UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended:
June 30, 1999 Commission File Number: 0-20707
COLONIAL REALTY LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 63-1098468
(State of organization) (IRS Employer
Identification Number)
2101 Sixth Avenue North 35203
Suite 750 (Zip Code)
Birmingham, Alabama
(Address of principal executive offices)
(205) 250-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO ___
Explanatory note: The registrant is filing this Quarterly Report on Form 10-Q/A
to reflect an adjustment made to previously reported depreciation expense in the
registrant's original report on Form 10-Q as of and for the three and six months
ended June 30, 1999. See Note 6 in the Notes to Consolidated Condensed Financial
Statements for further discussion and the effect of the adjustment.
The restatement of the original report on Form 10-Q as of and for the three and
six months ended June 30, 1999 does not affect the federal income tax treatment
of distributions or dividends previously paid to unitholders.
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q/A
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as of
June 30, 1999 and December 31, 1998 3
Consolidated Condensed Statements of Income for the
Three Months and for the Six Months Ended June 30, 4
1999 and 1998
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Condensed Financial Statements 6
Report of Independent Accountants 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II: OTHER INFORMATION
Item 2. Changes in Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBITS 18
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
--------------------
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(Unaudited) 1998
----------- ------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net $1,556,227 $1,566,840
Undeveloped land and construction in progress 208,436 128,336
Cash and equivalents 3,695 4,582
Restricted cash 2,965 2,897
Accounts receivable, net 12,343 9,151
Prepaid expenses 2,820 3,116
Notes receivable 727 696
Deferred debt and lease costs, net 9,374 9,644
Investment in unconsolidated subsidiaries 21,778 26,079
Other assets 6,121 5,207
---------- ----------
$1,824,486 $1,756,548
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable $ 917,583 $ 909,322
Accounts payable 6,957 8,150
Accounts payable to affiliates 4,771 4,670
Accrued interest 12,025 12,051
Accrued expenses 12,404 3,559
Tenant deposits 4,316 4,272
Unearned rent 1,850 2,800
---------- ----------
Total liabilities 959,906 944,824
---------- ----------
Redeemable units, at redemption value 300,549 282,597
Preferred units:
Series A Preferred Units 125,000 125,000
Series B Preferred Units 100,000 0
Partners' capital 339,031 404,127
---------- ----------
Total partners' capital 564,031 529,127
---------- ----------
$1,824,486 $1,756,548
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per unit data)
---------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---------------------- ----------------------
Revenue:
<S> <C> <C> <C> <C>
Minimum rent $ 56,145 $ 48,822 $ 110,822 $ 96,005
Percentage rent 724 664 1,621 1,442
Tenant recoveries 7,844 6,958 16,268 14,239
Other 5,188 3,139 8,649 5,957
--------- --------- --------- ---------
Total revenue 69,901 59,583 137,360 117,643
--------- --------- --------- ---------
Property operating expenses:
General operating expenses 5,038 4,396 10,158 8,706
Salaries and benefits 3,565 3,004 7,042 5,873
Repairs and maintenance 6,845 5,598 13,425 11,094
Taxes, licenses, and insurance 5,753 5,082 11,872 9,936
General and administrative 2,540 1,363 4,807 3,917
Depreciation 13,033 10,794 25,921 20,955
Amortization 557 343 1,082 680
--------- --------- --------- ---------
Total operating expenses 37,331 30,580 74,307 61,161
--------- --------- --------- ---------
Income from operations 32,570 29,003 63,053 56,482
--------- --------- --------- ---------
Other income (expense):
Interest expense (13,505) (11,612) (27,459) (24,191)
Income from unconsolidated subsidiaries 477 28 985 37
Gains from sales of property 473 65 3,478 33
Minority interest in consolidated operating property (22) -0- (82) -0-
--------- --------- --------- ---------
Total other expense (12,577) (11,519) (23,078) (24,121)
--------- --------- --------- ---------
Income before extraordinary item 19,993 17,484 39,975 32,361
Extraordinary income (loss) 115 (5) 115 (400)
--------- --------- --------- ---------
Net income $ 20,108 $ 17,479 $ 40,090 $ 31,961
Distributions to preferred unitholders (5,003) (2,735) (8,625) (5,469)
--------- --------- --------- ---------
Net income available to common unitholders $ 15,105 $ 14,744 $ 31,465 $ 26,492
========= ========= ========= =========
Net income per unit - basic and diluted $ 0.42 $ 0.42 $ 0.86 $ 0.80
========= ========= ========= =========
Weighted average common units outstanding 35,967 35,021 36,383 33,240
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
-------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1999 1998
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 40,090 $ 31,961
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 27,003 21,635
Income from unconsolidated subsidiaries (985) (37)
Gains from sales of property (3,478) (33)
Other 580 723
Decrease (increase) in:
Restricted cash (68) (32)
Accounts and notes receivable (3,803) (1,396)
Prepaid expenses 296 101
Other assets (1,344) (1,404)
Increase (decrease) in:
Accounts payable (1,092) (8,513)
Accrued interest (26) 286
Accrued expenses and other 8,027 6,779
--------- ---------
Net cash provided by operating activities 65,200 50,070
--------- ---------
Cash flows from investing activities:
Acquisition of properties (15,220) (143,202)
Development expenditures (83,526) (33,946)
Tenant improvements (4,224) (1,420)
Capital expenditures (8,315) (4,714)
Proceeds from sales of property, net of selling costs 23,586 908
Distributions from unconsolidated subsidiaries 6,690 39
Capital contributions to unconsolidated subsidiaries (1,404) (21)
--------- ---------
Net cash used in investing activities (82,413) (182,356)
--------- ---------
Cash flows from financing activities:
Principal reductions of debt (10,050) (11,869)
Proceeds from additional borrowings 9,750 -0-
Net change in revolving credit balances 8,473 47,524
Cash contributions 101,158 137,185
Capital distributions (55,358) (42,088)
Purchase of treasury units (37,265) -0-
Payment of mortgage financing cost (382) (32)
Other, net -0- (400)
--------- ---------
Net cash provided by financing activities 16,326 130,320
--------- ---------
Decrease in cash and equivalents (887) (1,966)
Cash and equivalents, beginning of period 4,582 4,534
--------- ---------
Cash and equivalents, end of period $ 3,695 $ 2,568
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Note 1 -- Basis of Presentation
Colonial Realty Limited Partnership ("CRLP") is the operating
partnership of Colonial Properties Trust (the "Company"), an Alabama real estate
investment trust whose shares are traded on the New York Stock Exchange. The
accompanying unaudited consolidated condensed financial statements of CRLP have
been prepared by management in accordance with generally accepted accounting
principles for interim financial reporting and in conjunction with the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. These financial statements should be read in conjunction with the
information included in CRLP's Annual Report as filed with the Securities and
Exchange Commission on Form 10-K for the year ended December 31, 1998, and with
the information filed with the Securities and Exchange Commission on Form 10-Q
for the quarter ended March 31, 1999. The December 31, 1998 balance sheet data
presented herein was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting principles.
In July 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities, which addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and hedging activities. Under SFAS 133, CRLP will be required
to account for derivative financial instruments, if any, at their fair market
value, and make certain required disclosures. CRLP is required to adopt SFAS 133
for all periods beginning after June 15, 2000.
Note 2 -- Acquisitions
Emmett R. Johnson Building-- On June 22, 1999, CRLP acquired the Emmett
R. Johnson Building, a 163,000 square-foot Class A office building located in
Birmingham, Alabama. The property was built in 1982, renovated in 1995, and was
90% leased at the time of acquisition. The Emmett R. Johnson Building was
acquired for a purchase price of $16.5 million, and was funded through an
advance on CRLP's unsecured line of credit.
Colonial Village at Haverhill-- On May 1, 1999, CRLP acquired the
remaining 20.2% ownership in Colonial Village at Haverhill, a 322-unit apartment
complex on approximately 19 acres of land in San Antonio, Texas. On July 1,
1998, CRLP had acquired 79.8% ownership in Colonial Village at Haverhill. The
purchase of the remaining 20.2% interest was funded through the issuance of
157,140 limited partnership units, valued at approximately $4.2 million.
<PAGE>
Note 3 -- Net Income Per Unit
The following table sets forth the computation of basic and diluted
earnings per unit:
<TABLE>
<CAPTION>
(Amounts in thousands,
except per unit data)
------------------------------------------------------------
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Numerator:
Numerator for basic and diluted net
income per unit - net income
<S> <C> <C> <C> <C>
available to common unitholders $ 15,105 $ 14,744 $ 31,465 $ 26,492
============ ============ ============ ============
Denominator:
Denominator for basic net income
per unit - weighted average common 35,967 35,021 36,383 33,240
units
Effect of dilutive securities:
Trustee and employee share options 22 53 22 53
------------ ------------ ------------ ------------
Denominator for diluted net income
per unit - adjusted weighted
average common units 35,989 35,074 36,405 33,293
============ ============ ============ ============
Basic net income per unit $ .42 $ .42 $ .86 $ .80
============ ============ ============ ============
Diluted net income per unit $ .42 $ .42 $ .86 $ .80
============ ============ ============ ============
</TABLE>
Options to purchase 419,348 common shares at a weighted average exercise price
of $28.72 per share were outstanding during 1999 but were not included in the
computation of diluted net income per unit because the options' exercise price
was greater than the average market price of the common shares and, therefore,
the effect would be antidilutive.
Note 4 -- Segment Information
CRLP is organized into, and manages its business based on the
performance of three separate and distinct operating divisions: Multifamily,
Retail, and Office. Each division has a separate management team that is
responsible for acquiring, developing, managing, and leasing properties within
each division. The applicable accounting policies of the segments are
substantially the same as those described in the "Summary of Significant
Accounting Policies" in CRLP's 1998 Annual Report. However, the pro rata portion
of the revenues, net operating income ("NOI"), and assets of the partially owned
entities and joint ventures that CRLP has entered into are included in the
applicable segment information. Subsequently, in the reconciliation to total
revenues, total NOI, and total assets, the amounts are eliminated, as the
investment in the partially owned entities and joint ventures are reflected in
the consolidated financial statements as investments accounted for under the
equity method.
<PAGE>
Management evaluates the performance of its segments and allocates resources to
them based on NOI. NOI consists of revenues in excess of general operating
expenses, salaries and wages, repairs and maintenance, taxes, licenses, and
insurance. Segment information for the three and six months ended June 30, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
As of and for the
Three Months Ended
June 30, 1999 Multifamily Retail Office Total
----------- ----------- ----------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Total Divisional Revenues $ 29,232 $ 32,837 $ 9,690 $ 71,759
NOI 19,323 23,651 6,674 49,648
Divisional assets 813,158 748,604 273,022 1,834,784
- --------------------------------------------------------------------------------
Three Months Ended
June 30, 1998 Multifamily Retail Office Total
----------- ----------- ----------- ----------
(in thousands)
Total Divisional Revenues $ 24,929 $ 27,223 $ 7,463 $ 59,615
NOI 16,528 19,647 5,420 41,595
- --------------------------------------------------------------------------------
Six Months Ended
June 30, 1999 Multifamily Retail Office Total
----------- ----------- ----------- ----------
(in thousands)
Total Divisional Revenues $ 57,303 $ 64,870 $ 19,512 $ 141,685
NOI 37,486 46,161 13,648 97,295
- --------------------------------------------------------------------------------
Six Months Ended
June 30, 1998 Multifamily Retail Office Total
----------- ----------- ----------- ----------
(in thousands)
Total Divisional Revenues $ 49,076 $ 53,255 $ 14,973 $ 117,304
NOI 32,788 38,180 10,887 81,855
- --------------------------------------------------------------------------------
For the Period Ended
December 31, 1998
(in thousands) Multifamily Retail Office Total
----------- ----------- ----------- ----------
Divisional assets $ 783,097 $ 742,761 $ 241,131 $1,766,989
- --------------------------------------------------------------------------------
</TABLE>
A reconciliation of total segment revenues to total revenues, total
segment NOI to income from operations, for the three and six months ended June
30, 1999 and 1998, and total divisional assets to total assets, for the periods
ended June 30, 1999 and December 31, 1998, is presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
As of and for the As of and for the As of and for the As of and for the
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
(in thousands) June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
Revenues
- ------------------------------------------------------------------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Total divisional revenues $ 71,759 $ 59,615 $ 141,685 $ 117,304
Unallocated corporate revenues 541 35 742 474
Partially-owned subsidiaries (2,399) (67) (5,067) (135)
- ------------------------------------------------------------------------------- -------------------- --------------------
Total Revenues $ 69,901 $ 59,583 $ 137,360 $ 117,643
- ------------------------------------------------------------------------------- -------------------- --------------------
NOI
- ------------------------------------------------------------------------------- -------------------- --------------------
Total divisional NOI $ 49,648 $ 41,595 $ 97,295 $ 81,855
Unallocated corporate revenues 541 35 742 474
Partially-owned subsidiaries (1,540) (41) (3,129) (81)
General and administrative expenses (2,540) (1,362) (4,807) (3,917)
Depreciation (13,033) (10,794) (25,921) (20,955)
Amortization (557) (343) (1,082) (680)
Other 51 (85) (45) (214)
- ------------------------------------------------------------------------------- -------------------- --------------------
- ------------------------------------------------------------------------------- -------------------- --------------------
Income from operations $ 32,570 $ 29,005 $ 63,053 $ 56,482
- ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
For the Period Ended For the Period Ended
Assets June 30, 1999 December 31, 1998
- -------------------------------------------------------------------------------
Total divisional assets $ 1,834,784 $ 1,766,989
Unallocated corporate assets (1) 50,226 49,149
Partially-owned subsidiaries (60,524) (60,689)
- -------------------------------------------------------------------------------
Total assets $ 1,824,486 $ 1,755,449
- -------------------------------------------------------------------------------
(1) Includes the Company's investment in partially owned entities of $20,685 as
of June 30, 1999, and 25,181 as of December 31, 1998.
</TABLE>
Note 5 -- Subsequent Events
Quarterly Distributions
On July 22, 1999, a cash distribution was declared to partners of CRLP
in the amount of $0.58 per unit, totaling $20.3 million. The distribution was
declared to partners of record as of August 2, 1999, and was paid on August 9,
1999.
Public Offering of Securities
On August 4, 1999, CRLP completed an offering of unsecured medium term
notes totaling $82.5 million. The securities were issued in two tranches of
$57.5 million maturing in August 2002 at 7.93% and $25 million maturing in
August 2004 at 8.19%. CRLP used the net proceeds of the offering to repay a
portion of the outstanding balance on its unsecured line of credit.
Note 6 - Restatement of Previously Issued Quarterly Information
Land, buildings, and equipment, partners' capital, net income
available to common unitholders, and net income per common unit as of and for
the three and six months ended June 30, 1999 have been revised from previously
reported results to reflect an adjustment made to previously reported
depreciation expense. The effect of this adjustment is an increase in net income
available to common unitholders and net income per unit, and an increase to net
land, buildings, and equipment and partners' capital as of and for the three and
six months ended June 30, 1999.
The adjustment results in the following changes to CRLP's Consolidated
Condensed Balance Sheet and Consolidated Condensed Statement of Income for the
Three and Six-Month Periods Ended June 30, 1999:
<TABLE>
<CAPTION>
($ in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
Previously As Previously As
Reported Restated Reported Restated
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Land, buildings, and equipment, net $1,553,739 $1,556,227 $1,553,739 $1,556,227
Partners' capital 336,543 339,031 336,543 339,031
Net income available to common
unitholders 13,490 15,105 28,977 31,465
Net income per common unit $ 0.38 $ 0.42 $ 0.80 $ 0.86
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Colonial Properties Trust:
We have reviewed the accompanying consolidated condensed balance sheet
of Colonial Realty Limited Partnership (the "Partnership") as of June 30, 1999,
and the related consolidated condensed statements of income for the three-month
and six-month periods ended June 30, 1999 and 1998, and the consolidated
condensed statements of cash flows for the six-month periods ended June 30, 1999
and 1998. These financial statements are the responsibility of the Partnership's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, after giving effect to the restatement described
in Note 6, we are not aware of any material modifications that should be made to
the accompanying consolidated condensed financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31, 1998, and
the related consolidated statements of operations, partners' capital, and cash
flows for the year then ended (not presented herein); and in our report dated
January 13, 1999, except for Note 16, as to which the date is February 10, 1999,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of December 31, 1998, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
July 19, 1999, except for Note 6, as to
which the date is November 15, 1999
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Colonial Realty Limited Partnership ("CRLP"), a Delaware limited
partnership, is the operating partnership of Colonial Properties Trust, an
Alabama real estate investment trust (the "Company") whose shares are listed on
the New York Stock Exchange. The Company is engaged in the ownership,
development, management, and leasing of multifamily communities, retail malls
and shopping centers, and office buildings. The Company is organized as a real
estate investment trust (REIT) and owns and operates properties in eight states
in the Sunbelt region of the United States. As of June 30, 1998, CRLP's real
estate portfolio consisted of 51 multifamily communities, 40 retail properties,
and 18 office properties.
CRLP is one of the largest diversified REITs in the United States.
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
CRLP to utilize specialized management personnel for each operating division.
Constant communication among the Executive Vice Presidents and centralized
functions of accounting, information technology, due diligence and
administrative services provide CRLP with unique synergy allowing CRLP to take
advantage of a variety of investment opportunities. Decisions for investments in
acquisitions and developments and for dispositions are also centralized.
The following discussion should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations and all of the other information appearing in CRLP's 1998 Financial
Statements as filed with the Securities and Exchange Commission on Form 10-K and
with the financial statements included therein and the notes thereto.
Any statement contained in this report which is not a historical fact,
or which might be otherwise considered an opinion or projection concerning CRLP
or its business, whether express or implied, is meant as, and should be
considered, a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. 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 CRLP's prospectuses and
annual reports filed with the Securities and Exchange 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.
<PAGE>
Results of Operations -- Three Months Ended June 30, 1999 and 1998 Revenue --
Total revenue increased by $10.3 million, or 17.3%, for the second
quarter of 1999 when compared to the second quarter of 1998. The majority of
this increase, $8.3 million, represents revenues generated by properties
acquired or developed during 1999 and the second half of 1998, net of revenues
from properties disposed of in 1998. The remaining increase primarily relates to
increases in rental rates at existing properties, certain lease cancellations
that occurred during the second quarter of 1999, and income associated with the
exchange of certain parcels of land
Operating Expenses -- Total operating expenses increased by $6.8
million, or 22.1%, for the second quarter of 1999 when compared to the second
quarter of 1998. The majority of this increase, $4.2 million, relates to
additional operating expenses associated with properties that were acquired or
developed during 1999 and the second half of 1998, net of operating expenses
associated with properties disposed of in 1998. The remaining increase primarily
relates to increases in operating expenses at existing properties.
Other Income and Expense -- Interest expense increased by $1.8 million,
or 16.3%, for the second quarter of 1999 when compared to the second quarter of
1998. The increase in interest expense is primarily attributable to the
assumption of acquisition-related debt, and the increased usage of CRLP's
revolving credit agreement in conjunction with the financing of acquisitions and
developments.
Results of Operations -- Six Months Ended June 30, 1999 and 1998
Revenue -- Total revenue increased by $19.7 million, or 16.8%, for the
six months ended June 30, 1999 when compared to the six months ended June 30,
1998. The majority of this increase, $17.5 million, represents revenues
generated by properties acquired or developed during 1999 and the second half of
1998, net of revenues from properties disposed of in 1998. The remaining
increase primarily relates to increases in rental rates at existing properties,
certain lease cancellations that occurred during 1999, and income associated
with the exchange of certain parcels of land.
Operating Expenses -- Total operating expenses increased by $13.1
million, or 21.5%, for the six months ended June 30, 1999 when compared to the
six months ended June 30, 1998. The majority of this increase, $9.2 million,
relates to additional operating expenses associated with properties that were
acquired or developed during 1999 and the second half of 1998, net of operating
expenses associated with properties disposed of in 1998. The remaining increase
primarily relates to increases in operating expenses at existing properties and
overall increases in corporate overhead and personnel costs associated with
CRLP's continued growth.
Other Income and Expense -- Interest expense increased by $3.3 million,
or 13.5%, for the six months ended June 30, 1999 when compared to the six months
ended June 30, 1998. The increase in interest expense is primarily attributable
to the assumption of acquisition-related debt, and the increased usage of CRLP's
revolving credit agreement in conjunction with the financing of acquisitions and
developments.
Liquidity and Capital Resources
During the second quarter of 1999, CRLP invested $61.9 million in the
acquisition and development of properties. CRLP financed this growth through the
issuance of preferred units, advances on its bank line of credit, and cash from
operations. As of June 30, 1999, CRLP had an unsecured bank line of credit
providing for total borrowings of $250 million. The line, which is used by CRLP
primarily to finance property acquisitions and development, bears interest at
LIBOR plus 80-135 basis points, based on the Company's investment grade rating,
and is renewable in July 2000 and provides for a two-year amortization in the
case of nonrenewal The line of credit agreement includees a competitive bid
feature that will allow CRLP to convert up to $125 million under the line of
credit to a fixed rate, for a fixed term not to exceed 90 days. The balance
outstanding on this line at June 30, 1999, was $182.9 million.
Management intends to replace significant borrowings that may
accumulate under the bank line of credit with funds generated from the sale of
additional limited partnership units to Colonial Properties Trust in connection
with public offerings of securities by the Company, and/or permanent financing,
as market conditions permit. Management believes that these potential sources of
funds, along with the possibility of issuing limited partnership units in
exchange for properties, will provide CRLP with the means to finance additional
acquisitions. Management anticipates that its net cash provided by operations
and its existing cash balances will provide the necessary funds on a short- and
long-term basis to cover its operating expenses, interest expense on outstanding
indebtedness, recurring capital expenditures, distributions to unitholders, and
dividends to shareholders in accordance with Internal Revenue Code requirements
applicable to real estate investment trusts.
Common Unit Repurchase Program
During 1999, the Board of Trustees authorized a unit repurchase program
under which the Company may repurchase up to $100 million of its currently
outstanding common units from time to time at the discretion of management in
open market and negotiated transactions. During the second quarter of 1999, the
Company repurchased 756,179 units at an all-in cost of approximately $20.5
million. For the six-month period ended June 30, 1999, the Company has
repurchased 1,407,365 units at an all-in cost of approximately $37.1 million,
which represents an average purchase price of $26.38 per unit.
Year 2000 Issue
Overview of Y2K Problem
The Year 2000 or "Y2K" problem refers to the inability of many existing
computer programs having time-sensitive software to recognize a date using "00"
as the year 2000. Instead, the computer programs interpret such data as the year
1900. This failure to accurately recognize the year 2000 and other key dates
could result in a variety of problems ranging from data miscalculations to the
failure of entire systems.
As a result of the potential adverse effects of Y2K problems on CRLP's
operations, in the early months of 1998, CRLP formed a Year 2000 Committee to
oversee, manage, and implement a Year 2000 Compliance Program (the "Program").
The Committee is comprised of representatives from senior management and various
departments and advisors at the home and regional offices, including the
telecommunications, information systems, and office services departments.
In an attempt to eliminate or minimize this potential risk, CRLP has
initiated an effort to identify, understand, and address the myriad of issues
associated with the Y2K problem. CRLP has identified two main areas where
potential Y2K problems exist: (a) Property Management Systems and, (b)
Information Systems.
Property Management Systems
CRLP has substantially completed an inventory of the material computer
systems being utilized in its existing property management systems, which may be
adversely affected by the Year 2000 issue. Such systems include, but are not
limited to, building automation (e.g., energy management, HVAC) elevator
controls, fire and life safety devices, security card access, garage revenue
controls, and office equipment.
In April 1998, CRLP began gathering data from vendors to catalog the
equipment in all of its buildings. To date, the majority of the data requested
has been received. CRLP does not expect to receive 100% of the data requested
due to a number of non-responsive vendors or unavailable information.
Regardless, efforts continue to obtain additional evidence from vendors
concerning these systems such as processes followed, test scripts, and actual
findings. Once this data has been received, CRLP will further evaluate these
systems and will determine if it will be necessary to confirm the information
received from the vendors. Due to the positive responses received to date from
responding vendors, CRLP does not feel that this will be necessary.
No estimate can be made as to any potential adverse impact resulting
from the failure of any third party vendor or service provider to be Year 2000
compliant. To the extent the Year 2000 issue has a material adverse effect on
the business operations or financial condition of third parties with which CRLP
has material relationships, such as vendors, suppliers, tenants and financial
institutions, the Year 2000 issue could also have a material adverse effect on
CRLP's business, results of operations and financial condition.
Information Systems
The general ledger software system currently used by CRLP is not Y2K
compliant. New versions of the software were written and delivered to CRLP
during the First Quarter of 1999. CRLP found the new versions would not run in
the current environment. The vendor continues to develop the software systems
and has represented to CRLP that is expects to deliver Y2K compliant systems
during the Third Quarter of 1999.
However, CRLP has signed a contract with another software vendor to
implement a Y2K compliant software package. CRLP has installed the software and
expects the testing phase to be completed during the Third Quarter of 1999. CRLP
anticipates achieving full Y2K compliance late in the Third Quarter or early in
the Fourth Quarter of 1999. The cost of implementing this new software is
estimated to be approximately $700,000.
CRLP has also assessed its non-financial computer systems, and is
replacing, upgrading or modifying such systems as needed. The cost of the
upgrade to the non-financial computer systems is not expected to be material.
As of July 31, 1999, CRLP has incurred approximately $1.7 million in
costs to analyze and prepare for the Year 2000 issue. CRLP currently estimates
that it will incur additional costs, which are not expected to exceed
approximately $200,000 to complete its Year 2000 compliance work.
Although CRLP's Y2K efforts are intended to minimize the potential
risks of the Year 2000 issue on CRLP's business and operations, the actual
effects of the Year 2000 issue and the success or failure of CRLP's efforts
described above cannot be known until the year 2000. Failure by CRLP, its major
vendors and other material service providers to address adequately their
respective Year 2000 issues in a timely manner (insofar as such issues relate to
CRLP's business) could have a material adverse effect on CRLP's business,
results of operations and financial condition. There can be no assurance that
CRLP will be able to identify and correct all aspects of the effect of the Year
2000 issue on CRLP. However, CRLP does not currently expect the Year 2000 issue
will have a material impact on CRLP's business, operations, or financial
condition.
<PAGE>
CRLP has completed development of their contingency plans to handle its
most reasonable worst case Year 2000 scenarios. While it is not possible at this
time to determine the likely impact of the potential problems of the Year 2000
issue, CRLP will continue to evaluate its plans and develop additional
contingency plans, as appropriate.
The preceding "Year 2000" discussion contains various forward-looking
statements, within the meaning of the federal securities laws, which represent
CRLP's beliefs or expectations regarding future events. When used in this
discussion, the words "expects" and "anticipates" and similar expressions are
intended to identify forward-looking statements. Forward-looking statements
include, without limitation, CRLP's expectations as to when it will complete its
Year 2000 evaluation, the estimated costs of achieving Year 2000 readiness and
CRLP's expectation that Year 2000 issues will not have a material impact on
CRLP's business, operations or financial condition. All forward-looking
statements involve a number of risks and uncertainties that could cause the
actual results to differ materially from the projected results. Factors that may
cause these differences include, but are not limited to, the availability of
qualified personnel to address potential Y2K issues, technology resources,
actions of third parties with respect to making their systems or products Year
2000 compliant, and other risks detailed from time to time in CRLP's filing with
the Securities and Exchange Commission. <PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
PART II -- OTHER INFORMATION
Item 2. Changes in Securities.
The Company from time to time issues common shares of beneficial
interest ("Common Shares") pursuant to its Dividend Reinvestment and Share
Purchase Plan, its Non-Employee Trustee Share Option Plan, its Non-Employee
Trustee Share Plan, and its Employee Share Option and Restricted Share Plan, in
transactions that are registered under the Securities Act of 1933, as amended
(the "Act"). Pursuant to CRLP's Second Amended and Restated Agreement of Limited
Partnership, each time the Company issues Common Shares pursuant to the
foregoing plans, CRLP issues to Colonial Properties Trust, its general partner,
an equal number of Units for the same price at which the Common Shares were
sold, in transactions that are not registered under the Act in reliance on
Section 4(2) of the Act. During the quarter ended June 30, 1999, CRLP issued
4,080 Units in such transactions for an aggregate of $0.1 million.
During the second quarter of 1999, CRLP repurchased a total of 100,879
Units from two limited partners for an aggregate purchase price of $2.7 million.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
12. Ratio of Earnings to Fixed Charges
15. Letter re: Unaudited Interim Financial Information
27. Financial Data Schedule (EDGAR Version Only)
(b) Reports on Form 8-K
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
COLONIAL REALTY LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Colonial Properties Trust,
its general partner
Date: November 15, 1999 By: /s/ Howard B. Nelson, Jr.
----------------------------
Howard B. Nelson, Jr.
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial Officer)
Date: November 15, 1999 /s/ Kenneth E. Howell
----------------------------
Kenneth E. Howell
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
EXHIBIT 12 - Ratio of Earnings to Fixed Charges
CRLP's ratio of earnings to fixed charges for the three months ended
June 30, 1999 and 1998, was 1.94 and 2.16, respectively. CRLP's ratio of
earnings to fixed charges for the six months ended June 30, 1999 and 1998, was
1.90 and 2.06, 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), distributions to preferred unitholders, and the amortization of
debt issuance costs.
<PAGE>
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Re: Colonial Realty Limited Partnership
(File No. 0-20707)
Registration on Form S-3
We are aware that our report dated July 19, 1999, except for Note 6, as to which
the date is November 15, 1999, on our review of interim financial information of
Colonial Realty Limited Partnership for the three-month and six-month periods
ended June 30, 1999 and 1998 and included in the Partnership's quarterly report
on Form 10-Q for the periods then ended, is incorporated by reference in the
registration statement on Form S-3 related to the Shelf Registration filed on
December 11, 1997 (File No. 333-42049). Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
November 15, 1999
<PAGE>
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