UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended:
September 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 ___
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as of
September 30, 1999 and December 31, 1998 3
Consolidated Condensed Statements of Income for the
Three Months and for the Nine Months Ended September 30, 4
1999 and 1998
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 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>
September 30,
1999 December 31,
(Unaudited) 1998
----------- ------------
ASSETS
<S> <C> <C>
Land, buildings, & equipment, net $1,506,155 $1,566,840
Undeveloped land and construction in progress 235,621 128,336
Cash and equivalents 3,845 4,582
Restricted cash 2,876 2,897
Accounts receivable, net 8,445 9,151
Prepaid expenses 2,446 3,116
Notes receivable 668 696
Deferred debt and lease costs, net 10,126 9,644
Investment in unconsolidated subsidiaries 24,649 26,079
Other assets 5,019 5,207
---------- ----------
$1,799,850 $1,756,548
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Notes and mortgages payable $ 954,802 $ 909,322
Accounts payable 15,356 12,820
Accrued interest 11,681 12,051
Accrued expenses 15,547 3,559
Tenant deposits 4,038 4,272
Unearned rent 1,644 2,800
---------- ----------
Total liabilities 1,003,068 944,824
---------- ----------
Redeemable units, at redemption value 284,590 282,597
Preferred units:
Series A Preferred Units 125,000 125,000
Series B Preferred Units 100,000 0
Partners' capital 287,192 404,127
---------- ----------
Total partners' capital 512,192 529,127
---------- ----------
$1,799,850 $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 Nine Months Ended
Sept 30, Sept 30,
---------------------- ----------------------
1999 1998 1999 1998
---------------------- ----------------------
Revenue:
<S> <C> <C> <C> <C>
Minimum rent $ 57,798 $ 54,664 $ 168,620 $ 150,669
Percentage rent 483 551 2,103 1,993
Tenant recoveries 7,908 8,171 24,176 22,409
Other 3,946 4,796 12,596 10,753
--------- --------- --------- ---------
Total revenue 70,135 68,182 207,495 185,824
--------- --------- --------- ---------
Property operating expenses:
General operating expenses 5,243 5,838 15,402 14,543
Salaries and benefits 3,936 3,191 10,977 9,065
Repairs and maintenance 6,982 6,837 20,407 17,931
Taxes, licenses, and insurance 6,036 6,099 17,909 16,035
General and administrative 1,801 2,207 6,608 6,124
Depreciation 13,292 11,942 39,213 32,897
Amortization 563 528 1,645 1,208
--------- --------- --------- ---------
Total operating expenses 37,853 36,642 112,161 97,803
--------- --------- --------- ---------
Income from operations 32,282 31,540 95,334 88,021
--------- --------- --------- ---------
Other income (expense):
Interest expense (14,829) (13,917) (42,288) (38,108)
Income from unconsolidated subsidiaries 359 24 1,346 61
Gains (losses) from sales of property 2,161 (16) 5,639 17
Minority interest in consolidated operating property -0- (62) (82) (62)
--------- --------- --------- ---------
Total other expense (12,309) (13,971) (35,385) (38,092)
--------- --------- --------- ---------
Income before extraordinary item 19,973 17,569 59,949 49,929
Extraordinary loss (742) (1) (628) (401)
--------- --------- --------- ---------
Net income $ 19,231 $ 17,568 $ 59,321 $ 49,528
Distributions to preferred unitholders (4,953) (2,735) (13,578) (8,203)
--------- --------- --------- ---------
Net income available to common unitholders $ 14,278 $ 14,833 $ 45,743 $ 41,325
========= ========= ========= =========
Net income per unit - basic and diluted $ 0.41 $ 0.41 $ 1.28 $ 1.20
========= ========= ========= =========
Weighted average common units outstanding 34,666 36,541 35,804 34,353
========= ========= ========= =========
</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>
Nine Months Ended
September 30,
----------------------
1999 1998
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 59,321 $ 49,528
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 40,858 34,105
Income from unconsolidated subsidiaries (1,346) (61)
Gains from sales of property (5,639) -0-
Other 1,513 989
Decrease (increase) in:
Restricted cash 21 (221)
Accounts and notes receivable (151) (1,789)
Prepaid expenses 670 370
Other assets (467) (3,714)
Increase (decrease) in:
Accounts payable 2,536 (7,432)
Accrued interest (370) 3,853
Accrued expenses and other 10,598 10,968
--------- ---------
Net cash provided by operating activities 107,544 86,596
--------- ---------
Cash flows from investing activities:
Acquisition of properties (44,417) (225,627)
Development expenditures (132,742) (68,547)
Tenant improvements (6,957) (2,702)
Capital expenditures (12,622) (12,389)
Proceeds from sales of property 120,795 908
Distributions from unconsolidated subsidiaries 8,004 85
Capital contributions to unconsolidated subsidiaries (5,228) (21)
--------- ---------
Net cash used in investing activities (73,167) (308,293)
--------- ---------
Cash flows from financing activities:
Principal reductions of debt (59,156) (47,156)
Proceeds from additional borrowings 136,200 198,976
Net change in revolving credit balances (31,564) (6,152)
Cash contributions 101,726 139,679
Capital distributions (80,606) (64,582)
Purchase of treasury units (99,614) -0-
Payment of mortgage financing cost (1,472) (311)
Other, net (628) (401)
--------- ---------
Net cash provided by (used in) financing activities (35,114) 220,053
--------- ---------
Decrease in cash and equivalents (737) (1,644)
Cash and equivalents, beginning of period 4,582 4,534
--------- ---------
Cash and equivalents, end of period $ 3,845 $ 2,890
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COLONIAL REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
September 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 quarters ended March 31, 1999 and June 30, 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 and Joint Ventures
The Plaza Mall -- On August 16, 1999, CRLP acquired The Plaza Mall, a
436,427 square-foot mall in Greenville, North Carolina for a total purchase
price of $28.5 million. The mall anchors include two Belk stores, a recently
expanded and renovated JC Penney, and Proffitt's. The purchase price was
partially funded through the proceeds received from the disposition of assets,
and an advance on CRLP's unsecured line of credit.
CMS Joint Venture -- During the third quarter, CRLP sold six
multifamily properties, representing 1,949 apartment units, which included
Colonial Village at Stockbridge, Colonial Grand at Barrington Club, Colonial
Grand at Ponte Vedra, Colonial Village at River Hills, Colonial Grand at
Mountain Brook, and Colonial Village at Cahaba Heights. The properties were
purchased by a joint venture formed by CMS Companies, a private investment
banking firm, and CRLP. CRLP will maintain a 15% interest in the joint venture
and serve as manager of the properties.
The properties were sold for a total purchase price of $94.8 million, of which
$15 million was used to repay two secured loans, and the remaining proceeds were
used to repay a portion of the borrowings under CRLP's unsecured line of credit,
purchase the Plaza Mall, and to support CRLP's future investment activities.
Note 3 -- Debt Offering
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 4 -- 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 Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 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 $ 14,278 $ 14,833 $ 45,743 $ 41,325
============ ============ ============ ============
Denominator:
Denominator for basic net income
per unit - weighted average common 34,666 36,541 35,804 34,353
units
Effect of dilutive securities:
Trustee and employee share options 21 44 21 44
------------ ------------ ------------ ------------
Denominator for diluted net income
per unit - adjusted weighted
average common units 34,687 36,585 35,825 34,397
============ ============ ============ ============
Basic net income per unit $ .41 $ .41 $ 1.28 $ 1.20
============ ============ ============ ============
Diluted net income per unit $ .41 $ .41 $ 1.28 $ 1.20
============ ============ ============ ============
</TABLE>
Options to purchase 409,348 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 5 -- 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.
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 nine months ended September 30,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
As of and for the
Three Months Ended
September 30, 1999 Multifamily Retail Office Total
--------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Total Divisional Revenues $ 30,329 $ 31,712 $ 10,359 $ 72,400
NOI 19,351 22,599 7,198 49,148
Divisional assets 757,472 775,603 279,348 1,812,423
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Three Months Ended
September 30, 1998 Multifamily Retail Office Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 27,414 $ 30,692 $ 9,659 $ 67,765
NOI 17,611 21,387 6,986 45,984
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1999 Multifamily Retail Office Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 87,632 $ 96,582 $ 29,871 $ 214,085
NOI 56,837 69,027 20,840 146,704
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30, 1998 Multifamily Retail Office Total
--------------------------------------------------------------------
(in thousands)
Total Divisional Revenues $ 76,490 $ 83,947 $ 24,632 $ 185,069
NOI 50,399 59,564 17,873 127,836
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
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 nine months ended
September 30, 1999 and 1998, and total divisional assets to total assets, for
the periods ended September 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 Nine Months Ended Nine Months Ended
(in thousands) September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
Revenues
- ------------------------------------------------------------------------------------ ---------------------- ---------------------
<S> <C> <C> <C> <C>
Total divisional revenues $ 72,400 $ 67,765 $ 214,085 $ 185,069
Unallocated corporate revenues 220 485 961 959
Partially-owned subsidiaries (2,485) (68) (7,551) (204)
- ------------------------------------------------------------------------------------ ---------------------- ---------------------
Total Revenues $ 70,135 $ 68,182 $ 207,495 $ 185,824
- ------------------------------------------------------------------------------------ ---------------------- ---------------------
NOI
- ------------------------------------------------------------------------------------ ---------------------- ---------------------
Total divisional NOI $ 49,148 $ 45,984 $ 146,704 $ 127,836
Unallocated corporate revenues 220 485 961 959
Partially-owned subsidiaries (1,448) (40) (4,531) (121)
General and administrative expenses (1,801) (2,207) (6,608) (6,124)
Depreciation (13,292) (11,942) (39,213) (32,897)
Amortization (563) (528) (1,645) (1,208)
Other 18 (212) (334) (424)
- ------------------------------------------------------------------------------------ ---------------------- ---------------------
Income from operations $ 32,282 $ 31,540 $ 95,334 $ 88,021
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
For the Period Ended For the Period Ended
Assets September 30, 1999 December 31, 1998
- ------------------------------------------------------------------------------------
Total divisional assets $ 1,812,423 $ 1,766,989
Unallocated corporate assets (1) 63,167 50,248
Partially-owned subsidiaries (75,740) (60,689)
- ------------------------------------------------------------------------------------
Total assets $ 1,799,850 $ 1,756,548
- ------------------------------------------------------------------------------------
</TABLE>
(1) Includes the Company's investment in partially owned entities of $24,497 as
of September 30, 1999, and $25,181 as of December 31, 1998.
Note 6 -- Subsequent Events
Quarterly Distributions
On October 19, 1999, a cash distribution was declared to partners of
CRLP in the amount of $0.58 per unit, totaling $19.3 million. The distribution
was declared to partners of record as of October 29, 1999, and was paid on
November 8, 1999.
Common Unit Repurchase Program
On October 19, 1999 the Board of Trustees increased the previously
authorized amount of the common unit repurchase program from $100 million to
$150 million, under which the Company may repurchase its currently outstanding
common units from time to time at the discretion of management in open market
and negotiated transactions. A portion of the units repurchased may be reserved
for re-issuance through a Unit Purchase Program. Under the Unit Purchase
Program, executives, management and members of the Board of Trustees will be
offered an opportunity to purchase units of CRLP.
<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 September 30,
1999, and the related consolidated condensed statements of income for the
three-month and nine-month periods ended September 30, 1999 and 1998, and the
consolidated condensed statements of cash flows for the nine-month periods ended
September 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, 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
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 nine states
in the Sunbelt region of the United States. As of September 30, 1999, CRLP's
real estate portfolio consisted of 51 multifamily communities, 41 retail
properties, and 19 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 September 30, 1999 and 1998
Revenue -- Total revenue increased by $1.9 million, or 2.9%, for the
third quarter of 1999 when compared to the third quarter of 1998. The majority
of this increase, $1.1 million, represents revenues generated by properties
acquired or developed during 1999 and the fourth quarter of 1998, net of
revenues from properties disposed of in 1998 and the first six months of 1999.
The remaining increase primarily relates to increases in rental rates at
existing properties.
Operating Expenses -- Total operating expenses increased by $1.2
million, or 3.3%, for the third quarter of 1999 when compared to the third
quarter of 1998. The majority of this increase is primarily related to
additional operating expenses associated with properties that were acquired or
developed during 1999 and the fourth quarter of 1998, net of operating expenses
associated with properties disposed of in 1998 and the first nine of months of
1999. 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 $0.9 million,
or 6.6%, for the third quarter of 1999 when compared to the third 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 -- Nine Months Ended September 30, 1999 and 1998
Revenue -- Total revenue increased by $21.7 million, or 11.7%, for the
nine months ended September 30, 1999 when compared to the nine months ended
September 30, 1998. The majority of this increase, $20.0 million, represents
revenues generated by properties acquired or developed during 1999 and the
fourth quarter 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 $14.4
million, or 14.7%, for the nine months ended September 30, 1999 when compared to
the nine months ended September 30, 1998. The majority of this increase, $10.0
million, relates to additional operating expenses associated with properties
that were acquired or developed during 1999 and the fourth quarter 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 $4.2 million,
or 11.0%, for the nine months ended September 30, 1999 when compared to the nine
months ended September 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 third quarter of 1999, CRLP invested $78.2 million in the
acquisition and development of properties. CRLP financed this growth through the
sale of certain properties, issuance of unsecured medium term notes, advances on
its bank line of credit, and cash from operations. As of September 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 non-renewal. The line of
credit agreement includes 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 September
30, 1999, was $142.8 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 third quarter of 1999, the
Company repurchased 2,290,200 units at an all-in cost of approximately $62.3
million. For the nine-month period ended September 30, 1999, the Company has
repurchased 3,697,565 units at an all-in cost of approximately $99.6 million,
which represents an average purchase price of $26.90 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 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 used by CRLP through October 1999
was not Y2K compliant. Therefore, in order to become Y2K compliant, CRLP has
purchased and installed a Y2K compliant software package from another vendor.
CRLP installed and completed the testing phase of the software in the Third
Quarter of 1999. During the month of October 1999, CRLP ran certain properties
within their portfolio parallel on both the current and new general ledger
systems. On November 1, 1999, CRLP began utilization of the new software package
for all of their properties and corporate accounting functions. The total cost
incurred and cost to complete implementation 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 October 31, 1999, CRLP has incurred approximately $1.8 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 $100,000 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.
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.
<PAGE>
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 September 30, 1999, CRLP
issued 1,681 Units in such transactions for an aggregate of approximately
$40,000.
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
September 30, 1999 and 1998, was 1.79 and 1.98, respectively. CRLP's ratio of
earnings to fixed charges for the nine months ended September 30, 1999 and 1998,
was 1.86 and 2.01, 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 November 15, 1999 on our review of interim
financial information of Colonial Realty Limited Partnership for the three-month
and nine-month periods ended September 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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1.0
<CASH> 3,845
<SECURITIES> 0
<RECEIVABLES> 8,445
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,698,904
<DEPRECIATION> 192,749
<TOTAL-ASSETS> 1,799,850
<CURRENT-LIABILITIES> 0
<BONDS> 954,802
0
225,000
<COMMON> 0
<OTHER-SE> 571,782
<TOTAL-LIABILITY-AND-EQUITY> 1,799,850
<SALES> 207,495
<TOTAL-REVENUES> 207,495
<CGS> 112,161
<TOTAL-COSTS> 112,161
<OTHER-EXPENSES> 35,385
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,288
<INCOME-PRETAX> 59,949
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (628)
<NET-INCOME> 59,321
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.28
</TABLE>
