taxes................................................ 329 901
Resident security deposits............................................ 590 2
Prepaid rent.......................................................... 285 (12)
--------- ---------
Net cash provided by operating activities............................... 19,788 19,586
Cash flows from investing activities
Purchase of real estate assets.......................................... (42,354) (60,643)
Sale of real estate assets.............................................. 6,012 -
--------- ---------
Net cash used in investing activities................................... (36,342) (60,643)
Cash flows from financing activities
Proceeds from Third Public Offering, net of expenses.................... 35,415 -
Proceeds from Second Public Offering, net of expenses................... - 41,107
Proceeds from exercise of options....................................... 207 160
Proceeds from mortgage notes and revolving
credit facility........................................................ 184,306 176,221
Principal payments on mortgage notes.................................... (193,355) (161,887)
Payment for loan costs.................................................. (1,473) (315)
Dividends paid.......................................................... (8,199) (12,424)
Minority interest distributions......................................... (1,864) (3,651)
--------- ---------
Net cash provided by financing activities............................... 15,037 39,211
--------- ---------
Net decrease in cash and cash equivalents............................... (1,517) (1,846)
Cash and cash equivalents, beginning of period.......................... 2,568 3,634
--------- ---------
Cash and cash equivalents, end of period................................ $ 1,051 $ 1,788
========= =========
Supplemental information
Cash paid during the period for interest................................ $ 13,457 $ 10,645
========= =========
Supplemental disclosure of non-cash activity
Assumption of debt related to the acquisition of
apartment communities.................................................. $ 18,318 $ -
========= =========
Origination of carryback mortgage notes arising from sale of
apartment communities................................................ $ 15,120 $ -
========= =========
Issuance of stock under restricted stock incentive plan................. $ 24 $ -
========= =========
Conversion of units to common stock..................................... $ 2,482 $ 888
========= =========
See Notes to Consolidated Financial Statements
35
EVANS WITHYCOMBE RESIDENTIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Amounts in thousands, except for number of shares or units and per share
amounts)
(Unaudited)
1. Organization and Formation of the Company
Evans Withycombe Residential, Inc. (the "Company") is one of the largest
developers and managers of upscale apartment communities in Arizona and is
expanding its operations into selected sub-markets in Southern California. The
Company owns and manages 52 stabilized multifamily apartment communities
containing 14,723 units, of which 45 stabilized multifamily apartment
communities are located in Phoenix and Tucson, Arizona, containing a total of
12,325 units and seven stabilized multifamily apartment communities are located
in the Southern California market containing a total of 2,398 units. The
Company is also in the process of developing or expanding three multifamily
apartment communities comprising 720 units in its Phoenix market. The Company
is fully integrated with expertise in development, acquisitions, construction
and management of apartment communities. The Company had approximately 600
employees at June 30, 1997.
The Company was incorporated on May 24, 1994 to develop, acquire, own and manage
upscale multifamily apartment communities. On August 17, 1994, the Company
completed an Initial Public Offering and engaged in various formation
transactions designed to transfer ownership of the communities and other assets
of the predecessor company to Evans Withycombe Residential, L. P. (the
"Operating Partnership") or Evans Withycombe Finance Partnership, L.P. (the
"Financing Partnership"). The Company is the sole general partner of and owned
a 81.46 percent and 77.08 percent interest in the Operating Partnership at June
30, 1997 and 1996, respectively. The Company also holds a noncontrolling
interest in Evans Withycombe Management, Inc. (the "Management Company").
In the second quarter of 1996, the Company completed the Second Public Offering.
The net proceeds of $40,891 from the sale of 2,088,889 shares of common stock
from the Second Public Offering were used to repay a portion of the $150 million
unsecured Revolving Credit Facility (Revolving Credit Facility).
In the first quarter of 1997, the Company completed the Third Public Offering.
The net proceeds of $35,415 from the sale of 1,800,000 shares of common stock
from the Third Public Offering were used to repay a portion of the Revolving
Credit Facility.
The Company elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes. A corporate REIT is a legal entity which holds
real estate interests and, through payments of dividends to stockholders, is
permitted to reduce or avoid the payment of federal income taxes at the
corporate level.
2. Basis of Presentation
The accompanying consolidated financial statements of Evans Withycombe
Residential, Inc. include the consolidated accounts of the Company, the
Operating Partnership, the Financing Partnership and the Management Company.
The accompanying unaudited consolidated financial statements have been presented
by the Company's management in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission (SEC). Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All significant intercompany
accounts and transactions have been eliminated in consolidation. In the opinion
of management, all adjustments (consisting of normally recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for the six month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
36
These consolidated financial statements should be read in conjunction with the
Company's December 31, 1996 audited consolidated financial statements and
accompanying notes in the Evans Withycombe Residential, Inc. Annual Report on
Form 10-K/A.
3. Summary of Significant Accounting Policies
Real Estate Assets and Depreciation
The Company records its real estate assets in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed of". SFAS No. 121
requires that long-lived assets such as real estate assets, be reviewed whenever
events or changes in circumstances indicate that the book value of the asset may
not be recoverable. If the sum of the estimated future net cash flows
(undiscounted and without interest charges) from an asset to be held and used is
less than the book value of the asset, an impairment loss must be recognized in
the amount of the difference between book value and fair value as opposed to the
difference between book value and net realizable value under the previous
accounting standard. For long-term assets like apartment communities, the
determination of whether there is an impairment loss is dependent primarily on
the Company's estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of many
years. At June 30, 1997 the Company does not hold any assets that meet the
impairment criteria of SFAS No. 121.
Costs related directly to the acquisition and improvement of real estate are
capitalized. Interest costs incurred during construction of a new property are
capitalized until completion of construction on a building-by-building basis.
Interest capitalized was $493 and $970 and $744 and $1,464, for the three and
the six months ended June 30, 1997 and 1996, respectively.
Ordinary repairs, maintenance and costs incurred in connection with resident
turnover such as unit cleaning, painting, and carpet cleaning are expensed as
incurred; major replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation is computed on a straight-line
basis over the expected useful lives of depreciable property, which ranges from
10 to 40 years for buildings and improvements and five to eight years for
furnishings and equipment.
The Company reports developments and lease-up properties as construction-in-
progress until construction on the apartment community has been completed and
the apartment community has reached stabilized occupancy.
The Company also reports land relating to construction-in-progress as land on
its balance sheet. Land associated with construction-in-progress was $10,802
and $12,060 at June 30, 1997 and December 31, 1996, respectively.
Revenue Recognition
Rental income attributable to residential leases is recorded when due from
residents. Leases are for periods of up to one year, with rental payments due
monthly.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less, primarily consisting of demand
deposits in banks.
Restricted Cash
Restricted cash includes restricted deposits held by third party intermediaries
for the purpose of completing an IRS Section 1031 tax free exchange, sinking
fund accounts related to tax exempt bonds, property taxes and escrow accounts.
37
Deferred Costs
Costs incurred in obtaining long-term financing are deferred. These costs are
amortized on the effective interest method over the terms of the related debt
agreements.
Income Taxes
The Company has made an election to be taxed as a REIT and accordingly, no
federal or state income taxes have been provided in the accompanying
consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Earnings Per Share
Earnings per share has been computed by dividing net income for the three and
the six months ended June 30, 1997 and 1996, respectively, by the weighted
average number of shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods presented. Under
the new requirements for calculating basic earnings per share, the dilutive
effect of stock options will be excluded. The impact of SFAS No. 128 is not
expected to be material.
4. Mortgage Notes Receivable
The Company's mortgage notes receivable consist of the following:
$7.9 million mortgage note receivable at a fixed interest
rate of 9.5 percent, secured by a first mortgage lien on
Deer Creek Village Apartments, matures November 1, 1997.
(Paid off on July 23, 1997.) $ 7,932
$7.2 million mortgage note receivable at a fixed interest
rate of 8.0 percent secured by a first mortgage lien on
The Pines Apartments, matures November 1, 1997. 7,188
-------
$15,120
=======
38
5. Mortgage and Notes Payable
The Company's mortgage notes and notes payable consists of the
following:
June 30, December 31,
1997 1996
---- ----
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly $ - $ 5,380
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly - 4,340
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.0 percent, monthly - 8,951
principal and interest payments. The unpaid principal balance was repaid on
January 9, 1997.
Mortgage note payable at a fixed interest rate of 8.28 percent, monthly - 6,225
principal and interest payments. The unpaid principal balance was repaid on
January 31, 1997.
Mortgage note payable at a fixed interest rate of 9.95 percent, monthly 12,000 12,065
principal and interest payments through September 15, 1997, remaining
balance due September 15, 1997. The unpaid principal balance was repaid on
July 15, 1997.
Mortgage note payable at a fixed interest rate of 9.3 percent, monthly 3,166 3,182
principal and interest payments through September 15, 1997, remaining
balance due September 15, 1997. The unpaid principal balance was repaid on
July 15, 1997.
Mortgage note payable at fixed interest rates ranging from 6.25 percent to 18,252 -
9.0 percent, monthly principal and interest payments through August 17,
2004, remaining balance due August 17, 2004. Interest rate increases 0.25
percent annually each September. Secured by a first mortgage lien on one
apartment community. The mortgage note can be repaid at any time at the
Company's option without prepayment penalty.
$50 million securitized debt at a fixed interest rate of 7.17 percent, 49,250 49,509
monthly principal and interest payments through January 1, 2006, remaining
balance due January 1, 2006. Secured by first mortgage liens on 5
communities.
Securitized debt at a fixed stated interest rate of 7.98 percent, with an 130,563 130,520
effective interest rate of 8.05 percent, monthly interest payments only
through August 1, 2001. Secured by first mortgage liens on 21 communities.
The face amount of $131 million is due August 1, 2001. The balance is net
of unamortized discount of $437 and $480 at June 30, 1997 and December 31,
1996, respectively.
$17.3 million tax exempt bonds with a floating interest rate based on the tax 17,300 17,300
exempt note rate set by the remarketing agent, or at the option of the
Company can convert to a fixed rate as determined by the remarketing agent.
Secured by a $17.5 million direct pay letter of credit, interest payments
only, matures December 1, 2007 (Effective interest rate of 5.20 percent at
June 30, 1997).
$22.6 million tax exempt bonds with a floating interest rate based on the tax 22,650 22,650
exempt note rate set by the remarketing agent, interest payments only.
Secured by a $22.8 million direct pay letter of credit, matures February 1,
2016. (Effective interest rate of 5.56 percent at June 30, 1997).
39
June 30, December 31,
1997 1996
------------ --------------
$24.05 million tax exempt bonds with a floating interest rate based on the $ 24,050 $ 24,050
tax exempt note rate set by the remarketing agent, interest payments only.
Secured by a $24.4 million direct pay letter of credit, matures August 1,
2005. (Effective interest rate of 5.34 percent at June 30, 1997).
$150 million unsecured Revolving Credit Facility with floating interest rate 44,000 152,000
based on LIBOR plus 1.15 percent or at the option of the Company at prime
rate, interest payments only. Matures September 24, 1999 (Effective
interest rate of 7.23 percent at June 30, 1997).
$75 million senior unsecured notes with a fixed coupon rate of 7.50 percent. 74,595 -
Semiannual interest only payments due April 15 and October 15 commencing
October 15, 1997. Face amount of $75 million is due April 15, 2004. The
balance is net of an unamortized discount of $405 at June 30, 1997. The
effective interest rate inclusive of the benefit of a treasury lock
transaction is 7.18 percent.
$50 million senior unsecured notes with a fixed coupon rate of 7.625 percent. 49,615 -
Semiannual interest only payments due April 15 and October 15 commencing
October 15, 1997. Face amount of $50 million is due April 15, 2007. The
balance is net of an unamortized discount of $385 at June 30, 1997. The
effective interest rate inclusive of the benefit of a treasury lock
transaction is 7.36 percent. --------- ---------
$ 445,441 $ 436,172
========= =========
Scheduled principal payments on debt, assuming that the Company exercises its
options to extend the maturity date on the Revolving Credit Facility, are as
follows:
-------------------------------------------------------------------------------
Mortgage Mortgage Senior Revolving
Notes Loan Unsecured Tax-Exempt Credit
Payable Certificate Notes Bonds Facility Total
-------------------------------------------------------------------------------
1997 $15,487 $ - $ - $ - $ - $ 15,487
1998 784 - - - - 784
1999 831 - - - 44,000 44,831
2000 882 - - - - 882
2001 500 130,563 - - - 131,063
Thereafter 64,184 - 124,210 64,000 - 252,394
-------------------------------------------------------------------------------
Total $82,668 $130,563 $124,210 $64,000 $44,000 $445,441
===============================================================================
On June 13, 1997, the Company amended its existing $225 million Revolving Credit
Facility with a bank group to decrease the commitment amount from $225 million
to $150 million and decrease the interest rate from LIBOR plus 1.50 percent to
LIBOR plus 1.15 percent.
The $150 million Revolving Credit Facility provides funding for working capital,
construction activities and acquisitions.
The Company has three direct pay letters of credit of $17,500, $22,800 and
$24,400 which serve as a credit enhancement for the tax exempt bonds. The
letters of credit are secured by a first mortgage on four apartment communities.
40
In January 1997, the Company extinguished the debt on four mortgages with unpaid
principal balances of approximately $25,000 with proceeds from the Revolving
Credit Facility. As a result, the Company incurred a loss from the early
extinguishment of debt of approximately $1,200, net of minority interest of
$300.
6. Distributions
On July 15, 1997, the Company paid a distribution of $0.405 per share ($8,235)
to shareholders and $0.405 per unit ($1,864) to unitholders of record as of June
30, 1997.
7. Management Fees
The Company performs management services for certain unaffiliated communities.
Management fees received from managed communities were $119 and $664 for the
three months ended June 30, 1997 and 1996 and $230 and $951 for the six months
ended June 30, 1997 and 1996, respectively. The Second Quarter 1996 balance
includes a one time non-recurring $500 termination fee received from the sale of
management contracts.
8. Stock Incentive Plan
Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Proforma information regarding net income and earnings per share is required by
SFAS No. 123 and is provided by the Company in its annual report.
Initially 1,830,000 shares of the Company's common stock were reserved for
issuance under the plan. Information with respect to stock options granted
during the six months ended June 30, 1997 is as follows:
Weighted
Average
Exercise Price
Shares Per Share
------ ---------
Options outstanding at December 31, 1996 908,850 $20.63
Exercised (7,500) 20.00
Granted 241,500 20.49
Forfeited (32,225) 20.84
--------- ------
Options outstanding at June 30, 1997 1,110,625 $20.66
========= ======
Options exercisable:
December 31, 1996 357,700 $19.98
June 30, 1997 521,125 $20.46
Options to purchase 719,375 and 901,650 shares of common stock were available
for grant under the plan at June 30, 1997 and December 31, 1996, respectively.
Executive Stock Incentive Plan
Prior to the Initial Public Offering, the Company's predecessor Evans
Withycombe, Inc. had in place an Executive Incentive Deferred Compensation Plan
(the "Executive Plan"). Pursuant to the Executive Plan, certain executives of
Evans Withycombe, Inc. (the "Participants") were granted an aggregate of 98,500
shares of restricted stock from the Company one year following the Initial
Public Offering if they remained employees of the Company during such
41
period. One-third of the shares vest on each of the second, third and fourth
anniversaries of the Initial Public Offering based on an offering price per
share of $20. The expense is being amortized ratably over the periods in which
the shares vest and an expense of $30 and $180 and $60 and $350 for the three
and six months ended June 30, 1997 and 1996, respectively, is included in
general and administrative expense. Information with respect to the executive
restricted stock incentive plan is as follows:
Shares
======
Restricted stock, net of forfeitures, at December 31, 1996, 74,346
Forfeited (1,174)
------
Restricted stock at June 30, 1997 73,172
======
Number of shares vested at June 30, 1997 27,600
Restricted Stock Program
The Company has awarded 45,220 shares, net of forfeitures, of restricted stock
to certain employees of the Company under its 1994 Stock Incentive Plan. The
restricted stock vests ratably over periods ranging from one to seven years from
the date of the award and are based on the price of the stock at the award date
which ranges from $19.13 to $22.25. The related expense will be amortized
ratably over the periods in which the shares vest and an expense of $27 and $11
and $45 and $20, for the three and six months ended June 30, 1997 and 1996,
respectively, is included in general and administrative expense.
9. Minority Interest
Minority interest at June 30, 1997 is comprised of the following:
Number
of Units Dollars
--------- -------
Balance at December 31, 1996 4,677,810 $56,592
Conversion of units to common stock (126,387) (2,482)
Allocation of net income - 2,664
Allocation of extraordinary item -
loss from early extinguishment of debt - (300)
Distributions paid - (1,864)
--------- -------
Balance at June 30, 1997 4,551,423 $54,610
========= =======
The Units can be redeemed for cash or shares of common stock of the Company on a
one-for-one basis at the Company's option. Minority interest of unitholders in
the Operating Partnership is calculated based on the weighted average of shares
of common stock and Units outstanding during the period.
42
PROPERTIES
Disposition Activity
During the second quarter of 1997, the Company sold two properties, Deer Creek
Village and the The Pines, containing 502 apartment units. The aggregate sales
price was approximately $22.4 million resulting in a gain from the sale of
approximately $5.2 million. The Company received cash of approximately $7.3
million and two carryback mortgage notes of approximately $15.1 million. The
mortgage notes are secured by a first deed of trust on the two properties and
mature in November 1997. The buyer may repay the two mortgage notes at any time
without prepayment penalties.
Apartment Communities
The following sets forth certain information regarding the current apartment
communities at June 30, 1997. All of the communities are owned 100 percent in
fee by the Company.
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
- --------------------- ---- ---------- ---------- ---------
Same Store
Arizona
- -------
Phoenix:
Acacia Creek Scottsdale 508 Acquired 1995
Bayside at the Islands Gilbert 272 Developed 1988
Country Brook Chandler 276 Acq/Dev 1991/1993
Gateway Villas Phoenix 180 Developed 1995
Greenwood Village Tempe 270 Acquired 1993
Heritage Point Mesa 148 Acquired 1994
La Mariposa Mesa 222 Acquired 1990
La Valencia Mesa 361 Acquired 1990
Little Cottonwoods Tempe 379 Acq/Acq/Dev 1989/89/90
Los Arboles Chandler 232 Developed 1985
Miramonte Scottsdale 151 Developed 1983
Morningside Scottsdale 160 Acquired 1992
Mountain Park Ranch Phoenix 240 Developed 1995
Park Meadow Gilbert 156 Acquired 1992
Preserve at Squaw Peak Phoenix 108 Acquired 1991
Promontory Pointe Phoenix 304 Acquired 1988
Rancho Murietta Tempe 292 Acquired 1995
Scottsdale Courtyards Scottsdale 274 Developed 1993
Scottsdale Meadows Scottsdale 168 Developed 1984
Shadow Brook Phoenix 224 Acquired 1993
Shores at Andersen Springs Chandler 299 Developed 1989/1993
Silver Creek Phoenix 174 Acquired 1991
Sonoran Phoenix 429 Developed 1995
Sun Creek Glendale 175 Acquired 1993
Superstition Vista Mesa 316 Acquired 1995
The Enclave Tempe 204 Developed 1995
The Heritage Phoenix 204 Developed 1995
The Meadows Mesa 306 Acquired 1987
The Palms Phoenix 132 Developed 1990
Towne Square Chandler 468 Acq/Dev 1992/1995
Villa Encanto Phoenix 382 Developed 1983
Village at Lakewood Phoenix 240 Developed 1988
------
8,254
Tucson:
Harrison Park Tucson 172 Acquired 1991
La Reserve Oro Valley 240 Developed 1988
Orange Grove Village Tucson 256 Acquired 1991
Suntree Village Oro Valley 424 Acquired 1992
The Arboretum Tucson 496 Acq/Dev 1992/1995
Village at Tanque Verde Tucson 217 Acq/Dev 1990/1994
------
1,805
California:
The Ashton Corona Hills 492 Acquired 1995
------
492
------
Total Same Store 10,551
======
Arizona
- -------
43
Year
Developed
Number of Developed/ or
Apartment Communities City Apartments Acquired Acquired
- -------------------------------- -------- ---------- --------- ---------
Phoenix:
Country Brook Expansion Phase III Chandler 120 Developed 1995/96
Ingleside Phoenix 120 Developed 1995/96
Ladera Phoenix 248 Developed 1995/96
Mirador Phoenix 316 Developed 1995/96
Park Meadow Expansion Phase II Gilbert 68 Developed 1995/96
Towne Square Expansion Phase III Chandler 116 Developed 1995/96
------
988
Tucson:
The Legends Tucson 312 Developed 1995/96
Orange Grove Expansion Phase II Tucson 144 Developed 1995/96
------
456
------
Total Communities Stabilized 1,444
Less than Two Years ======
Developments and Lease-Up Properties
Arizona
- -------
Phoenix:
The Hawthorne (1) Phoenix 276 Developed 1995/96
The Retreat Phase I Glendale 240 Developed 1996/97
Vista Grove Mesa 224 Developed 1996/97
The Isle at Arrowhead Ranch (2) Glendale 256 Developed 1996
Promontory Pointe Expansion Phase II (1) Phoenix 120 Developed 1995/96
------
1,116
Tucson:
Bear Canyon (3) Tucson 238 Developed 1995/96
Harrison Park Expansion Phase II (3) Tucson 188 Developed 1995/96
------
426
------
Total Developments and
Lease-Up Properties 1,542
======
Acquisitions
California
- ----------
Canyon Crest Views Riverside 178 Acquired 1996
Canyon Ridge San Diego 162 Acquired 1997
Marquessa Corona Hills 336 Acquired 1997
Portofino Chino Hills 176 Acquired 1996
Parkview Terrace Club Redlands 558 Acquired 1996
Redlands Lawn & Tennis Club Redlands 496 Acquired 1996
------
1,906
------
Total 15,443
======
Dispositions
Arizona
- -------
Deer Creek Village Phoenix 308 Acquired 1991
The Pines Mesa 194 Acquired 1992
------
502
======
(1) Community reached stabilized occupancy in the first quarter 1997
(2) Community is in lease-up
(3) Community reached stabilized occupancy in the second quarter 1997
44
C. Exhibits
4.1 Second Amended and Restated Revolving Credit Agreement dated as
of September 9, 1997 among ERP Operating Limited Partnership,
the Banks listed therein, and Morgan Guaranty Trust Company of
New York, as Lead Agent
23 Consent of Ernst & Young LLP
45
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: September 10, 1997 By: /s/ Bruce C. Strohm
-------------------------------------
Bruce C. Strohm, Secretary, Executive
Vice President and General Counsel
46