SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
AMENDMENT NO. 2 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 1, 1998
Gables Realty Limited Partnership
(Exact name of Registrant as specified in its charter)
Delaware 000-22683 58-2077966
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
2859 Paces Ferry Road, Suite 1450
Atlanta, Georgia 30339
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
770-436-4600
<PAGE>
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The undersigned Registrant hereby amends Item 7 of its Current Report on Form
8-K dated April 1, 1998, as amended, to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired:
Financial statements for the Trammell Crow Residential South Florida Group
are filed with this report as Attachment A.
(b) Pro Forma Financial Information:
Pro forma financial information for the Registrant is filed with this
report as Attachment B.
(c) Exhibits:
Exhibit No.
- -----------
10.1 Contribution Agreement dated March 16, 1998 (incorporated herein
by reference to the Registrant's Current Report on Form 8-K dated
March 16, 1998).
10.2 * Amendment No. 1 to Contribution Agreement dated April 1, 1998.
23.1 Consent of Independent Public Accountants.
_______________
* Previously Filed
<PAGE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 3, 1999 GABLES REALTY LIMITED PARTNERSHIP
By: Gables GP, Inc., its general partner
/s/ Marvin R. Banks, Jr.
-------------------------------
By: Marvin R. Banks, Jr.
Chief Financial Officer
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Attachment A
TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
TOGETHER WITH
AUDITORS' REPORT
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP:
We have audited the accompanying combined balance sheet of TRAMMELL CROW
RESIDENTIAL SOUTH FLORIDA GROUP as of December 31, 1997 and the related combined
statements of operations, partners' and owners' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trammell Crow Residential South
Florida Group as of December 31, 1997 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
May 15, 1998
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TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
COMBINED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
REAL ESTATE ASSETS:
Land $ 34,909
Buildings and land improvements 156,547
Furniture, fixtures, and equipment 12,125
Construction in progress 50,088
---------
Real estate assets before accumulated depreciation 253,669
Less accumulated depreciation (40,569)
---------
Net real estate assets 213,100
CASH AND CASH EQUIVALENTS 7,700
RESTRICTED CASH 2,544
DEFERRED CHARGES, net of accumulated amortization of $158 1,507
OTHER ASSETS, net of accumulated depreciation of fixed assets of $979 3,844
---------
Total assets $228,695
=========
LIABILITIES AND PARTNERS' AND OWNERS' EQUITY
LIABILITIES:
Notes payable $211,826
Accrued interest payable 1,026
Real estate taxes payable 198
Accounts payable and accrued expenses-construction 3,759
Accounts payable and accrued expenses-operating 2,839
Security deposits 1,789
---------
Total liabilities 221,437
COMMITMENTS AND CONTINGENCIES
PARTNERS' AND OWNERS' EQUITY 7,258
---------
Total liabilities and partners' and owners' equity $228,695
=========
The accompanying notes are an integral part of this combined balance sheet.
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TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands)
Rental revenues $31,320
Other property revenues 1,598
---------
Total property revenues 32,918
---------
Property management--third party 2,346
Property management--related party 479
---------
Total property management revenues 2,825
---------
Construction revenues, net 548
Brokerage revenues, net 942
---------
Total revenues 37,233
---------
Property operating and maintenance
(exclusive of items shown separately below) 12,830
Depreciation 6,597
Amortization of deferred financing costs 671
Property management-owned 824
Property management-third/related party 2,056
Interest 10,091
Credit enhancement fees 1,045
---------
Total expenses 34,114
---------
Income before interest income 3,119
Interest income 346
---------
Net income $ 3,465
=========
The accompanying notes are an integral part of this combined statement.
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TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
COMBINED STATEMENT OF PARTNERS' AND OWNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands)
PARTNERS' AND OWNERS' EQUITY, December 31, 1996 $ 8,554
Capital contributions 5,896
Capital distributions (10,657)
Net income 3,465
--------
PARTNERS' AND OWNERS' EQUITY, December 31, 1997 $ 7,258
========
The accompanying notes are an integral part of this combined statement.
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TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,465
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 7,268
Change in operating assets and liabilities:
Restricted cash 3,038
Other assets 42
Other liabilities 2,315
---------
Total adjustments 12,663
---------
Net cash provided by operating activities 16,128
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase and construction of real estate assets,
net of related payables (39,410)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 5,896
Capital distributions (10,657)
Notes payable proceeds 34,861
Notes payable repayments (1,141)
Payments of deferred financing costs (1,586)
---------
Net cash provided by financing activities 27,373
---------
INCREASE IN CASH AND CASH EQUIVALENTS 4,091
Cash and cash equivalents, beginning of period 3,609
---------
Cash and cash equivalents, end of period $ 7,700
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 11,160
Interest capitalized 680
---------
Cash paid for interest, net of capitalized amounts $ 10,480
=========
The accompanying notes are an integral part of this combined statement.
<PAGE>
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TRAMMELL CROW RESIDENTIAL SOUTH FLORIDA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Dollars in Thousands)
1. ORGANIZATION AND NATURE OF OPERATIONS
Trammell Crow Residential South Florida Group ("TCR/SF" or the "Group") engages
in the development, construction, and management of multifamily apartment
communities in the South Florida region. On April 1, 1998, Gables Residential
Trust ("Gables") acquired the properties and operations of the Group, consisting
of 15 multifamily apartment communities (the "South Florida Communities") and
all of TCR/SF's residential construction and development and third-party
management activities. Such acquisition was made pursuant to a Contribution
Agreement dated March 16, 1998 (the "Contribution Agreement") between Gables and
certain entities affiliated with the Group.
As of December 31, 1997, the 15 South Florida Communities consisted of a total
of 4,197 apartment homes, assuming the completion of three communities under
construction at December 31, 1997 expected to comprise 767 apartment homes. Two
of the communities under construction at December 31, 1997 were in the lease-up
stage at December 31, 1997. The South Florida Communities are located in the
metropolitan areas of Palm Beach, Fort Lauderdale, and Miami. In addition, as of
December 31, 1997, TCR/SF has contracts or options to acquire parcels of land
for future development.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
- -------------------------
The accompanying combined financial statements of TCR/SF have been presented on
a combined basis because of common ownership, control, and management and
because the assets of the Group are the subject of an acquisition by Gables
which was consummated on April 1, 1998.
All significant accounts and transactions between entities included in the Group
as of December 31, 1997 and for the year then ended have been eliminated in
combination.
Use of Estimates
- ----------------
The preparation of 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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Real Estate Assets and Depreciation
- -------------------------------------
Real estate assets are stated at historical cost. The cost of buildings and
improvements includes interest, property taxes, insurance, and allocated
development overhead incurred during the construction period. Ordinary repairs
and maintenance 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 real estate assets (buildings
and improvements--40 years; furniture, fixtures, and equipment--5-10 years; land
improvements--20 years).
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets to be held and used by an entity be
reviewed for impairment whenever the carrying amount of an asset may not be
recoverable. SFAS No. 121 also requires that certain long-lived assets to be
disposed of be reported at the lower of carrying value or fair value less cost
to sell. Pursuant to the acquisition by Gables executed April 1, 1998, the Group
realized an amount in excess of the carrying value of its assets at December 31,
1997. Accordingly, management has determined that no impairment provision of the
carrying cost of TCR/SF's real estate assets is necessary at December 31, 1997.
Revenue Recognition
- -------------------
RENTAL REVENUES
- ----------------
TCR/SF leases its residential properties under operating leases with terms
generally equal to one year or less. The related rental income is recognized
when earned which materially approximates revenue recognition on a straight-line
basis.
BROKERAGE
- ---------
TCR/SF provides brokerage services for properties which it does not own. Income
is recognized when earned.
PROPERTY MANAGEMENT
- --------------------
TCR/SF provides property management services for properties which it does not
own. Income is recognized when earned.
DEVELOPMENT AND CONSTRUCTION SERVICES
- ---------------------------------------
TCR/SF provides development and construction services for properties which it
does not own. Income is recognized when earned on a percentage-of-completion
basis.
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Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents represent amounts deposited with financial
institutions and investments with original maturities of three months or less.
Restricted Cash
- ---------------
Restricted cash includes capital improvement and mortgage interest payment
escrow balances required by certain lenders. It also includes cash restricted to
pay letter of credit fees and to refund tenant security deposits.
Deferred Charges
- ----------------
Deferred charges represent the costs incurred to obtain long-term financing.
These costs are capitalized and amortized over the term of the related
indebtedness and are written off upon repayment or expiration.
Income Taxes
- ------------
TCR/SF is not a legal entity subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial statements.
The legal entities comprising the Group are primarily partnerships and S
corporations whose partners and owners are required to include their respective
share of Group profits and losses in their individual tax returns. One legal
entity comprising the Group is a C corporation whose net profits are subject to
federal and state income taxes; however, no income tax provision has been
provided in the accompanying financial statements since this entity had no tax
liability for the year ended December 31, 1997.
Property Management Expenses
- ----------------------------
TCR/SF manages its owned properties, as well as properties owned by third- and
related-parties for which TCR/SF provides services for a fee. Property
management expenses are reported net of $609 of cost reimbursements received
from related Trammell Crow Residential entities. Such expenses have been
allocated between owned and third/related-party properties in the accompanying
combined statement of operations based on the proportional number of owned and
third/related party apartment homes managed by TCR/SF during the year.
<PAGE>
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3. NOTES PAYABLE
TCR/SF has the following notes payable, secured by the real estate assets of the
Group as of December 31, 1997:
Conventional fixed-rate $ 9,792
Tax exempt fixed-rate 46,986
---------
Total fixed-rate 56,778
---------
Conventional variable-rate 49,908
Tax exempt variable-rate 105,140
---------
Total variable-rate 155,048
---------
Total notes payable $211,826
=========
Conventional Fixed-Rate Notes Payable
- -------------------------------------
At December 31, 1997, the conventional fixed-rate mortgage indebtedness was
comprised of one loan collateralized by one apartment community included in real
estate assets in the accompanying combined balance sheet. This mortgage
indebtedness bears interest at a rate of 8% and has a maturity of 2003.
Tax Exempt Fixed-Rate Notes Payable
- -----------------------------------
At December 31, 1997, the tax-exempt fixed-rate indebtedness was comprised of
four loans collateralized by four apartment communities included in real estate
assets in the accompanying combined balance sheet. These bonds bear interest at
a fixed rate as determined by the individual loan agreements. The interest rates
on these notes payable in effect at December 31, 1997 ranged from 5.35% to 8.81%
(weighted average 6.49%) and the maturity dates ranged from 2000 through 2008.
Each of these bonds is secured by a guarantor. The tax-exempt bonds contain
certain covenants which require minimum rentals to individuals based upon income
levels specified by U.S. government programs, as defined.
Conventional Variable-Rate Notes Payable
- -----------------------------------------
At December 31, 1997, the conventional variable-rate mortgage indebtedness was
comprised of five loans collateralized by five apartment communities included in
real estate assets in the accompanying combined balance sheet. At December 31,
1997, the interest rates on these notes payable ranged from 7.13% to 7.86%
(weighted average 7.20%) and the maturity dates ranged from 1998 through 2000.
Certain of these notes payable require monthly principal amortization payments.
Tax Exempt Variable-Rate Notes Payable
- --------------------------------------
At December 31, 1997, the variable-rate mortgage notes payable securing
tax-exempt bonds were comprised of five loans collateralized by five apartment
communities included in real estate assets in the accompanying combined balance
sheet. These bonds bear interest at a variable rate of interest, adjusted weekly
based upon a negotiated remarketing rate. The interest rates on these notes
payable in effect at December 31, 1997 ranged from 3.85% to 4.30% (weighted
average 3.96%) and the maturity dates ranged from 1998 through 2007. Each of
<PAGE>
Page-14
these bonds is backed by either a letter of credit or guarantor. The fees for
the letters of credit were $1,045 for the year ended December 31, 1997. The
tax-exempt bonds contain certain covenants which require minimum rentals to
individuals based upon income levels specified by U.S. government programs, as
defined.
As of December 31, 1997, the aggregate stated maturities of notes payable are as
follows:
1998 $ 57,272
1999 25,220
2000 15,401
2001 10,800
2002 25,740
2003 and thereafter 77,393
--------
$211,826
========
4. RELATED-PARTY TRANSACTIONS
TCR/SF provides development, construction, management, and other services to
related Trammell Crow Residential entities. The related-party fees and expenses
for such services reflected in the accompanying combined financial statements
are as follows for the year ended December 31, 1997:
Development fees $365
Brokerage revenue 493
Management fees 479
In addition, as of December 31, 1997, the Group had accounts receivable and
accounts payable to related parties of $777 and $162, respectively.
5. PROFIT-SHARING PLAN
Eligible employees of TCR/SF may participate in a profit-sharing plan pursuant
to Section 401(k) of the Internal Revenue Code. Under the plan, employees may
defer portions of their salaries on a pretax basis. TCR/SF also has the
discretion to make matching contributions within Internal Revenue Code
guidelines, as defined. Employer contributions under this plan for the year
ended December 31, 1997 were $152.
6. COMMITMENTS AND CONTINGENCIES
Office Leases
- -------------
TCR/SF is party to office space leases with various terms. The Group recognizes
rental expense as incurred, which materially approximates recognition on a
straight-line basis. Rental expense of $123 was recognized under these leases
during the year ended December 31, 1997 and is included in property management
expenses in the accompanying combined statement of operations.
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The Group is subject to future rental expenses due under noncancelable operating
leases at December 31, 1997 as follows:
Years ended December 31:
1998 $ 490
1999 288
2000 288
2001 296
2002 305
2003 and thereafter 79
-------
$1,746
=======
Contingencies
- -------------
The entities comprising TCR/SF are subject to various legal proceedings and
claims that arise in the ordinary course of business. These matters are
generally covered by insurance. While the resolution of these matters cannot be
predicted with certainty, management believes that the final outcome of such
matters will not have a material adverse effect on the financial position or
results of operations of TCR/SF.
7. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
- -------------------------
TCR/SF estimates that the fair value of cash equivalents approximates carrying
value due to the relatively short maturities of these instruments.
Notes Payable
- -------------
TCR/SF estimates that the aggregate fair value of notes payable, including
accrued interest payable, approximates the aggregate carrying value of these
instruments based on the Group's effective current borrowing rate for issuance
of debt with similar terms and remaining maturities.
Disclosure about the fair value of financial instruments is based on pertinent
information available to management and conditions specific to the Group as of
December 31, 1997 and may not be indicative of valuations based on factors and
conditions surrounding entities external to the Group. Although management is
not aware of any factors that would significantly affect the fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date.
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ATTACHMENT B
GABLES REALTY LIMITED PARTNERSHIP
PREFACE TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
BASIS OF PRESENTATION
- ---------------------
The following unaudited pro forma consolidated statement of operations is
presented as if the Operating Partnership acquired the properties and operations
of Trammell Crow Residential South Florida Group (TCR/SF) on January 1, 1997 and
includes the historical operating results of the properties and residential
construction and development and third-party management activities acquired. The
following unaudited pro forma consolidated balance sheet is presented as if the
Operating Partnership acquired the properties and operations of TCR/SF on
December 31, 1997. The acquisition will be accounted for under the purchase
method of accounting in accordance with Accounting Principles Board Opinion No.
16. Accordingly, assets acquired and liabilities assumed have been reflected
herein at their estimated fair values which may be subject to further
modification based upon the final determination of the acquired properties' fair
values and the final determination of actual closing costs associated with the
transaction. Management believes that its final allocation of the purchase price
will not differ materially from the purchase price allocation included herein.
In management's opinion, all material adjustments necessary to present fairly
the effects of the acquisition have been made.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the consolidated financial statements and accompanying notes
thereto of the Operating Partnership included in its Annual Report on Form 10-K
for the year ended December 31, 1997.
The unaudited pro forma consolidated statement of operations is not necessarily
indicative of what the actual results of operations of the Operating Partnership
would have been assuming the Operating Partnership had consummated the
acquisition as of the beginning of the period presented, nor does it purport to
represent the results of operations for future periods. The unaudited pro forma
consolidated balance sheet is not necessarily indicative of what the actual
financial position would have been at December 31, 1997 nor does it purport to
represent the future financial position of the Operating Partnership.
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GABLES REALTY LIMITED PARTNERSHIP
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts in Thousands, Except Per Unit Amounts)
<TABLE>
<CAPTION>
Operating Pro Forma Operating
Partnership TCR/SF Acquisition Partnership
Historical(A) Historical(B) Adjustments Pro Forma
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Rental revenues .................................................... $ 132,371 $ 31,320 $ -- $ 163,691
Other property revenues ............................................ 6,322 1,598 -- 7,920
--------- -------- --------- ---------
Total property revenues ....................................... 138,693 32,918 -- 171,611
--------- -------- --------- ---------
Property management revenues ....................................... 3,032 2,825 -- 5,857
Other .............................................................. 1,713 1,490 -- 3,203
--------- -------- --------- ---------
Total other revenues .......................................... 4,745 4,315 -- 9,060
--------- -------- --------- ---------
Total revenues ................................................ 143,438 37,233 -- 180,671
--------- -------- --------- ---------
Property operating and maintenance (exclusive of items shown
separately below) ............................................. 47,592 12,830 -- 60,422
Depreciation and amortization ...................................... 25,194 6,597 888 (C) 32,679
Amortization of deferred financing costs ........................... 992 671 (541)(D) 1,122
Property management - owned ........................................ 3,364 824 -- 4,188
Property management - third party .................................. 2,332 2,056 -- 4,388
General and administrative ......................................... 3,248 -- -- 3,248
Interest ........................................................... 24,804 10,091 1,140 (E) 36,035
Credit enhancement fees ............................................ 509 1,045 316 (F) 1,870
Loss on treasury lock extension .................................... 1,178 -- -- 1,178
--------- -------- --------- ---------
Total expenses ................................................ 109,213 34,114 1,803 145,130
--------- -------- --------- ---------
Equity in income of joint ventures ................................. 320 -- -- 320
Interest income .................................................... 371 346 (346)(G) 371
--------- -------- --------- ---------
Income before gain on sale of real estate assets ................... 34,916 3,465 (2,149) 36,232
Gain on sale of real estate assets ................................. 5,349 -- -- 5,349
--------- -------- --------- ---------
Income before extraordinary loss ................................... 40,265 3,465 (2,149) 41,581
Extraordinary loss ................................................. (712) -- -- (712)
--------- -------- --------- ---------
Net income ......................................................... 39,553 3,465 (2,149) 40,869
Dividends to preferred unitholders ................................. (4,163) -- -- (4,163)
--------- -------- --------- ---------
Net income available to common unitholders ......................... $ 35,390 $ 3,465 ($ 2,149) $ 36,706
========= ======== ========= =========
Weighted average number of common Units outstanding - basic ........ 23,441 -- 2,348 (H) 25,789
Weighted average number of common Units outstanding - diluted ...... 23,591 -- 2,348 (I) 25,939
Per Common Unit Information:
Income before extraordinary loss - basic ........................... $ 1.54 $ 1.45
Extraordinary loss - basic ......................................... ($ 0.03) ($ 0.03)
Net income - basic ................................................. $ 1.51 $ 1.42
Income before extraordinary loss - diluted ......................... $ 1.53 $ 1.44
Extraordinary loss - diluted ....................................... ($ 0.03) ($ 0.03)
Net income - diluted ............................................... $ 1.50 $ 1.41
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
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GABLES REALTY LIMITED PARTNERSHIP
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and Amounts in Thousands)
(A) Represents the historical audited consolidated statement of operations of
the Operating Partnership contained in its Annual Report on Form 10-K for
the year ended December 31, 1997.
(B) Represents the historical audited combined statement of operations of
TCR/SF for the year ended December 31, 1997, included herein in Attachment
A.
(C) Represents the net increase in depreciation of real estate owned as a
result of recording the TCR/SF real estate assets at fair value versus
historical cost. The acquisition price of the real estate assets was
allocated to land, buildings, furniture, fixtures and equipment, and
construction in progress and the related depreciation is calculated
utilizing an estimated useful life of 40 years for the buildings and 5
years for furniture, fixtures and equipment. Depreciation expense is
provided to the extent the real estate was operational during the year
ended December 31, 1997. The components of the pro forma adjustment are as
follows:
Pro forma depreciation expense for acquired assets at
fair value $7,485
Less TCR/SF historical depreciation expense (6,597)
------
Pro forma adjustment $ 888
======
(D) Represents the net adjustment to amortization of deferred financing costs
as follows:
To record the amortization of deferred financing
costs related to the credit enhancement facility
put into effect on April 1, 1998 to enhance the
bond indebtedness assumed by the Operating
Partnership (the "Bond Enhancement Facility") $ 130
To eliminate the amortization of TCR/SF's deferred
financing costs which have a zero fair value at
April 1, 1998 (671)
------
Pro forma adjustment $ (541)
======
(E) Represents the net adjustment to interest expense as follows:
To record interest expense on the cash portion of the
TCR/SF purchase price financed with borrowings
under the Operating Partnership's unsecured
credit facilities $10,014
To record the amortization of the discount required
to record the $12,500 portion of the purchase
price that was deferred until January 1, 2000
at fair value 771
To record the interest expense on bond indebtedness
that was assumed by the Operating Partnership 6,391
To record capitalized interest for qualifying
construction expenditures at fair value (5,945)
-------
Pro forma interest expense for acquisition 11,231
Less TCR/SF historical interest expense (10,091)
-------
Pro forma adjustment $ 1,140
=======
The Operating Partnership's borrowings under its current unsecured credit
facilities currently bear interest at LIBOR plus 0.80%. If interest rates
under the credit facilities fluctuated 0.125%, interest costs on the pro
forma credit facility indebtedness would increase or decrease by
approximately $194 on an annualized basis.
<PAGE>
(F) Represents the net adjustment to credit enhancement fees as follows:
To record the credit enhancement fees under the Bond
Enhancement Facility $1,361
To eliminate the credit enhancement fees incurred
by TCR/SF related to enhancements that do not
remain in place at April 1, 1998 (1,045)
------
Pro forma adjustment $ 316
======
(G) Represents the adjustment to eliminate interest income included in the
TCR/SF historical amounts as the cash balances were not acquired by the
Operating Partnership.
(H) Represents the issuance of 2,348 minority units of limited partnership
interest in the Operating Partnership ("Units") in connection with the
acquisition.
(I) Represents the issuance of Units in connection with the acquisition that
are not antidilutive.
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GABLES REALTY LIMITED PARTNERSHIP
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Amounts in Thousands, Except Per Unit Amounts)
<TABLE>
<CAPTION>
Operating Pro Forma Operating
Partnership Acquisition Partnership
Historical(A) Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS:
Real estate assets:
Land ........................................................................$ 150,894 $ 44,452 (B) $ 195,346
Buildings ................................................................... 770,305 217,979 (B) 988,284
Furniture, fixtures and equipment ........................................... 60,015 8,371 (B) 68,386
Construction in progress .................................................... 53,240 98,620 (B) 151,860
Land held for future development ............................................ 21,774 -- 21,774
--------- -------- ---------
Real estate assets before accumulated depreciation ....................... 1,056,228 369,422 1,425,650
Less: accumulated depreciation ............................................. (98,236) -- (98,236)
--------- -------- ---------
Net real estate assets .................................................... 957,992 369,422 1,327,414
Cash and cash equivalents ...................................................... 3,179 -- 3,179
Restricted cash ................................................................ 4,498 1,789 (B) 6,287
Deferred charges, net .......................................................... 4,194 1,300 (B) 5,494
Other assets, net .............................................................. 11,304 1,107 (B) 12,411
--------- -------- ---------
Total assets ..............................................................$ 981,167 $ 373,618 $ 1,354,785
========= ======== =========
LIABILITIES AND PARTNERS' CAPITAL:
Notes payable ..................................................................$ 435,362 $ 290,985 (B) $ 726,347
Accrued interest payable ....................................................... 1,999 862 (B) 2,861
Preferred dividend payable ..................................................... 424 -- 424
Real estate taxes payable ...................................................... 13,568 198 (B) 13,766
Accounts payable and accrued expenses - construction ........................... 8,505 3,759 (B) 12,264
Accounts payable and accrued expenses - operating .............................. 5,552 -- 5,552
Security deposits .............................................................. 2,260 1,789 (B) 4,049
Other long-term liability ...................................................... -- 11,150 (B) 11,150
--------- -------- ---------
Total liabilities ......................................................... 467,670 308,743 776,413
--------- -------- ---------
Limited partners' capital interest (4,056 and 6,404 Units, respectively,
at redemption value) ......................................................... 110,866 64,875 (B) 175,051
(690)(C)
--------- -------- ---------
Partners' capital:
Preferred partners (4,600 Units at $25.00 liquidiation preference) ........... 115,000 -- 115,000
General partner (260 and 283 Units, respectively) ............................ 3,907 656 (C) 4,563
Limited partner (21,730 and 21,707 Units, respectively) ...................... 283,724 34 (C) 283,758
--------- -------- ---------
Total partners' capital .................................................... 402,631 690 403,321
--------- -------- ---------
Total liabilities and partners' capital $ 981,167 $ 373,618 $ 1,354,785
========= ======== =========
<FN>
The accompanying notes are an integral part of this balance sheet.
</FN>
</TABLE>
<PAGE>
Page-20
GABLES REALTY LIMITED PARTNERSHIP
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
(Unaudited and Amounts in Thousands)
(A) Represents the historical audited consolidated balance sheet of the
Operating Partnership as of December 31, 1997 contained in its Annual
Report on Form 10-K for the year ended December 31, 1997.
(B) Represents adjustments to record the acquisition of TCR/SF in accordance
with the purchase method of accounting. The calculation of the fair value
of total assets acquired in connection with the acquisition of TCR/SF is as
follows:
Cash funded at closing $155,000
Bond indebtedness assumed at closing 135,875
Units issued at closing 64,875
--------
Portion of purchase price satisfied at closing 355,750
Obligation to issue Units on January 1, 2000 12,500
--------
Total contractual purchase price 368,250
Discount to reflect the obligation to issue Units on
January 1, 2000 at fair value (1,350)
Estimated closing costs associated with the acquisition 3,000
Estimated deferred financing costs associated with the
Bond Enhancement Facility 1,300
Real estate pursuit costs reimbursement 629
Security deposit cash acquired 1,789
--------
Fair value of toal assets acquired $373,618
========
The balance sheet allocation of the total assets acquired is as follows:
Real estate assets $369,422
Restricted security deposit cash 1,789
Deferred financing costs 1,300
Fixed assets $478
Real estate pursuit costs 629
Total other assets ------ 1,107
--------
Total assets acquired $373,618
========
The fair value of the assets acquired was satisfied as follows:
Borrowings under the Operating Partnership's unsecured
credit facilities $155,110
Bond indebtedness assumed 135,875
--------
Total notes payable borrowings 290,985
Accrued interest liability assumed 862
Real estate tax liability assumed 198
Construction-related liabilities assumed 3,759
Security deposit liability assumed 1,789
Obligation to issue Units on January 1, 2000 ($12,500),
net of discount ($1,350) 11,150
Units issuance 64,875
--------
Total $373,618
========
(C) Represents the adjustment to state the pro forma limited partners' capital
interest at redemption value at December 31, 1997. Such adjustment is
allocated within partners' capital to reflect the general partner's
interest of 1% of the value of the 2,348 Units issuance and (ii) the excess
of the value of the 2,348 Units issuance over the amount allocated to
limited partners' capital interest.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K, into Gables Realty Limited Partnership's
previously filed Registration Statements on Form S-3 (File Nos. 333-30093 and
333-68359).
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 3, 1999
