SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 000-22683
GABLES REALTY LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its Charter)
DELAWARE 58-2077966
(State of Incorporation) (I.R.S. Employer Identification No.)
2859 Paces Ferry Road, Suite 1450
Atlanta, Georgia 30339
(Address of principal executive offices, including zip code)
(770) 436 - 4600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and formal fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(D) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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.
(1) (X) YES ( ) NO
(2) ( ) YES (X) NO
<PAGE>
Page-2
GABLES REALTY LIMITED PARTNERSHIP
FORM 10 - Q INDEX
Part I - Financial Information Page
----
Item 1: Financial Statements
Consolidated Balance Sheets of Gables Realty Limited 3
Partnership as of June 30, 1997 and December 31, 1996.
Consolidated Statements of Operations of Gables Realty 4
Limited Partnership for the three months ended June 30,
1997 and 1996.
Consolidated Statements of Operations of Gables Realty 5
Limited Partnership for the six months ended June 30,
1997 and 1996.
Consolidated Statements of Cash Flows of Gables Realty 6
Limited Partnership for the six months ended June 30,
1997 and 1996.
Notes to Consolidated Financial Statements 7-10
Item 2: Management's Discussion and Analysis of Financial 11-26
Condition and Results of Operations
Part II - Other Information 27
Item 1: Legal Proceedings
Item 2: Changes in Securities
Item 3: Defaults Upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
Signature 28
<PAGE>
Page-3
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
GABLES REALTY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED AND DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
ASSETS:
- -------
<S> <C> <C>
Real estate assets: (Note 7)
Land ....................................................................... $ 116,104 $ 102,762
Buildings ................................................................... 621,938 558,569
Furniture, fixtures and equipment ........................................... 49,589 45,830
Construction in progress .................................................... 76,887 74,690
Land held for future development ............................................ 4,087 2,749
------- -------
Real estate assets before accumulated depreciation ....................... 868,605 784,600
Less: accumulated depreciation ............................................. (84,343) (74,903)
------- -------
Net real estate assets .................................................... 784,262 709,697
Cash and cash equivalents ...................................................... 2,952 4,385
Restricted cash ................................................................ 7,864 8,430
Deferred charges, net .......................................................... 4,538 5,412
Other assets, net .............................................................. 11,276 31,736
------- -------
Total assets .............................................................. $ 810,892 $ 759,660
======= =======
LIABILITIES AND PARTNERS' CAPITAL:
- ---------------------------------
Notes payable .................................................................. $ 447,350 $ 390,321
Accrued interest payable ....................................................... 1,913 1,811
Distributions payable (Note 8) ................................................. 11,249 11,194
Real estate taxes payable ...................................................... 7,853 9,785
Accounts payable and accrued expenses - construction ........................... 4,641 6,218
Accounts payable and accrued expenses - operating .............................. 4,107 5,455
Security deposits .............................................................. 2,050 1,968
------- -------
Total liabilities ......................................................... 479,163 426,752
------- -------
Limited partners' capital interest (3,528,232 and 3,528,232 Units), at
redemption value (Note 1) .................................................. 91,514 98,482
------- -------
Partners' capital:
General partner (229,569 and 228,453 Units) .................................. 3,339 3,245
Limited partner (19,199,113 and 19,088,645 Units) ............................ 236,876 231,181
------- -------
Total partners' capital (19,428,682 and 19,317,098 Units) ................... 240,215 234,426
------- -------
Total liabilities, limited partners' capital interest and partners' capital $ 810,892 $ 759,660
======= =======
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
Page-4
GABLES REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1997 1996
---- ----
<S> <C> <C>
Rental revenues .................................................... $30,944 $25,319
Other property revenues ............................................ 1,525 1,269
------- -------
Total property revenues ....................................... 32,469 26,588
------- -------
Property management revenues ....................................... 747 985
Non-recurring Olympic revenues, net ................................ 0 230
Other .............................................................. 525 340
------- -------
Total other revenues .......................................... 1,272 1,555
------- -------
Total revenues ................................................ 33,741 28,143
------- -------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 11,473 9,243
Depreciation and amortization ...................................... 5,682 4,564
Amortization of deferred financing costs ........................... 222 317
Property management - owned (Note 4) ............................... 765 685
Property management - third party (Note 4) ......................... 527 719
General and administrative ......................................... 774 863
Interest ........................................................... 6,399 5,183
Credit enhancement fees ............................................ 129 139
------- -------
Total expenses ................................................ 25,971 21,713
------- -------
Income before equity in income of joint ventures and interest income 7,770 6,430
Equity in income of joint ventures ................................. 84 59
Interest income .................................................... 71 60
------- -------
Net income ......................................................... $ 7,925 $ 6,549
======= =======
Weighted average number of Units outstanding ....................... 22,933 19,405
======= =======
Per Unit Information (Note 6):
Net income ......................................................... $ 0.34 $ 0.34
======= =======
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-5
GABLES REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
---- ----
<S> <C> <C>
Rental revenues .................................................... $ 60,427 $ 47,458
Other property revenues ............................................ 2,863 2,330
------- -------
Total property revenues ....................................... 63,290 49,788
------- -------
Property management revenues ....................................... 1,546 1,965
Non-recurring Olympic revenues, net ................................ 0 230
Other .............................................................. 1,137 602
------- -------
Total other revenues .......................................... 2,683 2,797
------- -------
Total revenues ................................................ 65,973 52,585
------- -------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 22,531 17,313
Depreciation and amortization ...................................... 11,019 8,296
Amortization of deferred financing costs ........................... 503 667
Property management - owned (Note 4) ............................... 1,593 1,342
Property management - third party (Note 4) ......................... 1,167 1,488
General and administrative ......................................... 1,655 1,577
Interest ........................................................... 12,214 8,991
Credit enhancement fees ............................................ 257 303
------- -------
Total expenses ................................................ 50,939 39,977
------- -------
Income before equity in income of joint ventures and interest income 15,034 12,608
Equity in income of joint ventures ................................. 150 108
Interest income .................................................... 193 159
------- -------
Income before gain on sale of real estate assets ................... 15,377 12,875
Gain on sale of real estate assets ................................. 4,858 0
------- -------
Income before extraordinary loss ................................... 20,235 12,875
Extraordinary loss (Note 5) ........................................ (712) (631)
------- -------
Net income ......................................................... $ 19,523 $ 12,244
======= =======
Weighted average number of Units outstanding ....................... 22,895 19,004
======= =======
Per Unit Information (Note 6):
Income before extraordinary loss ................................... $ 0.88 $ 0.68
======= =======
Net income ......................................................... $ 0.85 $ 0.64
======= =======
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-6
GABLES REALTY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED AND DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net income ................................................ $ 19,523 $ 12,244
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .......................... 11,522 8,963
Equity in income of joint ventures ..................... (150) (108)
Gain on sale of real estate assets ..................... (4,858) 0
Long-term compensation expense ......................... 204 204
Extraordinary loss ..................................... 712 631
Change in operating assets and liabilities:
Restricted cash ...................................... 908 283
Other assets ......................................... (559) (994)
Other liabilities, net ............................... (2,688) 3,169
------- -------
Net cash provided by operating activities ....... 24,614 24,392
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Purchase and construction of real estate assets ........... (72,461) (123,137)
Net proceeds from sale of real estate assets .............. 12,333 3,968
Long-term land lease payments ............................. (1,000) (1,500)
Distributions received from joint ventures ................ 136 167
------- -------
Net cash used in investing activities ................ (60,992) (120,502)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Proceeds from share offerings, net of issuance costs ...... 0 20,630
Proceeds from the exercise of share options ............... 871 731
Share Builder Plan contributions .......................... 19 13
Payments of deferred financing costs ...................... (203) (1,226)
Notes payable proceeds .................................... 74,243 130,781
Notes payable repayments .................................. (17,214) (36,493)
Principal escrow deposits ................................. (342) (384)
Distributions paid ($0.98 and $0.96 per Unit, respectively) (22,429) (18,190)
------- -------
Net cash provided by financing activities ............ 34,945 95,862
------- -------
Net change in cash and cash equivalents ................... (1,433) (248)
Cash and cash equivalents, beginning of period ............ 4,385 8,529
------- -------
Cash and cash equivalents, end of period .................. $ 2,952 $ 8,281
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest ............................... $ 14,609 $ 10,805
Interest capitalized ................................. 2,497 2,428
------- -------
Cash paid for interest, net of amounts capitalized ... $ 12,112 $ 8,377
======= =======
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
Page-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands, Except Per Unit Amounts)
- --------------------------------------------------------------
1. ORGANIZATION AND FORMATION OF THE OPERATING PARTNERSHIP
Gables Realty Limited Partnership (the "Operating Partnership") is the entity
through which Gables Residential Trust (the "Company"), a self-administered and
self-managed real estate investment trust ("REIT"), conducts substantially all
of its business and owns (either directly or through subsidiaries) substantially
all of its assets. In 1993, the Company was formed under Maryland law and the
Operating Partnership was organized as a Delaware limited partnership to
continue and to expand the multifamily apartment community management,
development, construction and acquisition operations of its privately owned
predecessor organization. The term "Gables Residential Group" or "Group" as used
herein refers to the privately owned predecessor organization prior to the
Company's initial public offering in January, 1994 (the "Initial Offering" or
"IPO") and the concurrent completion of the various transactions that occurred
simultaneously therewith (the "Formation Transactions"). The term "Operating
Partnership" or "Gables" as used herein means Gables Realty Limited Partnership
and its subsidiaries on a consolidated basis, or, where the context so requires,
Gables Realty Limited Partnership only, and, as the context may require, their
predecessors.
The Company was an 84.6% economic owner of the Operating Partnership as of June
30, 1997. The Company controls the Operating Partnership through Gables GP, Inc.
("GGPI"), a wholly-owned subsidiary of the Company and the sole general partner
of the Operating Partnership (this structure is commonly referred to as an
umbrella partnership REIT or "UPREIT"). The board of directors of GGPI, the
members of which are the same as the members of the Board of Trustees of the
Company, manages the affairs of the Operating Partnership by directing the
affairs of GGPI. The Company's limited partner and indirect general partner
interests in the Operating Partnership entitle it to share in cash distributions
from, and in the profits and losses of, the Operating Partnership in proportion
to its ownership interest therein and entitle the Company to vote on all matters
requiring a vote of the limited partners.
The other limited partners of the Operating Partnership are persons who
contributed their direct or indirect interests in certain properties to the
Operating Partnership primarily in connection with the Formation Transactions.
The Operating Partnership is obligated to redeem each unit of limited
partnership ("Unit") held by a person other than the Company, at the request of
the holder thereof, for cash equal to the fair market value of a share of the
Company's common shares of beneficial interest, par value $.01 per share, at the
time of such redemption, provided that the Company at its option may elect to
acquire any such Unit presented for redemption for one common share or cash. The
Company presently anticipates that it will elect to issue its common shares to
acquire Units presented for redemption, rather than paying cash. Such limited
partners' redemption rights are reflected in "limited partners' capital
interest" in the accompanying consolidated balance sheets at the cash redemption
amount at the balance sheet date. With each such redemption the Company's
percentage ownership interest in the Operating Partnership will increase. In
addition, whenever the Company issues common shares or preferred shares of
beneficial interest, par value $.01 per share, the Company is obligated to
contribute any net proceeds therefrom to the Operating Partnership and the
Operating Partnership is obligated to issue an equivalent number of Units to the
Company.
Distributions to holders of Units are made to enable distributions to be made to
the Company's shareholders under its dividend policy. Federal income tax laws
require the Company, as a REIT, to distribute 95% of its ordinary taxable
income. The Operating Partnership makes distributions to the Company to enable
it to satisfy this requirement.
The Operating Partnership's third party management businesses are conducted
through two subsidiaries, Central Apartment Management, Inc., a Texas
corporation, and East Apartment Management, Inc., a Georgia corporation (each, a
"Management Company").
<PAGE>
Page-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands, Except Per Unit Amounts)
- --------------------------------------------------------------
As of June 30, 1997, Gables owned 49 completed multifamily apartment communities
comprising 15,255 apartment homes, of which 32 were developed and 17 were
acquired by Gables, and an indirect 25% general partner interest in two
apartment communities developed by Gables comprising 663 apartment homes. In
July, 1997, Gables acquired an existing apartment community comprising 126
apartment homes. Gables also owns seven multifamily apartment communities,
expected to comprise 2,025 apartment homes, that are currently under
development. Gables also has rights to acquire four existing multifamily
apartment communities comprising 908 apartment homes. Gables is pursuing other
acquisition and development opportunities in the ordinary course of business
which have not yet been, or may never be, put under contract.
As of June 30, 1997, Gables owned parcels of land for the future development of
four apartment communities expected to comprise an estimated 904 apartment
homes. In July, 1997, Gables acquired a parcel of land for the future
development of two apartment communities expected to comprise an estimated 700
apartment homes. Additionally, Gables has contracts or options to acquire
additional parcels of land. There can be no assurance that Gables will acquire
these land parcels, however it is Gables' intent to develop an apartment
community on each such land parcel, if purchased.
2. SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
Secondary Common Share Offerings -
- ---------------------------------
Since the IPO, the Company has had the following common share offerings:
Closing Date Shares Issued Net Proceeds
------------ ------------- ------------
October 7, 1994 444,500 $ 9,876
--------- -------
October 31, 1995 4,600,000 $94,364
--------- -------
March 25, 1996 879,068 $20,630
September 17, 1996 1,725,000 $38,600
September 27, 1996 1,435,000 $34,254
--------- -------
1996 Totals 4,039,068 $93,484
========= =======
The proceeds from these offerings were generally used (i) to reduce outstanding
indebtedness under interim financing vehicles utilized to fund Gables'
development and acquisition activities and (ii) for general working capital
purposes including funding of future development and acquisition activities.
Preferred Share Offering -
- --------------------------
On July 24, 1997, the Company issued 4,600,000 shares of 8.30% Series A
Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per
share). The net proceeds from this offering of approximately $111 million were
contributed to the Operating Partnership in exchange for an equal number of
preferred Units with similar economic rights and preferences. Gables used the
net proceeds from the offering to reduce outstanding indebtedness under the
interim financing vehicles discussed above.
Additional Issuances of Operating Partnership Units -
- -----------------------------------------------------
On December 5, 1995, Gables acquired a parcel of land for the development of an
apartment community, financed in part through the issuance of 111,074 minority
units of limited partnership interest in the Operating Partnership ("Units").
<PAGE>
Page-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands, Except Per Unit Amounts)
- --------------------------------------------------------------
On July 26, 1996, Gables acquired an apartment community comprising 500
apartment homes, financed in part through the issuance of 243,787 Units.
3. BASIS OF PRESENTATION
The accompanying consolidated financial statements of Gables Realty Limited
Partnership include the consolidated accounts of Gables Realty Limited
Partnership and its subsidiaries. As a result of the structure of the business
combination, certain partners and owners of the entities in Gables Residential
Group received common shares of the Company and/or Units in the Operating
Partnership. Purchase accounting was applied to the acquisition of all
non-controlled interests. The acquisition of all other interests was accounted
for as a reorganization of entities under common control and, accordingly, was
reflected at historical cost in a manner similar to that in pooling of interests
accounting. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The accompanying interim unaudited financial statements have been prepared by
Gables' management in accordance with generally accepted accounting principles
("GAAP") for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normally recurring adjustments) considered necessary for a fair
presentation for these interim periods have been included. The results of
operations for the interim period 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 financial statements
of Gables Realty Limited Partnership and Gables Residential Group and notes
thereto, included in Gables Realty Limited Partnership's Registration Statement
on Form 10.
4. PROPERTY MANAGEMENT EXPENSES
Gables manages its owned properties, as well as properties owned by third
parties for which Gables provides management services for a fee. Property
management expenses have been allocated between owned and third party properties
in the accompanying statements of operations based on the proportionate number
of owned and third party apartment homes managed by Gables during the applicable
periods.
5. EXTRAORDINARY LOSS
Extraordinary loss of $712 for the six months ended June 30, 1997 represents (i)
the write-off of unamortized deferred financing costs and prepaid credit
enhancement fees associated with the defeasance of the tax-exempt bond financing
encumbering the Club Candlewood property that was sold in January, 1997 and (ii)
the write-off of unamortized deferred financing costs associated with the
February 28, 1997 retirement of a conventional mortgage note payable that was
scheduled to mature on September 1, 1997.
Extraordinary loss of $631 for the six months ended June 30, 1996 represents the
write-off of unamortized deferred financing costs associated with the early
retirement of the Company's original $175 million secured revolving credit
facility (the "Original Credit Facility"). The Original Credit Facility that was
scheduled to mature in January, 1997, was refinanced in March, 1996 with a new
$175 million unsecured revolving credit facility (the "New Credit Facility").
6. PER UNIT INFORMATION
Quarterly per unit information has been computed based upon the weighted average
number of Units outstanding during the relevant period. The impact of
outstanding share options was less than 3% dilutive in both 1997 and 1996 and,
therefore, the impact on primary earnings per Unit ("EPU") has not been shown.
<PAGE>
Page-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and Dollars in Thousands, Except Per Unit Amounts)
- --------------------------------------------------------------
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (FAS 128) "Earnings per Share," which
becomes effective for periods ending after December 15, 1997. FAS 128 will
require dual presentation of basic and diluted EPU on the face of the income
statement for all entities with complex capital structures and will require
restatement of all prior period EPU data presented. The impact of FAS 128 on
Gables' EPU information disclosed in the accompanying financial statements is
not material.
7. REAL ESTATE ASSETS
Real estate assets, before accumulated depreciation, are as follows:
June 30, 1997 December 31, 1996
Basis Units Basis Units
----- ----- ----- -----
Completed properties $787,631 15,255 $707,161 14,581
Properties under development 76,887 2,025 74,690 2,284
Land held for future development 4,087 904 2,749 648
-------- ------- -------- ------
Total (a) $868,605 18,184 $784,600 17,513
======== ======= ======== ======
(a) Excludes (i) costs and units attributable to Arbors of Harbortown JV and
Metropolitan Apartments JV as Gables' 25% general partner interests in
these joint ventures are accounted for on the equity method of accounting
and (ii) costs of approximately $4,600 for two prepaid long-term land
leases which are included in other assets in the accompanying balance
sheets.
The change in real estate assets from December 31, 1996 to June 30, 1997
consisted of the following:
Balance at December 31, 1996 $784,600
Acquisitions, including renovation expenditures 50,992
Sale of real estate assets (8,797)
Development costs incurred, including related land acquisitions 39,750
Capital expenditures for completed properties 2,060
--------
Balance at June 30, 1997 $868,605
========
As discussed in Note 3, purchase accounting was applied to the acquisition of
all non-controlled interests in connection with the IPO and Formation
Transactions. The increase in basis related to such acquisition was $48,090 and
was allocated to the respective property's land and building accounts. The
acquisition of all other interests was accounted for as a reorganization of
entities under common control, and accordingly was reflected at historical cost.
8. DECLARATION OF DIVIDEND
On June 17, 1997, the Operating Partnership committed to distribute $0.49 per
Unit with respect to the period April 1, 1997 through June 30, 1997 to
unitholders of record on June 30, 1997. The total distribution of $11,249 was
paid on July 14, 1997.
<PAGE>
Page-11
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
Gables is focused within the multifamily industry in the Southeastern and
Southwestern United States and its operating performance relies predominantly on
net operating income from its apartment communities. Gables' net operating
income is influenced by operating expenses and rental revenues, which are
affected by the supply and demand dynamics within Gables' markets. Gables'
performance is also affected by the general availability and cost of capital and
by its ability to develop and to acquire additional apartment communities with
returns in excess of its blended cost of equity and debt capital.
Gables owns apartment communities in seven core cities in Georgia, Texas and
Tennessee. Gables recently entered an eighth market, Orlando, Florida, through
an association with a subsidiary of the Walt Disney Company and, in connection
therewith, currently has two communities under development in Orlando. Within
each city, Gables targets specific submarkets for investment. These submarkets
are generally characterized by their proximity to local employment centers,
retail and entertainment venues and traffic arteries. Gables believes
demographic trends (including job, population and household growth) in its
markets in recent years have generally led to favorable demand and supply
dynamics for multifamily communities. However, during any given time period
these demand and supply dynamics may be less favorable in certain of Gables'
markets depending on conditions influencing the specific market. Portfolio wide
occupancy levels have remained high and portfolio wide rental rates have
continued to increase during each of the last several years. Gables expects
portfolio wide rental expenses to increase at a rate slightly ahead of
inflation, and to approximate the increase in property revenues, for the coming
twelve months.
As a result of the aforementioned generally favorable market conditions,
management has been successful in growing the income of the stabilized
properties as well as growing earnings via a combination of new development and
acquisition. Management's extensive experience in new development (including
site selection, zoning, construction and lease-up) and in-depth local presence
affords Gables the opportunity to acquire land and develop new Class A
multifamily communities. In select markets and in certain real estate cycles,
management believes better returns can be generated from new development than
from acquisitions of comparable properties. During other real estate cycles or
in select markets, management will pursue the acquisition of existing apartment
communities, specifically when the returns on investment and the potential for
growth in net operating income are attractive. Additionally, Gables has been
able to acquire distressed or under-managed apartment communities which, through
strategic renovation and repositioning, have generally resulted in superior
returns when compared to traditional acquisitions and new developments.
Management believes Gables' ability to compete with other companies is
significantly enhanced by its in-depth local presence and the strength of its
management, development, acquisition, and construction personnel. In certain
situations, management's evaluation of the growth prospects for a specific asset
may result in a determination to dispose of the asset. In this event, management
would intend to sell the asset and utilize the net proceeds from any such sale
to invest in new assets which are expected to have better growth prospects or to
reduce indebtedness. Gables maintains staffing levels sufficient to meet the
existing construction, acquisition, and leasing activities. If market conditions
warrant, management would anticipate adjusting staffing levels to mitigate a
negative impact on results of operations.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements and the notes thereto. This Report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results or developments could differ materially from those
projected in such statements as a result of certain factors set forth in the
section entitled "Certain Factors Affecting Future Operating Results" on Page 25
of this Form 10-Q and elsewhere in this report.
<PAGE>
Page-12
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Gables Realty Limited Partnership and Initial Public Offering
- -------------------------------------------------------------
of Gables Residential Trust
- ---------------------------
Gables Realty Limited Partnership (the "Operating Partnership"), a Delaware
limited partnership, was formed in 1993 to conduct the multifamily apartment
community management, development, construction and acquisition operations for
Gables Residential Trust (the "Company"). On January 26, 1994, the Company
completed its initial public offering (the "IPO") and, in connection therewith,
sold 9,430,000 common shares at a price to the public of $22.50 per common
share. The net proceeds from such sale totaled approximately $190 million, a
portion of which was used by the Company to acquire an economic and voting
interest in the Operating Partnership, which was formed to succeed to
substantially all of the interests of its privately owned predecessor
organization. The Company, a self-administered and self-managed real estate
investment trust ("REIT"), became the majority owner of the Operating
Partnership upon the completion of the IPO. The term "Gables Residential Group"
or "Group" as used herein refers to the privately owned predecessor organization
prior to the completion of the Company's IPO and the concurrent completion of
the various transactions that occurred simultaneously therewith (the "Formation
Transactions"). The term "Operating Partnership" or "Gables" as used herein
means Gables Realty Limited Partnership and its subsidiaries on a consolidated
basis or, where the context so requires, Gables Realty Limited Partnership only,
and, as the context may require, their predecessors.
SECONDARY OFFERINGS AND ISSUANCES OF OPERATING PARTNERSHIP UNITS
Secondary Common Share Offerings -
- --------------------------------
Since the IPO, the Company has had the following common share offerings:
Closing Date Shares Issued Net Proceeds
------------ ------------- ------------
October 7, 1994 444,500 $ 9,876
--------- -------
October 31, 1995 4,600,000 $94,364
--------- -------
March 25, 1996 879,068 $20,630
September 17, 1996 1,725,000 $38,600
September 27, 1996 1,435,000 $34,254
--------- -------
1996 Totals 4,039,068 $93,484
========= =======
The proceeds from these offerings were generally used (i) to reduce outstanding
indebtedness under interim financing vehicles utilized to fund Gables'
development and acquisition activities and (ii) for general working capital
purposes including funding of future development and acquisition activities.
Preferred Share Offering -
- ------------------------
On July 24, 1997, the Company issued 4,600,000 shares of 8.30% Series A
Cumulative Redeemable Preferred Shares (liquidation preference $25.00 per
share). The net proceeds from this offering of approximately $111 million were
contributed to the Operating Partnership in exchange for an equal number of
preferred Units with similar economic rights and preferences (the "Series A
Preferred Units"). Gables used the net proceeds from this offering to reduce
outstanding indebtedness under the interim financing vehicles discussed above.
Additional Issuances of Operating Partnership Units -
- ---------------------------------------------------
On December 5, 1995, Gables acquired a parcel of land for the development of an
apartment community, financed in part through the issuance of 111,074 minority
units of limited partnership interest in the Operating Partnership ("Units").
<PAGE>
Page-13
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
On July 26, 1996, Gables acquired an apartment community comprising 500
apartment homes, financed in part through the issuance of 243,787 Units.
Results of Operations
- ---------------------
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE THREE MONTHS ENDED JUNE 30,
1997 (THE "1997 PERIOD") TO THE THREE MONTHS ENDED JUNE 30, 1996 (THE "1996
PERIOD").
Gables' net income is generated primarily from the operation of its apartment
communities. For purposes of evaluating comparative operating performance,
Gables categorizes its operating communities based on the period each community
reaches stabilized occupancy. A community is considered by Gables to have
achieved stabilized occupancy on the earlier to occur of (i) attainment of 93%
physical occupancy or (ii) one year after completion of construction.
The operating performance for all of Gables' apartment communities combined for
the three months ended June 30, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------- ---------- ----------- ---------
$ %
1997 1996 Change Change
--------- ---------- ----------- ---------
RENTAL AND OTHER REVENUE:
<S> <C> <C> <C> <C>
Same store communities (1) $19,162 $18,685 $477 2.6%
Communities stabilized during the 1997
Period, but not during the 1996 Period (2) 4,425 4,149 276 6.7%
Development and lease-up communities (3) 2,768 784 1,984 253.1%
Acquired communities (4) 6,114 2,145 3,969 185.0%
Sold communities (5) 0 825 (825) -100.0%
--------- -------- -------- --------
Total property revenues $32,469 $26,588 $5,881 22.1%
--------- -------- -------- --------
PROPERTY OPERATING AND MAINTENANCE EXPENSE
(EXCLUSIVE OF DEPRECIATION AND AMORTIZATION):
Same store communities (1) $6,889 $6,532 $ 357 5.5%
Communities stabilized during the 1997
Period, but not during the 1996 Period (2) 1,438 1,348 90 6.7%
Development and lease-up communities (3) 1,105 262 843 321.8%
Acquired communities (4) 2,041 750 1,291 172.1%
Sold communities (5) 0 351 (351) -100.0%
--------- -------- ------- -------
Total specified expenses $11,473 $9,243 $2,230 24.1%
--------- -------- ------- -------
Revenues in excess of specified expenses $20,996 $17,345 $3,651 21.0%
========= ======== ======= =======
Revenues in excess of specified expenses
as a percentage of total property revenues 64.7% 65.2% --- -0.5%
========= ======== ======= =======
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1997
Period and 1996 Period.
(2) Communities which were completed and fully stabilized during all of the
1997 Period, but were not completed and fully stabilized during all of the
1996 Period.
(3) Communities in the development and/or lease-up phase which were not fully
stabilized during all or any of the 1997 Period.
(4) Communities which were acquired subsequent to April 1, 1996.
(5) Communities which were sold subsequent to April 1, 1996.
</FN>
</TABLE>
<PAGE>
Page-14
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Total property revenues increased $5,881, or 22.1%, from $26,588 to $32,469 due
primarily to increases in the number of apartment homes resulting from the
development and acquisition of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
Same store communities:
<TABLE>
<CAPTION>
Increase Percent
(Decrease) Increase
Number of in Total (Decrease) in Occupancy Increase
Number of Apartment Percent Property Total Property During the (Decrease) in
Market Communities Homes of Total Revenues Revenues 1997 Period Occupancy
- ------ ----------- ----- -------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston 10 3,512 36% $241 3.7% 94.0% -0.8%
Atlanta 12 3,470 36% 149 2.1% 95.4% 0.1%
Dallas 4 1,089 11% 86 4.0% 95.3% 1.3%
Nashville 3 912 9% (6) -0.4% 96.0% 0.8%
Memphis 1 464 5% 1 0.1% 94.6% -2.7%
Austin 1 276 3% 6 1.0% 95.8% 3.3%
------- ------- ------- ------- ------- ------- -------
31 9,723 100% $477 2.6% 94.9% 0.0%
======= ======= ======= ======= ======= ======= =======
</TABLE>
Communities stabilized during the 1997 Period but not during the 1996 Period:
Increase
(Decrease)
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Communities Homes of Total Revenues 1997 Period
------ ----------- ----- -------- -------- -----------
San Antonio 2 544 29% $125 90.9%
Atlanta 1 384 20% (51) 93.5%
Austin 1 256 14% 42 94.9%
Nashville 1 254 14% 38 96.1%
Houston 1 246 13% 48 91.3%
Dallas 1 188 10% 74 94.3%
------- ------- ------- ------- -------
7 1,872 100% $276 93.2%
======= ======= ======= ======= =======
Development and lease-up communities:
Increase
Number of In Total Occupancy
Number of Apartment Percent Property During the
Market Communities Homes of Total Revenues 1997 Period
- ------ ----------- ----- -------- -------- -----------
Atlanta 3 862 45% $ 369 34.4%
Memphis 2 490 25% 942 85.5%
Dallas 1 300 16% 432 86.9%
Austin 1 273 14% 241 27.2%
------- ------- ------- ------- -------
7 1,925 100% $1,984 51.9%
======= ======= ======= ======= =======
<PAGE>
Page-15
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Other revenues decreased $283, or 18.2%, from $1,555 to $1,272 due to (i) $230
of non-recurring net revenues generated from certain corporate apartment home
leases entered into in connection with the 1996 Olympic games held in Atlanta
and (ii) a decrease in property management revenues of $238, or 24.2%, from $985
to $747 resulting from a net decrease of properties managed by Gables for third
parties primarily due to these properties being sold by the owners. Such
decreases were offset in part by an increase in revenues in the 1997 Period
related to the provision of certain ancillary services.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $2,230, or 24.1%, from $9,243 to $11,473 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities and an increase in property operating and maintenance
expense for same store communities of 5.5%. The same store increase in operating
expenses represents inflationary increases in expenses and increased marketing
and redecorating expenses in certain of Gables' markets. Gables anticipates that
property operating and maintenance expense for same store communities will
generally increase at a rate slightly ahead of inflation for the coming twelve
months.
Depreciation and amortization expense increased $1,118, or 24.5%, from $4,564 to
$5,682 due primarily to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third party properties on
a combined basis decreased $112, or 8.0%, from $1,404 to $1,292 due primarily to
certain non-recurring expense savings in the 1997 Period, offset in part by
inflationary increases in expenses. Gables allocates property management
expenses to both owned communities and third party properties based on the
proportionate share of total apartment homes and units managed.
General and administrative expense decreased $89, or 10.3%, from $863 to $774
due primarily to the timing of the recordation of certain expenses.
Interest expense increased $1,216, or 23.5%, from $5,183 to $6,399 due to an
increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase. These
increases in interest expense have been offset in part as a result of the
offerings the Company has consummated between periods, the proceeds of which
have been primarily used to reduce indebtedness.
Net income increased $1,376, or 21.0%, from $6,549 to $7,925 primarily due to
the reasons discussed above.
<PAGE>
Page-16
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Results of Operations
- ---------------------
COMPARISON OF OPERATING RESULTS OF GABLES FOR THE SIX MONTHS ENDED JUNE 30, 1997
(THE "1997 PERIOD") TO THE SIX MONTHS ENDED JUNE 30, 1996 (THE "1996 PERIOD").
Gables' net income is generated primarily from the operation of its apartment
communities. For purposes of evaluating comparative operating performance,
Gables categorizes its operating communities based on the period each community
reaches stabilized occupancy. A community is considered by Gables to have
achieved stabilized occupancy on the earlier to occur of (i) attainment of 93%
physical occupancy or (ii) one year after completion of construction.
The operating performance for all of Gables' apartment communities combined for
the six months ended June 30, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------- ---------- ---------- ------------
$ %
1997 1996 Change Change
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
RENTAL AND OTHER REVENUE:
Same store communities (1) $36,520 $35,738 $ 782 2.2%
Communities stabilized during the 1997
Period, but not during the 1996 Period (2) 10,249 8,981 1,268 14.1%
Development and lease-up communities (3) 4,632 1,131 3,501 309.5%
Acquired communities (4) 11,714 2,145 9,569 446.1%
Sold communities (5) 175 1,793 (1,618) -90.2%
-------- -------- -------- --------
Total property revenues $63,290 $49,788 $13,502 27.1%
======== ======== ======== ========
PROPERTY OPERATING AND MAINTENANCE EXPENSE
(EXCLUSIVE OF DEPRECIATION AND AMORTIZATION):
Same store communities (1) $13,339 $12,623 $ 716 5.7%
Communities stabilized during the 1997
Period, but not during the 1996 Period (2) 3,160 2,776 384 13.8%
Development and lease-up communities (3) 1,932 370 1,562 422.2%
Acquired communities (4) 3,985 750 3,235 431.3%
Sold communities (5) 115 794 (679) - 85.5%
-------- -------- -------- ---------
Total specified expenses $22,531 $17,313 $5,218 30.1%
-------- -------- -------- ---------
Revenues in excess of specified expenses $40,759 $32,475 $8,284 25.5%
-------- -------- -------- ---------
Revenues in excess of specified expenses
as a percentage of total property revenues 64.4% 65.2% ---- -0.8%
======== ======== ======== =========
<FN>
(1) Communities which were owned and fully stabilized throughout both the 1997
Period and 1996 Period.
(2) Communities which were completed and fully stabilized during all of the
1997 Period, but were not completed and fully stabilized during all of the
1996 Period.
(3) Communities in the development and/or lease-up phase which were not fully
stabilized during all or any of the 1997 Period.
(4) Communities which were acquired subsequent to January 1, 1996.
(5) Communities which were sold subsequent to January 1, 1996.
</FN>
</TABLE>
<PAGE>
Page-17
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Total property revenues increased $13,502, or 27.1%, from $49,788 to $63,290 due
primarily to increases in the number of apartment homes resulting from the
development and acquisition of additional communities and to increases in rental
rates on communities stabilized throughout both periods ("same store"). Below is
additional information regarding the increases in total property revenues for
three of the five community categories presented in the preceding table:
Same store communities:
<TABLE>
<CAPTION>
Increase Percent
(Decrease) Increase
Number of in Total (Decrease) in Occupancy Increase
Number of Apartment Percent Property Total Property During the (Decrease) in
Market Communities Homes of Total Revenues Revenues 1997 Period Occupancy
- ------ ----------- ----- -------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston 10 3,512 37% $417 3.2% 94.2% -0.2%
Atlanta 11 3,159 33% 308 2.5% 94.4% -0.4%
Dallas 4 1,089 12% 93 2.2% 94.0% 0.6%
Nashville 3 912 10% 26 0.8% 96.3% 0.3%
Memphis 1 464 5% (37) -2.3% 93.2% -3.9%
Austin 1 276 3% (25) -2.2% 91.5% -0.5%
------- ------- ------- ------- ------- -------- -------
30 9,412 100% $782 2.2% 94.3% -0.3%
======= ======= ======= ======= ======= ======== =======
</TABLE>
Communities stabilized during the 1997 Period but not during the 1996 Period:
Increase
(Decrease)
Number of in Total Occupancy
Number of Apartment Percent Property During the
Market Communities Homes of Total Revenues 1997 Period
------ ----------- ----- -------- -------- -----------
Atlanta 2 695 32% $ (62) 93.4%
San Antonio 2 544 25% 347 91.7%
Austin 1 256 12% 265 96.2%
Nashville 1 254 12% 333 95.8%
Houston 1 246 11% 125 94.1%
Dallas 1 188 8% 260 93.3%
------- ------- ------- ------- --------
8 2,183 100% $1,268 93.8%
======= ======= ======= ======= ========
Development and lease-up communities:
Increase
Number of In Total Occupancy
Number of Apartment Percent Property During the
Market Communities Homes of Total Revenues 1997 Period
------ ----------- ----- -------- -------- -----------
Atlanta 3 862 45% $576 33.5%
Memphis 2 490 25% 1,690 74.2%
Dallas 1 300 16% 940 82.6%
Austin 1 273 14% 295 19.3%
------- ------- ------- ------- -------
7 1,925 100% $3,501 49.1%
======= ======= ======= ======= =======
<PAGE>
Page-18
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Other revenues decreased $114, or 4.1%, from $2,797 to $2,683 due to (i) $230 of
non-recurring net revenues generated from certain corporate apartment home
leases entered into in connection with the 1996 Olympic games held in Atlanta
and (ii) a decrease in property management revenues of $419, or 21.3%, from
$1,965 to $1,546 resulting from a net decrease of properties managed by Gables
for third parties primarily due to these properties being sold by the owners.
Such decreases were offset in part by an increase in revenues in the 1997 Period
related to the provision of certain ancillary services.
Property operating and maintenance expense (exclusive of depreciation and
amortization) increased $5,218, or 30.1%, from $17,313 to $22,531 due to an
increase in apartment homes resulting from the development and acquisition of
additional communities and an increase in property operating and maintenance
expense for same store communities of 5.7%. The same store increase in operating
expenses represents inflationary increases in expenses and increased marketing
and redecorating expenses in certain of Gables' markets. Gables anticipates that
property operating and maintenance expense for same store communities will
generally increase at a rate slightly ahead of inflation for the coming twelve
months.
Depreciation and amortization expense increased $2,723, or 32.8%, from $8,296 to
$11,019 due primarily to the completion of newly developed communities and
acquisition of other communities.
Property management expense for owned communities and third party properties on
a combined basis decreased $70, or 2.5%, from $2,830 to $2,760 due primarily to
certain non-recurring expense savings in the 1997 Period, offset in part by
inflationary increases in expenses. Gables allocates property management
expenses to both owned communities and third party properties based on the
proportionate share of total apartment homes and units managed.
General and administrative expense increased $78, or 4.9%, from $1,577 to $1,655
due primarily to inflationary increases in expenses.
Interest expense increased $3,223, or 35.8%, from $8,991 to $12,214 due to an
increase in operating debt associated with newly developed or acquired
communities in addition to communities currently in the lease-up phase. These
increases in interest expense have been offset in part as a result of the
offerings the Company has consummated between periods, the proceeds of which
have been primarily used to reduce indebtedness.
Gain on sale of real estate assets of $4,858 in the 1997 Period represents the
gain generated in connection with the January, 1997 sale of Club Candlewood, a
community comprised of 486 apartment homes.
Extraordinary loss of $712 in the 1997 Period represents (i) the write-off of
unamortized deferred financing costs and prepaid credit enhancement fees
associated with the defeasance of the tax-exempt bond financing encumbering the
Club Candlewood property that was sold in January, 1997 and (ii) the write-off
of unamortized deferred financing costs associated with the February 28, 1997
retirement of a conventional mortgage note payable that was scheduled to mature
on September 1, 1997.
Net income increased $7,279, or 59.4%, from $12,244 to $19,523 primarily due to
the reasons discussed above.
<PAGE>
Page-19
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Gables' net cash provided by operating activities increased from $24,392 for the
six months ended June 30, 1996 to $24,614 for the six months ended June 30,
1997, due to (i) an increase of $5,019 in income before certain non-cash items
including depreciation, amortization, equity in income of joint ventures, gain
on sale of real estate assets, long-term compensation expense and extraordinary
losses, (ii) the change in restricted cash between periods of $625 and (iii) the
change in other assets between periods of $435. Such increases were offset in
part by the change in other liabilities between periods of $5,857.
Gables' net cash used in investing activities decreased from $120,502 for the
six months ended June 30, 1996 to $60,992 for the six months ended June 30, 1997
primarily due to (i) decreased development activities in 1997 when compared to
1996 and (ii) increased net proceeds from the sale of real estate assets in 1997
when compared to 1996. During the six months ended June 30, 1997, Gables
expended approximately $40.9 million related to development expenditures,
including related land acquisitions; approximately $29.0 million for the
acquisition of an existing apartment community; approximately $2.1 million
related to capital expenditures for operating apartment communities; and
approximately $0.5 million related to renovation expenditures.
Gables' net cash provided by financing activities decreased from $95,862 for the
six months ended June 30, 1996 to $34,945 for the six months ended June 30,
1997, due primarily to decreased development activities in 1997 and the $12.3
million of net sales proceeds generated from the January, 1997 sale of Club
Candlewood, a community comprised of 486 apartment homes. During the six months
ended June 30, 1997, Gables had net borrowings of $57.0 million which were used
in conjunction with the $12.3 million of net sales proceeds primarily to fund
Gables' development and acquisition activities discussed previously. These
proceeds from financing activities were offset in part by the payment of the
fourth quarter 1996 and the first quarter of 1997 distributions totaling
approximately $22.4 million.
Gables elected to be taxed as a REIT under Section 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with its taxable year
ended December 31, 1994. REITs are subject to a number of organization and
operational requirements, including a requirement that they currently distribute
95% of their ordinary taxable income. Provided Gables maintains its
qualification as a REIT, the Company generally will not be subject to Federal
income tax on distributed net income.
As of June 30, 1997, Gables had total indebtedness of $447,350, cash and cash
equivalents of $2,952 and principal escrow deposits reflected in restricted cash
of $1,553. Gables' indebtedness includes $211,598 in conventional fixed-rate
mortgage notes payable secured by individual properties, a $40,000 term loan,
$105,080 in tax-exempt bond indebtedness and $90,672 in borrowings outstanding
under its Credit Facilities. Gables' indebtedness has an average of 6.7 years to
maturity at June 30, 1997. Excluding monthly principal amortization payments,
over the next five years Gables has the following scheduled debt maturities for
indebtedness outstanding at June 30, 1997:
1997 $ 672
1998 0
1999 0
2000 134,930
2001 40,000
The debt maturities in 1997 of $672 relate to outstanding indebtedness under the
$20 Million Credit Facility which will be extended pursuant to Gables' unlimited
one-year extension options. The debt maturities in 2000 totaling $134,930
consist of $90,000 of outstanding indebtedness under the $175 Million Credit
Facility and $44,930 of four variable-rate notes payables securing tax-exempt
bonds. In July, 1997, Gables issued the Series A Preferred Units; the $111
million net proceeds from such issuance were used to paydown outstanding
borrowings under the Credit Facilities. Additionally, the $175 million Credit
Facility has two remaining one-year extension options.
<PAGE>
Page-20
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
The tax-exempt bonds are subject to mandatory redemption on the termination
dates of letters of credit securing the bonds, each of which is March, 2000.
Three of the underlying bond issues mature in December, 2007 and the fourth
underlying bond issue matures in August, 2024. Gables expects to be able to
remarket such bonds on or prior to March, 2000.
Gables' distributions through the second quarter of 1997 have been paid from
cash provided by operating activities. Gables anticipates that distributions
will continue to be paid on a quarterly basis from cash provided by operating
activities.
In January, 1997, Gables sold one of its communities, Club Candlewood,
comprising 486 apartment homes. The net sales proceeds were used to (i) defease
the related tax-exempt bond indebtedness which had a principal balance of $6,975
at December 31, 1996 and (ii) paydown outstanding borrowings under Gables'
Credit Facilities.
On October 1, 1996, Gables invested $21.5 million in an apartment community
comprising 232 apartment homes via a mortgage note receivable. In January, 1997,
Gables acquired the apartment community from the borrower, and the mortgage note
receivable was repaid in full.
In May, 1997, Gables acquired an apartment community comprising 438 apartment
homes. The acquisition costs of approximately $29 million were funded through
borrowings under Gables' Credit Facilities.
In July, 1997, Gables issued the Series A Preferred Units. The net proceeds from
such issuance were approximately $111 million and were used to paydown
outstanding borrowings under Gables' Credit Facilities.
In July, 1997, Gables acquired an apartment community comprising 126 apartment
homes and a parcel of land for the future development of two communities
expected to comprise an estimated 700 apartment homes. The acquisition costs
totaling approximately $25 million were funded primarily through borrowings
under Gables' Credit Facilities.
Gables has met and expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations. Gables' net cash
provided by operations has been adequate and Gables believes that it will
continue to be adequate to meet both operating requirements and payment of
distributions in accordance with REIT requirements. The budgeted expenditures
for improvements and renovations to the communities, in addition to monthly
principal amortization payments, are also expected to be funded from net cash
provided by operations. Gables anticipates construction and development
activities and land purchases will be initially funded primarily through
borrowings under its Credit Facilities described below.
Gables expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities, repayment of short-term financing of construction and
development activities and possible property acquisitions, through long-term
secured and unsecured borrowings and the issuance of debt securities or
additional equity securities or through the disposition of assets which, in
management's evaluation, may no longer meet Gables' investment requirements.
$175 Million Credit Facility
- ----------------------------
In conjunction with the IPO, Gables closed a $175 million three-year revolving
credit facility (the "Original Credit Facility") which had an initial maturity
of January, 1997. Borrowings under the Original Credit Facility were recourse to
Gables and bore interest at LIBOR plus 1.90% (reduced from 2.25% in December,
1994). Additionally, fees associated with letters of credit issued thereunder
for Gables' tax-exempt variable-rate bonds were 1.25% per annum (reduced from
1.50% in July, 1995).
<PAGE>
Page-21
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
In March, 1996, Gables closed a new $175 million unsecured revolving credit
facility (the "New Credit Facility" or "$175 Million Credit Facility") that
replaced the Original Credit Facility. Although the New Credit Facility is
unsecured, there were certain designated real estate assets that had escrowed
mortgages that were released promptly after the attainment of implied senior
unsecured debt ratings of BBB from Standard and Poor's and Baa2 from Moody's
Investors Service (the "Credit Ratings"). The New Credit Facility has an initial
term of three years and three one-year extension options. Gables has exercised
the first of its one-year extension options resulting in a maturity date for the
facility of March, 2000. Borrowings bore interest at LIBOR plus 1.50% (reduced
from 1.65% in November, 1996) through April, 1997 and letter of credit fees for
Gables' tax-exempt variable-rate bonds are 1.00% per annum. In April, 1997,
Gables' borrowing costs under the facility were reduced to LIBOR plus 1.10% in
connection with the attainment of the Credit Ratings. Under the facility, up to
$50 million is available to provide credit enhancements on outstanding
tax-exempt bond issues and all remaining amounts are available for borrowings.
Gables' availability under the facility is limited to the lesser of the total
$175 million commitment or the borrowing base. The borrowing base available
under the facility is currently based on the value of Gables' unencumbered real
estate assets as compared to the amount of Gables' unsecured indebtedness. As of
June 30, 1997, Gables had approximately $45.8 million of letters of credit
issued under the facility and had $90.0 million in borrowings outstanding
thereunder and, therefore, had $39.2 million of remaining capacity on the $175
million available commitment.
$20 Million Credit Facility
- ---------------------------
In November, 1996, Gables closed an unsecured revolving credit facility that
currently provides for up to $20 million in borrowings. This facility has an
initial term of one year and has unlimited one-year extension options.
Borrowings bore interest under this facility at LIBOR plus 1.50% through April,
1997. In April, 1997, Gables' borrowing costs were reduced to LIBOR plus 1.10%
in connection with the attainment of the Credit Ratings. As of June 30, 1997,
Gables had approximately $672 in borrowings outstanding under this facility.
Restrictive Covenants
- ---------------------
Certain of Gables' debt agreements contain customary representations, covenants
and events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions in excess of stated amounts, which
in turn restricts the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 95% of the Operating Partnership's consolidated income available for
distribution (as defined in the related agreement) exclusive of distributions of
capital gains for such year. The applicable debt agreements contain exceptions
to these limitations to allow the Operating Partnership to make any
distributions necessary to allow the Company to maintain its status as a REIT.
Gables does not anticipate that this provision will adversely effect the ability
of the Operating Partnership to make distributions or the Company to declare
dividends, as currently anticipated.
<PAGE>
Page-22
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
COMPLETED COMMUNITIES IN LEASE-UP AND DEVELOPMENT COMMUNITIES AT JUNE 30, 1997
Gables' current developments and lease-up activities for communities that had
not reached stabilized occupancy as of June 30, 1997 are summarized below:
<TABLE>
<CAPTION>
Actual / Actual / Actual / Actual /
Estimated Total Estimated Estimated Estimated Estimated
Number of Budgeted Percent Quarter Quarter of Quarter Quarter of
Apartment Cost Construction Percent Percent Construction Initial Construction Stabilized
Community Homes (millions) Complete Leased Occupied Commenced Occupancy Ended Occupancy
- --------- ----- ---------- -------- ------ -------- --------- --------- ----- ---------
(A) (B)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPLETED COMMUNITIES IN LEASE-UP
None
DEVELOPMENT COMMUNITIES
Atlanta, GA
- -----------
Gables Vinings 315 $24.7 98% 49% 38% 2 Q 1996 1 Q 1997 3 Q 1997 4 Q 1997
Roswell Gables II 284 21.7 88% 33% 24% 2 Q 1996 2 Q 1997 1 Q 1998 1 Q 1998
Gables at Sugarloaf 386 28.6 3% --- --- 2 Q 1997 1 Q 1998 1 Q 1999 2 Q 1999
Austin, TX
- ----------
Gables Central Park 273 19.6 98% 60% 43% 2 Q 1996 1 Q 1997 3 Q 1997 4 Q 1997
Gables Bluffstone 256 20.1 19% --- --- 1 Q 1997 1 Q 1998 3 Q 1998 4 Q 1998
Orlando, FL
- -----------
Gables Commons 280 21.7 5% --- --- 2 Q 1997 1 Q 1998 4 Q 1998 1 Q 1999
Gables Celebration 231 21.3 --- --- --- 3 Q 1997 1 Q 1998 4 Q 1998 4 Q 1998
----- ------
Totals 2,025 $157.7
----- ------
<FN>
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of
1934, as amended. The projections and estimates contained in the table above are
forward-looking statements. These forward-looking statements involve risks and
uncertainties and actual results may differ materially from those projected in
such statements. Risks associated with Gables' development, construction, and
lease-up activities, which could impact the forward-looking statements made,
include: development opportunities may be abandoned; construction costs of a
community may exceed original estimates, possibly making the community
uneconomical; and construction and lease-up may not be completed on schedule,
resulting in increased debt service and construction costs.
(A) Total Budgeted Cost includes all capitalized costs incurred and projected
to be incurred to develop the respective community presented in accordance
with generally accepted accounting principles, including land acquisition
costs, construction costs, real estate taxes, interest and loan fees,
permits, professional fees, allocated development overhead, and other
regulatory fees.
(B) Stabilized occupancy is defined as the earlier to occur of (i) 93% physical
occupancy or (ii) one year after completion of construction.
</FN>
</TABLE>
<PAGE>
Page-23
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Stabilized Apartment Communities at June 30, 1997
- -------------------------------------------------
<TABLE>
<CAPTION>
Number of Scheduled Rent Per
Community Homes Occupancy Unit Square Foot
--------- ----- --------- ---- -----------
<S> <C> <C> <C> <C>
Houston, TX
-----------
Baybrook Village 776 97% $548 $0.69
Gables Bradford Place 372 95% 703 0.82
Gables Bradford Pointe 360 98% 616 0.80
Gables CityPlaza 246 95% 828 0.94
Gables Cityscape 252 97% 885 1.04
Gables CityWalk/Waterford Sq. 317 97% 881 1.09
Gables Edgewater 292 92% 780 0.89
Gables Meyer Park 345 93% 845 0.98
Gables Piney Point 246 93% 891 0.96
Gables Pin Oak Green 582 97% 944 0.93
Gables Pin Oak Park 477 96% 961 0.94
Gables River Oaks 228 97% 1,312 1.08
Metropolitan Uptown (JV) 318 98% 978 1.07
Rivercrest 140 99% 693 0.82
Westhollow Park 412 92% 572 0.64
------- ------- ------- -------
5,363 96% 803 0.89
Atlanta, GA
-----------
Briarcliff Gables 104 98% 1,062 0.86
Buckhead Gables 162 97% 783 1.03
Dunwoody Gables 311 98% 785 0.84
Gables Cinnamon Ridge 200 94% 627 0.65
Gables Cityscape 192 95% 806 0.97
Gables Over Peachtree 263 92% 988 1.08
Gables Wood Arbor 140 98% 681 0.75
Gables Wood Crossing 268 97% 706 0.74
Gables Wood Glen 380 94% 657 0.66
Gables Wood Knoll 312 96% 699 0.70
Gables Wood Mill 438 94% 767 0.83
Lakes at Indian Creek 603 95% 563 0.62
Roswell Gables I 384 95% 795 0.73
Spalding Gables 252 96% 839 0.85
Wildwood Gables 546 98% 808 0.71
------- ------- ------- --------
4,555 95% 748 0.77
Dallas, TX
----------
Arborstone 536 95% 476 0.67
Gables at Pearl Street 108 98% 1,401 1.29
Gables CityPlace 232 96% 1,332 1.27
Gables Green Oaks 300 92% 814 0.85
Gables Preston 126 93% 1,051 0.96
Gables Spring Park 188 100% 949 0.90
Gables Turtle Creek 150 96% 1,243 1.24
Gables Valley Ranch 319 98% 920 0.90
------- ------- ------- --------
1,959 96% 893 0.95
Memphis, TN
-----------
Arbors of Harbortown (JV) 345 97% 793 0.80
Gables Cordova 464 95% 656 0.70
Gables Germantown 252 97% 871 0.75
Gables Quail Ridge 238 92% 793 0.66
Gables Stonebridge 500 97% 634 0.72
------- ------- ------- --------
1,799 96% 724 0.73
Nashville, TN
-------------
Brentwood Gables 254 97% 888 0.78
Gables Hendersonville 364 97% 649 0.69
Gables Hickory Hollow I 272 96% 633 0.70
Gables Hickory Hollow II 276 96% 633 0.67
-------- ------- ------- --------
1,166 96% 693 0.71
San Antonio, TX
---------------
Gables Colonnade I 312 98% 777 0.85
Gables Wall Street 232 93% 799 0.84
-------- ------- ------- -------
544 96% 786 0.85
Austin, TX
----------
Gables Great Hills 276 93% 773 0.93
Gables Town Lake 256 91% 1,056 1.13
-------- ------- ------- -------
532 92% 909 1.03
TOTALS 15,918 96% $784 $0.83
======== ======= ======= =======
</TABLE>
<PAGE>
Page-24
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Portfolio Indebtedness Summary and Interest Rate Protection Agreement Summary
A summary of Gables' portfolio indebtedness and interest rate protection
agreements as of June 30, 1997 follows:
Portfolio Indebtedness Summary
- ------------------------------
Percentage Interest Total Years to
Type of Indebtedness Balance of Total Rate (A) Rate (B) Maturity
- -------------------- ------- -------- -------- ------- --------
Conventional fixed-rate (C) $251,598 56.2% 7.87% 7.87% 7.70
Tax-exempt fixed-rate 60,150 13.5% 6.50% 6.62% 11.17
-------- -------- -------- -------- -------
Total fixed-rate $311,748 69.7% 7.60% 7.63% 8.37
-------- -------- -------- -------- -------
Tax-exempt variable-rate $44,930 10.0% 4.20% 5.20% 2.75
-------- -------- -------- -------- -------
Credit facilities $90,672 20.3% 6.79% 6.79% 2.73
-------- -------- -------- -------- -------
Total portfolio debt(D),(E) $447,350 100.0% 7.10% 7.21% 6.66
======== ======== ======== ======== =======
(A) Interest Rate represents the weighted average interest rate incurred on the
indebtedness, exclusive of deferred financing cost amortization and credit
enhancement fees, as applicable.
(B) Total Rate represents the Interest Rate (A) plus credit enhancement fees,
as applicable.
(C) Conventional fixed-rate debt includes $40,000 of financing which bears
interest at LIBOR plus a spread of 1.10%. Such financing is effectively
fixed at an all-in rate of 6.45% after the application of $40,000 of the
$44,530 interest rate cap and swap arrangements described below.
(D) Interest associated with construction activities is capitalized as a cost
of development and does not impact current earnings. The qualifying
construction expenditures at June 30, 1997 for purposes of interest
capitalization were $59,959.
(E) Excludes $16.4 million of tax-exempt bonds and $17.0 million of outstanding
conventional indebtedness related to joint ventures in which Gables owns a
25% interest.
Interest Rate Protection Agreement Summary
- ------------------------------------------
Notional Strike/Swap Effective Termination
Description of Agreement Amount Price (F) Date Date
- ------------------------ ------ --------- ---- ----
LIBOR, 30-day - "Rate Cap" $44,530 6.25% 01/27/94 01/30/99
LIBOR, 30-day - "Rate Swap" $44,530 5.35% 08/30/96 08/30/99 (G)
LIBOR, 30-day - "Rate Cap" $50,000 6.45% 01/30/97 12/31/97
LIBOR, 30-day - "Rate Swap" $25,000 5.76% 02/27/98 02/28/00 (H)
(F) The 30-day LIBOR rate in effect at month-end was 5.69%.
(G) This arrangement is a knock-out swap agreement which fixes the Company's
underlying 30-day LIBOR rate at 5.35%. The swap terminates upon the earlier
to occur of (i) the termination date or (ii) a rate reset date on which the
30-day LIBOR rate is 6.26% or higher.
(H) This arrangement is a knock-out swap agreement which fixes the Company's
underlying 30-day LIBOR rate at 5.76%. The swap terminates upon the earlier
to occur of (i) the termination date or (ii) a rate reset date on which the
30-day LIBOR rate is 6.70% or higher.
<PAGE>
Page-25
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
Book Value of Assets and Partners' Capital
- ------------------------------------------
The application of historical cost accounting in accordance with GAAP for
Gables' UPREIT structure results in an understatement of total assets and
partners' capital compared to the amounts that would be recorded via the
application of purchase accounting in accordance with GAAP had Gables not been
organized as an UPREIT. Management believes it is imperative to understand this
difference when evaluating the book value of assets and partners' capital. The
understatement of basis related to this difference in organizational structure
at June 30, 1997 is $112,494, exclusive of the effect of depreciation.
Accordingly, on a pro forma basis, the real estate assets before accumulated
depreciation, total assets and total partners' capital (including limited
partners' capital interest at redemption value) as of June 30, 1997 would be
$981,099, $923,386, and $444,223, respectively, if such $112,494 value was
reflected.
Inflation
- ---------
Substantially all of Gables' leases at the communities are for a term of one
year or less, which may enable Gables to seek increased rents upon renewal of
existing leases or commencement of new leases in times of rising prices. The
short-term nature of these leases generally serves to lessen the impact of cost
increases arising from inflation.
Certain Factors Affecting Future Operating Results
- --------------------------------------------------
This Report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results or developments
could differ materially from those projected in such statements. Certain factors
that might cause such a difference include, but are not limited to, the
following: development opportunities may be abandoned; construction costs of a
community may exceed original estimates; construction and lease-up may not be
completed on schedule, resulting in increased debt service expense and
construction costs and reduced rental revenues; occupancy rates and rents may be
adversely affected by local economic and market conditions; financing may not be
available on favorable terms; Gables' cash flow may be insufficient to meet
required payments of principal and interest; and existing indebtedness may not
be able to be refinanced or the terms of such refinancing may not be as
favorable as the terms of existing indebtedness.
SUPPLEMENTAL DISCUSSION -
Funds From Operations and Adjusted Funds From Operations
- --------------------------------------------------------
Gables considers funds from operations ("FFO") to be a useful performance
measure of the operating performance of an equity REIT because, together with
net income and cash flows, FFO provides investors with an additional basis to
evaluate the ability of a REIT to incur and service debt and to fund
acquisitions and other capital expenditures. Gables believes that in order to
facilitate a clear understanding of its operating results, FFO should be
examined in conjunction with net income as presented in the financial statements
and data included elsewhere in this report. Gables computes FFO in accordance
with standards established by the National Association of Real Estate Investment
Trusts ("NAREIT"). FFO as defined by NAREIT represents net income (loss)
determined in accordance with GAAP, excluding gains or losses from sales of
assets or debt restructuring, plus certain non-cash items, primarily real estate
depreciation, and after adjustments for unconsolidated partnerships and joint
ventures. FFO presented herein is not necessarily comparable to FFO presented by
other real estate companies due to the fact that not all real estate companies
use the same definition. However, Gables' FFO is comparable to the FFO of real
estate companies that use the NAREIT definition. Adjusted funds from operations
("AFFO") is defined as FFO less capital expenditures funded by operations. FFO
and AFFO should not be considered as alternatives to net income as indicators of
Gables' operating performance or as alternatives to cash flows as measures of
liquidity. FFO does not measure whether cash flow is sufficient to fund all of
Gables' cash needs including principal amortization, capital expenditures, and
distributions to shareholders and unitholders. Additionally, FFO does not
represent cash flows from operating, investing or financing activities as
defined by GAAP.
<PAGE>
Page-26
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollars in Thousands, Except Per Unit Amounts)
- -----------------------------------------------
RECONCILIATION OF FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
A reconciliation of funds from operations and adjusted funds from operations
follows:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
------- -------
1997 1996 1997 1996
---- ---- ---- ----
RECONCILIATION:
<S> <C> <C> <C> <C>
Net income ................................... $ 7,925 $ 6,549 $ 19,523 $ 12,244
Extraordinary loss ........................... 0 0 712 631
Gain on sale of real estate assets ........... 0 0 (4,858) 0
Real estate asset depreciation:
Wholly-owned real estate assets ........... 5,553 4,464 10,786 8,095
Joint venture real estate assets .......... 56 54 111 108
------- ------- ------- -------
Total .............................. 5,609 4,518 10,897 8,203
------- ------- ------- -------
Funds from operations ........................ $ 13,534 $ 11,067 $ 26,274 $ 21,078
------- ------- ------- -------
Capital expenditures for operating apartments:
Carpet ..................................... 401 281 772 508
Roofing .................................... 81 102 105 115
Exterior painting .......................... 56 86 56 86
Appliances ................................. 38 25 85 50
Other additions/improvements ............... 569 680 1,042 1,054
------- ------- ------- -------
Total .................................... 1,145 1,174 2,060 1,813
------- ------- ------- -------
Adjusted funds from operations ............... $ 12,389 $ 9,893 $ 24,214 $ 19,265
======= ======= ======= =======
</TABLE>
<PAGE>
Page-27
Part II - Other Information
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
On July 24, 1997, the Company used the proceeds from the
sale of 4,600,000 shares of 8.30% Series A Cumulative
Redeemable Preferred Shares (liquidation preference $25.00
per share) (the "Series A Preferred Shares") to purchase
from the Operating Partnership an equal number of Series A
Preferred Units. The Series A Preferred Units have, as to
the other Units, economic rights and preferences that are
analogous to the rights and preferences that the Series A
Preferred Shares have to the Common Shares of the Company.
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
<PAGE>
Page-28
SIGNATURE
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.
Date: August 12, 1997 GABLES REALTY LIMITED PARTNERSHIP
By: Gables GP, Inc.
Its: General Partner
/s/ Marvin R. Banks, Jr.
-------------------------------------
Marvin R. Banks, Jr.
Vice President and Chief
Financial Officer
(Authorized Officer of the Registrant
and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GABLES REALTY LIMITED PARTNERSHIP FOR THE SIX
MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001039797
<NAME> GABLES REALTY LIMITED PARTNERSHIP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,816
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 868,605
<DEPRECIATION> 84,343
<TOTAL-ASSETS> 810,892
<CURRENT-LIABILITIES> 0
<BONDS> 447,350
0
0
<COMMON> 0
<OTHER-SE> 331,729
<TOTAL-LIABILITY-AND-EQUITY> 810,892
<SALES> 0
<TOTAL-REVENUES> 65,973
<CGS> 0
<TOTAL-COSTS> 37,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,974
<INCOME-PRETAX> 20,235
<INCOME-TAX> 0
<INCOME-CONTINUING> 20,235
<DISCONTINUED> 0
<EXTRAORDINARY> 712
<CHANGES> 0
<NET-INCOME> 19,523
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0
</TABLE>
