<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 8, 1998)
$175,000,000
[LOGO]
COLONIAL REALTY LIMITED PARTNERSHIP
7% SENIOR NOTES DUE JULY 14, 2007
------------------
The 7% Senior Notes due July 14, 2007 (the "Notes") offered hereby (the
"Offering") are being issued by Colonial Realty Limited Partnership, a Delaware
limited partnership (the "Company"), in an aggregate principal amount of $175.0
million.
Interest on the Notes will be payable semi-annually in arrears on January 14
and July 14, commencing January 14, 1999. The Notes are redeemable at any time
at the option of the Company, in whole or in part, at a redemption price equal
to the sum of: (i) the principal amount of the Notes being redeemed plus accrued
interest to the redemption date; and (ii) the Make-Whole Amount (as defined
under "Description of the Notes--Optional Redemption"), if any. The Notes will
mature on July 14, 2007. Upon completion of the Offering and the related
transactions described herein, the Company will have approximately $224.2
million of secured indebtedness which will rank senior to the Notes and
approximately $396.6 million of unsecured indebtedness which will rank PARI
PASSU with the Notes.
The Notes will be represented by a single fully-registered note in
book-entry form (the "Global Note") registered in the name of a nominee of The
Depository Trust Company ("DTC"). Beneficial interests in the Global Note will
be shown on, and transfers thereof will be effected only through, records
maintained by DTC (with respect to beneficial interests of participants) or by
participants or persons that hold interests through participants (with respect
to beneficial interests of beneficial owners). Owners of beneficial interests in
the Global Note will be entitled to physical delivery of Notes in certificated
form equal in principal amount to their respective beneficial interests only
under the limited circumstances described under "Description of the
Notes--Book-Entry System." Settlement for the Notes will be made in immediately
available funds. The Notes will trade in DTC's Same-Day Funds Settlement System
until maturity or earlier redemption, as the case may be, or until the Notes are
issued in certificated form, and secondary market trading activity in the Notes
will therefore settle in immediately available funds. All payments of principal
and interest in respect of the Notes will be made by the Company in immediately
available funds. See "Description of the Notes--Same-Day Settlement and
Payment."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR
CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE NOTES.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (3)
<S> <C> <C> <C>
Per Note................................................. 99.415% .65% 98.765%
Total.................................................... $173,976,250 $1,137,500 $172,838,750
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $362,500.
--------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, subject to approval
of certain legal matters by counsel for the Underwriters and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in book-entry form through the facilities of
DTC, against payment therefor in immediately available funds, on or about July
14, 1998.
--------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
--------------------------
The date of this Prospectus Supplement is July 9, 1998.
<PAGE>
[Map]
[A graphic consisting of a map of the continental United States appears
here. Shaded regions of the map indicate the states in which the Company owns
Properties. At right is a blow-up of the map's shaded States, with pinpoints
indicating and names identifying the cities in which the Company's headquarters
and regional offices are located and in which the Company owns Properties. A key
to the map and the blow-up appears in the bottom left-hand corner of the
graphic.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET AND MAY IMPOSE PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR
INCORPORATED HEREIN OR THEREIN BY REFERENCE. AS USED HEREIN, THE TERM "COMPANY"
REFERS TO COLONIAL REALTY LIMITED PARTNERSHIP, WHICH IS THE "OPERATING
PARTNERSHIP" OF COLONIAL PROPERTIES TRUST ("COLONIAL"), AN ALABAMA REAL ESTATE
INVESTMENT TRUST ("REIT"). WHERE THE CONTEXT REQUIRES, THE TERM "COMPANY" ALSO
INCLUDES ONE OR MORE OF THE COMPANY'S SUBSIDIARIES, INCLUDING COLONIAL
PROPERTIES SERVICES LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP (THE
"MANAGEMENT PARTNERSHIP"), AND THE COMPANY'S PREDECESSORS. THE GENERAL PARTNER
OF THE COMPANY IS COLONIAL PROPERTIES HOLDING COMPANY, INC., AN ALABAMA
CORPORATION ("CPHC"), A WHOLLY OWNED SUBSIDIARY OF COLONIAL AND THE OWNER, AS OF
JUNE 30, 1998, OF APPROXIMATELY 72% OF THE OUTSTANDING PARTNERSHIP INTERESTS IN
THE COMPANY ("UNITS").
THE COMPANY
The Company is one of the largest owners, developers and operators of
multifamily, retail and office properties in the Sunbelt region of the United
States. The Company has been engaged in the multifamily, retail and office
property business for over 27 years. The Company is a fully-integrated real
estate company whose activities include the ownership and operation of a
diversified portfolio of 98 properties located in Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Tennessee, Texas and Virginia,
development of new properties and acquisitions of existing properties. The
Company's primary markets in the Sunbelt region are generally characterized by
high population and employment growth rates.
The Company owns 45 garden-style multifamily apartment communities
containing a total of 14,573 apartment units (the "Multifamily Properties"), 38
retail properties (including 13 regional malls, two "power centers" and 23
neighborhood shopping centers) containing a total of approximately 11.7 million
square feet of retail space (the "Retail Properties"), 15 office properties
containing a total of approximately 2.4 million square feet of office space (the
"Office Properties") and parcels of land adjacent to or near certain of these
properties (the "Land"). (The Multifamily Properties, the Retail Properties, the
Office Properties and the Land are referred to collectively as the
"Properties.")
The trustees and executive officers of Colonial, together with members of
the Lowder family, own an aggregate of 9,264,675 Units and common shares of
beneficial interest of Colonial ("Common Shares"), representing approximately
25.7% of the total number of Units and Common Shares outstanding.
The following table sets forth certain information with respect to the
Properties:
<TABLE>
<CAPTION>
TOTAL FIRST
QUARTER 1998 PERCENT OF
PROPERTY REVENUE TOTAL FIRST QUARTER PERCENTAGE
NUMBER OF UNITS/GLA/ (IN THOUSANDS) 1998 PROPERTY OCCUPANCY AT
TYPE OF PROPERTY PROPERTIES (1) NRA (1)(2) (3) REVENUE (3) MARCH 31, 1998 (3)
- -------------------------- ------------------- ------------ ----------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Multifamily............... 45 14,573 $ 24,148 41.9% 95.1%(4)
Retail.................... 38 11,679,000 26,033 45.1% 93.3%
Office.................... 15 2,361,000 7,510(5) 13.0% 97.0%
--
-------- -----
Total................. 98 $ 57,691 100.0%
--
--
-------- -----
-------- -----
</TABLE>
- ------------------------
(1) Includes two Multifamily Properties, one Retail Property, an additional
phase of an existing Retail Property and an additional phase of an existing
Office Property which were acquired after March 31, 1998.
(2) Units (in this table only) refers to multifamily apartment units, GLA refers
to gross leaseable area of retail space and NRA refers to net rentable area
of office space.
S-3
<PAGE>
(3) Excludes two Multifamily Properties, one Retail Property, an additional
phase of an existing Retail Property and an additional phase of an existing
Office Property which were acquired after March 31, 1998.
(4) Excludes 1,520 units of four newly developed or expanded Multifamily
Properties that had not achieved stabilized occupancy as of March 31, 1998.
(5) Includes the Company's proportionate share of revenues from those Office
Properties accounted for under the equity method.
The following table reflects the amount of the Company's adjusted net
operating income for the first quarter of 1998, as a percentage of total
adjusted net operating income of the Properties for the quarter, attributable to
each state in which a Property is located. Net operating income has been
adjusted to include first quarter net operating income of Properties acquired by
the Company after March 31, 1998.
<TABLE>
<CAPTION>
ADJUSTED PERCENT OF TOTAL ADJUSTED
NET OPERATING 1ST QUARTER 1998
STATE INCOME NET OPERATING INCOME
- ------------------------------------------------------ ------------- -------------------------
<S> <C> <C>
Alabama............................................... $16,599,000 38%
Florida............................................... 11,896,000 28%
Georgia............................................... 9,878,000 23%
North Carolina........................................ 1,416,000 3%
South Carolina........................................ 1,784,000 4%
Other (4 States)...................................... 1,815,000 4%
------------- -----
Total............................................. $43,388,000 100%
------------- -----
------------- -----
</TABLE>
BUSINESS STRATEGY
The Company (together with Colonial) seeks to diversify its property
portfolio by owning properties in the multifamily, retail and office property
segments. The Company's current objective is to adjust its property portfolio,
primarily through acquisitions, such that by 2002 the Company will derive
approximately 40% of its property operating income from multifamily properties,
40% from retail properties and 20% from office properties. The Company
anticipates that the portfolio will vary from year-to-year within these
guidelines as the Company takes advantage of opportunities within the three
property segments. There can be no assurance that the Company will continue to
pursue this strategy or that the Company will be able to achieve its objective.
Regardless of whether this portfolio allocation is achieved, however, the
Company believes that its strategy of maintaining a diversified portfolio of
property types provides the Company with more in-depth knowledge of local real
estate markets, creates cross-marketing opportunities between divisions,
minimizes the potential negative impact of downturns in the market for a
particular property type and provides the Company with a broad range of
investment alternatives in seeking acquisition opportunities. Product
diversification also permits the Company to take advantage of opportunities to
acquire, at favorable prices, properties in product segments that may be
undervalued, and to finance such acquisitions by exchanging or otherwise
leveraging the value of properties in higher-valued product segments.
The Company also seeks to maintain its geographic focus within the Sunbelt
region of the United States. During 1997, the Company expanded into four new
states within the Sunbelt region by acquiring Properties in Mississippi, North
Carolina, Tennessee and Virginia. In 1998, the Company continued this trend by
acquiring its first Property in Texas. The Company believes that its regional
focus permits it to develop and maintain an in-depth understanding of the
Company's primary markets and better enables the Company to identify and respond
to acquisition opportunities within those markets. In addition, the Company's
strong market presence in the region provides brand recognition that enhances
the Company's ability to attract new tenants to its Properties.
S-4
<PAGE>
The Properties are located primarily in growth-oriented markets within the
Sunbelt region, with emphasis on mid-sized markets, which provide better
opportunities to develop or take advantage of brand recognition and generally
involve less competition for tenants and acquisition and development
opportunities than larger, more developed markets. The Company believes that its
access to the public capital markets provides it with a lower cost of capital
than many property owners and developers in the markets in which the Properties
are located and therefore gives the Company an additional competitive advantage
in these markets. The Company believes that strategic acquisitions of properties
in growth-oriented markets within the Sunbelt region will permit the Company to
continue its geographic focus while providing the Company with added revenue
growth potential.
FINANCING STRATEGY
The Company (together with Colonial) seeks to maintain a well-balanced,
conservative, and flexible capital structure by: (i) targeting a ratio of debt
to total market capitalization in the range of 30% to 45%; (ii) extending and
sequencing the maturity dates of its debt; (iii) borrowing primarily at fixed
rates; (iv) generally pursuing current and future long-term debt financings and
refinancings on an unsecured basis; (v) maintaining conservative interest and
fixed charge coverage ratios; and (vi) maintaining a conservative dividend
payout ratio. As of March 31, 1998, Colonial's ratio of debt to total market
capitalization was 37.3%, the weighted average maturity of the Company's long
term debt was 8.1 years, the Company's ratio of fixed rate debt to total long
term debt was 90.8%, the Company's ratio of unsecured debt to total long term
debt was 61.3%, the Company's ratio of EBITDA to interest expense was 3.02 and
the Company's ratio of EBITDA to fixed charges was 2.37. For the year ended
December 31, 1997, Colonial's dividend as a percentage of funds from operations
was 77%.
The Company believes that these strategies have enabled and should continue
to enable it and Colonial to access the debt and equity capital markets to fund
debt refinancings and the acquisition and development of additional properties.
The Company and Colonial have demonstrated their ability to access the equity
and debt markets to finance the activities of the Company through underwritten
public offerings of Common Shares of Colonial (in May 1995, January 1996,
January and July of 1997, and April 1998), participation in four unit investment
trusts (in December 1997 and February and March of 1998), an underwritten public
offering of Preferred Shares of Colonial (in November 1997) and public offerings
of unsecured notes (in July and December of 1996, and January, July, August and
September of 1997). These transactions generated approximately $411.0 million of
net common equity proceeds, $120.5 million of net preferred equity proceeds and
$350.6 million of net debt proceeds, representing aggregate net proceeds of
$882.1 million.
S-5
<PAGE>
THE OFFERING
All capitalized terms not defined herein have the meanings specified in
"Description of the Notes." For a more complete description of the terms of the
Notes specified in the following summary, see "Description of the Notes."
<TABLE>
<S> <C>
Securities Offered........................... $175,000,000 aggregate principal amount of 7%
Senior Notes due July 14, 2007.
Maturity..................................... The Notes will mature on July 14, 2007.
Interest Payment Dates....................... Interest on the Notes will be payable
semi-annually in arrears on January 14, and
July 14, commencing January 14, 1999, and at
maturity.
Ranking...................................... The Notes will rank PARI PASSU with all other
unsecured and unsubordinated indebtedness of
the Company, except that the Notes will be
effectively subordinated to the prior claims
of each secured mortgage lender to any
specific property which secures such lender's
mortgage. Following the completion of the
Offering, the Company will have approximately
$224.2 million of secured indebtedness
collateralized by 26 Properties and will have
outstanding approximately $396.6 million of
unsecured indebtedness ranking PARI PASSU
with the Notes.
Use of Proceeds.............................. To repay outstanding indebtedness under the
Company's unsecured line of credit (the "Line
of Credit") and other short-term
indebtedness.
Limitations on Incurrence of Debt............ The Notes contain various covenants,
including the following:
(1) The Company will not, and will not permit
any Subsidiary to, incur any Debt, other than
intercompany and similar Debt that is
subordinate in right of payment to the Notes,
if, immediately after giving effect thereto,
the aggregate principal amount of all
outstanding Debt of the Company and its
Subsidiaries on a consolidated basis is
greater than 60% of the sum of: (i) the
Company's Adjusted Total Assets as of the end
of the most recent fiscal quarter prior to
the incurrence of such additional Debt; (ii)
the purchase price of all real estate assets
or mortgages receivable (or interests
therein) acquired by the Company or any
Subsidiary since the end of such quarter,
including those assets acquired in connection
with the incurrence of such additional Debt;
and (iii) the amount of any securities
offering proceeds received by the Company or
any Subsidiary since the end of such fiscal
quarter (to the extent that such proceeds
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
were not used to acquire such real estate
assets or mortgages receivable or used to
reduce Debt).
(2) The Company and the Subsidiaries will not
incur any Secured Debt if, immediately after
giving effect thereto, the aggregate
principal amount of all outstanding Secured
Debt of the Company and its Subsidiaries on a
consolidated basis is greater than 40% of the
sum of: (i) the Company's Adjusted Total
Assets as of the end of the most recent
fiscal quarter prior to the incurrence of
such additional Debt; (ii) the purchase price
of any real estate assets or mortgages
receivable (or interests therein) acquired by
the Company or any Subsidiary since the end
of such fiscal quarter, including those
assets acquired in connection with the
incurrence of such additional Debt; and (iii)
the amount of any securities offering
proceeds received by the Company or any
Subsidiary since the end of such fiscal
quarter (to the extent that such proceeds
were not used to acquire such real estate
assets or mortgages receivable or used to
reduce Debt).
(3) The Company will not, and will not permit
any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for
Debt Service to the Annual Service Charge for
the four consecutive fiscal quarters most
recently ended prior to the date on which
such additional Debt is to be incurred shall
have been less than 1.5 to 1 on a pro forma
basis, after giving effect thereto.
(4) The Company, together with the
Subsidiaries, must maintain an Unencumbered
Total Asset Value in an amount not less than
150% of the aggregate principal amount of
outstanding unsecured Debt of the Company and
its Subsidiaries.
Optional Redemption.......................... The Notes are redeemable at the option of the
Company, in whole or in part, at a redemption
price equal to the sum of: (i) the principal
amount of the Notes being redeemed plus
accrued interest to the redemption date and
(ii) the Make-Whole Amount, if any. See
"Description of the Notes--Optional
Redemption."
</TABLE>
S-7
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, including information incorporated by reference,
contains statements that may be deemed to be "forward-looking." Any statement
contained in this Prospectus Supplement which is not a historical fact, or which
might be otherwise considered an opinion or projection concerning the Company or
its business, whether express or implied, is meant as, and should be considered,
a forward-looking statement. Forward-looking statements are based upon
assumptions and opinions concerning a variety of known and unknown risks,
including but not limited to changes in market conditions, the supply and demand
for leasable real estate, interest rates, increased competition, changes in
governmental regulations, and national and local economic conditions generally,
as well as other risks more completely described in the Company's filings with
the Securities and Exchange Commission (the "Commission"). If any of these
assumptions or opinions prove incorrect, any forward-looking statements made on
the basis of such assumptions or opinions may also prove materially incorrect in
one or more respects. Certain other factors that might cause actual results to
differ from those set forth in forward-looking statements are discussed in the
section entitled "Risk Factors" beginning on page 3 of the accompanying
Prospectus.
S-8
<PAGE>
RECENT DEVELOPMENTS
ACQUISITION AND DEVELOPMENT ACTIVITY
The following is a summary of the Company's acquisition and development
activity since March 31, 1998.
ACQUISITION ACTIVITY
MULTIFAMILY. The Company acquired a Multifamily Property in Bluffton, South
Carolina (near Hilton Head Island) and a 79.8% interest in a Multifamily
Property in San Antonio, Texas, containing an aggregate of 522 apartment units
for a total purchase price of $30.9 million. The Company also acquired an
additional phase of a Multifamily Property located in Tampa, Florida containing
248 apartment units for a purchase price of $8.5 million.
RETAIL. The Company acquired Orlando Fashion Square, a super-regional mall
located in Orlando, Florida containing approximately 1.1 million square feet of
gross leasable area ("GLA"), for a purchase price of $104 million. As part of
the final phase of its merger with certain affiliates of Johnson Development
Company, LLC, the Company also acquired an additional phase of a community
shopping center located in Atlanta, Georgia containing approximately 21,000
square feet of GLA.
OFFICE. As part of the final phase of its merger with certain affiliates of
Johnson Development Company, LLC, the Company acquired an additional phase of an
Office Property located in Atlanta, Georgia containing approximately 163,000
square feet of net rentable area ("NRA").
PROBABLE ACQUISITIONS. The Company has entered into contracts to acquire
(i) a multifamily property located in Augusta, Georgia containing 256 apartment
units, (ii) an office property located in Birmingham, Alabama containing
approximately 35,000 square feet of NRA and (iii) an office property in Tampa,
Florida containing approximately 290,000 square feet of NRA (the "Probable
Acquisitions"). The aggregate purchase price of the Probable Acquisitions is
$42.4 million. Each Probable Acquisition is subject to customary closing
conditions and other contingencies, and there can be no assurance that any or
all of the Probable Acquisitions will be consummated on the terms specified in
the applicable contracts, if at all.
DEVELOPMENT ACTIVITY
Since March 31, 1998, the Company has continued the development and
expansion of the seven multifamily properties in progress at March 31, 1998. One
of these projects (containing 496 apartment units) was completed during the
second quarter, and management expects that the remaining projects will be
completed at various times through the second quarter of 1999. When complete,
the six multifamily properties still under development will add a total of 1,126
apartment units to the Company's portfolio. Management expects the aggregate
cost of the six remaining projects to be approximately $78.3 million.
S-9
<PAGE>
SUMMARY OF ACQUISITION AND DEVELOPMENT ACTIVITY
SINCE MARCH 31, 1998
<TABLE>
<CAPTION>
COST OR
COMPLETION OR TYPE OF UNITS (M)/ ANTICIPATED
ANTICIPATED PROPERTY GLA (R)/NRA (O) COST (IN
COMPLETION DATE NAME OF PROPERTY (1) LOCATION (2) (3) THOUSANDS)
- --------------- ------------------------------- ---------------- ------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
COMPLETED
ACQUISITIONS:
2nd Qtr 98 CV at Ashley Plantation Bluffton, SC M 200 $ 13,700
2nd Qtr 98 Orlando Fashion Square Orlando, FL R 1,072,000 104,000
3rd Qtr 98 CV at River Hills I Tampa, FL M 248 8,500
3rd Qtr 98 Haverhill Apartments San Antonio, TX M 322 17,200
3rd Qtr 98 Mansell Overlook 200 Atlanta, GA O 163,000 27,680
3rd Qtr 98 Shoppes at Mansell Atlanta, GA R 21,000 3,680
PROBABLE
ACQUISITIONS:
3rd Qtr 98 Birmingham Property Birmingham, AL O 35,000 3,100
3rd Qtr 98 Tampa Property Tampa, FL O 290,000 30,455
3rd Qtr 98 Augusta Property Augusta, GA M 256 8,820
DEVELOPMENTS:
2nd Qtr 98 CG at Hunter's Creek Orlando, FL M 496 33,400
CG at Inverness Lakes Mobile, AL M 132 8,000
3rd Qtr 98 (expansion)
4th Qtr 98 CG at Wesleyan II (expansion) Macon, GA M 88 6,200
4th Qtr 98 CG at Edgewater (expansion) Huntsville, AL M 192 11,500
1st Qtr 99 CV at Citrus Park Tampa, FL M 176 12,300
1st Qtr 99 CG at Cypress Crossing Orlando, FL M 250 20,000
2nd Qtr 99 CG at Lakewood Ranch Sarasota, FL M 288 20,300
-----------
Total $ 328,835
-----------
-----------
</TABLE>
- ---------
(1) In the listing of Multifamily Property names, CG has been used as an
abbreviation for Colonial Grand, and CV has been used an abbreviation for
Colonial Village.
(2) M refers to Multifamily Properties, R refers to Retail Properties, and O
refers to Office Properties.
(3) Units (in this table only) refers to multifamily apartments units, GLA
refers to gross leaseable area of retail space, and NRA refers to net
rentable area of office space.
FINANCING ACTIVITY
LINE OF CREDIT. The maximum amount available on the Company's Line of
Credit is $200 million. The facility also includes a competitive bid feature
that allows the Company to convert up to $100 million under the Line of Credit
to a fixed rate for a fixed term not to exceed 90 days. The Company has obtained
a commitment to increase the maximum amount available under the Line of Credit,
effective July 10, 1998, from $200 million to $250 million. Upon the
effectiveness of the commitment, which is subject to customary closing
conditions, interest on the Line of Credit will decrease from its current rate
of 110 basis points over LIBOR to a rate of 95 basis points over LIBOR. If the
Company's credit rating is upgraded, interest on the Line of Credit will be
further reduced to 80 basis points over LIBOR. Additionally, the commitment
contains a modification of the competitive bid feature of the Line of Credit,
increasing from $100 million to $125 million the amount of indebtedness under
the Line of Credit that the Company may convert to a fixed rate for a term not
to exceed 90 days. The amended Line of Credit will provide for a two-year
commitment term beginning on its effective date and will provide for a two-year
amortization of the principal balance in the event of non-renewal at the end of
the term.
The Company uses the Line of Credit primarily to finance additional property
investments, including acquisition, expansion and development activities. As of
June 30, 1998, the balance outstanding under the Line of Credit was
approximately $155 million, bearing interest at a weighted average rate of
6.42%.
COMMON SHARE OFFERING. On April 27, 1998, Colonial closed an underwritten
public offering of an aggregate of 3,046,400 of its Common Shares for aggregate
net proceeds of approximately $86.9 million. All of the net proceeds were used
by the Company to repay outstanding balances under the Line of Credit.
S-10
<PAGE>
THE COMPANY
The Company is one of the largest owners, developers and operators of
multifamily, retail and office properties in the Sunbelt region of the United
States. The Company has been engaged in the multifamily, retail and office
property business for over 27 years. It is a fully-integrated real estate
company, whose activities include the ownership and operation of a diversified
portfolio of 98 properties located in Alabama, Florida, Georgia, Mississippi,
North Carolina, South Carolina, Tennessee, Texas and Virginia, development of
new properties, and acquisitions of existing properties. The Company's primary
markets in the Sunbelt region are generally characterized by high population and
employment growth rates.
The Company owns all of the Properties (or interests therein), and the
Management Partnership provides management services for the Properties. As sole
general partner of the Company, Colonial, through CPHC, has the exclusive power
to manage and conduct the business of the Company, subject to certain limited
exceptions. (Colonial intends to dissolve CPHC and thereby become the direct
general partner of the Company.) Colonial also provides, through Colonial
Properties Services, Inc., an Alabama corporation (the "Management
Corporation"), management services for properties owned by third parties.
Colonial's Common Shares are listed on the New York Stock Exchange under the
symbol "CLP."
BUSINESS STRATEGY
The general business strategy of the Company is to generate stable and
increasing cash flow and portfolio value. The Company has implemented this
strategy principally by (i) realizing growth in income from its existing
portfolio of Properties, (ii) developing, expanding, and selectively acquiring
additional multifamily, retail and office properties in growth markets located
in the Sunbelt region of the United States where the Company has first-hand
knowledge of growth patterns and local economic conditions and primarily in
mid-sized markets where the Company has a competitive advantage due to its size
and access to lower-cost capital, (iii) managing its own Properties, which has
enabled it to better control operating expenses and establish long-term
relationships with its retail and office tenants, (iv) maintaining its third-
party property management business, which has increased cash flow and
established additional relationships with tenants and (v) employing a
comprehensive capital maintenance program to maintain Properties in first-class
condition. The Company plans to continue the implementation of these business
strategies while capitalizing on what it believes are its competitive advantages
in the real estate marketplace. These competitive advantages include the
following:
REGIONAL FOCUS. The Company seeks to maintain a geographic focus within the
Sunbelt region of the United States. Since January 1997, the Company has
expanded its portfolio to include, in addition to Properties located in its
existing markets in Alabama, Georgia, Florida and South Carolina, Properties
located in Mississippi, North Carolina, Tennessee, Texas and Virginia. The
Company believes that its regional focus permits it to develop and maintain an
in-depth understanding of the Company's primary markets and better enables the
Company to identify and respond to acquisition opportunities within those
markets. In addition, the Company's strong market presence in the region
provides brand recognition that enhances the Company's ability to attract new
tenants to its Properties.
DIVERSITY OF PRODUCT. Throughout its 27-year history, the Company has
strived to create superior value for its shareholders by diversifying its
product offerings among three major real estate industry segments-- multifamily,
retail and office. The Company's operations in these three segments are
conducted through three distinct divisions, each of which is independently
operated and staffed with management and staff personnel that have specialized
experience in that industry segment. See "The Company--Operating Strategy." The
Company's current objective is to adjust its Property portfolio, primarily
through acquisitions and development, such that by 2002 the Company will derive
approximately 40% of its property operating income from multifamily properties,
40% from retail properties and 20% from office properties. The Company
anticipates that the portfolio will vary from year-to-year within these
guidelines as the Company takes advantage of opportunities within the three
property segments. There can be no assurance
S-11
<PAGE>
that the Company will continue to pursue this strategy or that the Company will
be able to achieve its objective. Regardless of whether this portfolio
allocation is achieved, however, the Company believes that its strategy of
maintaining a diversified portfolio of property types provides the Company with
more in-depth knowledge of local real estate markets, creates cross-selling
opportunities between divisions, minimizes the potential negative impact of
downturns in the market for a particular property type and provides the Company
with a broad range of investment alternatives in seeking acquisition
opportunities. Product diversification also permits the Company to take
advantage of opportunities to acquire, at favorable prices, properties in
product segments that may be undervalued and to finance such acquisitions by
exchanging or otherwise leveraging the value of properties in higher-valued
product segments.
GROWTH-ORIENTED AND MID-SIZED MARKETS. The Properties are located primarily
in growth-oriented markets within the Sunbelt region with emphasis on mid-sized
markets, which provide better opportunities to develop or take advantage of
brand recognition and generally involve less competition for tenants and
acquisition and development opportunities than larger, more developed markets.
The Company believes that its access to the public capital markets provides it
with a lower cost of capital than many property owners and developers in the
markets in which the Properties are located and therefore gives the Company an
additional competitive advantage in these markets. The Company believes that
strategic acquisitions of properties in growth-oriented markets within the
Sunbelt region will permit the Company to continue its geographic focus while
providing the Company with added revenue growth potential.
EXPERIENCED MANAGEMENT. The Company believes that strong, experienced
leadership, particularly in the management and leasing area, is critical to the
success of a fully-integrated real estate company. Colonial's chief executive
officer and other executive officers have extensive experience (an average of
15.2 years) in the real estate industry in the Sunbelt region of the United
States, and have established numerous contacts throughout the industry through
leadership of various local and national chapters of real estate associations.
The Company believes that the experience of Colonial's management team gives it
an advantage over less experienced competitors in its primary markets. In
addition, the Company is committed to a continuing education program that
encourages its employees to attain recognized, professional designations.
Colonial's trustees and executive officers, together with members of the Lowder
family, own an aggregate of 9,264,675 Units and Common Shares, representing
approximately 25.7% of the total number of Units and Common Shares outstanding.
LONG-TERM RELATIONSHIPS. The Company has been actively engaged in the real
estate business in the Sunbelt region of the United States for over 27 years.
Thomas Lowder and his brother, James, have close ties to this region and are
established members of the local and regional business communities. Through
their extensive business dealings in the region, the Company and the Lowder
family have developed a number of long-term business relationships with tenants
and real estate owners, as well as contractors, suppliers, professionals and
lenders, in the Sunbelt region. The Company believes that these relationships
result in cost savings due to reduced tenant turnover and fewer management
terminations, enable the Company to obtain favorable terms for services, goods
and loans and provide the Company with access to additional business
opportunities.
OPERATING STRATEGY
Consistent with its diversified strategy, Colonial manages its business with
three separate and distinct operating divisions: Multifamily, Retail, and
Office. Each division has an executive vice president that oversees growth and
operations and has a separate management team that is responsible for acquiring,
developing, and leasing properties within each division. This structure allows
the Company to utilize specialized management personnel for each operating
division. Although these divisions operate independently from one another,
constant communication among Colonial's executive vice presidents and chief
investment officer provides the Company with synergy allowing the Company to
take advantage of a variety of investment opportunities.
S-12
<PAGE>
The Company is experienced in the management and leasing of multifamily,
retail and office properties and believes that the management and leasing of its
own portfolio has helped the Properties maintain consistent income growth and
has resulted in reduced operating expenses relating to the Properties. In
addition, the third-party management, leasing and brokerage businesses have
provided the Company both with a source of cash flow that is relatively stable
and with the benefits of economies of scale in conjunction with the management
and leasing of its own properties. These businesses also allow the Company to
establish additional relations with tenants that may require additional retail
or office space and to identify potential acquisitions. Additional information
with respect to each of the operating divisions is set forth below.
MULTIFAMILY DIVISION. The multifamily division of the Company is
responsible for all aspects of the Company's multifamily operations, including
day-to-day management and leasing of the 45 Multifamily Properties, as well as
development and acquisition of additional multifamily properties. The
multifamily division currently has approximately 305 employees, most of whom are
located at the Multifamily Property sites and a small number of whom are located
in Birmingham, Alabama and in regional offices in Mobile and Montgomery,
Alabama, Orlando and Tampa, Florida, and Stockbridge, Georgia.
RETAIL DIVISION. The Company's retail division is responsible for all
aspects of the Company's retail operations, including the provision of
management, leasing, and brokerage services for the 38 Retail Properties, as
well as the development and acquisition of additional retail properties. The
retail division has regional offices in Birmingham, Alabama, Orlando, Florida,
Macon, Georgia and Burlington, North Carolina. The retail division currently has
approximately 343 employees.
OFFICE DIVISION. The Company's office division is responsible for all
aspects of the Company's commercial office operations, including the provision
of management, leasing, and brokerage services for the 15 Office Properties, as
well as the development and acquisition of additional office properties. The
office division has a regional office located in Atlanta, Georgia and currently
has approximately 61 employees.
FINANCING STRATEGY
The Company (together with Colonial) seeks to maintain a well-balanced,
conservative, and flexible capital structure by: (i) targeting a ratio of debt
to total market capitalization in the range of 30% to 45%; (ii) extending and
sequencing the maturity dates of its debt; (iii) borrowing primarily at fixed
rates; (iv) generally pursuing current and future long-term debt financings and
refinancings on an unsecured basis; (v) maintaining conservative interest and
fixed charge coverage ratios; and (vi) maintaining a conservative dividend
payout ratio. As of March 31, 1998, Colonial's ratio of debt to total market
capitalization was 37.3%, the weighted average maturity of the Company's long
term debt was 8.1 years, the Company's ratio of fixed rate debt to total long
term debt was 90.8%, the Company's ratio of unsecured debt to total long term
debt was 61.3%, the Company's ratio of EBITDA to interest expense was 3.02 and
the Company's ratio of EBITDA to fixed charges was 2.37. For the year ended
December 31, 1997, Colonial's dividend as a percentage of funds from operations
was 77%.
The Company believes that these strategies have enabled and should continue
to enable it and Colonial to access the debt and equity capital markets to fund
debt refinancings and the acquisition and development of additional properties.
The Company and Colonial have demonstrated their ability to access the equity
and debt markets to finance the activities of the Company through underwritten
public offerings of Common Shares of Colonial (in May 1995, January 1996,
January and July of 1997, and April 1998), participation in four unit investment
trusts (in December 1997 and February and March of 1998), an underwritten public
offering of Preferred Shares of Colonial (in November 1997) and public offerings
of unsecured notes (in July and December 1996, and January, July, August and
September of 1997). These transactions generated approximately $411.0 million of
net common equity proceeds, $120.5 million of net
S-13
<PAGE>
preferred equity proceeds and $350.6 million of net debt proceeds, representing
aggregate net proceeds of $882.1 million.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be approximately $172.5 million. The Company will use the net
proceeds of the Offering to repay outstanding balances under the Line of Credit
and other short-term indebtedness. Pending such application, the Company may
invest the net proceeds in short-term, income-producing investments such as
commercial paper, government securities or money market funds that invest in
government securities. The Company anticipates that, upon completion of the
Offering and the application of the estimated net proceeds therefrom, the amount
outstanding under the Line of Credit will be approximately $41.6 million.
S-14
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of March 31, 1998, and on a Pro Forma basis to give effect to the application
by the Company of the proceeds from Colonial's sale of Common Shares in April
1998, the Company's acquisition after March 31, 1998 of (i) two Multifamily
Properties and an additional phase of an existing Multifamily Property,
containing an aggregate of 770 apartment units, (ii) Orlando Fashion Square and
an additional phase of an existing Retail Property, containing an aggregate of
approximately 1.1 million square feet of GLA, and (iii) an additional phase of
an existing Office Property containing approximately 163,000 square feet of NRA,
and the completion of the Offering and the use of the estimated net proceeds
therefrom as described in "Use of Proceeds." The information set forth in the
following table should be read in conjunction with the financial information and
notes thereto incorporated herein and in the accompanying Prospectus by
reference, and the discussion set forth in "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
HISTORICAL PRO FORMA
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable (excluding Line of Credit).............................. $ 224,386 $ 224,386
Line of Credit...................................................................... 115,648 41,636
Unsecured Senior Notes.............................................................. 130,000 305,000
Other unsecured debt................................................................ 225,000 225,000
------------ ------------
Total notes and mortgages payable............................................... 695,034 796,022
Redeemable units, at redemption value (1)............................................. 319,456 420,702
Partners' capital, excluding redeemable units (2)..................................... 390,404 390,404
------------ ------------
Total capitalization............................................................ $ 1,404,894 $ 1,607,128
------------ ------------
------------ ------------
</TABLE>
- ---------
(1) Redeemable units represent limited partnership interests in the Company
(I.E., Units) that are redeemable by the Unitholder for an equal number of
Common Shares or, in the discretion of Colonial, the cash value thereof.
(2) Includes capital represented by Units held by Colonial (through CPHC) and
capital contributed by Colonial (through CPHC) as a result of Colonial's
issuance of 5,000,000 shares of 8 3/4% Series A Cumulative Redeemable
Preferred Shares in November 1997 in an underwritten public offering.
S-15
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth selected historical financial and operating
information for Colonial Realty Limited Partnership for the years ended December
31, 1997, 1996 and 1995, which information has been derived from the audited
historical Consolidated and Financial Statements of the Company. In addition,
the following table sets forth selected financial and operating information as
of and for the three months ended March 31, 1998 and March 31, 1997, which
information has been derived from the unaudited financial statements of the
Company. All such information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this Prospectus Supplement and the financial statements included in
the documents incorporated by reference into the accompanying Prospectus.
The Company believes that the book value of its real estate assets, which
reflects the historical costs of such assets less accumulated depreciation, is
not indicative of the current market value of the Properties.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
------------ ------------ ------------ ----------- ----------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue................................. $ 58,310 $ 39,170 $ 184,126 $ 134,881 $ 111,437
Expenses:
Depreciation and amortization............... 10,498 7,023 33,278 23,533 20,615
Other operating............................. 20,333 13,353 63,581 46,819 42,282
Income from operations........................ 27,479 18,794 87,267 64,529 48,540
Interest expense.............................. 12,579 8,488 40,496 24,584 23,972
Other income (expense), net................... (23) 133 3,069 1,104 674
Income before extraordinary items and minority
interest.................................... 14,877 10,439 49,840 41,049 25,242
Preferred distributions....................... 2,734 -- 1,671 -- --
Net income available to common unitholders.... 11,748 10,055 44,519 40,538 25,242
Per unit:
Net income-basic and diluted................ .37 .37 1.55 1.58 1.28
Dividends declared.......................... .55 .52 2.08 2.00 1.90
BALANCE SHEET DATA:
Land, buildings, and equipment, net........... $ 1,337,028 $ 866,066 $ 1,268,430 $ 801,798 $ 624,514
Total assets.................................. 1,429,368 1,021,637 1,396,660 947,947 681,297
Total debt.................................... 695,034 534,927 702,044 506,435 354,100
OTHER DATA:
Funds from operations (1)..................... $ 22,359 $ 17,231 $ 77,894 $ 63,087 $ 43,672
EBITDA (2).................................... $ 37,954 $ 25,950 $ 123,614 $ 89,166 $ 69,829
Cash flow provided by (used in):
Operating activities........................ $ 19,817 $ 15,497 $ 69,849 $ 62,926 $ 47,167
Investing activities........................ (36,313) (52,870) (346,627) (224,138) (95,737)
Financing activities........................ 15,105 36,315 277,972 162,967 47,357
Total properties (at end of period)........... 95 78 93 73 62
Ratio of earnings to fixed charges (3)........ 1.93 2.04 2.00 2.39 1.97
Ratio of EBITDA to fixed charges.............. 2.37 2.58 2.62 3.05 2.70
Ratio of EBITDA to interest expense........... 3.02 3.06 3.05 3.63 2.90
</TABLE>
- ------------------------
(1) The Company generally considers funds from operations ("FFO") a widely used
and appropriate measure of performance for an equity REIT that provides a
relevant basis for comparison among REITs. FFO for the Company differs from
FFO for Colonial in that Colonial, as a stockholder of the Management
Corporation, takes the Management Corporation's earnings into account in
calculating
S-16
<PAGE>
its FFO. FFO, as defined by the National Association of Real Estate
Investment Trusts ("NAREIT"), means income (loss) before minority interest
(determined in accordance with GAAP), excluding gains (losses) from debt
restructuring and sales of property, plus real estate depreciation and after
adjustments for unconsolidated partnerships and joint ventures. FFO is
presented to assist investors in analyzing the Company's performance. The
method of calculating FFO employed by the Company and Colonial may be
different from methods used by other operating partnerships and REITs and,
accordingly, may not be comparable to such other operating partnerships and
REITs. FFO (i) does not represent cash flows from operations as defined by
GAAP, (ii) is not indicative of cash available to fund all cash flow needs
and liquidity, including its ability to make distributions, and (iii) should
not be considered as an alternative to net income (as determined in
accordance with GAAP) for purposes of evaluating the Company's operating
performance.
(2) EBITDA represent earnings before interest, taxes, depreciation and
amortization. EBITDA does not represent cash generated from operating
activities as defined by generally accepted accounting principles and,
therefore, should not be considered as an alternative to net income as the
primary indicator of operating performance or to cash flow as a measure of
liquidity, nor does it indicate that cash flow is sufficient to fund all
cash requirements.
(3) Ratio of earnings to fixed charges represents the ratio of earnings before
property sales and extraordinary items plus fixed charges to fixed charges.
Fixed charges consist primarily of interest, preferred distributions and
amortization of deferred financing costs.
S-17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto incorporated by reference in
the accompanying Prospectus.
GENERAL
The Company is engaged in the ownership, development, management, and
leasing of multifamily communities, retail malls and shopping centers, and
office buildings in nine states in the Sunbelt region of the United States. As
of March 31, 1998, the Company's real estate portfolio consisted of 43
Multifamily Properties, 37 Retail Properties, and 15 Office Properties, making
Colonial one of the largest diversified REITs in the United States.
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1998 AND 1997
REVENUE. Total revenue for the three months ended March 31, 1998 increased
by $19.1 million, or 48.9%, from the comparable period of 1997. This increase
primarily relates to revenues generated by Properties that were acquired or
developed during 1998 and 1997. The remaining increase relates to increases in
rental rates at existing Properties.
OPERATING EXPENSES. Total operating expenses for the three months ended
March 31, 1998 increased by $10.5 million, or 51.3%, from the comparable period
of 1997. The majority of this increase, $9.1 million, relates to additional
operating expenses associated with Properties that were acquired or developed in
1998 and 1997. The remaining increase relates primarily to increases in
operating expenses at existing Properties and overall increases in corporate
overhead and personnel costs associated with the Company's continued growth.
OTHER INCOME AND EXPENSES. Interest expense for the three months ended
March 31, 1998 increased by $4.1 million, or 48.2%, from the comparable period
of 1997. This increase is primarily attributable to the increased use of the
Line of Credit in conjunction with the financing of acquisitions and
developments.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1998, the Company invested approximately $36.1
million in the acquisition and development of properties. The Company financed
this acquisition and development activity through net proceeds from public
offerings of Colonial's equity securities during the first quarter of 1998
totaling $45.5 million ($132.4 million including the net proceeds from the
offering of Common Shares completed in the second quarter), advances under the
Line of Credit and cash from operations. The Company anticipates that, upon
completion of the Offering and the application of the estimated net proceeds
therefrom, the amount outstanding under the Line of Credit will be approximately
$41.6 million.
During 1997, the Company invested $523.0 million in the acquisition and
development of properties. This acquisition and development activity increased
the Company's Multifamily, Retail, and Office Property holdings. The Company
financed this growth through proceeds from public offerings of equity and debt
totaling $403.0 million during 1997, advances on its Line of Credit, the
issuance of Units, and cash from operations. In connection with the acquisition
activity, the Company sold or exchanged six multifamily properties and one
office property through tax-deferred transactions. The Company also used these
sources of funds, along with exchanging or selling properties, to repay or
transfer $120 million on 17 mortgage loans.
At March 31, 1998, the Company's total outstanding debt balance was $695.0
million. The outstanding balance includes fixed-rate debt of $525.8 million, or
75.7%, and floating-rate debt of $169.2 million, or 24.3%. Of this floating rate
debt, $53.0 million is tax-exempt floating-rate debt bearing a weighted average
S-18
<PAGE>
interest rate of 4.28%. The Company has obtained interest rate protection for
$67.8 million of the floating-rate debt under two agreements. One agreement,
protecting $17.8 million, limits the debt to an interest rate of 5.96% through
September 30, 1998, and the other agreement, protecting $50.0 million, limits
the debt to an interest rate of 8.00% through May 2, 2000. Certain loan
agreements of the Company contain restrictive covenants which, among other
things, require maintenance of various financial ratios. At March 31, 1998, the
Company was in compliance with these covenants. Colonial's total market
capitalization as of March 31, 1998 was $1.9 billion, and its ratio of debt to
total market capitalization was 37.3%. As of March 31, 1998, the Company's ratio
of EBITDA to fixed charges was 2.37, and its ratio of EBITDA to interest expense
was 3.02. See "Selected Financial and Operating Information."
ACQUISITION AND DEVELOPMENT ACTIVITIES
MULTIFAMILY PROPERTIES. Since January 1, 1997, the Company added 2,204
apartment units through the acquisition of seven multifamily communities and an
additional phase at an existing community at an aggregate cost of $122.1
million. In a continuing effort to diversify its portfolio, the Company sold or
exchanged six multifamily communities, which had a net book value of $68.0
million and consisted of 2,464 apartment units. The Company also completed
construction of six multifamily communities containing an aggregate of 1,288
apartment units and acquired land on which it intends to develop additional
multifamily communities during 1998. The aggregate cost of these completed
multifamily communities was $76.5 million and the aggregate cost of the land was
$7.7 million.
As of March 31, 1998, the Company had 1,622 apartment units in seven
multifamily communities under development or expansion. One of these projects
(containing 496 apartment units) was completed during the second quarter of
1998, and management expects that the remaining multifamily projects will be
completed at various times through the second quarter of 1999. When complete,
the six multifamily properties still under development will add a total of 1,126
apartment units to the Company's portfolio. Management expects the aggregate
cost of the six remaining projects to be approximately $78.3 million.
RETAIL PROPERTIES. Since January 1, 1997, the Company added 5.3 million
square feet of retail shopping space through the acquisition of nine community
shopping centers and eight enclosed malls at an aggregate cost of $354.6
million. The Company also completed a 422,000 square foot expansion of a
regional mall in Macon, Georgia and a 239,000 square foot expansion of a
community shopping center in Montgomery, Alabama at an aggregate cost during
1997 of $28.6 million.
OFFICE PROPERTIES. Since January 1997, the Company increased its office
portfolio by 1.5 million square feet with the acquisition of six Office
Properties, the purchase of additional buildings at an existing Property and the
purchase of additional interests in two joint ventures. The Office Properties
are located in Alabama and Georgia and were purchased at an aggregate cost of
$162.9 million. In connection with one of the acquisitions, the Company
exchanged an office property which had a net book value of $2.0 million and
consisted of 25,000 square feet.
EBITDA
The following table sets forth the manner in which EBITDA has been
calculated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1998 1997 1997 1996 1995
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Net income available to common unitholders.............. $ 11,748 $ 10,055 $ 44,519 $ 40,538 $ 25,242
Interest expense........................................ 12,579 8,488 40,496 24,584 23,972
Income taxes............................................ -- -- -- -- --
Depreciation and amortization........................... 10,498 7,023 33,278 23,533 20,615
Extraordinary loss (gain) from debt extinguishment...... 395 384 3,650 511 --
Preferred distributions................................. 2,734 -- 1,671 -- --
--------- --------- ---------- --------- ---------
EBITDA.................................................. $ 37,954 $ 25,950 $ 123,614 $ 89,166 $ 69,829
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>
S-19
<PAGE>
SCHEDULE OF INDEBTEDNESS
Certain of the Properties are subject to mortgage indebtedness. The
Properties whose financial results are consolidated in the financial statements
of the Company are subject to existing mortgage indebtedness, and the Company
has unsecured notes payable, in an aggregate amount as of March 31, 1998, of
approximately $695.0 million, carrying a weighted average interest rate of 7.13%
and a weighted average maturity of 6.8 years. The mortgage indebtedness on the
Properties and the Company's unsecured indebtedness as of March 31, 1998, are
set forth in the table below:
<TABLE>
<CAPTION>
ANTICIPATED
PRINCIPAL DEBT
BALANCE (AS SERVICE ESTIMATED
INTEREST OF (04/1/98- MATURITY BALANCE DUE
PROPERTY (1) RATE 03/31/98) 12/31/98) DATE (2) ON MATURITY
- ------------------------------------------- ----------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
MORTGAGE DEBT
MULTIFAMILY PROPERTIES:
CG at Carrollwood...................... 8.870% $ 6,230,000 $ 414,451 03/05/05 $6,230,000
CG at Natchez Trace.................... 7.950% 6,852,525 433,572 09/01/35 47,813
8.000% 4,078,048 263,552 02/01/37 29,071
CV at Rocky Ridge...................... 5.900% 6,000,000(3) 265,500 08/01/02(4) 6,000,000
7.625% 1,312,500 141,486 08/01/02(4) 841,667
CG at Galleria Woods................... 6.875% 7,216,403 485,256 07/15/99 7,035,235
CG at Mountain Brook................... 8.000% 12,060,204 852,100 01/10/00 11,742,632
CV at Cahaba Heights................... 8.060% 3,677,051 283,156 05/10/00 3,502,055
CG at Edgewater........................ 7.500% 9,774,594 10,277,288 11/15/98 9,685,749
CV at Inverness........................ 5.960%(5) 9,900,000(3) 260,618 06/15/26(6) 9,900,000
CV at Inverness Lakes.................. 5.900% 4,000,000(3) 177,000 07/31/02(7) 4,000,000
7.625% 1,643,333 153,028 07/31/02(8) 1,234,167
CG at Galleria......................... 3.700% 22,400,000(3) 589,680 06/15/26(6) 22,400,000
CG at Research Park.................... 3.700% 12,775,000(3) 336,302 06/15/26(6) 12,775,000
CG at Riverchase....................... 7.150% 9,051,004 9,090,709 12/31/98 8,967,396
CV at Vernon Marsh..................... 5.960%(5) 4,500,000(3) 118,463 06/15/26(6) 4,500,000
CV at White Bluff...................... 5.960%(5) 3,400,000(3) 89,505 06/15/26(6) 3,400,000
CV at Hillwood......................... 5.900% 3,330,000(3) 147,353 07/31/02(7) 3,330,000
7.625% 1,574,167 148,318 07/31/02(8) 1,179,167
RETAIL PROPERTIES:
Island Walk............................ 8.800% 10,213,784 796,095 10/01/01 9,578,044
Mayberry Mall.......................... 9.220% 3,388,729 749,944 10/01/01 3,237,064
Montgomery Promenade................... 9.250% 10,810,000 272,526 07/01/00 10,810,000
Rivermont Shopping Center.............. 10.125% 1,766,122 202,268 09/01/08 52,091
University Park Plaza.................. 8.870% 14,445,000 960,954 03/05/05 14,445,000
Village at Roswell Summit.............. 8.930% 1,646,732 127,643 09/01/05 1,401,860
OFFICE PROPERTIES:
International Park..................... 8.650% 2,001,143 484,719 10/01/99 1,931,425
Interstate Park........................ 8.500% 4,415,032 162,954 08/01/03 2,648,144
Riverchase Center...................... 7.880% 8,422,278 675,196 12/01/00 7,766,043
Mansell Office Park.................... 8.250% 17,534,800 1,197,936 01/10/08 15,285,811
8.625% 13,976,142 1,001,353 06/01/00 13,682,324
Perimeter Corporate Park............... 8.680% 5,686,055 448,047 12/01/03 4,668,653
OTHER DEBT:
Land Loan.............................. 7.010% 661,481 694,519 09/30/98 649,897
UNSECURED INDEBTEDNESS:
Line of Credit, incl. Comp. Bid........ 6.425%(9) 115,648,000 7,813,179 07/10/98 (10 115,648,000
Unsecured Senior Notes................. 7.500% 64,894,267 4,875,000 07/15/01 65,000,000
Unsecured Senior Notes................. 8.050% 64,749,208 5,232,500 07/15/06 65,000,000
Medium Term Notes...................... 7.050% 50,000,000 3,525,000 12/15/03 50,000,000
Medium Term Notes...................... 7.160% 50,000,000 3,580,000 01/17/03 50,000,000
Medium Term Notes...................... 6.960% 75,000,000 5,017,500 07/26/04 75,000,000
Medium Term Notes...................... 6.960% 25,000,000 1,740,000 08/01/05 25,000,000
Medium Term Notes...................... 6.980% 25,000,000 1,745,000 09/26/05 25,000,000
------------- ---------- ------------
TOTAL...................................... $695,033,602 $65,829,669 6$73,604,308
------------- ---------- ------------
------------- ---------- ------------
</TABLE>
- ------------
(1) As noted in the table, certain Properties were developed in phases and
separate mortgage indebtedness may encumber each of the various phases. In
the listing of property names, CG has been used as an abbreviation for
Colonial Grand and CV as an abbreviation for Colonial Village.
S-20
<PAGE>
(2) All of the mortgages can be prepaid at any time, subject to prepayment
penalties calculated typically on a yield maintenance basis, except for the
mortgages encumbering CV at Rocky Ridge, CV at Inverness Lakes, CV at
Hillwood, and CG at Natchez Trace, which are closed to prepayment for
varying lengths of time.
(3) These loans are financed through tax-exempt bonds.
(4) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2007.
(5) Represents the maximum interest rate payable by the Company through
September 30, 1998 on these loans as the result of an interest rate
protection agreement entered into by the Company. The loans (which are
financed through tax-exempt bonds) secured by these Properties (or phases
thereof) bear interest at a variable rate, determined weekly at the rate
necessary to produce a bid in the process of remarketing the bonds equal to
par plus accrued interest, based on comparable issues in the market. The
interest rate for these debt obligations as of March 31, 1998, was 3.70% for
these Properties.
(6) These loans are financed through tax-exempt bonds which are credit enhanced
by Fannie Mae. The loans, which bear interest at a weekly variable interest
rate, require monthly interest payments through June 2006 and principal and
interest payments from July 2006 through June 2026. The weighted average
interest rate of these five loans was 3.70% at March 31, 1998.
(7) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2022.
(8) The maturity date noted represents the date on which credit enhancement
expires for the tax-exempt municipal bonds put in place as part of the
original financing for the Property. The stated maturity date for the loans
is August 1, 2010.
(9) This Line of Credit bears interest at a variable rate, based on LIBOR plus a
spread that ranges from 100 to 150 basis points. At March 31, 1998, the Line
of Credit bore interest at a rate of 110 basis points above LIBOR. The
facility also includes a competitive bid feature that allows the Company to
convert up to $100 million under the Line of Credit to a fixed rate, for a
fixed term not to exceed 90 days. At March 31, 1998, $100 million was
outstanding under a competitive bid loan which bore interest at a weighted
average rate of 6.37%. The Company has obtained a commitment to increase the
maximum amount available under the Line of Credit, effective July 10, 1998,
from $200 million to $250 million. Upon the effectiveness of the commitment,
which is subject to customary closing conditions, interest on the Line of
Credit will decrease from its current rate of 110 basis points over LIBOR to
a rate of 95 basis points over LIBOR. If the Company's credit rating is
upgraded, interest on the Line of Credit will be further reduced to 80 basis
points over LIBOR. Additionally, the commitment contains a modification of
the competitive bid feature of the Line of Credit, increasing from $100
million to $125 million the amount of indebtedness under the Line of Credit
that the Company may convert to a fixed rate for a term not to exceed 90
days.
(10) This credit facility has a term of one year beginning in July 1997 and
provides for a two-year amortization in the event of non-renewal. As
discussed in note (9) above, the Company has obtained a commitment to
increase its borrowing capacity under the Line of Credit. In addition, this
commitment will provide for a two-year commitment term beginning July 10,
1998 and will provide for a two-year amortization in the event of
non-renewal.
In addition to the foregoing mortgage debt, the two Office Properties in
which the Company owns partial interests (and which therefore are not
consolidated in the financial statements of the Company) also are subject to
existing mortgage indebtedness. The Company's pro-rata share of such
indebtedness as of March 31, 1998, was $1,045,000 which carried a weighted
average interest rate of 9.3%. The maturity dates of these loans range from May
31, 1999 to July 17, 2000, and as of March 31, 1998, the loans had a weighted
average maturity of 1.8 years.
S-21
<PAGE>
PROPERTIES
GENERAL
The 98 Properties owned by the Company consist of 45 Multifamily Properties,
38 Retail Properties, and 15 Office Properties. Certain information relating to
the Company's revenues and occupancy rates by Property type is set forth below.
<TABLE>
<CAPTION>
TOTAL FIRST
QUARTER 1998 PERCENT OF
PROPERTY REVENUE TOTAL FIRST QUARTER PERCENTAGE
NUMBER OF UNITS/GLA/ (IN THOUSANDS) 1998 PROPERTY OCCUPANCY AT
TYPE OF PROPERTY PROPERTIES (1) NRA (1)(2) (3) REVENUE (3) MARCH 31, 1998 (3)
- -------------------------- ------------------- ------------ ----------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Multifamily............... 45 14,573 $ 24,148 41.9% 95.1%(4)
Retail.................... 38 11,679,000 26,033 45.1% 93.3%
Office.................... 15 2,361,000 7,510(5) 13.0% 97.0%
--
-------- -----
Total................. 98 $ 57,691 100.0%
--
--
-------- -----
-------- -----
</TABLE>
- ---------
(1) Includes two Multifamily Properties, one Retail Property, an additional
phase of an existing Retail Property and an additional phase of an existing
Office Property which were acquired after March 31, 1998.
(2) Units (in this table only) refers to multifamily apartment units, GLA refers
to gross leaseable area of retail space and NRA refers to net rentable area
of office space.
(3) Excludes two Multifamily Properties, one Retail Property, an additional
phase of an existing Retail Property and an additional phase of an existing
Office Property which were acquired after March 31, 1998.
(4) Excludes 1,520 units of four newly developed or expanded Multifamily
Properties that had not achieved stabilized occupancy as of March 31, 1998.
(5) Includes the Company's proportionate share of revenues from those Office
Properties accounted for under the equity method.
The following table reflects the amount of the Company's adjusted net
operating income for the first quarter of 1998, as a percentage of total
adjusted net operating income of the Properties for the quarter, attributable to
each state in which a Property is located. Net operating income has been
adjusted to include first quarter net operating income of Properties acquired by
the Company after March 31, 1998.
<TABLE>
<CAPTION>
ADJUSTED PERCENT OF TOTAL ADJUSTED
NET OPERATING 1ST QUARTER 1998
STATE INCOME NET OPERATING INCOME
- ------------------------------------------------------ ------------- -------------------------
<S> <C> <C>
Alabama............................................... $16,599,000 38%
Florida............................................... 11,896,000 28%
Georgia............................................... 9,878,000 23%
North Carolina........................................ 1,416,000 3%
South Carolina........................................ 1,784,000 4%
Other (4 States)...................................... 1,815,000 4%
------------- -----
Total............................................. $43,388,000 100%
------------- -----
------------- -----
</TABLE>
MULTIFAMILY PROPERTIES
The 45 Multifamily Properties contain a total of 14,573 garden-style
apartments and range in size from 104 to 1,080 apartment units. Fourteen of the
Multifamily Properties were acquired by the Company
S-22
<PAGE>
in connection with the formation of the Company at the time of the IPO (the
"Formation Transactions"), thirteen Properties and one additional phase of an
existing Property were acquired during 1994, seven Properties were acquired
during 1996, five Properties were acquired during 1997 and two Properties and
one additional phase of an existing Property were acquired in 1998. Also, since
its IPO the Company has developed four additional Multifamily Properties. Twenty
Multifamily Properties (containing a total of 6,985 apartment units) are located
in Alabama, 13 Multifamily Properties (containing a total of 4,794 apartment
units) are located in Florida, eight Multifamily Properties (containing a total
of 1,594 apartments units) are located in Georgia, one Multifamily Property
(containing a total of 328 apartment units) is located in Mississippi, two
Multifamily Properties (containing a total of 550 apartment units) are located
in South Carolina and one Multifamily Property (containing a total of 322
apartment units) is located in Texas. All of the Multifamily Properties are
managed by the Company.
RETAIL PROPERTIES
The 38 Retail Properties contain a total of approximately 11.7 million
square feet of GLA (including space owned by anchor tenants). Ten of the Retail
Properties are located in Alabama, twelve are located in Florida, seven are
located in Georgia, five are located in North Carolina, one is located in South
Carolina, one is located in Tennessee, and two are located in Virginia. The
Retail Properties consist of thirteen enclosed regional malls (Briarcliffe Mall,
Brookwood Village, Gadsden Mall, Glynn Place Mall, Holly Hill Mall, Lakeshore
Mall, Macon Mall, Mayberry Mall, Orlando Fashion Square, River Oaks Center,
Staunton Mall, Valdosta Mall, and Village Mall), two power centers, and 23
neighborhood shopping centers. Nine of the 38 Retail Properties were originally
developed by the Company, two were acquired in 1994, six were acquired in 1995,
four were acquired in 1996, 16 were acquired in 1997 and one was acquired in
1998. All of the Retail Properties are managed by the Company.
OFFICE PROPERTIES
The 15 Office Properties contain a total of approximately 2.4 million square
feet of NRA. Thirteen of the Office Properties are located in Alabama
(representing approximately 75% of the office portfolio's NRA), one is located
in Atlanta, Georgia and one is located in Orlando, Florida. The Office
Properties range in size from approximately 30,000 square feet to 536,000 square
feet. Four of the Office Properties were developed by the Company, five were
acquired at various times between 1980 and 1990, four were acquired in 1997, and
two were acquired in 1998. All of the Office Properties are managed by the
Company.
UNDEVELOPED LAND
The Company owns eight undeveloped land parcels consisting of approximately
103.2 acres. These parcels are adjacent to five of the Properties and are
suitable for potential expansion at those Properties. The land suitable for
expansion is located adjacent to a Multifamily Property and four Retail
Properties. Land adjacent to Multifamily Properties typically will be considered
for potential development of another phase of an existing Multifamily Property
if the Company determines that the particular market can absorb additional
apartment units. The Company currently owns one such parcel. For expansions at
Retail Properties, the Company owns parcels both contiguous to the boundaries of
Retail Properties, which would accommodate expansion of the mall or shopping
center, and outparcels which are suitable for restaurants, financial
institutions or free-standing retailers. The Company owns seven such parcels.
PRIMARY MARKETS
The Company believes that Properties in its primary markets have the
potential over the long term to provide investment returns that exceed national
averages. According to recent market surveys (source: Woods & Poole: 1997 MSA
Profile), employment, population and household formation growth in the Company's
primary markets, and the states in which those markets are located, generally
have shown, and
S-23
<PAGE>
are forecasted to continue to show, growth that exceeds averages for the 50
largest metropolitan statistical areas ("MSAs") and for the United States as a
whole, as shown in the tables below.
<TABLE>
<CAPTION>
FORECASTED
EMPLOYMENT POPULATION HOUSEHOLD EMPLOYMENT FORECASTED
GROWTH GROWTH FORMATION GROWTH GROWTH POPULATION GROWTH
MARKETS (1990-1997) (1990-1997) (1990-1997) (1998-2010) (1998-2010)
- ------------------------ --------------- ------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Birmingham, AL.......... 9.8% 6.8% 8.1% 13.1% 10.8%
Mobile, AL.............. 17.1% 10.7% 12.4% 18.2% 12.5%
Huntsville, AL.......... 9.8% 10.2% 11.8% 15.5% 11.9%
Montgomery, AL.......... 13.2% 9.7% 10.8% 14.0% 10.8%
Orlando, FL............. 20.5% 21.2% 19.5% 36.8% 41.5%
Tampa/St. Petersburg,
FL.................... 16.1% 9.6% 7.8% 23.9% 23.6%
Macon, GA............... -4.7% 6.3% 7.2% 8.1% 2.9%
Sarasota/Bradenton,
FL.................... 27.2% 11.8% 10.0% 27.6% 26.0%
Atlanta, GA............. 21.3% 20.2% 21.0% 22.1% 23.6%
50 largest MSAs......... 7.9% 7.6% 7.8% 13.3% 11.0%
<CAPTION>
FORECASTED
HOUSEHOLD
FORMATION GROWTH
MARKETS (1998-2010)
- ------------------------ -------------------
<S> <C>
Birmingham, AL.......... 13.8%
Mobile, AL.............. 16.1%
Huntsville, AL.......... 15.1%
Montgomery, AL.......... 13.2%
Orlando, FL............. 42.2%
Tampa/St. Petersburg,
FL.................... 23.7%
Macon, GA............... 4.4%
Sarasota/Bradenton,
FL.................... 26.0%
Atlanta, GA............. 26.4%
50 largest MSAs......... 13.0%
</TABLE>
<TABLE>
<CAPTION>
FORECASTED
EMPLOYMENT POPULATION HOUSEHOLD EMPLOYMENT FORECASTED
GROWTH GROWTH FORMATION GROWTH GROWTH POPULATION GROWTH
STATES (1990-1997) (1990-1997) (1990-1997) (1998-2010) (1998-2010)
- ------------------------ --------------- ------------- ------------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Alabama................. 11.5% 6.8% 8.3% 13.1% 9.0%
Florida................. 15.8% 13.2% 11.6% 22.0% 22.3%
Georgia................. 16.1% 14.0% 14.9% 17.6% 16.2%
Mississippi............. 16.0% 5.8% 6.8% 10.9% 5.8%
North Carolina.......... 14.5% 10.9% 11.2% 15.8% 14.3%
South Carolina.......... 7.6% 7.9% 10.3% 17.8% 16.0%
Tennessee............... 14.8% 9.7% 10.2% 14.1% 11.3%
Texas................... 14.9% 13.2% 13.2% 17.3% 16.9%
Virginia................ 7.6% 8.6% 10.4% 14.3% 11.3%
United States........... 8.5% 7.3% 7.6% 12.8% 10.3%
<CAPTION>
FORECASTED
HOUSEHOLD
FORMATION GROWTH
STATES (1998-2010)
- ------------------------ -------------------
<S> <C>
Alabama................. 12.2%
Florida................. 22.7%
Georgia................. 18.9%
Mississippi............. 8.4%
North Carolina.......... 16.2%
South Carolina.......... 19.8%
Tennessee............... 13.6%
Texas................... 18.9%
Virginia................ 14.5%
United States........... 12.1%
</TABLE>
S-24
<PAGE>
MANAGEMENT
TRUSTEES, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The trustees, executive officers and certain other significant employees of
Colonial, which, through CPHC, is the general partner of the Company, and their
positions and offices are set forth in the following table:
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES HELD
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Thomas H. Lowder.................... Chairman of the Board of Trustees, President and Chief Executive Officer
Carl F. Bailey...................... Trustee (Retired Co-Chairman of BellSouth Telecommunications, Inc., and
retired Chairman and CEO of South Central Bell Telephone Company; President
of BDI)
M. Miller Gorrie.................... Trustee (Chairman of the Board and Chief Executive Officer of Brasfield &
Gorrie, L.L.C.)
William M. Johnson.................. Trustee (President and Chief Executive Officer of Johnson Development
Company)
James K. Lowder..................... Trustee (Chairman and Chief Executive Officer of The Colonial Company)
Herbert A. Meisler.................. Trustee (Investor)
Claude B. Nielsen................... Trustee (President and Chief Executive Officer of Coca-Cola Bottling
Company United, Inc.)
Harold W. Ripps..................... Trustee (Investor)
Donald T. Senterfitt................ Trustee (President and Chief Executive Officer of The Pilot Group, L.C.)
Howard B. Nelson, Jr................ Chief Financial Officer
C. Reynolds Thompson III............ Chief Investment Officer
Paul F. Earle....................... Executive Vice President-Multifamily Division
John N. Hughey...................... Executive Vice President-Retail Division
Charles A. McGehee.................. Executive Vice President-Land, Brokerage and Dispositions
Robert A. Jackson................... Executive Vice President-Office Division
Paul C. Glascock.................... Senior Vice President-Retail Leasing
Thomas M. LaDow..................... Senior Vice President-Office Division
John L. Moss........................ Senior Vice President-Retail Management
R. William Pradat, Jr............... Senior Vice President-Office Division
Richard B. Yielding................. Senior Vice President-Retail Acquisitions
</TABLE>
S-25
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The following description of the specific terms of the Notes supplements the
description of the general terms and provisions of Debt Securities set forth in
the Prospectus under the caption "Description of Debt Securities."
The Notes constitute a series of debt securities (which are more fully
described in the accompanying Prospectus), which will be issued pursuant to an
indenture (the "Indenture") dated as of July 22, 1996, between the Company and
Bankers Trust Company, as trustee (the "Trustee"), and will be limited to an
aggregate principal amount of $175,000,000. The terms of the Notes include those
provisions contained in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of certain provisions of the Indenture does not purport to
be complete and is subject to and qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below.
The Notes will be direct, unsecured recourse obligations of the Company and
will rank pari passu with all other unsecured and unsubordinated indebtedness of
the Company from time to time outstanding. The Notes will be recourse to all of
the assets of the Company, but will be non-recourse with respect to the partners
of the Company, including CPHC, the Company's general partner. The Notes will be
effectively subordinated to (i) the prior claims of each secured mortgage lender
to any specific property of the Company which secures such lender's mortgage and
(ii) any indebtedness or other claims of creditors of any Subsidiary of the
Company, the amount of which is restricted by the Indenture.
Subject to certain limitations set forth in the Indenture, and as described
under "Certain Covenants-- Limitations on Incurrence of Debt" below, the
Indenture will permit the Company to incur additional secured and unsecured
indebtedness. Following the completion of the Offering and the application of
the net proceeds thereof, the Company will have approximately $224.2 million of
secured indebtedness collateralized by 26 Properties and approximately $396.6
million of unsecured indebtedness which will rank PARI PASSU with the Notes.
The Notes will mature on July 14, 2007 (the "Maturity Date"). The Notes are
not subject to any sinking fund provisions. The Notes will be issued only in
fully registered, book-entry form without coupons, in denominations of $1,000
and integral multiples thereof, except under the limited circumstances described
below under "Book-Entry System."
Except as described below under "Certain Covenants--Limitations on
Incurrence of Debt" and under "Description of Debt Securities--Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any provisions that would limit the ability of the Company to incur
indebtedness or that would afford holders of the Notes protection in the event
of: (i) a highly leveraged or similar transaction involving the Company, CPHC,
as general partner of the Company, or any affiliate of either such party; (ii) a
change of control; or (iii) a reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect the holders of the
Notes. However, certain restrictions on the ownership and transfer of Colonial's
Common Shares designed to preserve Colonial's status as a REIT may act to
prevent or hinder a change of control. The Company and its management have no
present intention of engaging in a transaction which would result in the
Company's being highly leveraged.
PRINCIPAL AND INTEREST
The Notes will bear interest at 7% per annum from the date of issuance,
payable semi-annually in arrears on January 14 and July 14, commencing January
14, 1999 (each, an "Interest Payment Date"), and on the Maturity Date, to the
persons (the "Holders") in whose names the applicable Notes are registered in
the security register applicable to the Notes at the close of business 15
calendar days prior to such
S-26
<PAGE>
payment date, regardless of whether such day is a Business Day, as defined below
(each, a "Regular Record Date"). Interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date falls on a day that is not
a Business Day, the required payment will be made on the next Business Day as if
it were made on the date such payment was due and no interest will accrue on the
amount so payable for the period from and after such Interest Payment Date or
the Maturity Date, as the case may be. "Business Day" means any day, other than
a Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.
CERTAIN COVENANTS
The Indenture contains the following covenants:
LIMITATIONS ON INCURRENCE OF DEBT. The Company will not, and will not
permit any Subsidiary to, incur any Debt (as defined below), other than
intercompany Debt (representing Debt to which the only parties are Colonial, any
of its subsidiaries, the Company and any Subsidiary, or Debt owed to the
Management Corporation arising from routine cash management practices, but only
so long as such Debt is held solely by any of Colonial, any of its subsidiaries,
the Company and any Subsidiary), that is subordinate in right of payment to the
Notes, if, immediately after giving effect to the incurrence of such Debt and
the application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles is
greater than 60% of the sum of (i) the Company's Adjusted Total Assets (as
defined below) as of the end of the most recent fiscal quarter prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable (or interests therein) acquired by the Company or
any Subsidiary since the end of such fiscal quarter, including those obtained in
connection with the incurrence of such additional Debt and (iii) the amount of
any securities offering proceeds received by the Company or any Subsidiary since
the end of such fiscal quarter (to the extent that such proceeds were not used
to acquire such real estate assets or mortgages receivable or used to reduce
Debt) (Section 1004(a)).
In addition to the foregoing limitation on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service to the Annual Service
Charge for the four consecutive fiscal quarters most recently ended prior to the
date on which such additional Debt is to be incurred shall have been less than
1.5 to 1, on a pro forma basis after giving effect to the incurrence of such
Debt and to the application of the proceeds thereof (Section 1004(b)).
Further, the Company will not, and will not permit any Subsidiary to, incur
any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Company or any Subsidiary
("Secured Debt"), whether owned at the date of the Indenture or thereafter
acquired, if, immediately after giving effect to the incurrence of such Secured
Debt and the application of the proceeds thereof, the aggregate principal amount
of all outstanding Secured Debt of the Company and its Subsidiaries on a
consolidated basis is greater than 40% of the sum of (i) the Company's Adjusted
Total Assets as of the end of the most recent fiscal quarter prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable (or interests therein) acquired by the Company or
any Subsidiary since the end of such fiscal quarter, including those obtained in
connection with the incurrence of such additional Debt and (iii) the amount of
any securities offering proceeds received by the Company or any Subsidiary since
the end of such fiscal quarter (to the extent that such proceeds were not used
to acquire such real estate assets or mortgages receivable or used to reduce
Debt) (Section 1004(c)).
S-27
<PAGE>
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Company or a
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof.
MAINTENANCE OF UNENCUMBERED TOTAL ASSET VALUE. The Company will at all
times maintain an Unencumbered Total Asset Value in an amount not less than 150%
of the aggregate principal amount of all outstanding unsecured Debt of the
Company and its Subsidiaries (Section 1004(d)).
As used in the Indenture and the description thereof herein:
"ADJUSTED TOTAL ASSETS" as of any date means the sum of (i) $328,177,823
(which represents the amount determined by multiplying the price at which
Colonial's common shares of beneficial interest were offered in the IPO by the
sum of (A) the common shares of beneficial interest of Colonial issued in the
IPO and (B) the Units of the Company not held by Colonial that were issued in
connection with the IPO), (ii) $108,841,000 (which represents the principal
amount of outstanding Debt of the Company immediately following the IPO) and
(iii) the purchase price or cost of any real estate assets or mortgages
receivable (or interests therein) acquired (including the value of any Units
issued in connection therewith) or developed after the IPO and the amount of any
securities offering proceeds and other proceeds of Debt received after the IPO
(to the extent such proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Debt), adjusted for the proceeds of any
real estate assets disposed of by the Company. This definition of "Adjusted
Total Assets" values the assets owned by the Company at the time of the IPO at
the market capitalization of the Company at that time, which the Company
believes to be a more appropriate measure of the value of those assets than
undepreciated book value, which reflects their pre-IPO cost before accumulated
depreciation.
"ANNUAL SERVICE CHARGE" as of any date means the amount of any interest
expensed during the four consecutive fiscal quarters most recently ended prior
to such date.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted for (a) interest on Debt of the Company
and its Subsidiaries, (b) provision for taxes of the Company and its
Subsidiaries based on income, (c) amortization of debt discount, (d) provisions
for losses on properties, (e) depreciation and amortization, (f) the effect of
any noncash charge resulting from a change in accounting principles in
determining Consolidated Net Income for such period and (g) amortization of
deferred charges, and less amounts that have been added in determining
Consolidated Net Income during such period for (a) provisions for gains from
sales or joint ventures and (b) decreases in deferred taxes and other non-cash
items.
"CONSOLIDATED NET INCOME" for any period means the amount of net income (or
loss) of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles.
"DEBT" of the Company or any Subsidiary means any indebtedness of the
Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed
money evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by the Company or any Subsidiary,
(iii) reimbursement obligations in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) any lease of property by the Company or
any Subsidiary as lessee which is reflected on the Company's consolidated
balance sheet as a capitalized lease in accordance with generally accepted
accounting principles; in the case of items of indebtedness incurred under (i)
through (iii) above to the extent that any such items (other than letters of
credit) would appear as a liability on the Company's consolidated balance sheet
in accordance with generally accepted accounting principles, and also includes,
to the extent not otherwise included, any obligation of the Company or any
Subsidiary to be
S-28
<PAGE>
liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), indebtedness of
another person (other than the Company or any Subsidiary).
"DISQUALIFIED STOCK" means, with respect to any person, any capital stock or
partnership interest of such person which by the terms of such capital stock or
partnership interest (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the occurrence
of any event or otherwise: (i) matures or is mandatorily redeemable, pursuant to
a sinking fund obligation or otherwise; (ii) is convertible into or exchangeable
or exercisable for Debt or Disqualified Stock; or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or prior to
the maturity of the relevant series of Notes.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries of the Company. For
the purposes of this definition, "voting stock" means stock having the voting
power for the election of directors, general partners, managers or trustees, as
the case may be, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency. The Management
Corporation would not be considered a Subsidiary of the Company.
"UNENCUMBERED TOTAL ASSET VALUE" as of any date means the sum of (i) the
portion of Adjusted Total Assets allocable to the Company's real estate assets
and (ii) the value of all other assets of the Company and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable), in each case
which are unencumbered by any mortgage, lien, charge, pledge or security
interest. For purposes of this definition, the portion of Adjusted Total Assets
allocable to each of the 36 properties owned by the Company at the time of the
IPO shall be determined by reference to each such property's contribution to net
operating income of the Company at the time of the IPO, and the portion
allocable to each property acquired or developed after the IPO shall be equal to
the purchase price or cost of such property.
Reference is made to the section entitled "Description of Debt
Securities--Certain Covenants" in the accompanying Prospectus for a description
of additional covenants applicable to the Notes. Compliance with the covenants
described herein and such additional covenants with respect to the Notes
generally may not be waived by the Board of Directors of CPHC, as general
partner of the Company, or by the Trustee unless the Holders of at least a
majority in principal amount of all outstanding Notes consent to such waiver;
PROVIDED, HOWEVER, that the defeasance and covenant defeasance provisions of the
Indenture described under "Description of Debt Securities--Discharge, Defeasance
and Covenant Defeasance" in the accompanying Prospectus will apply to the Notes,
including with respect to the covenants described in this Prospectus Supplement.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Company, in whole
or in part, at a redemption price equal to the sum of: (i) the principal amount
of the Notes being redeemed plus accrued interest thereon to the redemption
date; and (ii) the Make-Whole Amount (as defined below), if any, with respect to
such Notes (the "Redemption Price").
If notice of redemption has been given as provided in the Indenture and
funds for the redemption of any Notes called for redemption shall have been made
available on the redemption date referred to in such notice, such Notes will
cease to bear interest on the date fixed for such redemption specified in such
notice and the only right of the Holders of the Notes from and after the
redemption date will be to receive payment of the Redemption Price upon
surrender of such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for
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redemption. The notice of redemption will specify, among other items, the
Redemption Price and principal amount of the Notes held by such Holder to be
redeemed.
If less than all the Notes are to be redeemed at the option of the Company,
the Company will notify the Trustee at least 45 days prior to giving notice of
redemption (or such shorter period as may be satisfactory to the Trustee) of the
aggregate principal amount of Notes to be redeemed and their redemption date.
The Trustee shall select, in such manner as it shall deem fair and appropriate,
Notes to be redeemed in whole or in part.
As used herein:
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption of any
Notes, the excess, if any, of: (i) the aggregate present value as of the date of
such redemption of each dollar of principal being redeemed and the amount of
interest (exclusive of interest accrued to the date of redemption) that would
have been payable in respect of each such dollar if such redemption had not been
made, determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date notice of such redemption is given) from the respective dates
on which such principal and interest would have been payable if such redemption
had not been made, to the date of redemption; over (ii) the aggregate principal
amount of the Notes being redeemed.
"REINVESTMENT RATE" means the yield on Treasury securities at a constant
maturity corresponding to the remaining life (as of the date of redemption, and
rounded to the nearest month) to stated maturity of the principal being redeemed
(the "Treasury Yield"), plus 0.25%. For purposes hereof, the Treasury Yield
shall be equal to the arithmetic mean of the yields published in the Statistical
Release (as defined below) under the heading "Week Ending" for "U.S. Government
Securities--Treasury Constant Maturities" with a maturity equal to such
remaining life; provided, that if no published maturity exactly corresponds to
such remaining life, then the Treasury Yield shall be interpolated or
extrapolated on a straight-line basis from the arithmetic means of the yields
for the next shortest and next longest published maturities. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used. If
the format or content of the Statistical Release changes in a manner that
precludes determination of the Treasury Yield in the above manner, then the
Treasury Yield shall be determined in the manner that most closely approximates
the above manner, as reasonably determined by the Company.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of DTC
that affect the payment of principal and interest and transfers in the Global
Note. Upon issuance, the Notes will be issued only in the form of a Global Note
which will be deposited with, or on behalf of, DTC and registered in the name of
Cede & Co., as nominee of DTC. Unless and until it is exchanged in whole or in
part for Notes in definitive form under the limited circumstances described
below, a Global Note may not be transferred except as a whole: (i) by DTC to a
nominee of DTC; (ii) by a nominee of DTC to DTC or another nominee of DTC; or
(iii) by DTC or any such nominee to a successor or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Notes represented by such Global Note
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beneficially owned by such participants. Ownership of beneficial interests in
such Global Notes will be shown on, and the transfer of such ownership interests
will be effected only through, records maintained by DTC (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons holding through participants). The laws of some states may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may limit or impair the ability to own,
transfer or pledge beneficial interests in the Global Note.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of DTC and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a Holder under the Indenture. The Company understands that under existing
industry practices, if the Company requests any action of Holders or if an owner
of a beneficial interest in a Global Note desires to give or take any action
that a Holder is entitled to give or take under the Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Company, the Trustee or any agent of the
Company or agent of the Trustee will have any responsibility or liability for
any aspect of the records relating to or payment made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company expects that DTC, upon receipt of any payment of principal or
interest in respect of a Global Note, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in such Global Note as shown on the records of DTC. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Note held through such participants will be governed by standing customer
instructions and customary practice, as is now the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Company fails to appoint a successor depository registered as a
clearing agency under the Exchange Act within 90 days, the Company will issue
the Notes in definitive form in exchange for the Global Note. Any Notes issued
in definitive form in exchange for the Global Note will be registered in such
name or names, and will be issued in denominations of $1,000 and such integral
multiples thereof, as DTC shall instruct the Trustee. It is expected that such
instructions will be based upon directions received by DTC from participants
with respect to ownership of beneficial interests in the Global Note.
DTC has advised the Company of the following information regarding DTC. DTC
is a limited-purpose trust company organized under the Banking Law of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and
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certain other organizations, some of which (and/or their representatives) own
DTC. Access to the DTC book-entry system is also available to others, such as
banks, brokers and dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. All payments of principal and interest
in respect of the Notes will be made by the Company in immediately available
funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase from the Company, the principal amount of the Notes set forth below
opposite their respective names.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
--------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................... $ 122,500,000
Lehman Brothers Inc........................................................... 26,250,000
Morgan Stanley & Co. Incorporated............................................. 26,250,000
--------------
Total.............................................................. $ 175,000,000
--------------
--------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Notes are subject to the conditions contained
therein, and that if any of the Notes are purchased by the Underwriters pursuant
to the Underwriting Agreement, all the Notes agreed to be purchased by the
Underwriters must be so purchased.
The Company has been advised that the Underwriters propose initially to
offer the Notes directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain selected dealers
(who may include the Underwriters) at such price less a concession not in excess
of .4% of the principal amount of the Notes. The Underwriters may allow and the
selected dealers may reallow a concession to certain other dealers not in excess
of .25% of the principal amount of the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters to bid for and purchase the Notes.
Pursuant to an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the Offering, I.E., if they sell more Notes than set forth on the cover page of
this Prospectus Supplement, the Underwriters may reduce that short position by
purchasing Notes in the open market. In general, purchases of a security for the
purpose of stabilization or to reduce a short position could cause the price of
the security to be higher than it might be in the absence of such purchases.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor the Underwriters make any representations that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
The Company has agreed that, until the closing of the Offering, it will not,
without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, sell, offer to sell, distribute or otherwise dispose of any of its
debt securities or register for sale under the Securities Act any of its debt
securities, except for the Notes offered hereby.
The Company does not intend to apply for listing of the Notes on any
national securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable law
and regulations. The Underwriters are not obligated, however, to make a
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market in the Notes and any such market making may be discontinued at any time
at the sole discretion of the Underwriters. Accordingly, no assurance can be
given as to the liquidity of, or the existence of trading markets for, the
Notes.
LEGAL MATTERS
The legality of the Notes will be passed upon for the Company by Hogan &
Hartson L.L.P., Washington, D.C., and certain legal matters will be passed upon
for the Underwriters by Brown & Wood LLP, New York, N.Y. Hogan & Hartson L.L.P.
and Brown & Wood LLP will rely on the opinion of Sirote & Permutt, P.C.,
Birmingham, Alabama, as to matters of Alabama law.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996, and the
consolidated statements of income, partners' capital and cash flows for each of
the three years in the period ended December 31, 1997, which are incorporated by
reference in the Company's Form 10-K (incorporated herein by reference), and the
historical summary of revenues and direct operating expenses of The Orlando
Fashion Square, which is included in the Company's Form 8-K filed on June 11,
1998 (incorporated herein by reference), have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
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<PAGE>
PROSPECTUS
$450,000,000
Colonial Realty Limited Partnership
Debt Securities
----------------
Colonial Realty Limited Partnership (the "Company") may from time to time
offer in one or more series debt securities ("Debt Securities") with an
aggregate public offering price of up to $450,000,000 (or its equivalent based
on the exchange rate at the time of sale) in amounts, at prices and on terms to
be determined at the time of offering. The Debt Securities may be offered in
separate series in amounts, at prices and on terms to be described in one or
more supplements to this Prospectus (a "Prospectus Supplement").
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, the specific title, aggregate
principal amount, currency, form (which may be registered or bearer, or
certificated or global), authorized denominations, maturity, rate (or manner of
calculation thereof) and time of payment of interest, any terms for redemption
at the option of the Company or repayment at the option of the holder, any terms
for any sinking fund payments, additional covenants and any initial public
offering price.
The applicable Prospectus Supplement also will contain information, where
applicable, about certain U.S. federal income tax considerations relating to,
and any listing on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
The Debt Securities may be offered directly, through agents designated from
time to time by the Company, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Debt Securities,
their names, and any applicable purchase price, fee, commission or discount
arrangement with, between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Debt Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Debt Securities.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN FACTORS RELATING TO AN
INVESTMENT IN THE DEBT SECURITIES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is January 8, 1998.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and the documents incorporated by
reference herein and any accompanying Prospectus Supplement, including those set
forth in "Risk Factors" and "Use of Proceeds" herein, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forwarding-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
or industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions which will, among other things, affect demand for
multifamily properties, availability and creditworthiness of prospective
tenants, lease rents and the availability of financing, adverse changes in the
real estate markets including, among other things, competition with other
companies, risks of real estate acquisition, governmental actions and
initiatives, and environmental/safety requirements. See "Risk Factors."
THE COMPANY
The Debt Securities offered hereby are being issued by the Company, which is
the "operating partnership" of Colonial Properties Trust ("Colonial"), an
Alabama real estate investment trust ("REIT") whose common shares are listed on
the New York Stock Exchange ("NYSE") under the symbol "CLP." The Company is
managed by Colonial, through its wholly owned subsidiary, Colonial Properties
Holding Company, Inc., an Alabama corporation ("CPHC"), which in turn owns
approximately 67.8% of the common equity interests in the Company as of December
10, 1997 and serves as the sole general partner of the Company. The Company's
activities as of December 10, 1997 include ownership of a diversified portfolio
of 92 multifamily, retail and office properties located in Alabama, Florida,
Georgia, Mississippi, South Carolina, North Carolina, Virginia and Tennessee,
development of new properties, acquisitions of existing properties, and
build-to-suit development.
As of December 10, 1997, the Company owned a portfolio of 43 garden-style
multifamily apartment communities containing a total of 13,631 apartment units
(the "Multifamily Properties"), 36 retail properties (including 12 regional
malls, two "power centers," and 22 neighborhood shopping centers) containing a
total of approximately 10.2 million square feet of retail space (the "Retail
Properties"), 13 office properties containing a total of approximately 1.9
million square feet of office space (the "Office Properties") and parcels of
land adjacent to or near certain of these properties (the "Land"). (The
Multifamily Properties, the Retail Properties, the Office Properties and the
Land are referred to collectively as the "Properties.").
Colonial currently conducts all of its business through CPHC, the Company,
Colonial Properties Services Limited Partnership (the "Management Partnership"),
which provides management services for the Properties, and Colonial Properties
Services, Inc. (the "Management Corporation"), which provides management
services for properties owned by third parties. The Company owns all of the
Properties (or interests therein). The Company is the sole general partner of
the Management Partnership and owns 99% of the interests therein.
The Company's experienced staff of approximately 660 employees provides a
full range of real estate services from its headquarters in Birmingham, Alabama
and from seven regional offices located in the Mobile, Huntsville and
Montgomery, Alabama, Orlando and Tampa, Florida, Atlanta, Georgia and
Burlington, North Carolina metropolitan areas.
The principal executive offices of the Company are located at 2101 Sixth
Avenue North, Suite 750, Birmingham, Alabama 35203, and its telephone number is
(205) 250-8700.
2
<PAGE>
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
REAL ESTATE INVESTMENT RISKS
GENERAL. Real property investments are subject to varying degrees of risk.
The Company's ability to service debt will depend in large part on the amount of
income generated, expenses incurred and capital expenditures required. The
Company's income from retail, multifamily or office properties may be adversely
affected by a number of factors, including the general economic climate and
local real estate conditions, such as an oversupply of, or a reduction in demand
for, retail, apartment or office space in the area and the attractiveness of the
properties to shoppers, residents and tenants. In addition, income from
properties and real estate values also are affected by such factors as the cost
of compliance with government regulation, including zoning and tax laws, the
potential for liability under applicable laws, interest rate levels and the
availability of financing. Certain significant expenditures associated with each
equity investment by the Company in a property (such as mortgage payments, if
any, real estate taxes and maintenance costs) also are generally not reduced
when circumstances cause a reduction in income from the property.
RENEWAL OF LEASES AND RELETTING OF SPACE. The Company is subject to the
risks that upon expiration of leases for space located at the Properties, the
leases may not be renewed, the space may not be relet or the terms of the
renewal or reletting (including the cost of required renovations or concessions
to tenants) may be less favorable than current lease terms. Although the Company
has established an annual budget for renovation and reletting expenses that it
believes are reasonable in light of each Property's situation, no assurance can
be given that this budget will be sufficient to cover these expenses. If the
Company is unable promptly to relet or renew leases for all or substantially all
of the space at its Properties, if the rental rates upon such renewal or
reletting are significantly lower than expected, or if the Company's reserves
for these purposes prove inadequate, then the Company's cash provided by
operating activities and ability to make debt service payments could be
adversely affected.
DEPENDENCE ON PRIMARY MARKETS. All of the Properties are located in the
southern United States, and 41 of the Properties are located in Birmingham and
Montgomery, Alabama, Orlando, Florida and Macon, Georgia. The Company's
performance and its ability to make debt service payments could be adversely
affected by economic conditions in the Southeast and in Birmingham, Montgomery,
central Florida and Macon in particular.
POSSIBLE ENVIRONMENTAL LIABILITIES. Under various Federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous
substances released at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with the contamination. In
addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. The owner or operator
of a site also may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the site. The
Company has not been notified by any governmental authority of any material
non-compliance, liability or other claim in connection with any of the
Properties and the Company is not aware of any other environmental condition
with respect to any of the Properties that could be material. No assurance,
however, can be given that no prior owner created any material environmental
condition not known to the Company, that no material environmental condition
with respect to any Property has occurred during the Company's ownership
thereof, or that future uses or conditions (including, without limitation,
changes in applicable environmental laws and regulations) will not result in
imposition of environmental liability.
3
<PAGE>
At one of the Company's Properties, the Gadsden Mall in Gadsden, Alabama,
four underground storage tanks were removed in 1989. In connection with the
removal of these gasoline storage tanks, associated petroleum contamination was
discovered in the soil and groundwater. The Company is currently working with
the state regulatory agency to remediate the contamination in accordance with
applicable requirements. Because the tanks were registered with the Alabama
Department of Environmental Management and the facility was in compliance with
regulations prior to the incident, the Company has been reimbursed under the
Alabama Underground Storage Tank Trust Fund for the costs incurred to date in
connection with the ongoing cleanup, and expects to be reimbursed for the
remaining costs as well. Currently, a free product recovery program is underway.
At the Bardmoor Village Shopping Center in Largo, Florida, which the Company
acquired in October 1996, soil and groundwater contamination was discovered in
May 1995. The contamination included dry cleaning solvents, primarily
perchloroethylene, and was determined to have been released from a dry cleaning
business operated by a tenant at the property. The Company and the seller of the
property, Reynolds Metals Development Company ("Reynolds"), have entered into an
indemnity agreement under which Reynolds is obligated to indemnify the Company
against any claims brought by any governmental authorities or third parties as a
result of the contamination, including costs incurred in the investigation and
remediation of the contamination, as well as damages to persons, property or
natural resources. In addition, the Florida Department of Environmental
Protection has determined that the property is eligible for the State of
Florida's Drycleaning Solvent Cleanup Program, which means that remediation of
the contamination will be funded by the State's Hazardous Waste Management Trust
Fund.
DEBT FINANCING
The Company is subject to the risks associated with debt financing,
including the risk that the Company's cash provided by operating activities will
be insufficient to meet required payments of principal and interest, the risks
of rising interest rates on the Company's floating rate debt, the risk that the
Company will not be able to prepay or refinance existing indebtedness on the
Properties (which generally will not have been fully amortized at maturity) or
that the terms of such refinancing will not be as favorable as the terms of
existing indebtedness. In the event the Company is unable to secure refinancing
of such indebtedness on acceptable terms, the Company might be forced to dispose
of properties upon disadvantageous terms, which might result in losses to the
Company and might adversely affect the cash flow available for debt service. In
addition, If one or more properties are mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, the mortgage
securing the property could be foreclosed upon by, or the property could be
otherwise transferred to, the mortgagee with a consequent loss of income and
asset value to the Company.
CONFLICTS OF INTEREST
The Lowder family (which includes Thomas, James, Robert and Catherine Lowder
and their affiliates) holds interests in certain companies that in the past have
performed construction management, insurance brokerage and other services with
respect to the Properties. These companies may perform similar services for the
Company in the future. As a result of its financial interest in these companies,
the Lowder family may realize benefits from transactions between such companies
and the Company that are not realized by other holders of interests in the
Company. In addition, Thomas Lowder and his brother, James Lowder, as directors
of CPHC, may be in a position to influence the Company to do business with
companies in which the Lowder family has a financial interest. Although the
Company is subject to certain policies designed to eliminate or minimize
potential conflicts of interest, including a policy which requires that
transactions in which a director or officer of CPHC has a conflict of interest
be approved by a majority of the disinterested directors, there can be no
assurance that these policies will be successful in eliminating the influence of
such conflicts, or that such transactions, if any, will be on terms as favorable
to the Company as could be obtained in an arms-length transaction with a third
party.
4
<PAGE>
DEVELOPMENT AND ACQUISITION RISKS
The Company intends to continue development of new multifamily, retail and
office properties (including expansions of existing Properties on the land
adjacent to those Properties) and to consider acquisitions of multifamily,
retail and office properties where it believes that such development or
acquisition is consistent with the business strategies of the Company. New
project development is subject to a number of risks, including construction
delays or cost overruns that may increase project costs, financing risks as
described above, the failure to meet anticipated occupancy or rent levels,
failure to receive required zoning, occupancy and other governmental permits and
authorizations and changes in applicable zoning and land use laws, which may
result in the incurrence of development costs in connection with projects that
are not pursued to completion. In addition, because Colonial must distribute 95%
of its taxable income in order to maintain its qualification as a REIT, the
Company anticipates that new developments and acquisitions will be financed
primarily through lines of credit or other forms of secured or unsecured
construction financing. If permanent debt or equity financing is not available
on acceptable terms to refinance such new developments or acquisitions are
undertaken without permanent financing, further development activities or
acquisitions may be curtailed or cash available for distribution to shareholders
or to meet debt service obligations may be adversely affected. Acquisitions
entail risks that investments will fail to perform in accordance with
expectations and that judgments with respect to the costs of improvements to
bring an acquired property up to standards established for the market position
intended for that property will prove inaccurate, as well as general investment
risks associated with any new real estate investment. See "--Real Estate
Investment Risks" above.
CHANGES IN POLICIES
The major policies of the Company, including its policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by the board of directors of CPHC. Although it
has no present intention to do so, the board may amend or revise these and other
policies from time to time. A change in these policies could adversely affect
the Company's financial condition, results of operations, or ability to make
debt service payments.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds of any sale of Debt Securities for
general business purposes, including, without limitation, the development and
acquisition of additional properties as suitable opportunities arise, the
repayment of certain debt outstanding at such time, capital expenditures,
improvements to certain properties in the Company's portfolio, working capital
and other general purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 1993, 1994, 1995 and 1996 and the nine months ended September 30,
1997 was 1.26, 2.23, 1.91, 2.40 and 1.97, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income (loss) before
gains from sales of property and extraordinary items plus fixed charges. Fixed
charges consist of interest expense (including interest costs capitalized) and
the amortization of debt issuance costs.
Prior to completion of Colonial's initial public offering ("IPO"), certain
of the predecessor entities to the Company operated in a highly leveraged
manner. As a result, although the Properties have historically generated
positive net cash flow, the combined financial statements of the predecessor
entities for the fiscal year ended December 31, 1992 show net losses.
Consequently, the computation of the ratio of earnings to fixed charges for such
periods indicates that earnings were inadequate to cover fixed charges by
approximately $0.8 million for the year ended December 31, 1992.
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The reorganization and recapitalization effected in connection with the IPO
permitted the Company to de-leverage the Properties significantly, resulting in
an improved ratio of earnings to fixed charges for periods subsequent to the
IPO.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being offered
and the extent to which such general provisions may apply will be described in a
Prospectus Supplement relating to such Debt Securities.
The Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Indenture"), between the Company and
Bankers Trust Company, as trustee (the "Trustee"). The Indenture has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part
and is available for inspection at the corporate trust office of the Trustee or
as described above under "Available Information." The Indenture is subject to,
and governed by, the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made hereunder relating to the Indenture and the Debt Securities to
be issued thereunder are summaries of certain provisions thereof and do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of the Indenture and such Debt Securities. All
section references appearing herein are to sections of the Indenture, and
capitalized terms used but not defined herein shall have the respective meanings
set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured recourse obligations of the
Company and will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. Unless otherwise specified in the applicable
Prospectus Supplement, Colonial has no obligation for payment of principal or
interest on the Debt Securities. Except as set forth in the Indenture or in one
or more indentures supplemental thereto and described in a Prospectus Supplement
relating thereto, the Debt Securities may be issued without limit as to
aggregate principal amount, in one or more series, in each case as established
from time to time in or pursuant to authority granted by a resolution of the
Board of Directors of CPHC, as general partner of the Company, or as established
in the Indenture (or in accordance with) or in one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series. The Debt
Securities, while recourse to all of the assets of the Company, will not be
recourse to either CPHC, as general partner of the Company, or to Colonial, as
sole shareholder of CPHC.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of Debt Securities, each such Trustee shall be a
trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee, and, except as otherwise indicated herein,
any action described herein to be taken by each Trustee may be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee under the Indenture.
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The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without limitation:
(1) The title of such Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion
of the principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
(4) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such interest
will be payable, the regular record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the Indenture may be served;
(8) The period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if the Company
is to have such an option;
(9) The obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within which or
the date and dates on which, the price or prices at which and the other
terms and conditions upon which such Debt Securities will be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation;
(10) If other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and/or payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) Any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to Events of Default or covenants set
forth in the Indenture;
(13) Whether such Debt Securities will be issued in certificated and/or
book-entry form;
(14) Whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and the terms and conditions relating thereto;
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(15) The applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the Indenture;
(16) Whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax, assessment
or governmental charge and, if so, whether the Company will have the option
to redeem such Debt Securities in lieu of making such payment;
(17) The terms and conditions, if any, upon which such Debt Securities
may be subordinated to other indebtedness of the Company; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants--Limitations on
Incurrence of Debt," the Indenture does not contain any provisions that would
limit the ability of the Company to incur indebtedness or that would afford
Holders of Debt Securities protection in the event of a highly leveraged or
similar transaction involving the Company or in the event of a change of
control. Restrictions on ownership and transfers of Colonial's common shares of
beneficial interest and preferred shares of beneficial interest are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions to
the Events of Default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
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DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, Four
Albany Street, New York, New York 10006; provided that, at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto as it appears in the register for such Debt Securities
or by wire transfer of funds to such person at an account maintained within the
United States (Sections 301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than ten days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture
(Section 307).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the Trustee) initially designated
by the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a change
in the location through which any such transfer agent acts, except that the
Company will be required to maintain a transfer agent in each place of payment
for such series. The Company may at any time designate additional transfer
agents with respect to any series of Debt Securities (Section 1002).
Neither the Company nor the Trustee shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Company will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that (a) either the Company shall be the continuing entity, or
the successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets shall expressly assume payment of the principal of (and premium, if any)
and interest on all of the Debt Securities and the due and punctual performance
and observance of all of the covenants and conditions contained in the
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Indenture; (b) immediately after giving effect to such transaction and treating
any indebtedness that becomes an obligation of the Company or any Subsidiary as
a result thereof as having been incurred by the Company or such Subsidiary at
the time of such transaction, no Event of Default under the Indenture, and no
event which, after notice or the lapse of time, or both, would become such an
Event of Default, shall have occurred and be continuing; and (c) an officer's
certificate and legal opinion covering such conditions shall be delivered to the
Trustee (Sections 801 and 803).
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Company will not, and will not
permit any Subsidiary to, incur any Debt (as defined below), other than
intercompany Debt (representing Debt to which the only parties are Colonial, any
of its subsidiaries, the Company and any Subsidiary, or Debt owed to the
Management Corporation arising from routine cash management practices, but only
so long as such Debt is held solely by any of Colonial, any of its subsidiaries,
the Company and any Subsidiary), that is subordinate in right of payment to the
Debt Securities, if, immediately after giving effect to the incurrence of such
Debt and the application of the proceeds thereof, the aggregate principal amount
of all outstanding Debt of the Company and its Subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting principles is
greater than 60% of the sum of (i) the Company's Adjusted Total Assets (as
defined below) as of the end of the most recent fiscal quarter prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable (or interests therein) acquired by the Company or
any Subsidiary since the end of such fiscal quarter, including those obtained in
connection with the incurrence of such additional Debt and (iii) the net amount
of any securities offering proceeds received by the Company or any Subsidiary
since the end of such fiscal quarter (to the extent that such proceeds were not
used to acquire such real estate assets or mortgages receivable or used to
reduce Debt) (Section 1004(a)).
In addition to the foregoing limitation on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service to the Annual Service
Charge for the four consecutive fiscal quarters most recently ended prior to the
date on which such additional Debt is to be incurred shall have been less than
1.5 to 1, on a pro forma basis after giving effect to the incurrence of such
Debt and to the application of the proceeds thereof (Section 1004(b)).
Further, the Company will not, and will not permit any Subsidiary to, incur
any Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Company or any Subsidiary
("Secured Debt"), whether owned at the date of the Indenture or thereafter
acquired, if, immediately after giving effect to the incurrence of such Secured
Debt and the application of the proceeds thereof, the aggregate principal amount
of all outstanding Secured Debt of the Company and its Subsidiaries on a
consolidated basis is greater than 40% of the sum of (i) the Company's Adjusted
Total Assets as of the end of the most recent fiscal quarter prior to the
incurrence of such additional Debt, (ii) the purchase price of any real estate
assets or mortgages receivable (or interests therein) acquired by the Company or
any Subsidiary since the end of such fiscal quarter, including those obtained in
connection with the incurrence of such additional Debt and (iii) the amount of
any securities offering proceeds received by the Company or any Subsidiary since
the end of such fiscal quarter (to the extent that such proceeds were not used
to acquire such real estate assets or mortgages receivable or used to reduce
Debt) (Section 1004(c)).
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Company or a
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof.
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MAINTENANCE OF UNENCUMBERED TOTAL ASSET VALUE. The Company will at all
times maintain an Unencumbered Total Asset Value in an amount not less than 150%
of the aggregate principal amount of all outstanding unsecured Debt of the
Company and its Subsidiaries (Section 1004(d)).
EXISTENCE. Except as described above under "Merger, Consolidation or Sale,"
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights (by partnership agreement
and statute) and franchises; provided, however, that the Company shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1006).
MAINTENANCE OF PROPERTIES. The Company will cause all of its material
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that the Company and its Subsidiaries shall not
be prevented from selling or otherwise disposing of for value its properties in
the ordinary course of business (Section 1007).
INSURANCE. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage at least
equal to their then full insurable value with insurers of recognized
responsibility and having an A.M. Best policy holder's rating of not less than
A-:V (Section 1008).
PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings or for which the Company has set apart and maintains
an adequate reserve (Section 1009).
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act (as defined below), the Company will,
to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to such Section 13 or
15(d) if the Company were so subject (the "Financial Information"), such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company also will in
any event (x) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders of Debt Securities, as their names and addresses appear in the
Security Register, without cost to such Holders, copies of the Financial
Information and (ii) file with the Trustee copies of the Financial Information,
and (y) if filing such documents by the Company with the Commission is not
permitted under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective Holder (Section 1010).
As used herein,
"ADJUSTED TOTAL ASSETS" as of any date means the sum of (i) $328,177,823
(which represents the amount determined by multiplying the price at which
Colonial's common shares of beneficial interest were offered in the IPO by the
sum of (A) the common shares of beneficial interest of Colonial issued in the
IPO and
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(B) the Units of the Company not held by Colonial that were issued in connection
with the IPO), (ii) $108,841,000 (which represents the principal amount of
outstanding Debt of the Company immediately following the IPO) and (iii) the
purchase price or cost of any real estate assets or mortgages receivable (or
interests therein) acquired (including the value of any Units issued in
connection therewith) or developed after the IPO and the amount of any
securities offering proceeds and other proceeds of Debt received after the IPO
(to the extent such proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Debt), adjusted for the proceeds of any
real estate assets disposed of by the Company. This definition of "Adjusted
Total Assets" values the assets owned by the Company at the time of the IPO at
the market capitalization of the Company at that time, which the Company
believes to be a more appropriate measure of the value of those assets than
undepreciated book value, which reflects their pre-IPO cost before accumulated
depreciation.
"ANNUAL SERVICE CHARGE" as of any date means the amount of any interest
expensed during the four consecutive fiscal quarters most recently ended prior
to such date.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted for (a) interest on Debt of the Company
and its Subsidiaries, (b) provision for taxes of the Company and its
Subsidiaries based on income, (c) amortization of debt discount, (d) provisions
for gains and losses on properties, (e) depreciation and amortization, (f) the
effect of any noncash charge resulting from a change in accounting principles in
determining Consolidated Net Income for such period and (g) amortization of
deferred charges.
"CONSOLIDATED NET INCOME" for any period means the amount of net income (or
loss) of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles.
"DEBT" of the Company or any Subsidiary means any indebtedness of the
Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed
money evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by the Company or any Subsidiary,
(iii) reimbursement obligations in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable or (iv) any lease of property by the Company or
any Subsidiary as lessee which is reflected on the Company's consolidated
balance sheet as a capitalized lease in accordance with generally accepted
accounting principles; in the case of items of indebtedness incurred under (i)
through (iii) above to the extent that any such items (other than letters of
credit) would appear as a liability on the Company's consolidated balance sheet
in accordance with generally accepted accounting principles, and also includes,
to the extent not otherwise included, any obligation of the Company or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Company or any Subsidiary).
"DISQUALIFIED STOCK" means, with respect to any person, any capital stock or
partnership interest of such person which by the terms of such capital stock or
partnership interest (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the occurrence
of any event or otherwise: (i) matures or is mandatorily redeemable, pursuant to
a sinking fund obligation or otherwise; (ii) is convertible into or exchangeable
or exercisable for Debt or Disqualified Stock; or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case or prior to the
maturity of the relevant series of Debt Securities.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries of the Company. For
the purposes of this definition, "voting stock" means stock having the voting
power for the election of
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directors, general partners, managers or trustees, as the case may be, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency. The Management Corporation would not be considered
a Subsidiary of the Company.
"UNENCUMBERED TOTAL ASSET VALUE" as of any date means the sum of (i) the
portion of Adjusted Total Assets allocable to the Company's real estate assets
and (ii) the value of all other assets of the Company and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable), in each case
which are unencumbered by any mortgage, lien, charge, pledge or security
interest. For purposes of this definition, the portion of Adjusted Total Assets
allocable to each of the 36 properties owned by the Company at the time of the
IPO shall be determined by reference to each such property's contribution to net
operating income of the Company at the time of the IPO, and the portion
allocable to each property acquired or developed after the IPO shall be equal to
the purchase price or cost of such property.
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of the Company and/or modifications to the
covenants described above with respect to any Debt Securities or series thereof,
will be described in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (ii) default in the payment of principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (iii) default in making
any sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Company contained in the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued thereunder other
than such series), continued for 60 days after written notice as provided in the
Indenture; (v) default in the payment of an aggregate principal amount exceeding
$10,000,000 of any indebtedness of the Company or any mortgage, indenture or
other instrument under which such indebtedness is issued or by which such
indebtedness is secured, such default having occurred after the expiration of
any applicable grace period and having resulted in the acceleration of the
maturity of such indebtedness, but only if such indebtedness is not discharged
or such acceleration is not rescinded or annulled; (vi) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any SIGNIFICANT SUBSIDIARY or the
property of either; and (vii) any other Event of Default provided with respect
to a particular series of Debt Securities (Section 501). "Significant
Subsidiary" means any Subsidiary that is a "significant subsidiary" (within the
meaning of Regulation S-X promulgated under the Securities Act (as defined
below)) of the Company.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% of the principal
amount of the Outstanding Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the Holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then Outstanding under
the Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (a) the
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Company shall have deposited with the Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then Outstanding under the Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all events of default, other than the non-payment of accelerated
principal (or specified portion thereof), with respect to Debt Securities of
such series (or of all Debt Securities then Outstanding under the Indenture, as
the case may be) have been cured or waived as provided in the Indenture (Section
502). The Indenture also provides that the Holders of not less than a majority
in principal amount of the Outstanding Debt Securities of any series (or of all
Debt Securities then Outstanding under the Indenture, as the case may be) may
waive any past default with respect to such series and its consequences, except
a default (x) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the Indenture that cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
shall have been cured or waived; provided, however, that the Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified responsible officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the cases of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any Holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
such Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to the Trustee a certificate, signed by one of several
specified officers of CPHC, stating whether or not such officer has knowledge of
any default under the Indenture and, if so, specifying each such default and the
nature and status thereof (Section 1011).
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MODIFICATION OF THE INDENTURES
Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under the Indenture which are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the place of payment, or the coin or
currency, for payment of principal or premium, if any, or interest on any such
Debt Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of Outstanding Debt Securities of any series necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of each series affected thereby have the right to waive
compliance by the Company with certain covenants in the Indenture (Section
1013).
Modifications and amendments of the Indenture may be permitted to be made by
the Company and the Trustee without the consent of any Holder of Debt Securities
for any of the following purposes: (i) to evidence the succession of another
person to the Company as obligor under the Indenture; (ii) to add to the
covenants of the Company for the benefit of the Holders of all or any series of
Debt Securities or to surrender any right or power conferred upon the Company in
the Indenture; (iii) to add Events of Default for the benefit of the Holders of
all or any series of Debt Securities; (iv) to add or change any provisions of
the Indenture to facilitate the issuance of, or to liberalize certain terms of,
Debt Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that such action shall not adversely
affect the interests of the Holders of the Debt Securities of any series in any
material respect; (v) to change or eliminate any provisions of the Indenture,
provided that any such change or elimination shall become effective only when
there are no Debt Securities Outstanding of any series created prior thereto
which are entitled to the benefit of such provision; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities of any
series; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the Indenture by
more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in
the Indenture, provided that such action shall not adversely affect the
interests of Holders of Debt Securities of any series issued under the Indenture
in any material respect; or (x) to supplement any of the provisions of the
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action shall
not adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar
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equivalent, determined on the issue date for such Debt Security, of the
principal amount (or, in the case of Original Issue Discount Security, the U.S.
dollar equivalent on the issue date of such Debt Security of the amount
determined as provided in (i) above), (iii) the principal amount of an indexed
security that shall be deemed Outstanding shall be the principal face amount of
such indexed security at original issuance, unless otherwise provided with
respect to such indexed security pursuant to the Indenture and (iv) Debt
Securities owned by the Company or any other obligor upon the Debt Securities or
any affiliate of the Company or of such other obligor shall be disregarded
(Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Company or the
Holders of at least 10% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture
(Section 1502). Except for any consent that must be given by the Holder of each
Debt Security affected by certain modifications and amendments of the Indenture,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Debt Securities of that
series; provided, however, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the Indenture will be binding on all Holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such series
will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, the Indenture provides that if any
action is to be taken at a meeting of Holders of Debt Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver and other action that the Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Debt Securities affected thereby, or the Holders of such series and
one or more additional series: (i) there shall be no minimum quorum requirement
for such meeting, and (ii) the principal amount of the Outstanding Debt
Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under the Indenture (Section 1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may be permitted under the Indenture to discharge certain
obligations to Holders of any series of Debt Securities issued thereunder that
have not already been delivered to the Trustee for cancellation and that either
have become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
Trustee, in trust, funds in such currency or currencies, currency unit or units
or composite currency or currencies in which such Debt Securities are payable in
an amount sufficient to pay the entire indebtedness on such Debt Securities in
respect of principal (and premium, if any) and interest to the date of such
deposit (if such Debt Securities have become due and payable) or to the stated
maturity or redemption date, as the case may be.
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The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities, and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under certain specified sections of Article Ten
of the Indenture as specified in the applicable Prospectus Supplement and any
omission to comply with such obligations shall not constitute an Event of
Default with respect to such Debt Securities ("covenant defeasance") (Section
1403), in either case upon the irrevocable deposit by the Company with the
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient without reinvestment to pay the principal of (and premium, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Trustee an opinion of counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, and such
opinion of counsel, in the case of defeasance, will be required to refer to and
be based upon a ruling of the Internal Revenue Service or a change in applicable
U.S. federal income tax law occurring after the date of the Indenture (Section
1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation of the United States of America or such government, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligation held by such
custodian for the account of the Holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the Holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if, after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the Indenture or the terms of such Debt Security to receive payment
in a currency, currency unit or composite currency other than that in which such
deposit has been made in respect of such Debt Security, or (b) a Conversion
Event (as defined below) occurs in respect of the currency, currency unit or
composite currency in which such deposit has been made, the indebtedness
represented by such Debt Security will be deemed to have been, and will be,
fully discharged and satisfied through the payment of the principal of (and
premium, if any) and interest on such Debt Security as they become due
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out of the proceeds yielded by converting the amount so deposited in respect of
such Debt Security into the currency, currency unit or composite currency in
which such Debt Security becomes payable as a result of such election or
Conversion Event or such cessation of usage based on the applicable market
exchange rate (Section 1405). "Conversion Event" means the cessation of use of
(i) a currency, currency unit or composite currency both by the government of
the country which issued such currency and for the settlement of transactions by
a central bank or other public institutions of or within the international
banking community, (ii) the ECU both within the European Monetary System and for
the settlement of transactions by public institutions of or within the European
Communities or (iii) any currency unit or composite currency other than the ECU
for the purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a foreign currency
that ceases to be used by its government of issuance shall be made in U.S.
dollars (Section 101).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (iv) under "Events of Default, Notice and Waiver" with respect to
certain specified sections of Article Ten of the Indenture (which sections would
no longer be applicable to such Debt Securities as a result of such covenant
defeasance) or described in clause (vii) under "Events of Default, Notice and
Waiver" with respect to any other covenant as to which there has been covenant
defeasance, the amount in such currency, currency unit or composite currency in
which such Debt Securities are payable, and Government Obligations on deposit
with the Trustee, will be sufficient to pay amounts due on such Debt Securities
at the time of their stated maturity but may not be sufficient to pay amounts
due on such Debt Securities at the time of the acceleration resulting from such
Default. However, the Company would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any time
at the option of the Company, in whole or in part, at the Redemption Price,
except as may otherwise be provided in connection with any Debt Securities or
series thereof.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the Holders of the Debt Securities will be to receive payment of
the Redemption Price (Section 1106).
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed
(Section 1104).
If the Company elects to redeem Debt Securities, it will notify the Trustee
at least 45 days prior to the redemption date (or such shorter period as is
satisfactory to the Trustee) of the aggregate principal amount of Debt
Securities to be redeemed and the redemption date (Section 1102). If less than
all the Debt Securities are to be redeemed, the Trustee shall select the Debt
Securities to be redeemed in such manner as it shall deem fair and appropriate.
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NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of Colonial or equity interest in the Company.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depository identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities to or through underwriters for
public offer and sale by them, and also may sell the Debt Securities offered
hereby to investors directly or through agents. Any such underwriter or agent
involved in the offer and sale of the Debt Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market prices
at the time of sale or at negotiated prices. The Company also may, from time to
time, authorize underwriters acting as the Company's agents to offer and sell
the Debt Securities upon terms and conditions set forth in the applicable
Prospectus Supplement. In connection with the sale of the Debt Securities,
underwriters may be deemed to have received compensation from the Company in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of the Debt Securities for whom they may act as agent.
Underwriters may sell the Debt Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Debt Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Debt Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Debt Securities may be deemed
to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements to be entered
into with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to delayed delivery contracts ("Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Each
Contract will be for an amount not less than, and the aggregate principal amount
of Debt Securities sold pursuant to Contracts shall be not less nor more than,
the respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company. Contracts will not
be subject to any conditions except (i) the purchase by an institution of the
Debt Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is
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subject, and (ii) if the Debt Securities are being sold to underwriters, the
Company shall have sold to such underwriters the total principal amount of the
Debt Securities less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for the Company and its Subsidiaries
in the ordinary course of business.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission in accordance with the
Exchange Act can be inspected at the Public Reference Section maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and the
following regional offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Debt Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference is
made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Debt Securities, reference is hereby made to the
Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission. The Commission maintains a 'web site'
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is "http://www.sec.gov".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are integrated herein by reference:
1. The Company's Form 10 filed with the Commission on May 13, 1996,
File No. 0-20707, and as amended on June 21, 1996, July 3, 1996 and July 5,
1996.
2. The Company's Annual Report on Form 10-K for the year ended December
31, 1996 (the "Form 10-K").
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
4. The Company's Current Reports on Form 8-K filed on July 21, 1997,
September 17, 1997 and December 10, 1997.
All documents filed by the Company subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
termination of the offering of all Debt Securities to which this Prospectus
relates shall be deemed to be incorporated by reference in this Prospectus and
shall be part hereof from the date of filing of such document.
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Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of Debt
Securities or in any other subsequently filed document that is also incorporated
or deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus or
any accompanying Prospectus Supplement. Subject to the foregoing, all
information appearing in this Prospectus and each accompanying Prospectus
Supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon their
written or oral request, a copy of the Form 10 and any or all other documents
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be addressed to Douglas B. Nunnelley,
Senior Vice President and Secretary of Colonial Properties Holding Company,
Inc., at 2101 Sixth Avenue North, Suite 750, Birmingham, Alabama 35203,
telephone number (205) 250-8700.
LEGAL MATTERS
The legality of the Debt Securities offered hereby will be passed upon for
the Company by Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of operations, partners' capital, and cash flows for
each of the three years in the period ended December 31, 1996, which are
included in the Company's Form 10-K (incorporated herein by reference) and the
historical summaries of revenues and direct operating expenses of Acquired
Properties--Riverchase Center Building 2100, Beechwood Shopping Center,
Brookwood Mall, The Meadows at Trussville, and the Proposed Office and Retail
Merger, all of which are included in the Company's Form 8-K filed July 21, 1997
(incorporated herein by reference), and the historical summaries of revenues and
direct operating expenses of Acquired Properties--Georgia Malls, Mark Trace
Apartments and the Retail Portfolio, all of which are included in the Company's
Form 8-K filed December 10, 1997 (incorporated herein by reference), have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SELF MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
PAGE
---------
Prospectus Supplement Summary......... S-3
<S> <C>
Recent Developments................... S-9
The Company........................... S-11
Use of Proceeds....................... S-14
Capitalization........................ S-15
Selected Financial and Operating
Information......................... S-16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-18
Properties............................ S-22
Management............................ S-25
Description of the Notes.............. S-26
Underwriting.......................... S-33
Legal Matters......................... S-34
Experts............................... S-34
<CAPTION>
PROSPECTUS
<S> <C>
Special Note Regarding Forward
Looking Statements.................... 2
The Company........................... 2
Risk Factors.......................... 3
Use of Proceeds....................... 5
Ratios of Earnings to Fixed Charges... 5
Description of Debt Securities........ 6
Plan of Distributions................. 19
Available Information................. 20
Incorporation of Certain Documents by
Reference........................... 20
Legal Matters......................... 21
Experts............................... 21
</TABLE>
$175,000,000
[LOGO]
COLONIAL REALTY
LIMITED PARTNERSHIP
7% SENIOR NOTES DUE JULY 14, 2007
------------------
PROSPECTUS SUPPLEMENT
------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
JULY 9, 1998
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