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As filed with the Securities and Exchange Commission on May 14, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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IRVINE APARTMENT COMMUNITIES, L.P.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of 33-0587829
incorporation or organization) (I.R.S. Employer Identification No.)
550 Newport Center Drive, Suite 300
Newport Beach, California 92660
(Address of Principal Executive Offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered: Each Class is to be Registered:
Not Applicable Not Applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Units of General Partnership Interest
(Title of Class)
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EXPLANATORY NOTE
Because Irvine Apartment Communities, Inc. (the "Company")
conducts substantially all of its activity through, and all of its
properties are held directly or indirectly by, Irvine Apartment
Communities, L.P. (the "Operating Partnership"), the registrant, the
description of the business, property information, policies with respect to
certain activities, investment policies and management information for the
registrant are substantially the same as for the Company. Accordingly,
certain information is incorporated by reference herein from documents
filed with the Securities and Exchange Commission by the Company. To the
extent that information incorporated by reference from such documents is
inapplicable to the registrant, appropriate disclosure superseding such
disclosure is included herein.
The Company reincorporated from Delaware to Maryland in May
1996. References to the Company prior to such time refer to the Delaware
corporation.
Item 1. BUSINESS
The Operating Partnership was formed in November 1993. The
address of the Operating Partnership is identical to that of the Company.
"Item 1--Business," appearing on pages 2-11 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 (Commission
File No. 1-12478) (the "Company's 1996 Form 10-K"), is incorporated by
reference herein.
Item 2. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Selected Financial Information(1)
Years Ended December 31,
1996 1995 1994 1993 1992
(in thousands, except percentages, per share and property information)
- ---------------------------------------------------------------------------------------------------------
Selected Operating Information
<S> <C> <C> <C> <C> <C>
Total Revenues....................... $ 158,698 $ 136,168 $ 130,236 $ 124,820 $ 121,194
Income (loss) before extraordinary
item................................. $ 41,192 $ 25,056 $ 12,279 $ (387) $ (1,600)
Net income $ 41,192 $ 1,629 $ 12,279 $ (12,874)
Income before extraordinary item
per unit............................ $ 1.06 $ 0.75 $ 0.41 $ (0.01)
Net income per unit.................. $ 1.06 $ 0.05 $ 0.41 $ (0.43)
Cash distributions per unit.......... $ 1.44 $ 1.39 $ 1.11
Apartment units (at end of period) 13,656 12,776 11,358 11,334 10,952
- ---------------------------------------------------------------------------------------------------------
Selected Stabilized Property
Information(2)
Total properties (at end of period) 48 43 43 42 42
Average units........................ 12,139 11,334 11,334 10,799 10,446
Average physical occupancy........... 94.9% 94.6% 95.6% 96.3% 96.2%
Average monthly rent per unit(3)..... $ 1,025 $ 996 $ 981 $ 963 $ 950
- ---------------------------------------------------------------------------------------------------------
Selected Balance Sheet Information at
December 31,
Total assets......................... $ 900,998 $ 853,230 $ 757,240 $ 740,120 $ 654,694
Total long-term debt $ 553,064 $ 563,286 $ 540,689 $ 513,943 $ 555,491
Partners' capital $ 320,344 $ 264,566 $ 191,049 $ 212,344 $ 90,274
- ----------
(1) The selected financial information includes historical data of the
Operating Partnership and, prior to December 8, 1993, the date of the
Company's initial public offering, the Company's Predecessor. See Note 1
to Consolidated Financial Statements.
(2) A property is considered stabilized at the earlier of one year after
completion of construction or when it achieves 95% occupancy.
(3) Average monthly rent per unit is calculated by dividing average rental
revenue per unit by average economic occupancy.
</TABLE>
"Management's Discussion and Analysis of Financial Condition
and Results of Operations," appearing on pages 18-24 of the Company's 1996
Annual Report to Shareholders (filed as Exhibit 13 to the Company's 1996 Form
10-K) is incorporated by reference herein. Because the Company conducts all
of its operations through the Operating Partnership, such information is
equally applicable to the Operating Partnership as to the Company.
Item 3. PROPERTIES
"Item 2--Properties," appearing on pages 11-12 of the Company's
1996 Form 10-K, is incorporated by reference herein.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect
to beneficial ownership of L.P. Units (as defined in the Company's 1996 Form
10-K) by each of the Company's directors, the Company's new Chief Executive
Officer, Donald Bren who became Chief Executive Officer in February 1997, each
of the four most highly compensated executive officers (including the
Company's former Senior Vice President and Treasurer) who were serving as
executive officers at the end of 1996, other than the Company's former Chief
Executive Officer, the Company's former Chief Executive Officer, the Company's
former Executive Vice President and Chief Financial Officer, all directors and
current executive officers as a group and each person who is known by the
Operating Partnership to beneficially own five percent or more of the L.P.
Units as of March 31, 1997.
Name Number of Percent of
L.P. Units All L.P. Units
- ---- ---------- --------------
Directors and Officers
Donald Bren..................................... --(1) --(1)
Anthony M. Frank................................ -- --
John F. Grundhofer.............................. -- --
Bowen H. McCoy.................................. -- --
Michael D. McKee................................ -- --
William H. McFarland............................ -- --
Jack W. Peltason................................ -- --
John F. Seymour, Jr............................. -- --
Steven P. Albert(2)............................. -- --
Richard E. Moran Jr.(3)......................... -- --
James E. Mead................................... -- --
Tyler H. Rose(4)................................ -- --
Richard E. Lamprecht............................ -- --
Scott A. Reinert................................ -- --
All current directors and officers as
a group (17 persons).......................... --(1) --(1)
Holders of 5% of the L.P. Units
Irvine Apartment Communities, Inc.
550 Newport Center Drive
Newport Beach, CA 92660....................... 19,783,121 45.1%
The Irvine Company(1)(5)
550 Newport Center Drive
Newport Beach, CA 92660....................... 24,005,968(6) 54.7%
- ----------
* Less than 1.0%
(1) Mr. Bren may be deemed the beneficial holder of the L.P. Units owned by
The Irvine Company due to his status as the sole shareholder and Chairman
of the Board of Directors of The Irvine Company.
(2) Mr. Albert resigned as the Chief Executive Officer and President and a
Director of the Company in February 1997.
(3) Mr. Moran resigned as the Executive Vice President, Chief Financial
Officer and Secretary of the Company in December 1996.
(4) Mr. Rose resigned as Senior Vice President and Treasurer of the Company in
March 1997. Represents currently exercisable options to purchase
shares of Common Stock pursuant to the 1993 Long-Term Stock Incentive
Plan and 2,650 shares owned by such person.
(5) Represents L.P. Units owned directly or indirectly by subsidiaries of The
Irvine Company.
(6) Excludes 405,456 L.P. Units which pursuant to agreements with the
NYSE are not exchangeable for Common Stock by The Irvine Company
unless such exchange is approved by shareholders of the Company.
Shareholder approval for the exchange was obtained in connection with
the Company's 1997 Annual Meeting of Shareholders.
Information relating to beneficial ownership of the Company,
appearing on pages 17-20 of the proxy statement of the Company relating to the
Company's 1997 Annual Meeting of Shareholders (the "Company's 1997 Proxy
Statement"), is incorporated by reference herein.
Item 5. DIRECTORS AND OFFICERS
The Operating Partnership does not have any directors or
officers. The Operating Partnership is managed by the Company, the sole
general partner of the Operating Partnership. The information required by
this item is incorporated herein by reference to (i) "Item 1 -- Business --
Executive Officers," appearing on page 11 of the Company's 1996 Form 10-K, and
(ii) the information relating to the Company's directors, appearing on pages
3-7 of the Company's 1997 Proxy Statement.
Mr. Lamprecht was promoted to Senior Vice President,
Development and Division President, Irvine Ranch Operations of the Company, on
April 25, 1997.
Item 6. EXECUTIVE COMPENSATION
The Operating Partnership is managed by the Company, the
sole general partner of the Operating Partnership. Consequently, the
Operating Partnership has no executive officers. Information relating to
compensation of the Company's executive officers (which is funded by the
Operating Partnership), appearing on pages 24-30 of the Company's 1997
Proxy Statement, is incorporated by reference herein.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Operating Partnership is managed by the Company, in its
capacity as the sole general partner of the Operating Partnership.
Information relating to certain relationships and related transactions is
incorporated herein by reference to the information appearing on (i) pages
21-23 of the Company's 1997 Proxy Statement, (ii) pages 26-28 of the proxy
statement of the Company relating to the Company's 1996 Annual Meeting of
Shareholders and (iii) pages 7-9 of the proxy statement of the Company
relating to the Company's 1995 Annual Meeting of Shareholders.
Item 8. LEGAL PROCEEDINGS
"Item 3 -- Legal Proceedings," appearing on page 12 of the
Company's 1996 Form 10-K, is incorporated by reference herein.
Item 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED MATTERS
There is no established public trading market for the L.P.
Units. As of March 31, 1997, there were 9 holders of L.P. units. For
additional information with respect to the L.P. Units, see "Item
11--Description of Registrant's Securities to be Registered."
The following table sets forth the quarterly distributions paid
by the Operating Partnership to holders of its L.P. Units.
Distributions per
Payable Date L.P. Units
February 28, 1995................... $ 0.340
May 31, 1995........................ 0.340
August 31, 1995..................... 0.355
November 30, 1995................... 0.355
February 29, 1996................... 0.355
May 31, 1996........................ 0.355
August 30, 1996..................... 0.365
November 27, 1996................... 0.365
February 28, 1997................... 0.365
The return of capital portion of these distributions was 75%
and 18% in 1995 and 1996, respectively.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES
Since its formation in November 1993, the Operating Partnership
has issued L.P. Units in private placements in reliance on an exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") in the amounts and for the consideration set forth below:
In March 1995, 336,432 L.P. Units were issued to The Irvine
Company as partial consideration ($5,358,000) for the acquisition of a land
site pursuant to the Land Rights Agreement.
In November 1995, 113,372 L.P. Units were issued to The Irvine
Company as partial consideration ($1,967,000) for the acquisition of a land
site pursuant to the Land Rights Agreement.
In March 1996, 28,358 L.P. Units were issued to The Irvine
Company as partial consideration ($572,000) for the acquisition of a land site
pursuant to the Land Rights Agreement.
In July 1996, 1,490,700 L.P. Units were issued to The Irvine
Company for $30 million in cash, in connection with The Irvine Company's
exercise of its proportional purchase rights with respect to the Company's
follow-on offering of 1,490,700 shares of the Company's Common Stock.
In July 1996, 115,544 L.P. Units were issued to The Irvine
Company as partial consideration ($2,402,000) for the acquisition of a land
site pursuant to the Land Rights Agreement.
In December 1996, 244,857 L.P. Units were issued to The Irvine
Company as partial consideration ($5,999,000) for the acquisition of a land
site pursuant to the Land Rights Agreement.
During 1996, an aggregate of 15,851 L.P. Units were issued to
The Irvine Company for $353,861 in cash at prices ranging from $19.784 to
$23.875 per L.P. Unit, in connection with The Irvine Company's exercise of its
proportional purchase rights with respect to sales of the Company's Common
Stock pursuant to the Company's Dividend Reinvestment and Additional Cash
Investment Plan.
Item 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following description is only a summary of the material
provisions of the partnership agreement of the Operating Partnership (the
"Operating Partnership Agreement") and is subject to, and qualified in its
entirety by, the Operating Partnership Agreement.
Management
The Operating Partnership is organized as a Delaware limited
partnership pursuant to the terms of the Operating Partnership Agreement.
Generally, pursuant to the Operating Partnership Agreement, the Company, as
the sole general partner of the Operating Partnership, has full, exclusive and
complete responsibility and discretion in the management, operation and
control of the Operating Partnership including the ability to cause the
Operating Partnership to enter into certain major transactions including
acquisitions, refinancings and the selection of property managers and any
changes in the Operating Partnership's distribution policies. The Board of
Directors of the Company manages the affairs of the Operating Partnership.
The Irvine Company has the right to nominate three persons for election to the
Board of Directors of the Company so long as The Irvine Company, its
stockholders or its affiliates beneficially own at least 20% of the
outstanding shares of Common Stock of the Company (including for these
purposes shares issuable upon exchange of L.P. Units). In the event this
ownership falls below 20% but is at least 15%, The Irvine Company will have
the right to nominate two persons for election to the Board of Directors of
the Company; and if this ownership falls below 15% but is at least 10%, The
Irvine Company will have the right to nominate one person for election to the
Board of Directors of the Company. Dispositions of properties are subject to
the condition that there will be sufficient cash distributed to partners of
the Operating Partnership to allow, subject to certain limitations, all such
partners (including the Company) to pay any tax liabilities arising from the
disposition and on the distribution itself.
The consent of a majority of the outstanding L.P. Units is
required with respect to certain extraordinary actions involving the Operating
Partnership including (i) the amendment, modification or termination of the
Operating Partnership Agreement, (ii) a general assignment for the benefit of
creditors or the appointment of a custodian, receiver or trustee for any of
the assets of the Operating Partnership, (iii) the institution of any
proceeding for bankruptcy of the Operating Partnership, (iv) the transfer of
any general partnership interests in the Operating Partnership, including
through any merger, consolidation or liquidation of the Company, subject to
certain exceptions, (v) the admission of any additional or substitute general
partner in the Operating Partnership; (vi) for the Company to take title to
assets (other than temporarily in connection with an acquisition prior to
contributing such assets to the Operating Partnership) or to conduct business
other than through the Operating Partnership; and (vii) for the Company or the
Operating Partnership to engage in any business other than the ownership,
construction, development and operation of apartment communities. The
Operating Partnership Agreement requires, absent receipt of consent, that
title to assets be in the Operating Partnership in order to maintain a
one-for-one exchange ratio between L.P. Units and shares of Common Stock. If
such consent is obtained, the Company and The Irvine Company agree to
negotiate in good faith to amend the Operating Partnership Agreement,
including the mechanics for calculating the exchange ratio, in order to reflect
such direct ownership of assets by the Company.
In addition, until such time as the Company owns 90% or more of
the total percentage interest in the Operating Partnership, the consent of the
limited partners holding a majority interest in the L.P. Units will also be
required with respect to the liquidation of the Operating Partnership, the
sale or other transfer of all or substantially all of the assets of the
Operating Partnership and certain mergers and business combinations resulting
in the complete disposition of all L.P. Units.
The Operating Partnership Agreement prohibits the Operating
Partnership from lending money to The Irvine Company or any of its
subsidiaries.
Transfer of L.P. Units
The Operating Partnership Agreement provides that limited
partners may transfer their L.P. Units subject to certain limitations. Other
than transfers to or among The Irvine Company or affiliates of The Irvine
Company, transfers resulting from a dividend or other distribution by The
Irvine Company to its stockholders or pledges securing loans made by financial
institutions, holders of L.P. Units may only transfer their L.P. Units to a
purchaser who is an accredited investor within the meaning of Regulation D
under the Securities Act of 1933, as amended.
In addition, no transfer of L.P. Units by the limited partners
may be made in violation of certain regulatory and other restrictions set
forth in the Operating Partnership Agreement. Any other transfers may be made
only with the prior written consent of the Company as the sole general partner
of the Operating Partnership. Other than with respect to transfers to or
among The Irvine Company or affiliates of The Irvine Company, transfers
resulting from a dividend or other distribution by The Irvine Company to its
stockholders or pledges securing loans made by financial institutions, the
right to participate in an Exchange or a Cash Tender (as defined in the
Operating Partnership Agreement) will no longer be applicable to L.P. Units so
transferred and the transferee will not have any rights to nominate persons to
the Board of Directors of the Company.
Issuance of Additional L.P. Units
As the sole general partner of the Operating Partnership, the
Company has the ability to cause the Operating Partnership to issue additional
units of general and limited partnership interests in the Operating
Partnership. In addition, in the event of the exercise of an option or the
delivery of stock pursuant to the 1993 Stock Plan, the Operating Partnership
will issue additional units to the Company. In the event that the Operating
Partnership issues new L.P. Units (for cash but not property), The Irvine
Company will have the right to purchase L.P. Units at a purchase price equal
to the purchase price in the transaction giving rise to such participation
right in order, and to the extent necessary, to maintain its percentage
interest in the Operating Partnership.
Exchange Rights and Cash Tender Rights
The Irvine Company and certain related persons have certain
rights, exercisable once in each twelve-month period beginning on December 8,
1994 to exchange generally up to one-third of the L.P. Units owned by them for
shares of Common Stock (subject to restrictions on ownership) and to tender up
to one-third of the L.P. Units owned by them to the Company for cash payable
solely out of the net proceeds of an offering of the Company's Common Stock.
Funding of Investments
The Operating Partnership Agreement provides that if the
Operating Partnership requires additional funds to pursue its investment
objectives, the Company may fund such investments by raising additional equity
capital and making a capital contribution to the Operating Partnership or by
borrowing such funds and lending the net proceeds thereof to the Operating
Partnership. If the Company funds an investment as a contribution to capital
and purchase of units of general partnership interest or lends funds to the
Operating Partnership, the limited partners will have the right to participate
in such funding or loan on a pro rata pari passu basis. In the event that
limited partners do not participate in such funding, the Company's partnership
interest in the Operating Partnership will be increased based upon the amount
of such additional capital contributions and the value of the Operating
Partnership at the time of such contributions. The amount of any such loan
may be limited by the requirement that the Company derive at least 75% of its
gross income from certain investments related to real property.
Tax Accounting
The Operating Partnership has a taxable year ending on December
31, pursuant to a provision of the Internal Revenue Code of 1986, as amended,
that requires a partnership to adopt the same tax year as its majority in
interests partner.
Term
The Operating Partnership will continue in full force and
effect until December 31, 2092 or until sooner dissolved pursuant to the terms
of the Operating Partnership Agreement.
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Operating Partnership is managed by the Company, which
owns an approximate 45.1% interest in, and serves as the sole general
partner of, the Operating Partnership. Information relating to
indemnification of directors and officers of the Company, appearing in
"Item 15 -- Indemnification of Directors and Officers" of the Operating
Partnership's Registration Statement on Form S-3 filed on the date hereof,
is incorporated by reference herein.
Item 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Consolidated Financial Statements" on page F-1
of this registration statement on Form 10.
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Financial Statement Schedule
See "Index to Consolidated Financial Statements" on page F-1 of
this Registration Statement on Form 10.
(b) Exhibits
Index to Exhibits
Exhibit
Number Description
- ------- -----------
3.1 Agreement of Limited Partnership of the Registrant (the "Operating
Partnership Agreement") (incorporated by reference to Exhibit
10.1 of the Annual Report on Form 10-K of the Company for the
year ended December 31, 1993, File No. 1-12478 (the "Company's
1993 Form 10-K")).
3.1.1 Amendment No. 1 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 10.1.1 of the Quarterly Report on Form
10-Q of the Company for the quarter ended June 30, 1995, File
No. 1-12478 (the "Company's 1995 Second Quarter Form 10-Q")).
3.1.2 Amendment No. 2 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 10.1.2 of the Company's 1995 Second
Quarter Form 10-Q).
3.1.3 Amendment No. 3 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 10.1.3 of the Company's 1995 Second
Quarter Form 10-Q).
3.1.4 Amendment No. 4 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 10.1.4 of the Company's Registration
Statement on Form 8-B, filed with the Securities and Exchange
Commission on April 30, 1996 (the "Company's Form 8-B")).
3.1.5 Amendment No. 5 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 10.1.5 of the Company's Form 8-B).
3.1.6 Amendment No. 6 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 24 of Amendment No. 6 to the Schedule
13D filed on March 4, 1997 by The Irvine Company, TIC
Investment Company A, TIC Investment Company C and Donald L.
Bren ("Amendment No. 6 to the Schedule 13D")).
3.1.7 Amendment No. 7 to the Operating Partnership Agreement (incorporated
by reference to Exhibit 25 of Amendment No. 6 to the Schedule
13D).
10.2 Lease Agreement (incorporated by reference to Exhibit 10.2 of the
Company's 1993 Form 10-K).
10.4 Miscellaneous Rights Agreement among the Company and the persons
named therein (incorporated by reference to Exhibit 10.4 of the
Company's Form 8-B).
10.5 Administrative Services Agreement (incorporated by reference to
Exhibit 10.5 of the Company's 1993 Form 10-K).
10.5.1 Amendment and Extension to the Administrative Services Agreement
(incorporated by reference to Exhibit 10.5.1 of the Annual
Report on Form 10-K of the Company for the year ended December
31, 1994).
10.6 Exclusive Land Rights and Non-Competition Agreement (incorporated by
reference to Exhibit 10.6 of the Company's 1993 Form 10-K).
10.6.1 Amendment No. 1 to the Exclusive Land Rights and Non-Competition
Agreement (incorporated by reference to Exhibit 10.6.1 of the
Company's 1995 Second Quarter Form 10-Q).
10.6.2 Amendment No. 2 to the Exclusive Land Rights and Non-Competition
Agreement (incorporated by reference to Exhibit 10.6.2 of the
Company's 1995 Second Quarter Form 10-Q).
10.6.3 Amendment No. 3 to the Exclusive Land Rights and Non-Competition
Agreement (incorporated by reference to Exhibit 10.6.3 of the
Company's Form 8-B).
10.7 Contribution Agreement and Escrow Instructions Agreement
(incorporated by reference to Exhibit 10.7 of the Company's 1993
Form 10-K).
10.8 Irvine Apartment Communities, Inc. 1993 Stock Option Plan for
Directors (incorporated by reference to Exhibit 10.8 of the
Company's 1993 Form 10-K).
10.9 Irvine Apartment Communities, Inc. 1993 Long-Term Stock Incentive
Plan (incorporated by reference to Exhibit 10.9 of the Company's
1993 Form 10-K).
10.10 Irrevocable Trust Agreement (incorporated by reference to
Exhibit 10.10 of the Company's 1993 Form 10-K).
10.11 Revolving Credit Agreement dated November 30, 1995 (incorporated
by reference to Exhibit 10.11 of the Annual Report on Form 10-K
of the Company for the year ended December 31, 1995, File No. 1-
12478 (the "Company's 1995 Form 10-K")).
10.11.1 Amendment No. 1 to the Revolving Credit Agreement dated July 1,
1996 (incorporated by reference to Exhibit 10.11.1 of the
Annual Report on Form 10-K of the Company for the year ended
December 31, 1996, File No. 1-12478 (the "Company's 1996 Form
10-K")).
10.11.2 Amendment No. 2 to the Revolving Credit Agreement dated August 15,
1996 (incorporated by reference to Exhibit 10.11.2 of the
Company's 1996 Form 10-K).
10.11.3 Amendment No. 3 to the Revolving Credit Agreement dated February
20, 1997 (incorporated by reference to Exhibit 10.11.3 of the
Company's 1996 Form 10-K).
10.12 Indenture of Trust for Tax-Exempt Mortgage Bond Financing
(incorporated by reference to Exhibit 10.13 of the Company's
1995 Second Quarter Form 10-Q).
10.13 Employment Arrangement Letter with Chief Executive Officer
(incorporated by reference to Exhibit 10.13 of the Company's
1995 Form 10-K).
10.14 Irvine Apartment Communities, Inc. 1996 Long-Term Stock Incentive
Plan (incorporated by reference to Exhibit 10.14 of the
Company's Form 8-B).
10.15 Severance Agreement with the Company's former Chief Financial Officer
(incorporated by reference to Exhibit 10.15 of the Company's
1996 Form 10-K).
10.16 Severance Agreement with the Company's former Chief Executive Officer
(incorporated by reference to Exhibit 10.16 of the Company's
1996 Form 10-K).
21 Subsidiaries of the Registrant.
23.1 Opinion of Ernst & Young LLP.
27 Financial Data Schedule.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
IRVINE APARTMENT COMMUNITIES, L.P.
By: Irvine Apartment Communities,
Inc., its sole general partner
Dated: May 13, 1997 By: /s/ JAMES E. MEAD
-------------------------
James E. Mead
Senior Vice President,
Chief Financial Officer and
Secretary
IRVINE APARTMENT COMMUNITIES, L.P.
(a Delaware limited partnership)
Index to Consolidated Financial Statements and Schedule
<TABLE>
<S> <C>
Description Page Number
Consolidated Financial Statements:
Report of Independent Auditors....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995......................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and
1994............................................................................................... F-4
Consolidated Statements of Changes in Partners' Capital for the years ended December 31,
1996, 1995 and 1994................................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994............................................................................................... F-6
Notes to Consolidated Financial Statements........................................................... F-7
Schedule III:
Consolidated Real Estate and Accumulated Depreciation................................................ F-19
</TABLE>
IRVINE APARTMENTS COMMUNITIES, L.P.
(a Delaware limited partnership)
REPORT OF INDEPENDENT AUDITORS
To the Partners
Irvine Apartment Communities, L.P.
We have audited the accompanying consolidated balance sheets
of Irvine Apartment Communities, L.P., a Delaware limited partnership, as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, changes in partners' capital and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule beginning on page F-19. These
financial statements and schedule are the responsibility of management.
Our responsibility is to express an opinion on these financial statements
and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Irvine Apartment Communities, L.P. at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
Newport Beach, California
January 31, 1997
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
---------- ----------
(in thousands)
<S> <C> <C>
ASSETS
Real estate assets, at cost
Land............................................................................... $ 176,070 $ 163,169
Buildings and improvements......................................................... 849,924 768,737
--------- ---------
1,025,994 931,906
Accumulated depreciation........................................................... (219,193) (192,106)
806,801 739,800
Under development, including land.................................................. 58,241 73,727
--------- ---------
865,042 813,527
Cash and cash equivalents............................................................. 3,205 4,392
Restricted cash....................................................................... 1,376 1,181
Deferred financing costs, net of accumulated amortization
of $8,290 in 1996 and $5,663 in 1995................................................. 20,187 22,814
Other assets.......................................................................... 11,188 11,316
--------- ---------
$ 900,998 $ 853,230
========= =========
LIABILITIES
Mortgages and notes payable
Line of credit..................................................................... $ 16,000 $ 22,000
Tax-exempt mortgage bond financings................................................ 329,248 332,602
Conventional mortgage financings................................................... 134,761 136,960
Mortgage notes payable to The Irvine Company....................................... 51,227 52,011
Tax-exempt assessment district debt................................................ 21,828 19,713
--------- ---------
553,064 563,286
Accounts payable and accrued liabilities........................................... 21,496 20,254
Security deposits.................................................................. 6,094 5,124
--------- ---------
580,654 588,664
--------- ---------
PARTNERS' CAPITAL
40,848 partnership units outstanding at December 31, 1996 and 37,372
at December 31, 1995
General partner, 18,556 partnership units at December 31, 1996 and 16,975
at December 31, 1995.............................................................. 180,017 155,433
Limited partner, 22,292 partnership units at December 31, 1996 and 20,397
at December 31, 1995.............................................................. 140,327 109,133
--------- ---------
320,344 264,566
--------- ---------
$ 900,998 $ 853,230
========= =========
- ----------
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Years Ended December 31,
--------------------------------------
1996 1995 1994
---------- ----------- ----------
(in thousands, except per unit amounts)
<S> <C> <C> <C>
REVENUES
Rental income.................................................. $ 154,925 $ 133,678 $ 127,338
Other income................................................... 3,162 2,079 1,585
Interest income................................................ 611 411 1,313
-------- -------- --------
158,698 136,168 130,236
-------- -------- --------
EXPENSES
Property expenses.............................................. 33,859 31,761 33,105
Real estate taxes.............................................. 13,496 12,002 11,786
Property management fees....................................... 4,502 3,893 3,800
Interest expense, net.......................................... 29,506 25,894 26,827
Amortization of deferred financing costs....................... 2,627 8,510 15,942
Depreciation and amortization.................................. 27,239 23,143 21,055
General and administrative..................................... 6,277 5,909 5,442
-------- -------- --------
117,506 111,112 117,957
-------- -------- --------
Income before extraordinary item............................... 41,192 25,056 12,279
Extraordinary item - charge related to debt extinguishment..... - (23,427) -
-------- -------- --------
Net income..................................................... $ 41,192 $ 1,629 $ 12,279
======== ======== ========
ALLOCATION OF NET INCOME (LOSS):
General partner................................................ $ 18,746 $ 8,465 $ 7,273
Limited partner................................................ $ 22,446 $ (6,836) $ 5,006
======== ======== ========
PARTNERSHIP UNIT DATA:
Weighted average partnership units outstanding................. 38,953 33,191 30,247
Income before extraordinary item per unit...................... $ 1.06 $ 0.75 $ 0.41
Net income per unit............................................ $ 1.06 $ 0.05 $ 0.41
======== ======== ========
- ----------
See accompanying notes.
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES
IN PARTNERS' CAPITAL
Irvine
Apartment
Communities, The Irvine
Inc. Company Total
------------ ----------- ---------
(in thousands)
PARTNERS' CAPITAL
Balance, January 1, 1994...... $ 87,578 $ 124,766 $ 212,344
Net income.................... 7,273 5,006 12,279
Distributions................. (13,098) (20,476) (33,574)
--------- --------- ---------
Balance, December 31, 1994....... $ 81,753 $ 109,296 $ 191,049
Net income.................... 8,465 (6,836) 1,629
Contributions................. 83,454 33,200 116,654
Distributions................. (18,239) (26,527) (44,766)
--------- --------- ---------
Balance, December 31, 1995....... $ 155,433 $ 109,133 $ 264,566
Net income.................... 18,746 22,446 41,192
Contributions................. 31,385 39,327 70,712
Distributions................. (25,547) (30,579) (56,126)
--------- --------- ---------
Balance, December 31, 1996....... $ 180,017 $ 140,327 $ 320,344
========= ========= =========
PARTNERSHIP UNITS OUTSTANDING
Balance, January 1, 1994......... 11,800 18,447 30,247
Additional units issued....... - - -
--------- --------- ---------
Balance, December 31, 1994....... 11,800 18,447 30,247
Additional units issued....... 5,175 1,950 7,125
--------- --------- ---------
Balance, December 31, 1995....... 16,975 20,397 37,372
Additional units issued....... 1,581 1,895 3,476
--------- --------- ---------
Balance, December 31, 1996....... 18,556 22,292 40,848
========= ========= =========
- ----------
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1996 1995 1994
--------- --------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income................................................................. $ 41,192 $ 1,629 $ 12,279
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary item -- charge related to debt extinguishment................ - 23,427 -
Amortization of deferred financing costs................................... 2,627 8,510 15,942
Depreciation and amortization.............................................. 27,239 23,143 21,055
Increase (decrease) in cash attributable to changes in assets and
liabilities:
Restricted cash....................................................... (195) (150) 16
Other assets.......................................................... (104) (4,882) (975)
Accounts payable and accrued liabilities.............................. 1,308 3,147 895
Security deposits..................................................... 970 579 574
------- ------- -------
Net Cash Provided by Operating Activities.................................. 73,037 55,403 49,786
======= ======= =======
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements to operating real estate assets....................... (4,766) (4,520) (5,555)
Investment in real estate assets, net of construction payables............. (61,850) (123,698) (45,363)
------- ------- -------
Net Cash Used in Investing Activities...................................... (66,616) (128,218) (50,918)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit........................................... 78,900 143,344 6,256
Payments on lines of credit................................................ (84,900) (127,600) -
Proceeds from tax-exempt mortgage bond financings and notes
payable................................................................... - 334,190 9,833
Payments on tax-exempt mortgage bond financings............................ - (325,845) -
Principal payments......................................................... (7,101) (5,676) (4,999)
Additions to deferred financing costs...................................... - (9,237) (832)
Contributions from partners................................................ 61,619 109,329 -
Distributions to partners.................................................. (56,126) (44,766) (33,574)
------- ------- -------
Net Cash (Used in) Provided by Financing Activities........................ (7,608) 73,739 (23,316)
======= ======= =======
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....................... (1,187) 924 (24,448)
Cash and Cash Equivalents at Beginning of Year............................. 4,392 3,468 27,916
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................... $ 3,205 $ 4,392 $ 3,468
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid, net of amounts capitalized............................... $ 29,644 $ 25,165 $ 25,860
Tax-exempt assessment district debt assumed............................. $ 2,771 $ 4,184 $ 15,656
======= ======= =======
- ------------
See accompanying notes.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per unit amounts)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
Irvine Apartment Communities, L.P., a Delaware limited
partnership (the "Partnership"), was formed on November 15, 1993. In
connection with an initial public offering of common shares on December 8,
1993, Irvine Apartment Communities, Inc. (the "General Partner") obtained a
general partnership interest in and became the sole managing general partner
of the Partnership. The Irvine Company (the "Limited Partner") transferred 42
apartment communities and a 99% interest in a limited partnership which owns
one apartment community to the Partnership. The Partnership's management and
operating decisions are under the unilateral control of the General Partner.
All management powers over the business and affairs of the Partnership are
vested exclusively in the General Partner. No limited partner of the
Partnership has any right to exercise control or management power over the
business and affairs of the Partnership. As of December 31, 1996, Irvine
Apartment Communities, Inc. had a 45.4% general partnership interest and The
Irvine Company had a 54.6% limited partnership interest in the Partnership.
The Partnership owns, operates and develops apartment
communities in Orange County, California. The Partnership utilizes independent
third-party property management and construction management firms. As of
December 31, 1996 the Partnership owned and operated 52 properties containing
13,656 operating apartment units and 864 units under construction
(collectively, the "Properties"). Until July 31, 2020, the Partnership has the
exclusive right, but not the obligation, to acquire land from The Irvine
Company for development of additional apartment communities on the Irvine
Ranch (see Note 7 to the consolidated financial statements).
Profits and losses are generally allocated to the General
Partner and to the Limited Partner based upon their respective ownership
interests in the Partnership. The partnership agreement provides for the
allocation of certain costs to The Irvine Company. As of December 31, 1995,
all such allocations had been completed.
The accompanying financial statements include the consolidated
accounts of the Partnership and its financially controlled subsidiary. All
intercompany accounts and transactions have been eliminated in consolidation.
Under the terms of the partnership agreement, all costs
incurred by the General Partner relating to the ownership of interests in and
operation of the Partnership, including the compensation of its officers and
employees, stock incentive plans, director fees and the costs and expenses of
being a public company, are reimbursed by the Partnership. In addition, the
Limited Partner has the right, but not the obligation, to match on the same
terms and conditions any capital contributions made by the General Partner
based on the pro rata ownership interest at the time of such contribution.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as
of December 31, 1996 and 1995, and the revenues and expenses for the three
years ended December 31, 1996. Actual results could differ from those
estimates.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets and Depreciation: Real estate assets, which
are held as long-term investments, are stated at cost less accumulated
depreciation. Impairment losses on long-lived assets used in operations are
recorded when events and circumstances indicate that the assets are impaired
and the undiscounted cash flows estimated to be generated by those assets are
less than the carrying amounts. Land and infrastructure costs are allocated to
properties based on relative fair value. Costs related to the development and
construction of properties are capitalized as incurred. Interest and property
taxes are capitalized to apartment communities which are under active
development. When a building within a community under construction is
completed and held available for occupancy, the related costs are expensed.
Repair and maintenance expenditures are expensed as incurred.
Major replacements and betterments are capitalized and depreciated over their
useful lives. Depreciation is computed on a straight-line basis over the useful
lives of the properties (principally forty years for buildings; twenty years
for siding, roofs and balconies; fifteen years for plumbing and air
conditioning equipment; ten years for pools, tennis courts, parking lots and
driveways; and five to ten years for furniture and fixtures).
Cash and Cash Equivalents: The Partnership considers all
highly liquid investments with a maturity when purchased of three months or
less to be cash equivalents.
Restricted Cash: Restricted cash is comprised of reserve
accounts for capital replacements, property taxes and insurance. These
restricted funds are subject to supervision and approval by a lender or a
government agency. The terms of the contract with the government agency
contain certain restrictions concerning operating policies, rental charges,
operating expenditures, distributions to owners and other matters.
Deferred Financing Costs: Costs incurred in obtaining
long-term financing or costs to buy down or hedge interest costs are deferred
and amortized over the term of the related debt agreements using the effective
interest method.
Revenue Recognition: The Partnership leases apartment units to
a diverse resident base for terms of one year or less. Credit investigations
are performed for all prospective residents and security deposits are also
obtained. Resident receivables are evaluated for collectibility. Rental
revenue is recognized on an accrual basis as it is earned over the life of the
lease. Interest income is recorded as earned.
Interest Expense: Interest rates are substantially fixed for
specified periods through interest rate swaps and buy-down agreements for
certain debt instruments. These financial instruments are entered into
as a hedge against the interest exposure from variable rate debt. The
differences paid or received on swaps and related agreements are included
in interest expense as yield adjustments.
Income Taxes: The Partnership's taxable income is reportable
by its partners. Accordingly, no provision has been made for federal income
taxes in the accompanying statements of operations.
Per Unit Data: The computation of net income per partnership
unit is based on the weighted average number of partnership units outstanding
and excludes the effect of the General Partner's stock options and performance
awards since their dilutive effect is minimal.
Reclassifications: Certain amounts in the 1995 and 1994
financial statements have been reclassified to conform with financial
statement presentations in 1996.
NOTE 3 -- MORTGAGES AND NOTES PAYABLE
Line Of Credit: In November 1995, the General Partner obtained
a $175 million unsecured revolving credit facility for the Partnership. The
line of credit facility has a term of two years and at the Partnership's
option may be converted to a two-year term loan at maturity. This revolving
credit facility is available to finance the Partnership's ongoing rental
property development program and for general working capital needs. Borrowings
under the line of credit bear interest at the Partnership's option at variable
rates based on the Eurodollar rate plus a spread of 1.5% or the Prime rate.
The Partnership is also obligated to pay a fee on the average daily amount of
the unused portion of the commitment, and quarterly agent fees on the
commitment amount. The General Partner and the Partnership must comply with
certain affirmative and negative covenants, including limitations on
distributions to its partners, limitations on payment of distributions, and
the maintenance of certain net worth, cash flow and financial ratios. At
December 31, 1996 the General Partner and the Partnership were in compliance
with all of these covenants. As of December 31, 1996, $16 million was
outstanding and $159 million was available under the line of credit. In
February 1997, the General Partner increased its capacity in the line of
credit for the Partnership to $250 million.
Tax-Exempt Mortgage Bond Financings: On May 25, 1995, the
Partnership refinanced all $324,816 of its outstanding tax-exempt mortgage
debt. As a result of a new 30-year refunding agreement, which is backed by
credit and liquidity support from the Federal National Mortgage Association
("Fannie Mae"), the Partnership obtained tax-exempt mortgage bond financings
of $334,190 maturing in June 2025. Standard & Poor's Rating Group assigned
ratings of AAA/A-1+ to the bonds based on the collateral agreement with
Fannie Mae. In connection with the refinancing transaction, the Partnership
recorded an extraordinary charge of $23,427 to write off deferred
financing costs related to the debt that was refinanced.
The tax-exempt financings represent loans payable that are
collateralized by twenty-three properties with a net book value of $281,211 as
of December 31, 1996. Monthly principal and interest payments are made to a
trustee, which in turn pays the bondholders when interest is due. The bonds
are remarketed periodically and bear interest at short-term floating rates.
The floating rates have been fixed through interest rate swap agreements. (See
Interest Rate Swap Agreements.) Principal payments are amortized over a
30-year period and are held in a principal payment fund. The tax-exempt
mortgage bond financings, before giving effect to the swap agreements, had an
average floating interest rate inclusive of fees of 4.76% in December 1996.
Conventional Mortgage Financings: Conventional mortgages are
collateralized by apartment communities with a net book value of $148,493 as
of December 31, 1996. The mortgages are generally due in monthly installments
and mature at various dates through 2018. Prior to the Offering, interest
rates were fixed at rates which ranged from 7.75% to 9.63%, with a weighted
average rate of 8.69%. In connection with the Offering, the interest rates
were adjusted to market rates for specified periods of time and currently
range from 5.82% to 7.75%. As of December 31, 1996 the weighted average
interest rate was 6.45%. Including the amortization of deferred financing
costs the all-in interest rate was 8.16%. The interest reduction periods
expire prior to or at the loan maturity dates and range from 1997 to 2008.
Mortgage Notes Payable to The Irvine Company: Two of the
Partnership's apartment communities are financed by mortgage notes payable to
The Irvine Company. These mortgage notes totaled $51,227 and $52,011 at
December 31, 1996 and 1995, respectively. The mortgage notes are
collateralized by all-inclusive trust deeds on each of the apartment
communities financed. They bore fixed interest rates of 5.75% at December 31,
1996, are fully amortizing and mature in 2015 and 2024. Interest incurred on
the mortgage notes payable to The Irvine Company totaled $2,966, $3,010 and
$3,055 for the years ended December 31, 1996, 1995 and 1994, respectively. The
mortgage notes payable to The Irvine Company "wrap around" secured first trust
deed notes payable to third-party financial institutions. The secured first
trust deed notes totaled $51,363 and $52,030 as of December 31, 1996 and 1995,
respectively.
Tax-Exempt Assessment District Debt: In conjunction with the
purchase of land, the Partnership assumed $2,771 in 1996 and $4,184 in 1995 in
tax-exempt assessment district debt which represents debt issued by municipal
government authorities to finance the construction of infrastructure and
improvements. The debt obligations are repaid by the Partnership through
assessments.
Interest Rate Swap Agreements: The Partnership uses interest
rate swap agreements to effectively convert its floating rate tax-exempt
mortgage bond financings to a fixed-rate basis, thus reducing the impact on
future income of fluctuations in interest rates. At December 31, 1996, the
Partnership had interest rate swap agreements on notional amounts totaling
$329,248 which pay fixed rates of interest and receive floating rates of
interest based on a municipal bond index that is remarketed weekly. The swap
agreement periods mature from 2002 to 2007. The swap counterparties are
primarily financial institutions rated AAA by Standard & Poor's. The
differences to be paid or received are accrued and included in interest
expense as a yield adjustment and the related amount payable or receivable
from counterparties is included in other assets or accrued liabilities.
Additionally, the Partnership restructured several interest rate swaps related
to the retired tax-exempt bonds in May 1995. These transactions reduce the
interest expense on tax-exempt mortgage bond financings by approximately 30
basis points per year through 2001. At December 31, 1996, the average fixed
interest rate paid to the counterparties was 5.10% and the average variable
interest rate received was 3.64%. This resulted in a net interest payable of
$381 which was settled in the first week of January 1997. Based on prevailing
interest rates at December 31, 1996, the interest rate swap agreements have a
fair value of negative $4 million.
Capitalized Interest: The Partnership capitalizes interest on
projects actively under development using qualifying asset balances and
applicable weighted average interest rates. The average qualifying asset
balance for projects under development was approximately $40 million for the
year ended December 31, 1996. Interest capitalized was $3,151, $6,779 and
$1,261 in 1996, 1995 and 1994, respectively. Interest incurred totaled
$32,657, $32,673 and $27,617 for the years ended December 31, 1996, 1995 and
1994, respectively.
Other Matters: Mortgages and notes payable totaling $183,829
at December 31, 1996 are subject to prepayment penalties.
<TABLE>
<CAPTION>
Mortgages and Notes Payable
(at December 31, 1996)
---------------------------------------------------------------------------------
Expiration of
Outstanding Interest Rate
Principal Effective Reduction Interest Rate Maturity
Balance Interest Rate Period After Step-Up Date
----------- ------------- ------------- ------------- --------
Type of Debt
- ------------
($ in thousands)
<S> <C> <C> <C> <C> <C>
Tax-exempt mortgage bond financings $ 329,248 5.82% n/a n/a 6/25
-------- ----
Conventional mortgage financings:
Bayport 4,862 6.91% 7/08 9.25% 7/18
Bayview 3,510 6.91% 7/08 9.25% 7/18
Baywood 20,972 6.91% 7/08 9.25% 7/18
Deerfield Phase I 7,462 6.57% 7/02 8.90% 7/08
Mariner Square 5,637 6.32% 9/00 8.50% 8/08
The Parklands 6,512 6.15% n/a n/a 4/04
Parkwood 12,642 6.31% 8/00 8.50% 7/08
Promontory Point 36,303 5.82% 9/97 8.30% 8/00
Rancho Mariposa 12,839 7.75% n/a 7.75% 6/03
San Paulo 1,458 4.00% n/a n/a 1/13
San Paulo 700 3.00% n/a n/a 1/08
Turtle Rock Vista 13,405 6.31% 8/00 8.50% 7/08
Woodbridge Pines 8,459 6.91% 9/08 9.25% 8/18
-------- ----
134,761 6.45% 8.42% 6/07
-------- ----
Mortgage notes payable to The Irvine
Company:
Park West 33,993 5.75% n/a n/a 7/24
Rancho San Joaquin 17,234 5.75% n/a n/a 1/15
-------- ----
51,227 5.75% 3/20
-------- -----
Tax-exempt assessment district debt:
Fixed rate 5,554 6.27% n/a n/a 1/16
Variable rate 16,274 3.95% n/a n/a 2/17
-------- ----
21,828 4.54% 10/16
-------- ----
Line of credit 16,000 7.50% n/a n/a 12/97
-------- ----
Total/weighted average $ 553,064 5.97% 7/18
======== ====
</TABLE>
<TABLE>
<CAPTION>
Scheduled Principal Amortization: Mortgages and Notes Payable
(at December 31, 1996)
-----------------------------------------------------------------------------------------------------------
Tax-Exempt Mortgage
Mortgage Conventional Notes Payable Tax-Exempt
Bond Mortgage to The Irvine Assessment Percentage of
Line of Credit Financings Financings Company District Debt Totals Total Debt
-------------- ---------- ------------ ------------- ------------- ------ -------------
Year of Maturity
- ---------------- ($ in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
1997............. $ 16,000 $ 3,604 $ 2,504 $ 830 $ 284 $ 23,222 4.2%
1998............. 3,876 2,717 879 303 7,775 1.4%
1999............. 4,165 2,958 931 326 8,380 1.5%
2000............. 4,478 36,754 986 522 42,740 7.7%
2001............. 4,813 2,773 1,044 583 9,213 1.7%
Thereafter....... 308,312 87,055 46,557 19,810 461,734 83.5%
------- ------- ------- ------ ------ ------- -----
Total............ $ 16,000 $329,248 $134,761 $51,227 $21,828 $553,064 100.0%
------- ------- ------- ------ ------ ------- -----
Number of loans.. 1 25 11 2 6 45
======= ======= ======= ====== ====== =======
</TABLE>
NOTE 4 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for
financial instruments approximate their fair value except as discussed below.
The fair values of mortgage notes payable to The Irvine Company are estimated
using discounted cash flow analyses and the Partnership's current estimated
borrowing rates for similar types of borrowing arrangements. The interest rate
used in the fair value calculation was 7.72% based on the terms of the loans.
As of December 31, 1996, the fair value of the mortgage notes payable to The
Irvine Company was $42,590. See Note 3 to the consolidated financial
statements for a discussion of the fair value of the interest rate swap
agreements.
NOTE 5 -- PARTNERS' CAPITAL
On May 8, 1995, the General Partner filed a shelf registration
statement with the Securities and Exchange Commission providing for the
issuance from time to time of up to $250 million of common stock, preferred
stock, debt securities, and warrants to purchase common stock, preferred stock
and debt securities. The Partnership plans to use the proceeds raised from
any securities issued under the shelf registration and any matching issuance
of partnership units to the Limited Partner for general corporate purposes,
including the development of new apartment communities, acquisitions and the
repayment of existing debt.
On August 9, 1995, the General Partner sold, pursuant to its
shelf registration statement, 5.175 million shares of common stock at $17.25
per share. Concurrently, the Limited Partner, pursuant to its rights under
the partnership agreement, purchased 1.5 million partnership units at $17.25
per unit. Such units are exchangeable for common stock on a one-for-one
basis, subject to adjustment and certain limitations. The net proceeds from
the two transactions totaled $109,329. Proceeds of $80,100 were used to repay
amounts outstanding under construction and revolving lines of credit. The
balance of $29,229 was used to fund new construction.
Pursuant to its shelf registration statement, on July 3, 1996,
the General Partner completed the sale of 1.49 million shares of common stock
at $20.125 per share. The proceeds from this offering of $30 million together
with proceeds from the sale of newly issued partnership units to the Limited
Partner (see Note 6 to the consolidated financial statements), totaled $60
million. Proceeds were used to repay $43 million of debt outstanding under
the revolving line of credit. The remaining proceeds were used to fund
ongoing development programs and for general corporate purposes. Availability
under the General Partner's shelf registration statement was $130.7 million at
December 31, 1996.
On February 20, 1997, the General Partner sold, pursuant to its
shelf registration statement, 1.15 million shares of common stock at $27.50
per share. Concurrently, the Limited Partner purchased 1.39 million
additional partnership units at $26.06 per unit (which is equal to the public
offering price of the common stock less an amount equivalent to the
underwriting discount) which are exchangeable for common stock on a
one-for-one basis, subject to adjustment and certain limitations. The
proceeds from the two transactions totaled $66 million and were used to repay
all indebtedness outstanding under the revolving line of credit, and will be
used for general corporate purposes, including ongoing development activities
on and off the Irvine Ranch. After the above transaction, availability under
the General Partner's shelf registration statement is approximately $99
million.
<TABLE>
<CAPTION>
Reconciliation of Partnership Units Outstanding
------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996 Year Ended December 31, 1995 Year Ended December 31, 1994
---------------------------------- ----------------------------------- ---------------------------------
Irvine Irvine Irvine
Apartment Apartment Apartment
Communities, The Irvine Communities, The Irvine Communities, The Irvine
Inc. Company Total Inc. Company Total Inc. Company Total
------------ ---------- ------ ------------ ---------- ------ ------------ ---------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning
of period............ 16,975 20,397 37,372 11,800 18,447 30,247 11,800 18,447 30,247
Stock awards issued
and options
exercised............ 77 - 77 - - - - - -
Dividend
reinvestment plan.... 13 16 29 - - - - - -
Common stock
offerings and
related cash
contributions from
The Irvine
Company.............. 1,491 1,491 2,982 5,175 1,500 6,675 - - -
Contributions of
property by The
Irvine Company....... - 388 388 - 450 450 - - -
------ ------ ------ ------ ------ ------ ------ ------ ------
Balance at end of
period............... 18,556 22,292 40,848 16,975 20,397 37,372 11,800 18,447 30,247
------ ------ ------ ------ ------ ------ ------ ------ ------
Ownership interest at
end of period........ 45.4% 54.6% 100% 45.4% 54.6% 100% 39.0% 61.0% 100%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Net Income (Loss) Allocation
----------------------------------------
Years Ended December 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
The Irvine Company:
Specific allocations to The Irvine Company................................. $ - $(17,741) $ (6,370)
Income allocated to The Irvine Company based on its ownership interest..... 22,446 10,905 11,376
------- ------- -------
22,446 (6,836) 5,006
Irvine Apartment Communities, Inc.: ------- ------- -------
Income allocated to Irvine Apartment Communities, Inc. based on its
ownership interest........................................................ 18,746 8,465 7,273
------- ------- -------
NET INCOME $ 41,192 $ 1,629 $ 12,279
======= ======= =======
</TABLE>
Prior to December 31, 1995, the Partnership incurred debt
extinguishment costs and swap amortization costs that were allocated 100% to
The Irvine Company in accordance with the partnership agreement. As of
December 31, 1995, all such allocations had been completed.
NOTE 6 -- CERTAIN TRANSACTIONS WITH RELATED PARTIES
Substantially all costs incurred by the General Partner are
borne by the Partnership. Included in general and administrative expenses are
charges from The Irvine Company pursuant to an administrative service agreement
covering services for risk management, income taxes and other services of $108
for the year ended December 31, 1996. The amounts for the corresponding
periods in 1995 and 1994 were $106 and $160, respectively. The Irvine Company
and the Partnership jointly purchase employee health care insurance and
property and casualty insurance. In addition, the Partnership incurred rent
totaling $349, $270 and $203 for the years ended December 31, 1996, 1995 and
1994, respectively, related to leases with The Irvine Company that expire in
1997 and 1998. For the year ended December 31, 1996, The Irvine Company
contributed $354, or the maximum allowable in connection with stock issuances
under the dividend reinvestment and additional cash investment plan.
In the third quarter of 1994, the Partnership acquired four
sites for development of 1,695 units for $19,703 from The Irvine Company. As
partial financing for these four sites, the Partnership elected to assume
$15,656 in tax-exempt assessment district debt and paid $4,047 in cash.
In March 1995, the Partnership acquired a 512-unit development
site known as Newport Ridge for $9,542 from The Irvine Company. As partial
financing for the acquisition of the site, the Partnership elected to assume
$4,184 of tax-exempt assessment district debt. The balance of $5,358 was paid
through the issuance of 336,432 additional partnership units in the
Partnership to The Irvine Company. In November 1995, the Partnership acquired
a 300-unit development site known as Baypointe from The Irvine Company for
$4,190, of which $1,967 was paid through the issuance of 113,372 additional
partnership units in the Partnership to The Irvine Company. The partnership
units are exchangeable for common stock of the General Partner on a
one-for-one basis, subject to adjustment and certain limitations.
In March 1996, the Partnership acquired a land site for $3.3
million from The Irvine Company for the development of 227 rental units,
pursuant to the Land Rights Agreement between the Partnership and The Irvine
Company. The General Partner's board committee of independent directors
approved the purchase in accordance with the Land Rights Agreement. As partial
financing for the site acquisition, the Partnership assumed $2.8 million in
tax-exempt assessment district debt. The balance of the purchase price was
paid through the issuance of 28,358 additional partnership units in the
Partnership to The Irvine Company.
Concurrent with the General Partner's common stock offering on
July 3, 1996 (see Note 5 to the consolidated financial statements), The Irvine
Company, pursuant to its rights under the partnership agreement, purchased 1.49
million partnership units at a price equal to the public offering price of
$20.125 per common share of stock, or a total of $30 million. These units are
exchangeable for common stock on a one-for-one basis, subject to adjustment and
certain limitations.
On July 29, 1996, the Partnership acquired a land site for $3.5
million from The Irvine Company for the development of 245 rental units
pursuant to the Land Rights Agreement between the Partnership and The Irvine
Company. The General Partner's board committee of independent directors
approved the purchase in accordance with the Land Rights Agreement. Of the
total purchase price, $2.4 million was paid through the issuance of 115,544
additional partnership units in the Partnership to The Irvine Company.
On December 23, 1996, the Partnership acquired a land site for
$6.0 million from The Irvine Company for the development of 207 rental units
pursuant to the Land Rights Agreement between the Partnership and The Irvine
Company. The General Partner's board committee of independent directors
approved the purchase in accordance with the Land Rights Agreement. The
purchase price was paid through the issuance of 244,857 additional partnership
units in the Partnership to The Irvine Company.
One of the General Partner's directors is chairman of a bank
which participates in the Partnership's line of credit. Based on the bank's
percentage participation in the credit facility, the Partnership estimates
that the amount of interest and fees paid to the bank totaled $245, $388 and
$96 in 1996, 1995 and 1994, respectively.
NOTE 7 -- LAND RIGHTS AGREEMENT WITH THE IRVINE COMPANY
The Partnership and The Irvine Company are parties to an
exclusive land rights and non-competition agreement (the "Land Rights
Agreement"). This agreement, which extends through July 31, 2020, provides the
Partnership with the exclusive right, but not the obligation, to acquire
additional land sites which have been entitled for residential use and
designated by The Irvine Company as ready for apartment development in
accordance with the Master Plan. The determination to exercise an option with
respect to a site is made solely by a majority of a committee of independent
directors of the General Partner (the "Independent Directors Committee"),
whose members are unaffiliated with The Irvine Company. In addition, The
Irvine Company and its chairman, Donald Bren, have agreed to conduct their
apartment community development and ownership activities on the Irvine Ranch
solely through the Partnership.
Under terms of the Land Rights Agreement, through July 31,
2000, the purchase price for any apartment community sites acquired may be
paid with either cash, common stock or limited partnership units at the option
of the General Partner. After July 31, 2000, the choice of consideration will
revert to The Irvine Company. In addition, the purchase price for future
apartment sites encompassing the next 505 apartment units the Partnership
develops will be set at an amount such that each project's budgeted pro forma
unleveraged return on costs for the first twelve months following stabilized
occupancy will be between 10.0% and 10.5%. However, in no event shall the
purchase price for each such site exceed 95% of the value of such site as
determined by independent appraisals.
NOTE 8 -- STOCK PLANS
Under the terms of the partnership agreement, payments under
the General Partner's stock incentive plans are reimbursed by the Partnership.
Employee Stock Option Plan: The General Partner has adopted
long-term stock incentive plans that provide for awards of non-qualified or
incentive stock options, stock appreciation rights, performance awards,
restricted stock, restricted stock units and stock unit awards. The plans
limit the number of shares of common stock, and matching partnership units, to
be issued with respect to these awards to 5% of the total partnership units
and common stock outstanding at the end of each year. The non-qualified stock
options in the table below vest in equal installments over a three-year period
and expire ten years from the grant dates.
<TABLE>
<CAPTION>
Non-Qualified Stock Option Transactions
------------------------------------------------
Number of Options Exercise Price Per Share
----------------- --------------------------
<S> <C> <C>
Granted in 1993.................................... 149,000 $17.50
Outstanding at December 31, 1993................... 149,000 $17.50
Granted............................................ 55,000 $17.50
Canceled........................................... (15,000) $17.50
------- ---------------
Outstanding at December 31, 1994................... 189,000 $17.50
Granted............................................ 384,000 $15.88 to $16.13
Canceled........................................... (74,000) $16.13 to $17.50
------- ---------------
Outstanding at December 31, 1995................... 499,000 $15.88 to $17.50
Granted............................................ 10,000 $20.00
Exercised.......................................... (66,667) $16.13 to $17.50
Canceled........................................... (33,333) $16.13
------- ---------------
Outstanding at December 31, 1996................... 409,000 $15.88 to $20.00
======= ===============
Vested and exercisable at December 31, 1996........ 170,667 $15.88 to $17.50
======= ===============
</TABLE>
In addition, restricted stock performance awards issued to
certain officers of the General Partner vest over a five-year period
provided that the General Partner meets certain financial targets.
Number
Performance Award Transactions of Awards
- ------------------------------ ---------
Granted in 1993.................................. 200,000
Granted in 1995.................................. 235,000
Canceled in 1995................................. (110,000)
---------
Outstanding at December 31, 1995................. 325,000
---------
Granted in 1996.................................. 10,000
Awarded in 1996.................................. (20,000)
Canceled in 1996................................. (82,049)
--------
Outstanding at December 31, 1996................. 232,951
=======
Vested at December 31, 1996...................... 62,951
=======
The total number of shares, and matching partnership units,
available to be granted at December 31, 1996 under these plans was 1,323,770.
Directors' Stock Option Plan: The 1993 Stock Option Plan for
Directors was established with 100,000 shares of common stock that may be
granted to independent directors. Grants of fully vested options to purchase
5,000 shares of common stock, and matching partnership units, at the market
price on the grant date were made to each independent director immediately
following the Offering. Additionally, grants of fully vested options to
purchase 1,000 shares of common stock, and matching partnership units, at the
market price on the grant date were made to each independent director
immediately following each annual shareholders' meeting beginning in 1995.
These options are fully vested when granted and are exercisable for ten years
from the grant dates.
Number of Exercise Price Per
Directors' Option Transactions Options Share
- ------------------------------ --------- ------------------
Granted in 1993 25,000 $17.44
Granted in 1995 5,000 $15.63
------ ------------------
Outstanding at December 31, 1995 30,000 $15.63 to $17.44
Granted in 1996 5,000 $20.06
------ ------------------
Outstanding at December 31, 1996 35,000 $15.63 to $20.06
====== ==================
Available for future grant 65,000
======
Equity Compensation Plans: The Partnership applies APB Opinion
25 and related interpretations in accounting for its equity compensation plans
as described above. Accordingly, no compensation cost has been recognized for
its stock option plans. Compensation cost for the General Partner's other
stock-based compensation plans has been determined utilizing the fair value of
the award over the service period. Had the Partnership applied FAS Statement
123 for stock-based compensation, it would result in net income and earnings
per unit amounts that approximate the amounts reported. Under FAS Statement
123, the fair value for options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 7.15%
and 6.46%; dividend yields of 8.49% and 7.09%; volatility factors of the
expected market price of the General Partner's common stock of 0.242 and
0.204; and a weighted average expected life of the options of seven years.
NOTE 9 -- SAVINGS PLAN
Effective January 1, 1994, the General Partner implemented a
defined contribution 401(k) benefit plan covering substantially all employees
who have satisfied minimum age and service requirements. The Partnership
matches employee contributions up to 50%, within certain limits, which is
accrued by the Partnership as incurred. The Partnership also makes
contributions to this plan for each participant, generally equal to 3% of the
participant's base salary. The aggregate cost of these contributions by the
Partnership was $122, $95 and $82 in 1996, 1995 and 1994, respectively.
NOTE 10 -- AGREEMENTS, COMMITMENTS AND CONTINGENCIES
Management Agreements: The Partnership has management
agreements with unaffiliated property management companies to maintain and
manage the operations of the properties. Management fees range from 2.5% to
3.25% of revenues depending on the size of the property (resulting in a
weighted average rate of approximately 2.8% of revenues). These agreements are
renewable annually and are generally cancelable on 30 days' notice. Included in
operating expenses are costs incurred by the management companies on behalf of
the Partnership.
Litigation: The Partnership is party to various legal actions
which are incidental to its business. Management believes that these actions
will not have a material adverse effect on the Partnership's consolidated
financial position.
Assessment Districts: In some of the local jurisdictions
within Orange County where the Predecessor developed property, assessment
districts were formed by local governments to finance major infrastructure
improvements. At December 31, 1996, the Partnership had $39.0 million of
assessment district debt, of which $21.9 million was reflected in the balance
sheet.
Exchange Rights: The Irvine Company has the right to exchange
up to one-third of the total partnership units it owns for shares of common
stock of the General Partner in each twelve-month period commencing on
December 1 of each year at an exchange ratio of one-to-one, subject to
adjustment in certain events. These exchanges are subject to certain
restrictions including percentage ownership limits.
General Partner's Obligation to Purchase Tendered Partnership
Units: The Limited Partner has the right to sell to the General Partner for
cash generally up to one-third of its partnership units in each twelve-month
period commencing on December 1 of each year. These sales are subject to
certain restrictions. The General Partner is to purchase the tendered
interests at a purchase price equal to the average of the daily market prices
for the common stock of the General Partner for the ten consecutive trading
days immediately preceding the date of receipt by the General Partner of a
notice of cash tender. The General Partner is to pay for these interests
solely with the net proceeds of an offering of the General Partner's common
stock. The General Partner would bear the costs of sale (other than
underwriting discounts and commissions). The Limited Partner would bear all
market risk if the market price at closing was less than the purchase price as
determined on the date of tender. Any proceeds of the offering in excess of the
purchase price would be for the sole benefit of the General Partner.
Rent Restrictions: As of December 31, 1996, 21% of the
apartment units within the Partnership's portfolio were required to be set
aside for residents within certain income levels and had limitations on the
rent that could be charged to such tenants. The rental revenue from five of
these projects includes governmental rent subsidy payments of $3,977, $4,023
and $3,932 for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 11 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per unit amounts)
1996 Quarters Ended March 31 June 30 September 30 December 31
- -------------------- -------- -------- ------------ -----------
Revenues............ $ 37,089 $ 38,967 $ 40,680 $ 41,962
Expenses............ 28,401 29,811 29,619 29,675
Net income.......... 8,688 9,156 11,061 12,287
Net income per unit. $ 0.23 $ 0.24 $ 0.27 $ 0.30
1995 Quarters Ended March 31 June 30 September 30 December 31
- -------------------- -------- -------- ------------ -----------
Revenues............ $ 32,584 $ 33,170 $ 34,328 $ 36,086
Expenses............ 28,777 27,912 27,068 27,355
Net income.......... 3,807 (18,169) 7,260 8,731
Net income per unit. $ 0.13 $ (0.59) $ 0.21 $ 0.23
Schedule III - Consolidated Real Estate and Accumulated Depreciation
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1996 (a) (b)
-----------------------------------
City, State Number Encumbrances Buildings and Accumulated Date of Depreciable
Apartment Community Name of Units (c) Land (d) Improvements Total Depreciation Completion Life (e)
- --------------------------- -------- ------------ -------- ------------- ------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stabilized More Than Two
Years
Irvine, California
Amherst Court........... 162 $ 1,430 $ 11,247 $ 12,677 $ 2,255 1991 5-40 yrs.
Berkeley Court.......... 152 $ 7,808 858 8,257 9,115 2,821 1986 5-40 yrs.
Cedar Creek............. 176 8,586 519 8,614 9,133 3,021 1985 5-40 yrs.
Columbia Court.......... 58 2,601 321 2,683 3,004 881 1984 5-40 yrs.
Cornell Court........... 109 5,202 785 5,044 5,829 1,597 1984 5-40 yrs.
Cross Creek............. 136 6,754 561 7,287 7,848 2,568 1985 5-40 yrs.
Dartmouth Court......... 294 17,303 2,674 17,230 19,904 5,513 1986 5-40 yrs.
Deerfield............... 288 10,812 3,810 11,495 15,305 4,383 1975/83 5-40 yrs.
Harvard Court........... 112 5,158 1,034 5,864 6,898 1,952 1986 5-40 yrs.
Northwood Park.......... 168 7,759 1,246 8,459 9,705 3,058 1985 5-40 yrs.
Northwood Place......... 604 30,143 4,613 34,096 38,709 11,191 1986 5-40 yrs.
Orchard Park............ 60 1,138 2,099 3,237 837 1982 5-40 yrs.
Park West............... 880 33,992 18,768 53,522 72,290 25,328 1970/71/72 5-40 yrs.
Parkwood................ 296 12,642 7,667 12,698 20,365 4,850 1974 5-40 yrs.
Rancho San Joaquin...... 368 17,234 7,910 28,325 36,235 12,972 1976 5-40 yrs.
San Carlo............... 354 2,715 25,720 28,435 5,907 1989 5-40 yrs.
San Leon................ 248 12,380 1,726 14,507 16,233 4,449 1987 5-40 yrs.
San Marco............... 426 24,327 2,873 24,355 27,228 6,199 1988 5-40 yrs.
San Marino.............. 200 9,849 1,376 11,567 12,943 3,756 1986 5-40 yrs.
San Mateo............... 283 1,444 18,621 20,065 3,696 1990 5-40 yrs.
San Paulo............... 382 26,591 1,906 26,785 28,691 2,487 1993 5-40 yrs.
San Remo................ 248 13,832 1,765 14,287 16,052 4,457 1986/88 5-40 yrs.
Stanford Court.......... 320 13,877 2,202 14,226 16,428 5,202 1985 5-40 yrs.
The Parklands........... 121 6,512 68 7,068 7,136 2,216 1983 5-40 yrs.
Turtle Rock Canyon...... 217 18,791 1,889 19,969 21,858 3,703 1991 5-40 yrs.
Turtle Rock Vista....... 252 13,405 6,327 13,340 19,667 5,120 1976/77 5-40 yrs.
Windwood Glen........... 196 9,852 1,266 9,668 10,934 3,124 1985 5-40 yrs.
Windwood Knoll.......... 248 1,111 11,575 12,686 3,724 1983 5-40 yrs.
Woodbridge Oaks......... 120 832 6,718 7,550 2,217 1983 5-40 yrs.
Woodbridge Pines........ 220 8,459 5,755 10,484 16,239 3,985 1976 5-40 yrs.
Woodbridge Villas....... 258 4,353 9,105 13,458 3,729 1982 5-40 yrs.
Woodbridge Willows...... 200 9,655 1,421 11,468 12,889 4,888 1984 5-40 yrs.
------ ------- ------- ------- ------- -------
8,156 333,524 92,363 466,383 558,746 152,086
------ ------- ------- ------- ------- -------
Newport Beach, California
Bayport................. 104 4,862 3,146 4,226 7,372 1,678 1971 5-40 yrs.
Bayview................. 64 3,510 2,353 2,925 5,278 1,193 1971 5-40 yrs.
Baywood................. 388 20,972 10,809 20,362 31,171 7,450 1973/84 5-40 yrs.
Mariner Square.......... 114 5,637 392 5,030 5,422 3,106 1969 5-40 yrs.
Newport North........... 570 37,970 8,849 31,314 40,163 9,963 1986 5-40 yrs.
Promontory Point........ 520 36,303 18,775 41,153 59,928 16,083 1974 5-40 yrs.
------ ------- ------- ------- ------- -------
1,760 109,254 44,324 105,010 149,334 39,473
------ ------- ------- ------- ------- -------
Tustin, California
Rancho Alisal........... 356 20,625 3,558 19,894 23,452 5,884 1988/91 5-40 yrs.
Rancho Maderas.......... 266 19,372 1,144 16,263 17,407 3,732 1989 5-40 yrs.
Rancho Mariposa......... 238 12,839 683 16,241 16,924 2,535 1992 5-40 yrs.
Rancho Tierra........... 252 19,622 1,215 16,470 17,685 3,918 1989 5-40 yrs.
Sierra Vista............ 306 2,318 22,667 24,985 3,405 1992 5-40 yrs.
------ ------- ------- ------- ------- -------
1,418 72,458 8,918 91,535 100,453 19,474
------ ------- ------- ------- ------- -------
Total Stabilized More Than
Two Years................ 11,334 $515,236 $145,605 $662,928 $808,533 $211,033
====== ======== ======== ======== ======== ========
Stabilized Less Than Two Years
Irvine, California
Villa Coronado.......... 513 $ 5,842 $ 37,985 $ 43,827 $ 2,058 1995/96 5-40 yrs.
Santa Rosa.............. 368 3,169 27,615 30,784 1,410 1995/96 5-40 yrs.
Santa Clara............. 378 3,624 31,126 34,750 1,468 1995/96 5-40 yrs.
----- ------- -------- ------- --------
1,259 12,635 96,726 109,361 4,936
----- ------- ------- ------- --------
Tustin, California
Rancho Monterey......... 436 6,823 33,970 40,793 1,385 1995/96 5-40 yrs.
------ ------- ------- ------- -------
436 6,823 33,970 40,793 1,385
------ ------- ------- ------- -------
Newport Coast, California
Newport Ridge........... 512 9,357 45,265 54,622 1,813 1995/96 5-40 yrs.
------ ------- ------- ------- -------
512 9,357 45,265 54,622 1,813
------ ------- ------- ------- -------
Total Stabilized Less Than
Two Years.................. 2,207 $ 28,815 $175,961 $204,776 $ 8,134
======= ======= ======= ======= =======
- ----------
See notes on next page.
See report of independent auditors and accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1996 (a) (b)
__________________________________
Number Encumbrances Buildings and Accumulated Date of Depreciable
Apartment Community Name (City) of Units (c) Land (d) Improvements Total Depreciation Completion Life (e)
- ------------------------------- -------- ------------ -------- ------------- ----- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Delivered Units In Projects
Under Construction
Baypointe (Newport Beach) 68 $ 953 $ 6,609 $ 7,562 $ 13 1996 5-40 yrs.
Santa Maria (Irvine)......... 47 697 4,426 5,123 13 1996 5-40 yrs.
------ ------- ------- --------- ------- ---- ---------
Total Delivered Units.......... 115 $ 1,650 $ 11,035 $ 12,685 $ 26
------ ------- ------- ------- ---------
Total Stabilized
and Delivered................. 13,656 $515,236 $176,070 $849,924 $1,025,994 $219,193
====== ======= ======= ======= ========= =======
Units Under Construction
Baypointe (Newport Beach) 232 $ 3,237 $ 18,602 $ 21,839
Santa Maria (Irvine)......... 180 2,646 11,638 14,284
The Colony (Newport
Beach)..................... 245 3,545 9,772 13,317
Santa Rosa II (Irvine) 207 5,999 1,323 7,322
1,478 1,478
Other........................ ------ ------- ------- ---------
Total Units Under Construction 864 $ 15,428 $ 42,813 $ 58,241
------ ------- ------- ------- --------- -------
Total.......................... 14,520 $515,236 $191,497 $892,737 $1,084,234 $219,193
====== ======= ======= ======= ========= =======
- ----------
Notes:
(a) The aggregate cost of land and buildings for federal income tax purposes
is approximately $654,007 (unaudited).
(b) The gross amount at which buildings and improvements are carried represent
historical cost amounts incurred in the development of the projects and
capital improvements incurred subsequent to the completion of construction.
Prior to the General Partner's December 1993 initial public offering, the
gross land, buildings and improvements amounts represent The Irvine Company's
historical cost basis.
(c) Encumbrances represent debt secured by deeds of trust.
(d) Land acquired from The Irvine Company is recorded at cost based on the
purchase price.
(e) Estimated useful lives are five to seven years for furniture and fixtures,
five to twenty years for improvements and forty years for buildings.
</TABLE>
A summary of activity of real estate and accumulated
depreciation is as follows:
<TABLE>
<CAPTION>
Real Estate
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year...................................... $ 1,005,633 $ 869,756 $ 792,510
Additions:
Through cash expenditures...................................... 66,857 124,368 61,590
Through assumption of tax-exempt assessment district debt...... 2,771 4,184 15,656
Through issuance of partnership units.......................... 8,973 7,325
----------- ----------- ---------
Balance at end of year............................................ $ 1,084,234 $ 1,005,633 $ 869,756
=========== =========== =========
Accumulated Depreciation
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
Balance at beginning of year...................................... $ 192,106 $ 169,039 $ 148,052
Charges to depreciation expense................................... 27,087 23,067 20,987
----------- ----------- ---------
Balance at end of year............................................ $ 219,193 $ 192,106 $ 169,039
=========== =========== =========
</TABLE>
See report of independent auditors and accompanying notes.
Exhibit 21
IRVINE APARTMENT COMMUNITIES, L.P.
SUBSIDIARIES OF THE REGISTRANT
State of
Subsidiary Incorporation
- ---------- -------------
San Rafael Apartment Limited Partnership California
Exhibit 23.1
Irvine Apartment Communities, L.P.
Consent of Independent Auditors
We consent to the use of our report dated January 31, 1997
with respect to the consolidated financial statements and related financial
statement schedule of Irvine Apartment Communities, L.P. included in this
Registration Statement (Form 10).
ERNST & YOUNG LLP
Newport Beach, California
May 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,205
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,025,994
<DEPRECIATION> 219,193
<TOTAL-ASSETS> 900,998
<CURRENT-LIABILITIES> 0
<BONDS> 553,064
0
0
<COMMON> 0
<OTHER-SE> 320,344
<TOTAL-LIABILITY-AND-EQUITY> 900,998
<SALES> 0
<TOTAL-REVENUES> 158,698
<CGS> 0
<TOTAL-COSTS> 79,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,506
<INCOME-PRETAX> 41,192
<INCOME-TAX> 0
<INCOME-CONTINUING> 41,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,192
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
