<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________.
Commission file number 0-22411
----------
SUMMIT PROPERTIES PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
Delaware 56-1857809
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
212 S. Tryon Street, Suite 500, Charlotte, North Carolina 28281
(Address of principal executive offices - zip code)
(704) 334-9905
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check 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 No X
------- -------
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Balance Sheets as of June 30, 1997
(Unaudited) and December 31, 1996 . . . . . . . . . . . . 3
Statements of Earnings for the three and
six months ended June 30, 1997 and 1996
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Partners' Equity (Unaudited) . . . . . . . . . 5
Statements of Cash Flows for the six
months ended June 30, 1997 and 1996
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 10
PART II OTHER INFORMATION
Item 2 Changes in Securities . . . . . . . . . . . . . . . . . . . . 27
Item 4 Submission of Matters to a Vote of Security Holders . . . . . 27
Item 6 Exhibits Index and Reports on Form 8-K . . . . . . . . . . . 27
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT PROPERTIES PARTNERSHIP, L.P.
BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets:
Land and land improvements $ 113,681 $ 102,605
Buildings and improvements 543,475 472,996
Furniture, fixtures and equipment 46,779 43,021
--------- ---------
703,935 618,622
Less: accumulated depreciation (93,936) (85,651)
--------- ---------
Operating real estate assets 609,999 532,971
Construction in progress 111,006 86,157
--------- ---------
Net real estate assets 721,005 619,128
Cash and cash equivalents 5,346 3,665
Restricted cash 14,052 4,121
Deferred financing costs, net 4,215 4,675
Other assets 4,699 3,775
--------- ---------
Total assets $ 749,317 $ 635,364
========= =========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes payable $ 398,890 $ 309,933
Accrued interest payable 1,861 1,318
Accounts payable and accrued expenses 16,741 7,257
Distributions payable to unitholders 10,856 10,244
Security deposits and prepaid rents 3,581 3,196
--------- ---------
Total liabilities 431,929 331,948
--------- ---------
Commitments
Partners' equity
Partnership units issued and outstanding 27,309,726
and 26,434,920
General partner - outstanding 273,097 and 264,349 3,903 3,766
Limited partners - outstanding 27,036,629 and
26,170,571 313,485 299,650
--------- ---------
Total partners' equity 317,388 303,416
--------- ---------
Total liabilities and partners' equity $ 749,317 $ 635,364
========= =========
</TABLE>
See notes to financial statements.
3
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
STATEMENTS OF EARNINGS
(Dollars in Thousands except for Per Unit Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 26,328 $ 21,764 $ 52,108 $ 41,954
Other property income 1,577 1,154 2,898 2,168
Interest 132 79 208 155
Other income 66 65 138 215
------------ ------------ ------------ ------------
Total revenues 28,103 23,062 55,352 44,492
------------ ------------ ------------ ------------
Expenses:
Property operating and maintenance:
Personnel 2,306 2,119 4,472 4,124
Advertising and promotion 442 295 822 581
Utilities 1,144 1,001 2,311 1,980
Building repairs and maintenance 2,113 1,884 4,056 3,434
Real estate taxes and insurance 2,843 2,309 5,538 4,486
Depreciation 5,430 4,437 10,611 8,567
Property supervision 678 552 1,340 1,056
Other operating expenses 758 630 1,559 1,253
------------ ------------ ------------ ------------
15,714 13,227 30,709 25,481
Interest 5,042 4,905 9,592 9,054
General and administrative 596 656 1,242 1,281
Loss (income) in equity investments:
Summit Management Company (105) (71) 25 95
Real estate joint venture -- -- -- (1)
------------ ------------ ------------ ------------
Total expenses 21,247 18,717 41,568 35,910
------------ ------------ ------------ ------------
Income before gain on sale of
real estate assets 6,856 4,345 13,784 8,582
Gain on sale of real estate assets 4,366 -- 4,366 --
------------ ------------ ------------ ------------
Net income 11,222 4,345 18,150 8,582
Net income allocated to general partner (112) (43) (181) (86)
------------ ------------ ------------ ------------
Net income allocated to limited partners $ 11,110 $ 4,302 $ 17,969 $ 8,496
============ ============ ============ ============
Per unit data:
Net income $ 0.41 $ 0.21 $ 0.67 $ 0.42
============ ============ ============ ============
Distributions declared $ 0.40 $ 0.39 $ 0.80 $ 0.78
============ ============ ============ ============
Weighted average units 27,333,968 20,624,614 27,192,559 20,618,684
============ ============ ============ ============
</TABLE>
See notes to financial statements.
4
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
STATEMENT OF PARTNERS' EQUITY
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- --------- ---------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 3,766 $ 299,650 $ 303,416
Distributions (218) (21,538) (21,756)
Contributions from Summit Properties related to:
Issuance of stock 117 11,629 11,746
Exercise of stock options 7 711 718
Amortization of restricted stock grants 1 150 151
Proceeds from Dividend Reinvestment
and Employee Stock Purchase Plans 12 1,185 1,197
Costs of shelf registrations (2) (171) (173)
Issuance of units related to property acquisitions 39 3,900 3,939
Net income 181 17,969 18,150
------- --------- ---------
Balance, June 30, 1997 $ 3,903 $ 313,485 $ 317,388
======= ========= =========
</TABLE>
See notes to financial statements.
5
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,150 $ 8,582
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on equity method investments 25 94
Gain on sale of real estate assets (4,366) --
Depreciation and amortization 11,130 9,075
Increase in restricted cash (660) (200)
Increase in other assets (773) (1,492)
Increase in accrued interest payable 526 127
Increase in accounts payable and accrued expenses 3,185 2,657
Increase (decrease) in security deposits and prepaid rents (56) 467
-------- --------
Net cash provided by operating activities 27,161 19,310
-------- --------
Cash flows from investing activities:
Construction of real estate assets, net of payables (39,562) (34,497)
Purchase of Communities (40,408) (6,360)
Capitalized interest (2,948) (1,927)
Recurring capital expenditures (1,471) (1,403)
Non-recurring capital expenditures (2,147) (1,839)
-------- --------
Net cash used in investing activities (86,536) (46,026)
-------- --------
Cash flows from financing activities:
Debt proceeds 76,429 44,442
Debt repayments (2,698) (1,716)
Distributions to unitholders (21,199) (15,726)
Payments of financing costs (31) (175)
Contributions from Summit Properties related to:
Issuance of stock 6,813 --
Exercise of stock options 718 --
Proceeds from Dividend Reinvestment and Employee Stock
Purchase Plans 1,197 289
Costs of shelf registrations (173) (138)
-------- --------
Net cash provided by financing activities 61,056 26,976
-------- --------
Net increase in cash and cash equivalents 1,681 260
Cash and cash equivalents, beginning of period 3,665 2,881
-------- --------
Cash and cash equivalents, end of period $ 5,346 $ 3,141
======== ========
Supplemental disclosure of cash flow
information - Cash paid for interest, net of capitalized interest $ 8,573 $ 8,390
======== ========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
the management of Summit Properties Partnership, L.P., (the "Operating
Partnership") in accordance with generally accepted accounting
principles for interim financial information and in conformity with the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the full year. These financial
statements should be read in conjunction with the Operating
Partnership's December 31, 1996 audited financial statements and notes
thereto included in the Operating Partnership's Registration Statement
on Form 10 as amended.
The Operating Partnership conducts the business of developing,
acquiring and managing multi-family apartment communities for Summit
Properties Inc. ("Summit Properties"). Summit Properties is the sole
general partner and majority owner of the Operating Partnership. Summit
Properties is a self-administered and self-managed equity real estate
investment trust ("REIT").
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standard No. 128 (SFAS No. 128), "Earnings Per
Share," which will be effective at the Operating Partnership's 1997
fiscal year end. SFAS No. 128 will change the method for calculating
earnings per Unit. Had the Operating Partnership applied SFAS No. 128
for the three and six months ended June 30, 1997, the effect on
reported earnings per Unit would not be significant.
2. ACQUISITIONS AND DISPOSITIONS
During the first quarter of 1997, the Operating Partnership completed
the acquisition of three Communities: Summit Mayfaire, Summit Portofino
and Summit Sand Lake (the "1997 Acquisitions"). The 1997 Acquisitions
added a total of 882 apartment homes to the Operating Partnership's
portfolio at an aggregate purchase price of $64.5 million. The 1997
Acquisitions were primarily financed with the assumption of $15.2
million in debt, the issuance of 243,608 Units to Summit Properties in
exchange for Summit Properties issuing 243,608 shares of Common Stock
to the seller, the issuance of 194,495 Units directly to the seller,
and the payment of $40.4 million in cash.
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<PAGE> 8
In addition, the Operating Partnership acquired its joint venture
partner's interest in Summit Plantation (formerly Plantation Cove)
apartment community on April 1, 1996. The Operating Partnership paid
$6.4 million in cash for the remaining 75% interest in this joint
venture, which is now owned entirely by the Operating Partnership.
The following summary of selected unaudited pro forma results of
operations presents information as if the 1997 Acquisitions and the
Summit Plantation acquisition had occurred at the beginning of each
period presented. The pro forma information for the six months ended
June 30, 1997 and 1996 is provided for informational purposes only and
is not indicative of results that would have occurred or which may
occur in the future (dollars in thousands, except per unit amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1997 1996
---------- -----------
<S> <C> <C>
Net Revenues $ 55,974 $ 47,277
========== ===========
Net income $ 18,159 $ 8,472
========== ===========
Net income per Unit $ 0.66 $ 0.40
========== ===========
Weighted average units 27,326,508 21,371,816
========== ===========
</TABLE>
On May 14, 1997, the Operating Partnership sold a community located in
Charlotte, North Carolina known as Summit Charleston for $9.5 million.
A gain on the sale of $4.4 million was recognized. Proceeds from the
sale were used to partially fund the acquisition of an apartment home
community on July 18, 1997 (See Note 5).
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<PAGE> 9
3. RESTRICTED STOCK
In the six months ended June 30, 1997 and 1996, Summit Properties
granted 26,278 and 56,041, respectively, shares of restricted stock to
employees of the Operating Partnership and subsidaries under Summit
Properties' 1994 Stock Option and Incentive Plan. The market value of
the restricted stock grants in 1997 and 1996 totaled $565,000 and $1.1
million, respectively. Unearned compensation is being amortized to
expense over the vesting period which ranges from three to five years.
4. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the six months ended
June 30, 1997 and 1996 are as follows:
A. In the six months ended June 30, 1997, the Operating
Partnership purchased three communities (Summit Mayfaire,
Summit Portofino and Summit Sand Lake). The Operating
Partnership completed the purchase of the three Communities by
assuming debt, issuing 194,495 Units, issuing 243,608 Units to
Summit Properties in exchange for Summit Properties issuing
243,608 shares of Common Stock to the seller, assuming certain
liabilities and current assets, and the payment of cash. The
recording of the purchase is summarized as follows (in
thousands):
<TABLE>
<S> <C>
Fixed assets $ 65,170
Other assets 30
Debt assumed (15,226)
Current liabilities assumed (694)
Value of Operating Partnership Units issued (3,939)
Value of Common Stock issued (4,933)
--------
Cash invested $ 40,408
========
</TABLE>
B. The Operating Partnership sold a community on May 14, 1997 for
net proceeds of approximately $9.3 million. The proceeds of
the sale were put in escrow to fund the acquisition of an
apartment home community on July 18, 1997 (See Note 5). The
escrow funds are shown in the balance sheet caption
"Restricted Cash".
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<PAGE> 10
C. On April 1, 1996, the Operating Partnership acquired its joint
venture partner's interest in the Summit Plantation (formerly
Plantation Cove) apartment community. The Operating
Partnership paid $6.4 million in cash for the remaining 75%
interest in this joint venture, which is now owned entirely by
the Operating Partnership. The recording of the purchase is
summarized as follows (in thousands):
<TABLE>
<S> <C>
Fixed assets $ 21,913
Current assets 202
Deferred charges 95
Debt assumed (14,347)
Current liabilities assumed (288)
Equity investment (1,215)
---------
Net cash paid $ 6,360
=========
</TABLE>
D. The Operating Partnership issued 106,330 Units (valued at $2.1
million) for the purchase of land during the six months ended
June 30, 1996.
E. The Operating Partnership accrued a distribution payable in
the amount of $10.9 million and $8.0 million at June 30, 1997
and 1996, respectively.
F. Summit Properties issued 26,278 and 56,041 shares of
restricted stock valued at $565,000 and $1.1 million during
the six months ended June 30, 1997 and 1996, respectively, to
employees of the Operating Partnership and subsidaries.
5. SUBSEQUENT EVENT
The Operating Partnership purchased an apartment home community to be
known as Summit Windsor II for $17.1 million in cash on July 18, 1997.
Summit Windsor II, which was developed by the Company in 1988, has 306
apartment homes and is located in Frederick, Maryland. The proceeds
from the sale of a community (See Note 2) and borrowings on the
Operating Partnership's line of credit were used to fund the purchase.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements including, without
limitation, statements relating to the operating performance of stabilized
communities and development activities of the Operating Partnership within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Operating Partnership
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, the Operating Partnership's actual results and
performance of stabilized and development communities could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference include general economic conditions, local real
estate market conditions, construction delays due to unavailability of
materials, weather conditions or other delays and those factors discussed in
the last paragraph under the heading entitled "Operating Performance of the
Operating Partnership's Stabilized Communities" and in the section entitled
"Development Activity--Certain Factors Affecting the Performance of Development
Communities" on pages 13 and 22, respectively, of this Form 10-Q.
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As of June 30, 1997, there were 27,309,726 Units outstanding of the Operating
Partnership, of which 23,144,614, or 84.7% were owned by Summit Properties and
4,165,112, or 15.3% were owned by other partners (including certain officers and
directors of Summit Properties).
The following discussion should be read in conjunction with the Financial
Statements of Summit Properties Partnership, L.P. and the Notes thereto
appearing elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
The Operating Partnership's net income is generated primarily from operations of
its apartment communities (the "Communities"). The changes in operating results
from period to period reflect changes in existing Community performance and
increases in the number of apartment homes due to development and acquisition of
new Communities. Where appropriate, comparisons are made on a "stabilized
Communities," "acquisition Communities," "stabilized development Communities"
and "Communities in lease-up" basis in order to adjust for changes in the number
of apartment homes. A Community is deemed to be "stabilized" when it has
attained either a physical occupancy level of at least 93% or when construction
has been completed for one year in each of the comparable periods presented. A
Community is deemed to be a "stabilized development" when stabilized in the
entire current period presented but was in lease-up in the prior period
presented.
Results of Operations for the Three and Six Months Ended June 30, 1997 and 1996
For the three and six months ended June 30, 1997, income before gain on sale of
real estate assets increased $2.5 million and $5.2 million, respectively, to
$6.9 million and $13.8 million, respectively, from the three and six months
ended June 30, 1996.
11
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OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S PORTFOLIO OF COMMUNITIES
The operating performance of the Communities for the three and six months ended
June 30, 1997 and 1996 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------ ---------------------------------
1997 1996 % CHANGE 1997 1996 % CHANGE
---------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized communities (1) $21,027 $20,677 1.7% $40,506 $39,674 2.1%
Acquisition communities (2) 2,205 0 100.0% 5,475 731 649.0%
Stabilized development communities 3,059 1,869 63.7% 6,127 2,995 104.6%
Communities in lease-up 1,451 22 6495.5% 2,379 22 10713.6%
Community sold 163 350 -53.4% 519 700 -25.9%
---------- --------- ---------- ----------
Total property revenues 27,905 22,918 21.8% 55,006 44,122 24.7%
---------- --------- ---------- ----------
Property operating and maintenance
expense (3):
Stabilized communities 7,915 7,875 0.5% 15,251 15,074 1.2%
Acquisition communities 742 0 100.0% 1,814 260 597.7%
Stabilized development communities 1,009 715 41.1% 1,932 1,238 56.1%
Communities in lease-up 543 47 1055.3% 890 47 1793.6%
Community sold 75 153 -51.0% 211 295 -28.5%
---------- --------- ---------- ----------
Total property operating and
maintenance expense 10,284 8,790 17.0% 20,098 16,914 18.8%
---------- --------- ---------- ----------
Property operating income $17,621 $14,128 24.7% $34,908 $27,208 28.3%
========== ========= ========== ==========
Apartment homes, end of period 14,072 11,900 18.3% 14,072 11,900 18.3%
========== ========= ========== ==========
</TABLE>
(1) Includes Communities which were stabilized for each of the comparable
periods presented. Three month results include Summit Plantation which
was acquired April 1, 1996.
(2) Three month results include the 1997 Acquisition Communities. Six month
results include the 1997 Acquisition Communities and Summit Plantation
acquired April 1, 1996.
(3) Before real estate depreciation expense.
A summary of the Operating Partnership's apartment homes for the six months
ended June 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Apartment homes at the beginning of period 12,454 11,286
Acquisitions 882 262
Developments which began rental
operations during the period 950 352
Sale of apartment home community (214) --
======= ======
Apartment homes at the end of the period 14,072 11,900
======= ======
</TABLE>
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OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S STABILIZED COMMUNITIES
The operating performance of the 45 and 44 Communities stabilized during the
entire period in each of the three and six months ended June 30, 1997 and 1996,
respectively, are summarized below (dollars in thousands except average monthly
rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ----------------------------------
1997 1996 % CHANGE 1997 1996 % CHANGE
--------- --------- ----------- --------- --------- ---------
Property revenues:
<S> <C> <C> <C> <C> <C> <C>
Rental $19,967 $19,667 1.5% $38,576 $37,780 2.1%
Other 1,060 1,010 5.0% 1,930 1,894 1.9%
--------- --------- --------- ----------
Total property revenues 21,027 20,677 1.7% 40,506 39,674 2.1%
--------- --------- --------- ----------
Property operating and maintenance
expense (1):
Personnel 1,815 1,900 -4.5% 3,457 3,703 -6.6%
Advertising and promotion 270 213 26.8% 491 391 25.6%
Utilities 890 917 -2.9% 1,773 1,778 -0.3%
Building repairs and maintenance 1,759 1,790 -1.7% 3,349 3,263 2.6%
Real estate taxes and insurance 2,090 1,998 4.6% 4,010 3,868 3.7%
Property supervision 529 520 1.7% 1,014 986 2.8%
Other operating expense 562 537 4.7% 1,157 1,085 6.6%
--------- --------- --------- ----------
Total property operating and
maintenance expense 7,915 7,875 0.5% 15,251 15,074 1.2%
--------- --------- --------- ----------
Property operating income $13,112 $12,802 2.4% $25,255 $24,600 2.7%
========= ========= ========= ==========
Average physical occupancy (2) 92.8% 92.8% 0.0% 93.0% 93.0% 0.0%
========= ========= ========= ==========
Average monthly rental revenue (3) $721 $707 2.0% $713 $697 2.3%
========= ========= ========= ==========
Number of apartment homes 10,134 10,134 9,872 9,872
========= ========= ========= ==========
</TABLE>
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in
the Communities, expressed as a percentage. Average physical occupancy
has been calculated using the average of the midweek occupancy that
existed during each week of the period.
(3) Represents the average monthly net rental revenue per occupied
apartment home.
The increase in rental revenue from stabilized Communities for the second
quarter and the first six months of 1997 compared to 1996 was primarily the
result of increases in average rental rates. Property operating and maintenance
expense increases were due primarily to an increase in advertising and
promotion, real estate taxes and insurance offset by a decrease in personnel
expense. As a percentage of total property revenue, property operating and
maintenance expenses decreased for the three month period from 38.1% in 1996 to
37.6% in 1997 and for the six month period from 38.0% in 1996 to 37.7% in 1997.
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<PAGE> 14
The 1.7% and 2.1% rates of growth in property revenues was lower than the 3.8%
and 4.4% rates of growth in property revenues achieved from the first quarter of
1995 compared to first quarter 1996 and the first six months of 1995 compared to
the first six months of 1996, respectively. The growth rate was lower primarily
as a result of a new supply of competing multi-family communities and the
increase in home affordability in some of the markets in which the Operating
Partnership operates. This lower growth rate was especially noticeable in the
Tampa and Atlanta markets. The Operating Partnership expects property growth
rates for the remainder of 1997 to be similar to the first six months of 1997
as the supply of new multi-family communities continues to increase balanced by
the continued strength of the local economies in which the Operating
Partnership operates. The Operating Partnership believes its expectations with
respect to property revenue growth are based on reasonable assumptions as to
future economic conditions and the quantity of competitive multi-family
communities in the markets in which the Operating Partnership does business.
There can be no assurance that actual results will not differ from these
assumptions.
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<PAGE> 15
OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S ACQUISITION COMMUNITIES
Acquisition communities consist of the 1997 Acquisitions (882 apartment homes)
and Summit Plantation (262 apartment homes) acquired on April 1, 1996, for the
six month periods presented and the 1997 Acquisitions for the three month
periods presented. The operations of these Communities for the three and six
months ended June 30, 1997 are summarized as follows (dollars in thousands
except average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- --------------------
1997 1996 1997 1996
------ ---- ------ ----
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues $2,048 $ 0 $5,149 $696
Other property revenue 157 0 326 35
------ --- ------ ----
Total property revenues 2,205 0 5,475 731
------ --- ------ ----
Property operating and maintenance
expense (1) 742 0 1,814 260
------ --- ------ ----
Property operating income $1,463 $ 0 $3,661 $471
====== === ====== ====
Average physical occupancy (2) 92.8% 0.0% 93.9% 90.2%
====== === ====== ====
Average monthly rental revenue (3) $ 848 $ 0 $ 892 $998
====== === ====== ====
Number of apartment homes 882 0 1,144 262
====== === ====== ====
</TABLE>
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in
the communities, expressed as a percentage. Average physical occupancy
has been calculated using the average of the midweek occupancy that
existed during each week of the period.
(3) Represents the average monthly net rental revenue per occupied
apartment home. Average monthly rental revenue for the six months
ended June 30, 1997 for the 1997 Acquisitions was $846.
The unleveraged yield, defined as property operating income for the three and
six months ended June 30, 1997 for the acquisition communities, as defined
above, on an annualized basis over total acquisition cost, was 9.0% and 9.4%,
respectively. The unleveraged yield for the 1997 Acquisitions only for the six
months ended June 30, 1997, was 9.3%.
15
<PAGE> 16
OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S STABILIZED DEVELOPMENT
COMMUNITIES
The Operating Partnership had four development communities (Summit Aventura,
Summit Hill II, Summit Green, and Summit River Crossing), which were stabilized
during the entire three and six months ended June 30, 1997 but were still in
lease-up/construction in the three and six months ended June 30, 1996. The
operating performance of these four Communities for the three and six months
ended June 30, 1997 and 1996 is summarized below (dollars in thousands except
average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- --------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues $2,878 $1,743 $5,802 $2,785
Other property revenue 181 126 325 210
------ ------ ------ ------
Total property revenues 3,059 1,869 6,127 2,995
------ ------ ------ ------
Property operating and maintenance
expense (1) 1,009 715 1,932 1,238
------ ------ ------ ------
Property operating income $2,050 $1,154 $4,195 $1,757
====== ====== ====== ======
Average physical occupancy (2) 91.7% 55.9% 92.3% 44.3%
====== ====== ====== ======
Average monthly rental revenue (3) $ 908 $ 878 $ 910 $ 890
====== ====== ====== ======
Number of apartment homes 1,200 1,200 1,200 1,200
====== ====== ====== ======
</TABLE>
(1) Before real estate depreciation expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in
the communities, expressed as a percentage. Average physical occupancy
has been calculated using the average of the midweek occupancy that
existed during each week of the period.
(3) Represents the average monthly net rental revenue per occupied
apartment home.
The unleveraged yield, defined as property operating income for the three and
six months ended June 30, 1997 on an annualized basis over total development
cost, was 10.2% and 10.4%, respectively.
16
<PAGE> 17
OPERATING PERFORMANCE OF THE OPERATING PARTNERSHIP'S COMMUNITIES IN LEASE-UP
The Operating Partnership had seven Communities in lease-up in the three and six
months ended June 30, 1997. A Community in lease-up is defined as one which has
commenced rental operations but has not reached stabilization. A summary of the
seven Communities in lease-up as of June 30, 1997 is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
TOTAL ACTUAL/ HOMES % LEASED
NUMBER OF ACTUAL/ ANTICIPATED COMPLETED Q2 1997 AS OF
APARTMENT ESTIMATED CONSTRUCTION ANTICIPATED AT JUNE 30, AVERAGE JUNE 30,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1997 OCCUPANCY 1997
- --------------------- ------------ ----------- -------------- -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit Fairways 240 $ 17,900 Q4 1996 Q3 1997 240 76.30% 94.20%
Summit on the River 352 24,300 Q2 1997 Q3 1997 352 58.20% 76.40%
Summit Russett 314 23,100 Q3 1997 Q3 1997 250 42.50% 72.60%
Summit Stonefield 216 18,400 Q4 1997 Q1 1998 36 1.10% 19.90%
Summit Ballantyne I 246 16,800 Q4 1997 Q2 1998 42 1.50% 16.70%
Summit Sedgebrook I 248 15,600 Q4 1997 Q2 1998 32 0.60% 12.10%
Summit Plantation II 240 22,000 Q4 1997 Q2 1998 32 0.00% 15.00%
=========== ==========
1,856 $138,100
=========== ==========
</TABLE>
Property operating income after interest expense was $117,000 and $67,000 for
the seven communities in lease-up for the three and six months ended June 30,
1997, respectively.
17
<PAGE> 18
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
The operating performance of Summit Management Company (the "Management
Company") and its wholly-owned subsidiary, Summit Apartment Builders Inc. (the
"Construction Company"), for the three and six months ended June 30, 1997 and
1996 is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ---------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
Property management revenue $1,203 $1,166 $ 2,385 $ 2,298
Construction Company income 266 112 458 176
Other Management Company income 31 33 55 59
------ ------ ------- -------
Total revenue 1,500 1,311 2,898 2,533
Property management expenses:
Operating 1,042 997 2,073 2,149
Depreciation 48 28 96 56
Amortization 76 69 148 138
Interest 75 75 150 150
------ ------ ------- -------
Total property management expenses 1,241 1,169 2,467 2,493
Construction Company expenses 154 71 456 135
------ ------ ------- -------
Total expenses 1,395 1,240 2,923 2,628
------ ------ ------- -------
Net income (loss) of the
Management Company $ 105 $ 71 ($ 25) ($ 95)
====== ====== ======= =======
</TABLE>
The increase in property management revenue was the result of higher revenues
for managing the Operating Partnership's Communities (which was due to an
increase in the number of Communities managed as a result of new developments
and acquisitions), offset by a reduction in the average number of communities
managed for third parties during 1997 compared to 1996. Total apartment homes
managed for third parties was 5,398 and 7,925 at June 30, 1997 and 1996,
respectively. The Operating Partnership expects third party management revenue
as a percentage of total property management revenues to continue to decline as
revenues from the Operating Partnership's communities continue to increase.
Property management fees include $432,000 and $568,000 of fees from third
parties for the three months ended June 30, 1997 and 1996, respectively, and
$906,000 and $1.1 million of fees from third parties for the six months ended
June 30, 1997 and 1996, respectively.
Construction Company revenues and expenses increased in 1997 compared to 1996
primarily due to the increased number of construction projects. The increase in
construction projects was a result of the Operating Partnership's decision to
expand its in-house construction operations in the state of Florida to cover the
entire geographic area in which the Operating Partnership operates. All of the
Construction Company's income is from contracts with the Operating Partnership.
18
<PAGE> 19
OTHER INCOME AND EXPENSES
Interest expense increased $137,000 and $538,000 or 2.8% and 5.9% for the three
and six months ended June 30, 1997, respectively, primarily due to interest on
debt related to the Communities acquired in 1997 and interest on Communities in
lease-up, offset by the Operating Partnership's repayment of debt in connection
with Summit Properties' public offering of 5.75 million shares of Common Stock
in August 1996 the proceeds of which were contributed to the Operating
Partnership.
Depreciation expense increased $993,000 and $2.0 million or 22.4% and 23.9% for
the three and six months ended June 30, 1997, respectively, primarily due to the
1997 and 1996 Acquisitions, increased depreciation on Communities that were in
construction in 1996, but completed by 1997 and Communities in lease-up in 1997.
General and administrative expense decreased $39,000 or 3.0% to $1.24 million
for the six months ended June 30, 1997 from $1.28 million for the same period in
1996 primarily due to decreased compensation costs.
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership's working capital is primarily provided by operations
and an unsecured $150 million credit facility (the "Unsecured Credit Facility").
The Unsecured Credit Facility has a three year term and currently bears interest
at LIBOR + 110 basis points based upon the Operating Partnership's credit rating
of BBB- by Standard & Poors Rating Group. The interest rate can be reduced in
the event of an upgrade of the Operating Partnership's unsecured credit rating
as assigned by Standard & Poors Rating Group (which rating must be accompanied
by the comparable senior unsecured bond rating from one of Moody's, Duff &
Phelps or Fitch) as follows:
S & P CREDIT RATING RATE
------------------- ----
BBB-.................................... LIBOR + 110
BBB..................................... LIBOR + 95
BBB+.................................... LIBOR + 80
The Unsecured Credit Facility provides $25 million for general working capital
purposes with the remaining $125 million available to finance new development
and acquisitions.
The Operating Partnership's outstanding indebtedness at June 30, 1997 totaled
$398.9 million. This amount includes approximately $206.7 million in fixed rate
conventional mortgages, $53.1 million of variable rate tax-exempt bonds, $31.0
million of unsecured notes, $9.3 million of tax exempt fixed rate loans, and
$98.8 million under the variable rate Unsecured Credit Facility.
Summit Properties and the Operating Partnership have filed a Form S-3
Registration Statement under which Summit Properties can issue up to $250
million of common stock and preferred stock, and the Operating Partnership can
issue up to $250 million of debt securities.
19
<PAGE> 20
The Operating Partnership's net cash provided by operating activities increased
from $19.3 million for the six months ended June 30, 1996 to $27.2 million for
the same period in 1997 primarily due to a $7.7 million increase in property
operating income.
Net cash used in investing activities increased from $46.0 million for the six
months ended June 30, 1996 to $86.5 million for the same period in 1997
primarily due to an increase in the acquisition of Communities and an increase
in construction of real estate assets.
Net cash provided by financing activities increased from $27.0 million for the
six months ended June 30, 1996 to $61.1 million for the same period in 1997,
primarily due to an increase in debt proceeds and Summit Properties equity
offering proceeds contributed to the Operating Partnership, partially offset by
higher dividends and distributions to unitholders. The increase in debt proceeds
was primarily due to borrowings to finance the 1997 Acquisitions.
The Operating Partnership expects to meet its short-term liquidity requirements
(i.e., liquidity requirements arising within twelve months) generally through
its net cash provided by operations and borrowings under the Unsecured Credit
Facility. The Operating Partnership believes that its net cash provided by
operations will be adequate to meet its operating requirements and to satisfy
Summit Properties' applicable REIT dividend payment requirements in both the
short-term and in the long-term. Improvements and renovations at existing
Communities are expected to also be funded from property operations.
The Operating Partnership expects to meet its long-term liquidity requirements
(i.e., liquidity requirements arising after twelve months), such as current and
future developments, debt maturities, acquisitions, renovations and other
non-recurring capital expenditures, with borrowings under its Unsecured Credit
Facility, through the issuance of long-term secured and unsecured debt
securities and additional equity securities of Summit Properties which will be
contributed to the Operating Partnership, or in connection with the acquisition
of land or improved property, through the issuance of Units of the Operating
Partnership.
On May 14, 1997, the Operating Partnership sold a community in Charlotte, North
Carolina known as Summit Charleston for $9.5 million. A gain on the sale of
approximately $4.4 million was recognized.
The Operating Partnership purchased an apartment community to be known as Summit
Windsor II for $17.1 million in cash on July 18, 1997. Summit Windsor II, which
was developed by the Company in 1988, has 306 apartment homes and is located in
Frederick, Maryland. The proceeds from the sale of a community and borrowings on
the Unsecured Credit Facility were used to fund the purchase.
20
<PAGE> 21
The following table sets forth certain information regarding debt financing as
of June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
PRINCIPAL OUTSTANDING
INTEREST -----------------------------
RATE AS OF MATURITY JUNE 30, DECEMBER 31,
JUNE 30, 1997 DATE 1997 1996
---------------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
FIXED RATE DEBT (1)
MORTGAGE LOAN (2) (3) 5.88% 2/15/01 $121,673 $122,950
MORTGAGE LOAN (2) (3) 7.71% 12/15/05 29,434 29,653
MORTGAGE LOAN (4) 8.00% 09/1/05 8,598 8,638
MORTGAGE NOTES
Summit Hollow I 8.00% 11/1/18 2,265 2,286
Summit Hollow II 7.75% 1/1/29 2,577 2,587
Summit Creekside 8.00% 6/1/22 2,857 2,877
Summit Old Town 8.00% 9/1/20 3,073 3,097
Summit Eastchester 8.00% 5/1/21 3,843 3,872
Summit Foxcroft 8.00% 4/1/20 2,759 2,788
Summit Oak 7.75% 12/1/23 2,569 2,585
Summit Sherwood 7.88% 3/1/29 3,316 3,329
Summit Radbourne 9.80% 3/1/02 8,642 8,683
Summit Sand Lake 7.88% 2/15/06 15,128 -
TAX EXEMPT MORTGAGE NOTES
Summit Crossing 6.95% 11/1/25 4,188 4,213
Summit East Ridge 7.25% 12/1/26 5,129 5,156
------------- --------------
TOTAL MORTGAGE DEBT 216,051 202,714
------------- --------------
UNSECURED NOTES
Bank Note 7.85% 8/3/02 16,000 16,000
Bank Note 7.61% 8/3/00 15,000 15,000
------------- --------------
TOTAL UNSECURED NOTES 31,000 31,000
------------- --------------
TOTAL FIXED RATE DEBT 247,051 233,714
VARIABLE RATE DEBT
UNSECURED CREDIT FACILITY LIBOR + 110 9/30/99 98,786 22,357
TAX EXEMPT BONDS(5)
Summit Belmont 5.70% 4/1/07 11,650 11,850
Summit Hampton 5.70% 6/1/07 12,490 12,700
Summit Pike Creek 5.70% 8/15/20 13,143 13,262
Summit Gateway 5.70% 7/1/07 7,100 7,300
Summit Stony Point 5.70% 4/1/29 8,670 8,750
------------- --------------
TOTAL TAX EXEMPT BONDS 53,053 53,862
------------- --------------
TOTAL VARIABLE RATE DEBT 151,839 76,219
------------- --------------
TOTAL OUTSTANDING INDEBTEDNESS $398,890 $309,933
============= ==============
</TABLE>
(1) With the exception of the Mortgage Loans referred to in Note 3 below,
all of the secured debt can be prepaid at any time. Prepayment of such
debt is generally subject to penalty or premium; however, the tax
exempt mortgage notes can be prepaid at any time without penalty or
premium.
21
<PAGE> 22
(2) Mortgage Loans are secured by the following Communities:
Summit Glen Summit Blue Ash Summit Heron's Run
Summit Park Summit Square Summit Perico
Summit Village Summit Waterford Summit Providence
Summit Highland Summit Del Ray Summit Meadow
Summit Norcroft Summit Palm Lake Summit Windsor
(3) The Operating Partnership may elect to extend the maturity of each of
these Mortgage Loans for a period of up to two years by providing six
months' written notice. These Mortgage Loans generally may not be
prepaid in whole or in part during their original term, but may be
prepaid in whole or in part at any time during applicable extension
periods, if any, without premium or penalty.
(4) Mortgage Loan secured by Summit Simsbury and Summit Touchstone
Communities.
(5) The tax exempt bonds (the "Bonds") are enhanced by letters of credit
from financial institutions (the "Credit Enhancements"), each of which
Credit Enhancement will terminate prior to the maturity dates of the
related Bonds. In the event such Credit Enhancements are not renewed or
replaced upon termination, the related loan obligations will be
accelerated.
The London Interbank Offered Rate (LIBOR) at June 30, 1997 was 5.69%
DEVELOPMENT ACTIVITY
The Operating Partnership's developments in process at June 30, 1997 are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ESTIMATED ANTICIPATED
APARTMENT ESTIMATED COST TO COST TO CONSTRUCTION
COMMUNITY HOMES COSTS DATE COMPLETE COMPLETION
- ---------------------------------------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Summit Russett-Laurel, MD 314 $ 23,100 $ 22,005 $ 1,095
Summit Stonefield-Yardley, PA 216 18,400 13,817 4,583 Q4 1997
Summit Norcroft II-Charlotte, NC 54 3,750 1,704 2,046 Q4 1997
Summit Sedgebrook I-Charlotte, NC 248 15,600 10,950 4,650 Q4 1997
Summit Ballantyne I-Charlotte, NC 246 16,800 10,855 5,945 Q4 1997
Summit Plantation II-Plantation, FL 240 22,000 16,145 5,855 Q4 1997
Summit Lake I-Raleigh, NC 302 19,700 8,700 11,000 Q2 1998
Summit Fair Lakes I-Fairfax, VA 370 32,900 8,750 24,150 Q4 1998
Summit New Albany-Columbus, OH 301 22,600 4,507 18,093 Q1 1999
------------ ----------- ----------- -----------
2,291 174,850 97,433 77,417
Other development and construction - - 13,573 -
costs
------------ ----------- ----------- -----------
2,291 $ 174,850 $ 111,006 $ 77,417
============ =========== =========== ===========
</TABLE>
In addition, the Operating Partnership has a commitment to purchase a community
(Summit St. Claire) currently under construction in Atlanta, Georgia for
approximately $27.5 million, subject to adjustment based on the percentage of
apartment homes leased as of the date of acquisition. The 336 apartment home
community is expected to be purchased, after reaching rental stabilization which
is currently expected in the fourth quarter of 1998.
Estimated costs to complete the development communities and the purchase
commitment for Summit St. Claire represent all of the Operating Partnership's
material commitments for capital expenditures.
22
<PAGE> 23
Certain Factors Affecting the Performance of Development Communities
The Operating Partnership is optimistic about the operating prospects of the
Communities under construction even with the increased supply of newly
constructed apartment homes of comparable quality in many of its markets. As
with any development community, there are uncertainties and risks associated
with the development of the Communities described above. While the Operating
Partnership has prepared development budgets and has estimated completion and
stabilization target dates based on what it believes are reasonable assumptions
in light of current conditions, there can be no assurance that actual costs will
not exceed current budgets or that the Operating Partnership will not experience
construction delays due to the unavailability of materials, weather conditions
or other events.
Other development risks include the possibility of incurring additional cost or
liability resulting from defects in construction material and the possibility
that financing may not be available on favorable terms, or at all, to pursue or
complete development activities. Similarly, market conditions at the time these
Communities become available for leasing will affect the rental rates that may
be charged and the period of time necessary to achieve stabilization, which
could make one or more of the development communities unprofitable or result in
achieving stabilization later than currently anticipated. In addition, the
Operating Partnership is conducting feasibility and other pre-development work
for eight Communities. The Operating Partnership could abandon the development
of any one or more of these potential Communities in the event that it
determines that market conditions do not support development, financing is not
available on favorable terms or other circumstances prevent development.
Similarly, there can be no assurance that if the Operating Partnership does
pursue one or more of these potential Communities that it will be able to
complete construction within the currently estimated development budgets or that
construction can be started at the time currently anticipated.
CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS
The Operating Partnership has established a policy of capitalizing those
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset. All expenditures necessary to maintain a Community in ordinary operating
condition (including replacement carpets) are expensed as incurred.
The Operating Partnership has a capital expenditure replacement program whereby
various physical components are replaced as necessary to maintain the
Communities in normal operating condition. Certain physical components may be
replaced other than at regular inspection intervals when extraordinary wear has
occurred. The Operating Partnership also makes capital expenditures for new
physical components if these expenditures will produce sufficient revenue
enhancements as to achieve acceptable returns on invested capital. There are
currently no material commitments with respect to renovation or improvements at
existing facilities.
23
<PAGE> 24
Capitalized expenditures for the six months ended June 30, 1997 and 1996 are
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1997 1996
-------- -------
<S> <C> <C>
Acquisition of new Communities (1) $ 65,170 $21,913
Construction of new Communities (2) 44,950 37,617
Capitalized interest 2,948 1,927
Non-recurring capital expenditures:
Construction of garages 13 720
Access gates 68 65
New signage 76 52
Water meters 19 173
Washer/dryer units 18 58
Major improvements 1,949 758
Other 4 13
-------- -------
Total non-recurring capital expenditures 2,147 1,839
-------- -------
Recurring capital expenditures:
Exterior painting 558 465
Other community additions and improvements 852 935
Corporate additions 61 3
-------- -------
Total recurring capital expenditures 1,471 1,403
-------- -------
$116,686 $64,699
======== =======
</TABLE>
(1) Includes the issuance of Units with a value of $8.9 million and
assumption of debt of $15.2 million in the six months ended June 30,
1997.
(2) Includes issuance of $2.1 million of Units for the acquisition of land
in 1996.
Construction of Communities was funded primarily by development loans, Summit
Properties equity offering proceeds contributed to the Operating Partnership and
borrowing under the Operating Partnership's credit facilities. Other additions
and improvements were funded primarily by Community operations and the Operating
Partnership's credit facilities.
INFLATION
Substantially all of the leases at the Communities are for a term of one year or
less, which, coupled with the relatively high occupancy rates, may enable the
Operating Partnership to seek increased rents upon renewal of existing leases or
commencement of new leases. The short-term nature of these leases generally
serves to reduce the risk to the Operating Partnership of the adverse effect of
inflation.
24
<PAGE> 25
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Operating Partnership computes Funds from Operations in accordance
with the standards established by the White Paper, which may differ from the
methodology for calculating Funds from Operations utilized by other equity
REITs, and, accordingly, may not be comparable to such other REITs. Funds
Available for Distribution is defined as Funds from Operations less capital
expenditures funded by operations (recurring capital expenditures). The
Operating Partnership's methodology for calculating Funds Available for
Distribution may differ from the methodology for calculating Funds Available for
Distribution utilized by other REITs, and accordingly, may not be comparable to
other REITs. Funds from Operations and Funds Available for Distribution do not
represent amounts available for management's discretionary use because of needed
capital replacement or expansion, debt service obligations, property
acquisitions, development, distributions or other commitments and uncertainties.
Funds from Operations and Funds Available for Distribution should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Operating Partnership's financial performance or to
cash flows from operating activities (determined in accordance with GAAP) as a
measure of the Operating Partnership's liquidity, nor are they indicative of
funds available to fund the Operating Partnership's cash needs, including its
ability to make distributions. The Operating Partnership believes Funds from
Operations and Funds Available for Distribution is helpful to investors as
measures of the performance of the Operating Partnership because, along with
cash flows from operating activities, financing activities and investing
activities, they provide investors with an understanding of the ability of the
Operating Partnership to incur and service debt and make capital expenditures.
25
<PAGE> 26
Funds from Operations and Funds Available for Distribution for the three and six
months ended June 30, 1997 and 1996 are calculated as follows (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 11,222 $ 4,345 $ 18,150 $ 8,582
Gain on sale of real estate assets (4,366) -- (4,366) --
Depreciation:
Operating Communities 5,421 4,428 10,593 8,549
Summit Plantation -- -- -- 33
------------ ------------ ------------ ------------
Funds from Operations 12,277 8,773 24,377 17,164
Recurring capital expenditures (1) (1,016) (842) (1,471) (1,403)
------------ ------------ ------------ ------------
Funds Available for Distribution $ 11,261 $ 7,931 $ 22,906 $ 15,761
============ ============ ============ ============
Weighted average shares and units
outstanding 27,333,968 20,624,614 27,192,559 20,618,684
============ ============ ============ ============
</TABLE>
(1) Recurring capital expenditures are expected to be funded from
operations and consist primarily of exterior painting, new appliances,
vinyl, blinds, tile, and wallpaper. In contrast, non-recurring capital
expenditures, such as major improvements, new garages and access gates,
are expected to be funded by financing activities and are therefore not
included in the calculation of Funds Available for Distribution.
26
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
During the past three months ended June 30,1997 the Operating Partnership has
issued Units in private placements in reliance on the exemption from
registration under section 4(2) of the Securities Act in the amounts and for the
consideration set forth below:
A. Summit Properties has issued an aggregate of 7,208 shares of
Common Stock pursuant to its Dividend Reinvestment Plan.
Summit Properties has contributed the proceeds (approximately
$144,000) of these sales to the Operating Partnership in
consideration of an aggregate of 7,208 Units.
B. Summit Properties has issued an aggregate of 5,420 shares of
Common Stock in connection with restricted stock awards. Each
time a share of Common Stock is issued in connection with such
an award, the Operating Partnership issues a Unit to Summit
Properties; consequently, 5,420 Units have been issued to
Summit Properties to date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 18, 1997, the Operating Partnership partners were asked to consider a
proposal (the "Proposal") to approve the Amendment No. 10 to the Limited
Partnership Agreement (the "Agreement") of the Operating Partnership, which
amendment modified certain provisions of the agreement applicable in certain
mergers, consolidations or asset transfers.
With respect to the Proposal, the partners of the Operating Partnership voted by
a vote of 27.3 million votes of Units of the Operating Partnership in favor of
the Proposal, in excess of a majority of eligible votes, with no votes against
Amendment No. 10 to the Limited Partnership Agreement of the Operating
Partnership.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amendment No. 10 to the Limited Partnership Agreement of the
Operating Partnership
27.1 Financial Data Schedule
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT PROPERTIES PARTNERSHIP, L.P.
July 29, 1997 /s/ William F. Paulsen
- --------------------------- --------------------------------------------
(Date) William F. Paulsen, President
and Chief Executive Officer
July 29, 1997 /s/ Michael L. Schwarz
- --------------------------- --------------------------------------------
(Date) Michael L. Schwarz, Executive
Vice President and Chief Financial Officer
28
<PAGE> 29
EXHIBIT INDEX
3.1 Amendment No. 10 to the Limited Partnership Agreement of the Operating
Partnership
27.1 Financial Data Schedule
29
<PAGE> 1
EXHIBIT 3.1
TENTH AMENDMENT TO AGREEMENT OF
LIMITED PARTNERSHIP OF SUMMIT PROPERTIES PARTNERSHIP, L.P.
THIS TENTH AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF SUMMIT
PROPERTIES PARTNERSHIP, L.P. (the "Amendment") is dated as of June 18, 1997, and
entered into by and among Summit Properties Inc., a Maryland corporation (the
"Company"), and the persons whose names are set forth on Exhibit A attached
hereto (the "Limited Partners").
WHEREAS, the Company and the Limited Partners are partners of Summit
Properties Partnership, L.P., a Delaware limited partnership (the
"Partnership"), pursuant to an Agreement of Limited Partnership dated as of
January 29, 1994, as previously amended (as previously amended, the
"Agreement"); and
WHEREAS, in accordance with Section 14.1 of the Agreement, the Partners
have approved this Amendment by written consent.
NOW, THEREFORE, in accordance with the provisions of Section 14.1 of
the Agreement and for other good and valuable consideration the Partners hereby
amend the Agreement by adding the following Article 16 to the end of the
Agreement.
ARTICLE 16
CONSOLIDATION, MERGER OR SALE OF ASSETS OF THE COMPANY
Section 16.1 Triggering Events
For the purposes of this Article 16, each of the following events shall
be deemed to be a "Triggering Event": (w) if the Company consolidates with, or
merges into, any other Person, and the Company is not the continuing or
surviving corporation of such consolidation or merger, (x) if any Person
consolidates with, or merges into, the Company, and the Company is the
continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
REIT Shares are converted into stock or other securities of any other Person or
cash or any other property, (y) if any Person becomes the Beneficial Owner (as
hereinafter defined) of 33.3% or more of the outstanding REIT Shares or (z) if
the Company sells or otherwise transfers (or one or more of its Subsidiaries
sells or otherwise transfers) to any Person or Persons, in one or more
transactions, assets aggregating more than 50% of the value of the assets (based
on either the fair market value of the assets or cash flow generated by the
assets) of the Company or the Partnership. "Beneficial Owner" means any Person
who, together with such Person's Affiliates (as defined in Rule 12b-2 of the
Securities Exchange Act of 1934 as in effect on the date this Article 16 shall
be adopted (including any rules and regulations thereunder) (the "Exchange
Act")) and associates (as defined in Rule 12b-2 of the Exchange Act), (i) would
be considered a "beneficial owner" under Rule 13d-3 of the
<PAGE> 2
Exchange Act, other than (A) as a result of a revocable proxy given in response
to a proxy or consent solicitation made pursuant to, and in accordance with, the
Exchange Act or (B) as would not be reportable by such Person on Schedule 13D
under the Exchange Act, (ii) has entered into any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring, owning,
voting (except pursuant to a revocable proxy or consent solicitation made
pursuant to, and in accordance with, the Exchange Act) or disposing of REIT
Shares or (iii) has the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of
conditions) REIT Shares pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options or otherwise.
Section 16.2 From and After the Occurrence of a Triggering Event
Effective on the date of each Triggering Event, the Redemption Right
shall be adjusted as provided in this Section 16.2.
A. From and after the occurrence of a Triggering Event (each such
occurrence, a "Trigger Occurrence") and until the occurrence, if any, of a
subsequent Triggering Event (in which case a further adjustment shall be made
pursuant to this Section 16.2), each and every reference contained in this
Agreement to a "REIT Share" or "REIT Shares" shall be deemed to be a reference
to a share or shares, respectively (each, a "Replacement Share"; collectively,
"Replacement Shares"), of: (i) if, as a result of any Triggering Event, all of
the REIT Shares are converted solely into Registered Common Stock (as
hereinafter defined), such Registered Common Stock and (ii) in all other cases,
the common stock, or, if such Person shall have no common stock, the equity
securities or other equity interests having power to control or direct the
management (the "Common Stock") of (a) in the event of a Triggering Event
described in clause (w) or (x) of the first sentence of Section 16.1, (1) the
Person that is the issuer of any securities into which the REIT Shares are
converted in such merger or consolidation, or, if there is more than one such
issuer, the issuer who has the highest Market Capitalization (as hereinafter
defined) and (2) if no securities are so issued, the Person that is the other
party to such merger or consolidation, or if there is more than one such Person,
the Person who has the highest Market Capitalization or (b) in the event of a
Triggering Event described in clause (y) or (z) of the first sentence of Section
16.1, the Person that is the party becoming the Beneficial Owner of the largest
percentage of the outstanding REIT Shares or receiving the largest portion of
the value of assets (with such value determined based on either the fair market
value of the assets or the cash flow generated by the assets) transferred
pursuant to such transaction or transactions, or, if each Person that is a party
to such transaction or transactions or if the Person becoming the Beneficial
Owner of the largest portion of the REIT Shares or receiving the largest portion
of the assets cannot be determined, whichever Person has the highest Market
Capitalization; provided, however, that in any such case, (1) if the Common
Stock of such Person is not at such time and has not been continuously over the
preceding twelve-month period registered ("Registered Common Stock") under
<PAGE> 3
Section 12 of the Exchange Act, or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Replacement Shares" shall mean shares of the Common
Stock of such other Person; (2) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
a direct or indirect Subsidiary of another Person but is not a direct or
indirect Subsidiary of another Person which has Registered Common Stock
outstanding, "Replacement Shares" shall mean shares of the Common Stock of the
ultimate parent entity of such first-mentioned Person; (3) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one of such other Persons has Registered Common Stock
outstanding, "Replacement Shares" shall mean shares of the Common Stock of
whichever of such other Persons is the issuer having the highest Market
Capitalization; and (4) if the Common Stock of such Person is not Registered
Common Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such other Persons
have Registered Common Stock outstanding, "Replacement Shares" shall mean shares
of the Common Stock of whichever ultimate parent entity is the corporation
having the highest aggregate shareholders' equity or, if no such ultimate parent
entity is a corporation, shall be deemed to refer to shares of the Common Stock
of whichever ultimate parent entity is the entity having the greatest net
assets. Any issuer of "Replacement Shares" shall be referred to as an "Issuer".
"Market Capitalization" means the dollar figure equal to the product of the
number of shares of Common Stock issued and outstanding on the date of the
Trigger Occurrence in question, on a fully diluted basis, not held by Affiliates
(as defined under the Exchange Act) multiplied by the Average Trading Price (as
hereinafter defined). The holders of a majority of the Partnership Units held by
the Limited Partners (excluding the Partnership Units held by the General
Partner) may, within 90 days after the occurrence of a Triggering Event
described in clause (y) of the first sentence of Section 16.1, waive, in
writing, the adjustment to the Redemption Right provided for in this Section
16.2; provided, that (i) the Redemption Right shall remain in full force and
effect as provided in Section 8.6, (ii) such election shall be binding on all of
the Limited Partners and (iii) if the adjustment to the Redemption Right has
previously been waived pursuant to this sentence, a new Triggering Event shall
be deemed to occur each time a Person who is the Beneficial Owner of at least
33.3% of the outstanding REIT Shares becomes the Beneficial Owner of an
additional 2% or more of the outstanding REIT Shares.
B. From and after a Trigger Occurrence, the "Conversion Factor" shall
be adjusted by multiplying the "Conversion Factor" existing on the day
immediately prior to such Trigger Occurrence as follows: (i) if the REIT Shares,
as a result of the Trigger Occurrence, have been converted solely into the right
to receive Registered Common Stock, by the number of shares of Registered Common
Stock which the holder of a single REIT Share was entitled to receive as a
result of the Trigger Occurrence or (ii) in all other cases, by a fraction, the
numerator of which shall be the Average Trading Price of a REIT Share as of such
Trigger Occurrence and the
<PAGE> 4
denominator of which shall be the Average Trading Price of a Replacement Share
as of such Trigger Occurrence. Following a Trigger Occurrence, the Conversion
Factor shall be further adjusted as set forth in the definition of "Conversion
Factor" contained in Article 1 of this Agreement and as provided in this Section
16.2.
C. For the purpose of any computation hereunder, the "Average Trading
Price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such shares for the ten consecutive
trading days immediately prior to the third trading day prior to such date;
provided, however, in the event the Triggering Event occurs as part of a series
of related transactions which also includes a tender offer, the ten trading day
period shall be the ten consecutive trading day period immediately prior to the
day REIT Shares are accepted for payment pursuant to such tender offer;
provided, however, further, if prior to the expiration of such requisite ten
trading day period the issuer announces either (A) a dividend or distribution on
such shares payable in such shares or securities convertible into such shares or
(B) any subdivision, combination or reclassification of such shares, then,
following the ex-dividend date for such dividend or the record date for such
subdivision, as the case may be, the "Average Trading Price" shall be properly
adjusted to take into account such event. The closing price for each day shall
be, if the shares are listed and admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which such shares are listed or admitted to trading or, if such shares are
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the high bid price in the over-the-counter
market, as reported by the NASDAQ National Market System or such other system
then in use, or, if on any such date such shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such shares selected by the holders
of a majority of the Partnership Units held by the Limited Partners (excluding
the Partnership Units held by the General Partner). If such shares are not
publicly held or not so listed or traded or if, for the ten days prior to such
date, no market maker is making a market in such shares, the Average Trading
Price of such shares on such date shall be deemed to be the fair value of such
shares as determined as set forth in Section 16.2.D. The term "trading day"
shall mean, if such shares are listed or admitted to trading on any national
securities exchange, a day on which the principal national securities exchange
on which such shares are listed or admitted to trading is open for the
transaction of business or, if such shares are not so listed or admitted, a
Business Day.
D. In the event that on the date of a Trigger Occurrence, the shares of
a Person are not publicly held or not so listed or traded or if, for the ten
days prior to such date, no market maker is making a market in the shares of a
Person, the Average Trading Price of the shares of such Person shall be the fair
value of the shares as determined in good faith by the holders of a majority of
the Partnership Units held by the Limited Partners (excluding the Partnership
Units held by the General Partner) and
<PAGE> 5
by the General Partner, which determination shall be binding on all of the
Limited Partners. If the holders of a majority of the Partnership Units held by
the Limited Partners (excluding the Partnership Units held by the General
Partner) and General Partner have not agreed on the fair value of the shares and
executed and delivered between them an agreement setting forth the same within
twenty (20) days after the Trigger Occurrence in question, then either the
General Partner or the holders of a majority of the Partnership Units held by
the Limited Partners (excluding the Partnership Units held by the General
Partner) may notify the other that they or it desire to invoke the following
arbitration procedure:
(1) Notice of the holders of a majority of the Partnership
Units held by the Limited Partners (excluding the Partnership Units
held by the General Partner) or by the General Partner of such parties'
intention to seek arbitration shall be delivered to the other parties
within ten (10) days, after which all parties shall, in good faith,
attempt to agree on a single arbitrator to determine the fair value of
the shares (the "Arbitrator"). If the holders of a majority of the
Partnership Units held by the Limited Partners (excluding the
Partnership Units held by the General Partner) and the General Partner
have not agreed on the Arbitrator within ten (10) days after the giving
of the Arbitration Notice, then either party, on behalf of both, may
apply to the local office of the American Arbitration Association or
any organization which is the successor thereof (the "AAA") for
appointment of the Arbitrator, or, if the AAA shall not then exist or
shall fail, refuse or be unable to act such that the Arbitrator is not
appointed by the AAA within ten (10) days after application therefor,
then either party may apply to any court of competent jurisdiction in
the State of North Carolina (the "Court") for the appointment of the
Arbitrator and the other party shall not raise any question as to the
Court's full power and jurisdiction to entertain the application and
make the appointment. The date on which the Arbitrator is appointed, by
the agreement of the parties, by appointment by the AAA or by
appointment by the Court, is referred to herein as the "Appointment
Date". If any Arbitrator appointed hereunder shall be unwilling or
unable, for any reason, to serve, or continue to serve, a replacement
arbitrator shall be appointed in the same manner as the original
Arbitrator.
(2) The arbitration shall be conducted in accordance with the
then prevailing commercial arbitration rules of the AAA, modified as
follows:
(i) To the extent that any statute imposes
requirements different than those of the AAA in order for the
decision of the Arbitrator to be enforceable in the courts of
the State of North Carolina, such requirements shall be
complied with in the arbitration.
(ii) The Arbitrator shall be disinterested and
impartial, shall not be affiliated with the Limited Partners,
the General Partner or their
<PAGE> 6
Affiliates and shall have at least ten (10) years experience
in the market in which the applicable Person transacts the
majority of its business.
(iii) Before hearing any testimony or receiving any
evidence, the Arbitrator shall be sworn to hear and decide the
controversy faithfully and fairly by an officer authorized to
administer an oath and a written copy thereof shall be
delivered to each of the Limited Partners and the General
Partner.
(iv) Within twenty (20) days after the Appointment
Date, the holders of a majority of the Partnership Units held
by the Limited Partners (excluding the Partnership Units held
by the General Partner) and the General Partner shall deliver
to the Arbitrator two (2) copies of their respective written
determinations of the fair value of the shares (each, a
"Determination") together with such affidavits, appraisals,
reports and other written evidence relating thereto as the
submitting party deems appropriate. After the submission of
any Determination, the submitting party may not make any
additions to or deletions from, or otherwise change, such
Determination or the affidavits, appraisals, reports and other
written evidence delivered therewith. If either party fails to
so deliver its Determination within such time period, time
being of the essence with respect thereto, such party shall be
deemed to have irrevocably waived its right to deliver a
Determination and the Arbitrator, without holding a hearing,
shall accept the Determination of the submitting party as the
fair value of the shares. If each party submits a
Determination with respect to the fair value of the shares
within the twenty (20) day period described above, the
Arbitrator shall, promptly after its receipt of the second
Determination, deliver a copy of each party's Determination to
the other party.
(v) Not less than ten (10) days nor more than twenty
(20) days after the earlier to occur of (x) the expiration of
the twenty (20) day period provided for in clause (iv) of this
subparagraph or (y) the Arbitrator's receipt of both of the
Determinations from the parties (such earlier date is referred
to herein as the "Submission Date") and upon not less than
five (5) days notice to the parties, the Arbitrator shall hold
one or more hearings with respect to the determination of the
fair value of the shares. The hearings shall be held in the
Charlotte metropolitan area of North Carolina at such location
and time as shall be specified by the Arbitrator. Each of the
parties shall be entitled to present all relevant evidence and
to cross-examine witnesses at the hearings. The Arbitrator
shall have the authority to adjourn any hearing to such later
date as the Arbitrator shall specify, provided that in all
events all hearings with respect to the determination of the
fair value of the shares shall be concluded not later than
thirty (30) days after the Submission Date.
<PAGE> 7
(vi) The Arbitrator shall be instructed, and shall be
empowered only, to select as the fair value of the shares that
one of the Determinations which the Arbitrator believes is the
more accurate determination of the Average Trading Price of
the shares. Without limiting the generality of the foregoing,
in rendering his or her decision, the Arbitrator shall not add
to, subtract from or otherwise modify the provisions of this
Agreement or either of the Determinations.
(vii) The Arbitrator shall render his or her
determination as to the selection of a Determination in a
signed and acknowledged written instrument, original
counterparts of which shall be sent simultaneously to Limited
Partners and the General Partner, within ten (10) days after
the conclusion of the hearing(s) required by clause (v) of
this Section.
(3) This provision shall constitute a written agreement to
submit any dispute regarding the determination of the Average Trading
Price of the shares of a Person to arbitration.
(4) The arbitration decision, determined as provided in this
Article, shall be conclusive and binding on the parties, shall
constitute an "award" by the Arbitrator within the meaning of the AAA
rules and applicable law, and judgment may be entered thereon in any
court of competent jurisdiction.
(5) The Partnership shall pay all fees and expenses relating
to the arbitration (including, without limitation, the reasonable fees
and expenses of one counsel chosen by the holders of a majority of the
Partnership Units held by the Limited Partners (excluding the
Partnership Units held by the General Partner) and of experts and
witnesses retained or called by the Limited Partners). The Limited
Partners' counsel chosen as set forth in the preceding sentence shall
represent the interests of all of the Limited Partners and the choice
of counsel shall be binding on all of the Limited Partners.
E. From and after a Trigger Occurrence, each and every reference to the
"Company" in Section 8.6 shall be deemed to be a reference to the Issuer of the
Replacement Shares. From and after a Trigger Occurrence, the Issuer shall assume
or unconditionally guaranty the performance of the General Partner's obligations
under this Agreement pursuant to an instrument in form and substance
satisfactory to the holders of a majority of the Partnership Units held by the
Limited Partners (excluding the Partnership Units held by the General Partner).
From and after a Trigger Occurrence, the "Average Trading Price" of a REIT Share
or a Replacement Share, as applicable shall be substituted for the "Value" of
the same for the purposes of determining the Cash Amount.
<PAGE> 8
Section 16.3 Additional Issuer Covenants
The General Partner shall (i) not enter into an agreement with
any Person which would result in a Triggering Event unless such agreement
provides for each of the following and (ii) from and after any Trigger
Occurrence, comply with each of the following:
A. If, on the day immediately prior to a Trigger Occurrence, the Issuer
is qualified as a REIT, then, substantially contemporaneously with such Trigger
Occurrence, the General Partner, the Issuer and its Affiliates shall enter into
such mergers, combinations, conveyances or other transactions as shall be
required to cause substantially all of the assets of the General Partner and the
Issuer and its Affiliates to be owned, leased or held directly or indirectly by
a single operating partnership in which the Limited Partners shall hold
partnership units having the rights specified by this Agreement. The agreement
governing the resulting operating partnership shall be in a form substantially
no less favorable to each of the Limited Partners than is this Agreement.
B. From and after a Trigger Occurrence, the General Partner shall not
take any action (other than (i) paying a dividend or distribution in respect of
all of the Partnership Units that complies with Articles 5 and 13, (ii)
purchasing or disposing of any real property or other assets provided that any
single disposition of assets does not represent 10% or more of the total gross
book value of the Partnership's assets at the time of such disposition and the
Partnership shall use reasonable efforts to structure any dispositions of assets
to comply with the requirements of Section 1031 of the Code, (iii) financing,
refinancing or other repayment of any indebtedness or entering into or
terminating any guaranty of indebtedness, (iv) issuing any Units to the Company
or the General Partner in connection with a sale of securities by the Company or
the General Partner or selling any Units, including, without limitation, in
connection with a purchase of assets by the Partnership, or (v) redeeming any
Units pursuant to this Agreement), or fail to take any action, if such action or
failure to take action, would result in any Limited Partner realizing a taxable
gain, without the prior written consent of the holders of a majority of the
Partnership Units held by the Limited Partners (excluding the Partnership Units
held by the General Partner). Notwithstanding the previous sentence, if the
Issuer or the General Partner, or both, shall agree, in writing, to indemnify
each of the Limited Partners against any taxes that the Limited Partners might
incur a result of an action, or failure to take action, on the part of the
General Partner, such action, or failure to take action, shall not require the
consent of any of the Limited Partners. Further, if the General Partner is a
REIT, the General Partner shall be permitted to take any action required by the
Code or the IRS to allow the General Partner to remain a REIT without the
consent of any of the Limited Partners.
C. From and after a Trigger Occurrence, in the event a dividend or
distribution consisting of cash or property (other than Replacement Shares) or
both is paid by the Issuer in respect of the Replacement Shares, the General
Partner shall
<PAGE> 9
cause the Partnership to distribute, in respect of each Partnership Unit, the
same amount of cash or property the holder of a Partnership Unit would have
received had such holder exercised its Redemption Right and received Replacement
Shares prior to such dividend or distribution.
Section 16.4 Application to Later Transactions
This Article 16 shall apply to the initial Triggering Event and shall
continue to apply to each subsequent Triggering Event.
Section 16.5 Waivers and Amendments
A. The provisions of this Article 16 may be waived only upon the
written consent of the holders of a majority of the Partnership Units held by
the Limited Partners (excluding the Partnership Units held by the General
Partner and its Affiliates).
B. This Article 16 shall only be amended as provided in Section 14.1.D
of this Agreement and shall be deemed included in such section for all purposes.
Except as expressly amended by the foregoing Article 16, or as may be
necessary to effect the intent of the parties hereto as evidenced by this
Amendment, all other terms of the Agreement are hereby ratified and confirmed
and shall remain in full force and effect.
[Remainder of page intentionally left blank]
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
GENERAL PARTNER:
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
---------------------------------------
Michael G. Malone
Senior Vice President
LIMITED PARTNERS:
Those Persons listed on Exhibit A attached
hereto
By: Summit Properties Inc., their attorney-
in-fact
By: /s/ Michael G. Malone
---------------------------------------
Michael G. Malone
Senior Vice President
<PAGE> 11
EXHIBIT A
John & Patricia Ackerman Patrick Bailey, Jr.
1818 Manor Hill 352 Eastover Road
St. Louis, MO 63141 Charlotte, NC 28207
Kenneth M. Barnes Jr. Trustee JH Barnhardt
3516 Brunswick Court 2331 Rock Creek Drive
Winston-Salem, NC 27104 Charlotte, NC 28226
Sadler H. Barnhardt Thomas M. Barnhardt
2123 Hastings Drive 600 Llewellyn Place
Charlotte, NC 28207 Charlotte, NC 28207
James H. & Sybil Blumenberg Charles C. Bollinger
2 Kehrsboro Court Northwest Boulevard
Chesterfield, MO 63017 Newton, NC 28658
Douglas L. Boone David R. Boozer
4508 Grandfather's Lane 107 Shoreline Drive
Charlotte, NC 28226 Stanley, NC 28164-9750
Timothy A. Braswell Eugene E. Brucker
17925 Southeast Village Circle 4 Clayprice Court
Tequesta, FL 33469 St. Louis, MO 63124
Dr. Andrew P. Collins John Crosland, Jr.
3115 Academy Road 301 Colville Road
Durham, NC 27707 Charlotte, NC 28207
<PAGE> 12
Carl T. Dedmon Robert W. Donaldson, Jr.
P.O. Box 1146 2531 Forest Drive
Shelby, NC 28151 Charlotte, NC 28211
James H. Donnewald Estate of Raymond Donnewald
1220 Walnut Street 1071 Randolph
Breese, IL 62230 Carlyle, IL 62231
B. D. Farmer, III M.D. James S. Forrester
3810 Silver Bell Drive P.O. Box 457
Charlotte, NC 28211 Stanley, NC 28164
William A. & Cornelia D. Frank Harvey & Cynthia P. Frohlichstein
7 Chatfield Place 140 Executive Estates
St. Louis, MO 63141 St. Louis, MO 63141
Robert H. Gaither John C. Golding
602 East Street 3913 Beresford Road
Albemarle, NC 28001 Charlotte, NC 28211
Rebecca H. Gordon Charles H. Griffin
9219 Hampton Oaks Lane P.O. Box 206
Charlotte, NC 28270-0452 Marshville, NC 28103
<PAGE> 13
David E. Harrold William M. Herndon
209 East Lake Shore Drive 112 Herndon Farm Road
Studio E Kings Mountain, NC 28086
Chicago, IL 60611
M.D. Richard D. Hill K. Reid Hotaling
8405 Rego Street 6231 Floridian Court
Charlotte, NC 28216 Lake Worth, FL 33463
Francis J. Intagliata Ruthanne Jones
10666 Mentz Hill Acres 407 Yachtclub Drive
St. Louis, MO 63128 Rockwall, TX 75087
Donald H. Jones Dr. Duncan A. Killen
3101 Valencia Terrace 1909 W. 70th Street
Charlotte, NC 28211 Shawnee Mission, KS 66208
Richard E. Killough Jack Krause
16112 Weatherly Way 433 Baker Avenue
Huntersville, NC 28078 Webster Groves, MO 63119
Jean H. Lamb Paul R. Leonard, Jr.
P.O. Box 23177 150 Prestwood Lane
Charlotte, NC 28227 Mooresville, NC 28115
Roger M. Lewis Terry G. Link
125 Scaleybark Road 421 Hempstead Place
Charlotte, NC 28209 Charlotte, NC 28207
<PAGE> 14
Justin F. Little Daniel P. McCabe
4211 Chevington Road 2862 Glenwood Springs Drive
Charlotte, NC 28226 Glenwood, MD 21738
Susan H. McDowell Mark L. Messerly
6009 Robin Hollow Drive 4310 North Park Drive
Charlotte, NC 28227 Tampa, FL 33624
Roy H. Michaux, Jr. Jack R. Miller
1929 Queens Road 114 Inwood Drive
Charlotte, NC 28207 Aiken, SC 29803-5614
Kenneth M. Murphy J. Frank Newton
1603 N. Mattis 5241 Haynes Hall Place
Champaign, IL 61820 Charlotte, NC 28270
Gordon L. Pfefferkorn Eugene V. Rankin
333 Pine Valley Drive 230 Pebble Acres Drive
Winston-Salem, NC 27104 St. Louis, MO 63141
Leroy Robinson Sam J. Rosenbloom
2127 Cortelyou Road 14241 Forest Crest Drive
Charlotte, NC 28211 Chesterfield, MO 63017
<PAGE> 15
Raymond Edgar Rowland, Jr. Albert F. Sloan
30 Clermont Lane 3826 Silverbell Road
St. Louis, MO 63124 Charlotte, NC 28211
Brant R. Snavely, Jr. Eloise Y. Spangler
633 W. Fourth Street 926 Elizabeth Road
Winston-Salem, NC 27104 Shelby, NC 28150
Emil A. Stange Dr. John B. Summers
2346 S. Farm Road 237 12658 Alswell Lane
Rogersville, MO 65742-9106 St. Louis, MO 63178
Roberta K. Symonds Nick Tacony
2495 W. Highway 161 9433 Firebush Drive
Nelleville, IL 62221 St. Louis, MO 63126
Edward D. Trevillian Raymond E. Rowland Revocable Trust
6816-A2 Fisher's Farm Lame 710 S. Hamley, #21A
Charlotte, NC 28226 Clayton, MO 63105
Robert W. Sauer Grantor Trust Owen H. Whitfield
14300 Conway Meadows Court, East 2523 Red Fox Trail
Chesterfield, MO 63107 Charlotte, NC 28211
<PAGE> 16
Gerald S. Workman Bernard A. Zimmer
P.O. Box 1325 1324 Waxhaw-Marvin Road
Manteo, NC 27954 Waxhaw, NC 28173
Franz J. Zimmer Frederick C. Hines
12033 Lazy Willow Lane Allen Tate Company
Charlotte, NC 28217 6618 Fairview Road
Charlotte, NC 28210
Charles W. Brown III Ned Curran
Altman Development Corporation Estate of E. R. Street
115-F Venetian Drive 2115 Rexford Road
Delray Beach, FL 33483 Suite 100
Charlotte, NC 28211
c/o Audrey F. Smith Thomas Mannausa
Estate of W.H.L. Smith Neal & Mannausa
P.O. Box 14737 1343 Main Street
St. Louis, MO 63178 5th Floor
Sarasota, FL 34236
Phil Larmon John Gray
P.K. Partners Summit Properties
9000 Keystone Crossing
Suite 560
Indianapolis, IN 46240
Ray Jones Michael Malone
Summit Properties Summit Properties
Mary Beth Marshall Bill McGuire
Summit Properties Summit Properties
<PAGE> 17
John Moore Bill Paulsen
Summit Properties Summit Properties
Jim Smith Steve Wylie
Summit Properties Summit Properties
Keith Downey Keith H. Kuhlman
Summit Properties Inc. Summit Properties Inc.
777 S. Harbour Island Blvd., #980
Tampa, FL 33602
Stephen F. Smoak Michael A. Underwood
Summit Properties Inc. Summit Properties Inc.
Charles Teal
The Crosland Group, Inc.
125 Scaleybark Road
Charlotte, NC 28209
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,346
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 814,941
<DEPRECIATION> 93,936
<TOTAL-ASSETS> 749,317
<CURRENT-LIABILITIES> 0
<BONDS> 398,890
0
0
<COMMON> 0
<OTHER-SE> 317,388
<TOTAL-LIABILITY-AND-EQUITY> 749,317
<SALES> 55,006
<TOTAL-REVENUES> 55,352
<CGS> 0
<TOTAL-COSTS> 20,123
<OTHER-EXPENSES> 0
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