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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-10272
SECURITY CAPITAL PACIFIC TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-6056896
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
7777 MARKET CENTER AVENUE
EL PASO, TEXAS 79912
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(915) 877-3900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
<S> <C>
Common Shares of Beneficial Interest, par value
$1.00 per share New York Stock Exchange
Cumulative Convertible Series A Preferred Shares
of Beneficial Interest, par value $1.00 per
share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Based on the closing price of the Registrant's shares on March 30, 1995, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $767,380,556.
At March 30, 1995, there were outstanding approximately 72,212,337 Common
Shares of Beneficial Interest of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual
meeting of its shareholders scheduled to be held June 13, 1995 are incorporated
by reference in Part III of this report.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---- ----------- ----
PART I
<C> <S> <C>
1. Business........................................................... 3
Security Capital Pacific Trust..................................... 3
Strategy for Cash Flow and Distribution Growth..................... 4
Multifamily Properties............................................. 5
Non-Multifamily Properties......................................... 6
Investment Analysis................................................ 6
Strategic Accomplishments.......................................... 7
The REIT Manager................................................... 9
Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates................................................ 11
Insurance.......................................................... 16
Competition........................................................ 16
Environmental Matters.............................................. 16
Employees.......................................................... 16
Executive Officers................................................. 17
2. Properties......................................................... 17
Portfolio Composition.............................................. 23
Geographic Distribution............................................ 24
3. Legal Proceedings.................................................. 24
4. Submission of Matters to a Vote of Security Holders................ 25
PART II
Market for the Registrant's Common Equity and Related Stockholder
5. Matters............................................................ 25
6. Selected Financial Data............................................ 27
Management's Discussion and Analysis of Financial Condition and
7. Results of Operations.............................................. 28
Overview........................................................... 28
Merger and Concurrent Subscription Offering........................ 28
Results of Operations.............................................. 29
Environmental Matters.............................................. 33
Liquidity and Capital Resources.................................... 33
REIT Management Agreement.......................................... 36
8. Financial Statements and Supplementary Data........................ 36
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure Matters...................................... 37
PART III
10. Directors and Executive Officers of the Registrant................. 37
11. Executive Compensation............................................. 37
12. Security Ownership of Certain Beneficial Owners and Management..... 37
13. Certain Relationships and Related Transactions..................... 37
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 37
</TABLE>
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PART I
ITEM 1. BUSINESS
SECURITY CAPITAL PACIFIC TRUST
The objective of Security Capital Pacific Trust (formerly known as Property
Trust of America, and referred to herein as "PTR") is to be the preeminent real
estate operating company focusing on multifamily property in its target market.
PTR'S REIT manager is Security Capital Pacific Incorporated (the "REIT Manager"
or "REIT Management"). Through its REIT Manager, PTR is a fully integrated
operating company which engages in development, acquisition, operation and long
term ownership of multifamily properties. At March 23, 1995, PTR owned and
operated or was developing 47,120 multifamily units. The total investment cost
of all of PTR's multifamily properties is $1.9 billion, including planned
renovations and development expenditures.
PTR seeks to achieve long term sustainable growth in cash flow and
distributions by maximizing operating performance through value-added asset
management, concentrating its fully integrated development capability and
experienced team of professionals on developing industry-leading product in
targeted submarkets that exhibit strong job growth and demographic trends and
implementing an asset optimization strategy of redeploying capital into
targeted moderate income developments with significant long-term cash flow
growth prospects.
PTR has traditionally focused on multifamily assets in the Southwest. In
November 1994, PTR's Board of Trustees (the "Board") expanded PTR's target
market to include a six-state region of the western United States comprised of
California, Idaho, Nevada, Oregon, Utah and Washington. On March 23, 1995, PTR
consummated a merger (the "Merger") of Security Capital Pacific Incorporated, a
Maryland corporation ("PACIFIC"), with and into PTR. The assets acquired from
PACIFIC in the Merger are located in some of the new markets, which the REIT
Manager believes have significant growth prospects. Concurrently with the
Merger, PTR completed a subscription offering of common shares of beneficial
interest, $1.00 par value per share ("Common Shares"), at a price of $16.375
per share, pursuant to which PTR received subscriptions for 13.2 million Common
Shares representing proceeds of $216.6 million.
Based on the Merger, its recent subscription offering, debt issuance
capacity, asset optimization strategy and current real estate and debt market
conditions, PTR believes it has reached an optimal level of equity
capitalization. Hence, PTR has no plans to raise additional capital through the
equity markets. For the foreseeable future, PTR intends to fund its capital
needs through implementation of its asset optimization strategy and the
issuance of additional fixed-rate, fully amortizing long term debt. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
PTR highlights include:
. Average rental rates increased 6.42% in 1994 for PTR's multifamily
properties that were fully operational throughout both 1994 and 1993. At
March 23, 1995, PTR's operating multifamily properties were 95.8% leased.
. PTR believes that development of multifamily properties from the ground
up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source
of long term cash flow growth in the future than acquisitions. PTR
expects to complete an additional 1,991 multifamily units by June 30,
1995. At March 23, 1995, PTR had completed $217.7 million of
developments, had $201.3 million of developments under construction and
owned land for which it is planning $253 million of developments.
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. Security Capital Group Incorporated (which reflects the imminent name
change from Security Capital Realty Incorporated and is referred to
herein as "Security Capital Group"), PTR's largest shareholder, which
owned 37.9% of the Common Shares at March 30, 1995, is the owner of the
REIT Manager and has provided investment capital to PTR, at the same
times and on the same terms made available to public investors.
. Based on forecasts published by Woods & Poole Economics, Inc., the
projected growth in population of PTR's primary target market is 39.5%
for the years 1994-2015, whereas the projected growth in population in
the U.S. as a whole for such period is 19.2%. For the same time period,
job growth is projected to be 31.5% in PTR's primary target market, and
22.4% in the U.S. as a whole.
. A review of local market information in PTR's primary target market
indicates that the number of multifamily units for which building permits
have been issued has declined significantly from mid-1980 levels. In
1985, 55,005 units were permitted as compared to 32,394 units in 1994.
. PTR's long term debt as a percentage of total long term book
capitalization was 26% at December 31, 1994 and 22% at March 23, 1995 on
a pro forma basis, giving effect to the Merger and the concurrent
subscription offering and property acquisitions through March 23, 1995.
Giving effect to the use of the proceeds from the subscription offering
that closed on March 23, 1995, there would be no borrowings outstanding
under PTR's $350 million revolving line of credit at March 23, 1995.
PTR has elected to be taxed as a real estate investment trust ("REIT") for
federal income tax purposes. PTR was formed in 1963 and is a real estate
investment trust organized under the laws of Maryland. Its principal executive
offices are located at 7777 Market Center Avenue, El Paso, Texas 79912, and its
telephone number is (915) 877-3900.
STRATEGY FOR CASH FLOW AND DISTRIBUTION GROWTH
PTR seeks to achieve long term sustainable growth in cash flow and
distributions by maximizing operating performance through value-added asset
management, concentrating its fully integrated development capabilities and
experienced team of professionals on developing industry-leading product in
targeted submarkets that exhibit strong job growth and demographic trends and
implementing an asset optimization strategy of redeploying capital into
targeted moderate income developments with significant long-term cash flow
growth prospects.
Commitment to Fundamental Real Estate Research. PTR utilizes its affiliate,
Security Capital (U.S.) Investment Research Incorporated ("Security Capital
(U.S.) Investment Research"), to conduct comprehensive evaluations of its
target markets on a submarket-by-submarket basis to identify those submarkets
and product types that present above average prospects for long term cash flow
growth. These evaluations, combined with PTR's experience in development and as
one of the largest multifamily property owners in its target market, enable PTR
to identify the submarkets with the highest projected job and population growth
and to determine the product type to develop, acquire and own in each submarket
to appeal to the local resident base.
Asset Review and Reallocation. PTR develops and acquires properties with a
view to effective long term operation and ownership. REIT Management's asset
managers actively review PTR's asset base. These reviews generate operating and
capital plans and, with guidance from Security Capital (U.S.) Investment
Research, identify submarkets and product types that PTR believes represent
better long term growth opportunities. For each market, PTR's research
evaluates five major economic factors, further broken down into 20-25 submarket
characteristics. This research provides PTR with the demographic information to
target specific resident profiles and identify unit size, density and amenities
for each community which will provide the greatest opportunity for consistent
rental increases and high occupancies and will be contributors to long term
income growth. Based upon PTR's market research and in an effort to optimize
its portfolio allocation, PTR may from time to time seek to dispose of assets
that in management's view do not meet PTR's long
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term investment criteria and redeploy the proceeds therefrom, preferably
through like-kind exchanges, into assets that it believes provide better long
term growth opportunities.
Development. Through March 23, 1995, PTR has completed $217.7 million of
multifamily developments, has $201.3 million of developments under construction
and owns land for which it is planning $253 million of developments. PTR has
engaged in multifamily development since 1970. PTR has developed from the
ground up, or has under development, 29.8%, based on cost, of its multifamily
portfolio as of March 23, 1995. Historically, actual operating results on
properties developed by PTR have generally exceeded projected operating results
and the results available from acquisitions. PTR's development strategy is to
focus on developing state of the art product in attractive submarkets to meet
renter preferences and demographic trends. PTR believes that developing
communities designed for long term appeal to the largest segment of the renter
population will allow PTR to achieve more consistent rental increases and
higher occupancies over the long term and, thereby, realize cash flow growth.
PTR minimizes development risks by having zoning, site planning, construction
budgets and similar risks resolved or assumed by third parties prior to PTR's
commitment. PTR also targets development for markets with high occupancy rates
where population and job growth trends indicate increasing future demand. PTR
cannot eliminate all development risk but believes that the opportunities to
better control product and realize higher returns from development properties
compensate for the retained risk.
Development opportunities also permit PTR to incorporate into multifamily
communities proprietary technologies and designs aimed at enhancing long term
rental growth while reducing ongoing maintenance costs. PTR has had the
opportunity to evaluate and refine its multifamily product through its long
history of development. PTR, unlike a typical merchant builder, intends to own
long term the properties that it develops. Hence, PTR focuses on the quality of
construction, materials and design with a view towards minimizing long term
operation and maintenance costs.
REIT Management believes that development of multifamily units from the
ground up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source of long
term cash flow growth. Therefore, while land prices are favorable, PTR has
acquired and will acquire, on an unleveraged basis, prudent amounts of zoned
land for future multifamily development. For purposes of the property charts
and other information in this report, land held for these future developments,
which comprises less than 1% of assets, based on cost, is not aggregated with
the multifamily properties.
PTR believes that effective execution of the strategy described above will
contribute to long term sustainable growth in cash flow and distributions.
MULTIFAMILY PROPERTIES
PTR categorizes operating multifamily properties (which include all
properties not under development) as either "stabilized" or "pre-stabilized."
The term "stabilized" means that renovation, repositioning, new management and
new marketing programs (or development and marketing in the case of newly-
developed properties) have been completed and in effect for a sufficient period
of time (but in no case longer than 12 months or, in the case of properties
requiring major rehabilitation, as long as 18 months) to achieve 93% occupancy
at market rents. Prior to being "stabilized," a property is considered "pre-
stabilized." For operating properties that PTR has acquired, stabilized
operations generally have been achieved six to twelve months after acquisition.
For properties that PTR has developed, stabilized operations generally have
been achieved twelve to eighteen months after construction commenced. Due to
its active development and acquisition programs, 80.5% of PTR's operating
multifamily properties, based on cost, were classified by PTR as stabilized as
of March 23, 1995. At March 23, 1995, PTR's operating multifamily properties
were 95.8% leased and PTR's stabilized multifamily properties were 96.5%
leased.
PTR's multifamily properties are primarily garden style, two-story
multifamily dwellings that range in size from 57 units to 896 units. Resident
leases are generally for six-month to twelve-month terms and require
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security deposits. As of March 23, 1995, PTR owned 27 properties that contain
affordable corporate efficiency units which are rented for terms generally
shorter than six months. As of March 23, 1995, nine of these properties were
under development, including one in the leasing stage, and six were in
planning. PTR expects to develop more of these properties.
PTR believes that its multifamily communities generally occupy strategic
locations in growing submarkets. At March 23, 1995, excluding affordable
corporate efficiency properties, the average unit size for properties
operating, under development and in planning is 833 square feet, with 53.5% of
the units having two or more bedrooms. Many units have washer/dryer connections
and walk-in closets, which REIT Management believes substantially enhance
marketability. PTR improves attractiveness by investing in extensive
landscaping when developing or repositioning multifamily units. Other features
frequently included in PTR's multifamily communities are swimming pools,
playgrounds, volleyball courts, fitness centers and community rooms.
PTR expects to continue to focus a portion of its future development and
acquisition efforts on moderate income multifamily housing, which includes
moderately priced apartments and efficiency units priced to appeal to the
largest segment of the renter population, based on income, age and family size.
NON-MULTIFAMILY PROPERTIES
PTR focuses its investment and development activities on multifamily
properties. It will continue to aggressively manage its non-multifamily
properties in order to maximize cash flow, and periodic sales of non-
multifamily properties may occur as opportunities arise. The percentage of
PTR's rental income generated by non-multifamily properties was less than 2% of
total rental income during 1994.
Hotel. PTR owns a 338-room, five-story hotel building and land located in the
Fisherman's Wharf area of San Francisco, California. The hotel building is
leased to Holiday Inns of America, Inc. The lease expires in 2018. Holiday Inns
has recently renovated portions of this building at its own expense. The
effective annual rent is 25% of the hotel's gross room revenues and 5% of gross
food and beverage sales. Holiday Inns operates this building jointly with its
243-room building across the street, and PTR's rental income is based on total
revenues for both buildings, prorated based on the number of rooms in PTR's
building. Average occupancy for the one-year period ended December 31, 1994 was
82.8%, at an average room rate of $89.77.
Office/Industrial. PTR owns one office building through a 40% owned joint
venture, and owns three industrial properties. PTR's office building is located
in the Dallas, Texas metropolitan area. As of March 23, 1995, this office
building was 98.2% leased. PTR's industrial properties are warehouse/showroom
facilities located in Texas and California, ranging in size from 37,200 square
feet to 130,000 square feet and were 100% leased at March 23, 1995.
INVESTMENT ANALYSIS
Prospective property investments are analyzed pursuant to several
underwriting criteria, including purchase price, competition and other market
factors, and prospects for growth in income and market value. PTR's investment
decision is based upon the expected contribution of the property to cash flow
growth which provides the opportunity for increases in shareholder
distributions. The expected economic contribution is based on an estimate of
all cash revenues from leases and other revenue sources, minus expenses
incurred in operating the property (generally, real estate taxes, insurance,
maintenance, personnel costs and utility charges, but excluding depreciation,
debt service and amortization of loan costs). Residual value and the effects of
debt financing are not considered in the calculation.
The economic contribution of properties cannot be predicted with certainty,
and no assurance can be given that developed or acquired properties will
contribute to increased cash flow and shareholder distributions, or that
developments and acquisitions will be available on comparable terms in the
future.
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STRATEGIC ACCOMPLISHMENTS
Developments and Acquisitions
The REIT Manager's development and acquisition specialists are each assigned
to a specific metropolitan area within PTR's target market where they are
present each week to review available properties, meet with potential sellers,
process planning approvals and monitor construction in progress. PTR has
selectively developed and acquired multifamily properties where land costs,
demographic trends and market trends indicate a high likelihood of achieving
expected operating results. This system has produced multifamily property
developments and acquisitions on favorable terms. As of March 23, 1995, the
multifamily portfolio consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
NUMBER TOTAL EXPECTED
OF UNITS COST(1)
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<S> <C> <C>
Properties Acquired............................... 31,845 $1,187,822
Developments Completed............................ 5,750 217,727
Developments Under Construction................... 4,433 201,349
Developments in Planning.......................... 5,092 253,001
------ ----------
Totals.......................................... 47,120 $1,859,899
====== ==========
</TABLE>
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(1) Represents cost, including planned renovations, for properties owned at
March 23, 1995. Represents budgeted development cost, which includes the
cost of land, fees, permits, payments to contractors, architectural and
engineering fees and interest and property taxes to be capitalized during
the construction period, for properties under development. Does not include
land held for future development, which is less than 1% of assets based on
cost.
As of March 23, 1995, PTR had contingent contracts or letters of intent,
subject to final due diligence, to acquire land for the near term development
of 5,877 multifamily units with an aggregate estimated development cost of
$289.3 million. At the same date, PTR also had contingent contracts or letters
of intent, subject to final due diligence, for the acquisition of 1,821
additional multifamily units with an aggregate investment cost of $76.4
million, including planned renovations. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
Property Management
The REIT Manager believes that a successful REIT must actively manage its
properties in order to increase cash flow and enhance the long term economic
performance of the properties. Prior to retaining the REIT Manager, PTR's
properties were managed by several different property managers for whom PTR was
one of many customers. In order to gain more control over multifamily
operations, in August 1991, the REIT Manager retained SCG Realty Services
Incorporated ("SCG Realty Services"), a property management firm, to replace
other firms as the property manager for most of PTR's multifamily properties.
Security Capital Group is SCG Realty Services' sole shareholder. At March 23,
1995, SCG Realty Services managed 84.6% of PTR's operating multifamily units,
with the balance in various stages of transition to SCG Realty Services'
management.
SCG Realty Services has over 987 employees dedicated to the management of
PTR's properties. SCG Realty Services emphasizes locally-based management of
PTR's properties and has opened ten local offices to serve PTR's target market.
This network improves SCG Realty Services' ability to respond to changes in
local market conditions and resident needs. The REIT Manager believes that SCG
Realty Services has developed superior marketing programs, operating
procedures, financial controls, information systems and training programs,
which it expects to positively affect rental returns and occupancy rates. In
addition, incentive compensation programs have been implemented for on-site
property managers to further improve the performance of the properties. Rates
for services performed by SCG Realty Services are subject to annual approval by
PTR's independent Trustees (who receive an annual review from an independent
third party)
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and are at rates prevailing in the markets in which PTR operates. During 1994,
PTR paid aggregate fees of $7,148,000 to SCG Realty Services.
The REIT Manager has taken an active role in overseeing SCG Realty Services'
management of PTR's multifamily properties and has assembled a staff of asset
managers to provide better oversight and long term direction.
Capital Markets
REIT Management believes that a successful REIT must have the ability to
access the equity and debt markets efficiently, expeditiously and
inexpensively. PTR's capital markets ability permits it to capitalize on the
development and acquisition opportunities that PTR believes exist in its target
market. In order to maximize this function and enhance relationships with major
institutional sources of capital, Security Capital Group has formed a
registered broker-dealer subsidiary, Security Capital Markets Group
Incorporated ("Capital Markets Group"). Capital Markets Group's services are
included in the REIT Manager's fee and do not result in a separate charge to
PTR. Capital Markets Group and the REIT Manager have arranged innovative public
offering structures, underwritten offerings and substantial credit facilities
for PTR, including:
In June 1991, PTR raised $21.4 million of net proceeds from a rights
offering to holders of Common Shares;
In November 1991, PTR raised $45.6 million of net proceeds from a public
offering of Common Shares to shareholders and institutions;
In April 1992, PTR raised $69.8 million of net proceeds from a public
offering of Common Shares that was 71% underwritten by a syndicate of
investment banks;
In October 1992, PTR raised $73.4 million of net proceeds from a rights
offering to holders of Common Shares and a sale of shelf-registered Common
Shares to new institutional investors;
In February and March 1993, PTR raised $129.5 million of net proceeds
from a public offering of Common Shares that was 82% underwritten by a
syndicate of investment banks;
In September 1993, PTR raised $165.3 million of net proceeds from a
rights offering to holders of Common Shares and a sale of shelf-registered
Common Shares to institutional investors;
In November 1993, PTR raised $219.7 million of net proceeds from an
underwritten public offering of Cumulative Convertible Series A Preferred
Shares of Beneficial Interest, $1.00 par value per share ("Preferred
Shares");
In February 1994, PTR raised $196.4 million of net proceeds from an
underwritten public offering of fully amortizing, long term senior debt
securities (the "Notes");
In August 1994, PTR raised $101.8 million of net proceeds from a rights
offering to holders of Common Shares; and
In March 1995, PTR raised $216.3 million of net proceeds from a
subscription offering for Common Shares that closed concurrently with the
Merger (see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and Capital Resources
Financing Activities").
For the Common Share offerings, PTR's underwriting commissions (all of which
were paid to unaffiliated underwriters) have been $8.8 million, representing
1.05% of gross proceeds of $835.1 million, compared to an average commission
cost of 5.49% for all public equity REIT offerings of common shares, other than
initial public offerings, from January 1, 1991 through March 23, 1995, or $37.1
million less than the industry average commission on the same amount of gross
proceeds.
When the REIT Manager was retained, PTR had $14.3 million of lines of credit
available to it for developments and acquisitions. The REIT Manager has
arranged increases in PTR's borrowing capacity as follows:
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In October 1991, the REIT Manager negotiated a $20 million line of credit
for PTR from Texas Commerce Bank National Association ("TCB") at an
interest rate of prime plus 1/2 of 1%;
In August 1992, with the REIT Manager's assistance in the syndication
process, TCB arranged with a group of banks to increase this line of credit
to $72 million at an interest rate of prime plus 1/4 of 1%;
In February 1993, the REIT Manager negotiated and assisted in syndicating
an increase in the line of credit to $125 million;
In November 1993, the REIT Manager negotiated and assisted in syndicating
an extension of this line of credit from August 1994 to August 1995 and an
increase to $200 million, with a reduction in interest rate to prime or, at
PTR's option, LIBOR plus 2%;
In August 1994, the REIT Manager negotiated and assisted in converting
the line of credit to an unsecured facility;
In October 1994, the REIT Manager negotiated and assisted in syndicating
an extension of the line of credit from August 1995 to August 1996 and an
increase to $275 million, with a reduction in interest rate to the greater
of prime or the federal funds rate plus 0.5% or, at PTR's option, LIBOR
plus 1.75% to 2.0% (varying based upon the rating of PTR's senior unsecured
debt); and
In March 1995, the REIT Manager negotiated and assisted in syndicating an
increase in the line of credit to $350 million, with a reduction in
interest rate to the greater of prime or the federal funds rate plus 0.5%
or, at PTR's option, LIBOR plus 1.625% (which can vary from LIBOR plus
1.25% to LIBOR plus 2.0% based upon the rating of PTR's senior unsecured
debt).
PTR's increased borrowing capacity enables it to develop and acquire
multifamily properties prior to equity and long term debt offerings and to
eliminate or minimize the amount of cash it must invest in short term
investments at low yields. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
PTR's strategy includes maintaining a conservative ratio of long term debt to
total long term book capitalization (26% at December 31, 1994 and 22% at March
23, 1995 on a pro forma basis, giving effect to the Merger and the concurrent
subscription offering and property acquisitions through March 23, 1995). PTR
believes its current conservative leverage provides considerable flexibility to
prudently utilize long term debt as a financing tool in the future. During
1995, PTR intends to prudently increase its capital base with debt, while
keeping long term debt below 50% of total book capitalization. PTR also intends
to limit the sum of total long term and outstanding revolving credit debt to
less than 50% of the sum of book capitalization and outstanding revolving
credit debt (32% at December 31, 1994 and 22% at March 23, 1995 on a pro forma
basis, giving effect to the Merger and the concurrent subscription offering and
property acquisitions through March 23, 1995).
THE REIT MANAGER
The REIT Manager provides both strategic and day-to-day management for PTR,
including research, investment analysis, acquisition and development services,
asset management, capital markets services, disposition of assets and legal and
accounting services, all of which are included in the REIT Management fee.
Hence, PTR depends upon the quality of the management provided by the REIT
Manager. As of March 23, 1995, 94 professionals were employed by the REIT
Manager and its specialized service affiliates. The REIT Manager also provides
office and other facilities for PTR's needs.
The REIT Manager believes that the quality of management should be assessed
in light of the following factors:
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Management Depth/Succession. Management should have several senior executives
with the leadership, operational, investment and financial skills and
experience to oversee the entire operations of the REIT. The REIT Manager
believes that several of its senior officers could serve as the principal
executive officer and continue PTR's performance. See "--Officers of PTR and
Directors and Officers of the REIT Manager and Relevant Affiliates."
Strategic Vision. Management should have the strategic vision to determine an
investment focus that provides favorable initial yields and growth prospects.
The REIT Manager demonstrated its strategic vision by focusing PTR on
multifamily properties in target markets where demographic and supply factors
have permitted high occupancies at increasing rents. This focus has enabled PTR
to consistently make investments on attractive terms. See "--Strategic
Accomplishments--Developments and Acquisitions" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Research Capability. Management should have the means for researching markets
to determine appropriate investment opportunities. PTR divides its target
market into numerous submarkets for analysis purposes. The REIT Manager and its
affiliate, Security Capital (U.S.) Investment Research, have several
professionals devoting substantial time to research, on a submarket-by-
submarket basis, who are closely supervised by the Managing Directors of the
REIT Manager; hence, the REIT Manager's research has provided guidance for
PTR's strategic focus and investment program.
Investment Committee Process. Investment committees should provide discipline
and guidance to the investment activities of the REIT in order to achieve its
investment goals. The members of the REIT Manager's Investment Committee have a
combined 69 years of experience in the real estate industry. See "--Officers of
PTR and Directors and Officers of the REIT Manager and Relevant Affiliates."
The Investment Committee receives detailed written analyses and research, in a
standardized format, from the REIT Manager's development and acquisition
personnel and evaluates all prospective investments pursuant to uniform
underwriting criteria prior to submission of investment recommendations to the
Board. The quality of the REIT Manager's Investment Committee process is
evident from the ability of PTR to achieve its investment goals, generally
realizing its projected initial returns and growth from multifamily
investments.
Development/Redevelopment Capability. Development returns generally are
higher than acquisition returns. PTR can better control the quality of
developed properties than acquired properties. Hence, development is an
important source of cash flow growth even during attractive acquisition
markets. By internally developing projects and redeveloping well located
existing properties, management can capture for the REIT the value that
normally escapes through sales premiums paid to successful developers. The REIT
Manager's personnel have substantial development and redevelopment experience,
as described in "--Officers of PTR and Directors and Officers of the REIT
Manager and Relevant Affiliates." The REIT Manager has 31 full-time development
professionals (which include seven due diligence professionals). At March 23,
1995, the REIT Manager had under construction 4,433 multifamily units for PTR,
with a total budgeted cost of $201.3 million, and had in the final planning
stages an estimated 5,092 multifamily units with a total budgeted cost of $253
million. The REIT Manager has engaged in substantial development on behalf of
PTR at attractive yields that have generally exceeded projections. See "--
Multifamily Properties" and "--Strategic Accomplishments--Developments and
Acquisitions."
Acquisitions Capability/Due Diligence Process. Management should have
experienced senior personnel dedicated to acquiring investments and performing
intelligent and thorough due diligence. The REIT Manager has 11 full-time
acquisition and due diligence professionals (including the seven due diligence
professionals who also focus on development) and has developed uniform systems
and procedures for due diligence. As described under "--Strategic
Accomplishments--Developments and Acquisitions," the REIT Manager's acquisition
and due diligence personnel have screened and selected a large volume of
successful investments.
Capital Markets Capability. Management must be able effectively to raise
equity and debt capital for the REIT in order for the REIT to achieve growth
through investment. As set forth under "--Strategic
10
<PAGE>
Accomplishments--Capital Markets," the REIT Manager has successfully arranged
funding for PTR's investment program.
Operating Capability. Management can substantially improve cash flow by
actively and effectively operating assets. As described under "--Strategy for
Cash Flow and Distribution Growth" and "--Strategic Accomplishments--Property
Management," the REIT Manager and its affiliates have devoted substantial
personnel and financial resources to effectively administer and control the
operations of PTR's multifamily assets.
Communications/Shareholder Relations Capability. A REIT's success in capital
markets and asset acquisition activities can be enhanced by management's
ability to effectively communicate the REIT's strategy and performance to
investors, sellers of property and the financial media. The REIT Manager
believes that PTR has now generally established an excellent reputation among
these constituencies through its performance and the REIT Manager's
communications ability. The REIT Manager provides at its expense full-time
personnel who prepare informational materials for and conduct periodic meetings
with shareholders, the investment community and analysts.
Successfully combining the foregoing attributes can establish for a REIT the
ability to increase cash flow and the market valuation of the REIT's portfolio.
Both PTR's cash flow and market valuation have increased under the REIT
Manager's administration.
OFFICERS OF PTR AND DIRECTORS AND OFFICERS OF THE REIT MANAGER AND RELEVANT
AFFILIATES
Directors and Senior Officers of the REIT Manager.
Members of the REIT Manager's Investment Committee are designated by an
asterisk.
*C. RONALD BLANKENSHIP--45--Chairman of PTR; since March 1991, Chairman of
the REIT Manager and Managing Director of Security Capital Group; from June
1988 to March 1991, Regional Partner, Trammell Crow Residential, Chicago,
Illinois (multifamily real estate development and property management); prior
thereto, Executive Vice President and Chief Financial Officer, The Mischer
Corporation, Houston, Texas (multibusiness holding company with investments
primarily in real estate). While with Trammell Crow Residential, Mr.
Blankenship was on the Management Board for Trammell Crow Residential Services,
a property management company that managed approximately 90,000 multifamily
units nationwide, and was chief executive officer of Trammell Crow Residential
Services-North, which managed 10,000 multifamily units in the Midwest and
Northeast. In his various positions prior to his affiliation with the REIT
Manager, Mr. Blankenship supervised the development of approximately 9,300
multifamily units. Mr. Blankenship supervises the overall operations of PTR and
the REIT Manager.
PATRICK R. WHELAN--38--Director of the REIT Manager since February 1995;
President of SCG Realty Services since October 1994, where he is responsible
for overall property management; from February 1994 to October 1994, Senior
Vice President and Co-Manager of Multifamily Acquisitions of Security Capital
Group; from April 1991 to January 1994, Senior Vice President of Trammell Crow
Company (development, acquisition and management of commercial properties)
where he most recently had regional responsibilities for asset management,
leasing and acquisitions/dispositions of a $300 million portfolio of
properties.
*DAVID C. DRESSLER, JR.--41--Managing Director of SCG Multifamily Development
Incorporated ("SCG Multifamily Development") since January 1994, PTR since May
1993 and the REIT Manager since April 1992; Director of the REIT Manager since
June 1992; from 1984 to May 1991, Regional Partner, Trammell Crow Residential,
Boston, Massachusetts (multifamily real estate development and property
management). While with Trammell Crow Residential, Mr. Dressler was on the
Management Board for Trammell Crow Residential Services (managing 90,000
multifamily units nationwide) and was co-founder and a board member of Trammell
Crow Residential Services-North, which managed 10,000 multifamily units in the
Midwest and Northeast. In his various positions prior to his affiliation with
the REIT Manager, Mr.
11
<PAGE>
Dressler supervised the development of approximately 6,500 multifamily units.
Mr. Dressler supervises the development activities of the REIT Manager on
behalf of PTR.
CONSTANCE B. MOORE--39--Managing Director of PTR since May 1994, Director and
Managing Director of the REIT Manager since March 1994, Senior Vice President
of Security Capital Group from March 1993 to June 1994; from January 1990 to
December 1992, President and Director of Kingswood Realty Advisors, Inc.,
investment advisor to ICM Property Investors, a New York Stock Exchange
("NYSE") listed REIT, and from March 1991 to December 1992, President and
Director of ICM Property Investors; from April 1989 to December 1989,
consultant to Bedford Properties, a real estate development and management firm
where Ms. Moore was responsible for acquiring a controlling interest in ICM
Property Investors and Kingswood for Bedford; from January 1983 to November
1988, Senior Vice President and Director of Consolidated Capital Equities
Corporation where she was in charge of portfolio and asset management for
Consolidated Capital's $3.0 billion diversified debt and equity portfolio.
*R. SCOT SELLERS--38--Managing Director of PTR since September 1994 and
Senior Vice President of PTR from May 1994 to September 1994, where he has
overall responsibility for PTR's investment and development program; Director
and Managing Director of the REIT Manager since September 1994; from April 1993
to May 1994, Senior Vice President of Security Capital Group, where he was
responsible for portfolio acquisitions from institutional sources; from
September 1981 to April 1993, Mr. Sellers was an operating partner and Vice
President of Lincoln Property Company (LPC) (development, acquisition and
management of multifamily properties) where he was responsible, among other
things, for the development of more than 6,500 apartment units in a number of
different markets.
JOSHUA M. BROWN--43--Senior Vice President of PTR and the REIT Manager since
September 1994, where he has overall responsibility for multifamily
acquisitions and dispositions; from January 1991 to June 1994, President of
Prentiss Properties Realty Advisors, Inc., where he directed the firm's tax-
exempt institutional advisory business; from June 1983 to December 1990 Vice
President of Fayez Sarofim & Co., where he worked with the firm's real estate
advisory group, Sarofim Realty Advisors; prior thereto, Vice President,
Director of Investment Administration for CB Institutional Realty Advisors in
Los Angeles.
*JOHN H. GARDNER JR.--41--Director of the REIT Manager since February 1995;
Senior Vice President of PTR and the REIT Manager since September 1994, where
he has overall responsibility for multifamily asset management; from December
1984 to January 1993, Vice President of Asset Management and through September
1994, Managing Director and Principal of Copley Real Estate Advisors in Boston,
where he had overall responsibility for the portfolio management function for
eight accounts valued at $7.5 billion; prior thereto, Real Estate Manager of
Equity Real Estate at John Hancock Companies.
K. BRUCE WEBSTER--38--Senior Vice President of PTR and the REIT Manager since
March 1995 and of PACIFIC from November 1994 to March 1995, where he had
responsibility for PACIFIC's portfolio performance and asset management; from
June 1993 to November 1994, Vice President of Asset Management at Irvine
Apartment Communities with responsibility for property operations, portfolio
performance and long term positioning; prior thereto, President and Chief
Operating Officer of Trammell Crow Residential Services North where he had
responsibility and accountability for management company operations and
property performance in the midwestern and northeastern United States.
Other Officers.
ARIEL AMIR--35--Vice President of Security Capital Group since June 1994;
from September 1985 to April 1994, an attorney with the law firm of Weil,
Gotshal & Manges, New York, New York where he practiced securities and
corporate law for eight years. Mr. Amir provides securities offerings and
corporate acquisition services to PTR.
ANTHONY R. ARNEST--44--Vice President of PTR and the REIT Manager since
November 1994, where he is the head of the due diligence group; from December
1990 to September 1994, Mr. Arnest maintained a
12
<PAGE>
private law practice specializing in real estate, development and business and
financial consulting; from March 1990 to November 1990, Director of Infill
Acquisitions with Lewis Homes of California; from January 1986 to March 1990,
Vice President, Director of Acquisitions and Forward Planning/Due Diligence
with Wesco Development; prior thereto, House Counsel for Torino Development.
MARK J. CHAPMAN--37--Vice President of PTR since March 1995, where he is a
member of the asset management group, and Vice President of PACIFIC from
November 1994 to March 1995; from July 1989 to November 1994, Vice President at
Copley Real Estate Advisors, Inc. where he directed asset management for Copley
assets located from Connecticut to Virginia, valued in excess of $1.5 billion;
prior thereto, Director of Asset Management for Liberty Real Estate with
responsibility for assets east of the Mississippi River, including multifamily,
office and retail properties.
MARK G. CONROE--37--Vice President of PTR and the REIT Manager since January
1995, where he has overall responsibility for the multifamily corporate
affordable housing development program, Homestead Village properties; from
February 1994 to January 1995, Vice President of Security Capital Atlantic
Incorporated, where he was a member of the development group; from October 1991
to February 1994, President of Classic Communities, Inc., a home building
company; prior thereto General Partner and Executive Vice President of the
Mozart Development Company, a real estate development company.
RICHARD W. DICKASON--38--Vice President of PTR and the REIT Manager since
March 1995, where he is a member of the development group, and Vice President
of PACIFIC from December 1993 to March 1995; from July 1992 to September 1993,
President at J.M. Peters Company/Capital Pacific Homes, where he acquired
property for the development of single-family homes and apartments; from May
1980 to January 1992, Partner and Vice President of Lincoln Property Company
N.C. Inc. where he was responsible for the acquisition, development,
construction and management of a sizable multifamily residential portfolio in
the California marketplace; prior thereto, Mr. Dickason represented private
investors in the development of condominiums, townhouses, shopping centers and
single-family homes throughout California.
JOSEPH G. DI CRISTINA--35--Vice President of PTR and the REIT Manager since
March 1995, where he is a member of the development group, and Vice President
of PACIFIC from August 1994 to March 1995; prior thereto, Vice President of
Forward Planning at Robertson Homes.
PETER M. GRIMM--52--Vice President of SCG Multifamily Development since
January 1994 and Vice President of PTR, of which he has been an officer since
1975.
JAMES M. HARLEY--43--Vice President of PTR and the REIT Manager since June
1993, where he provides asset management services for PTR's Homestead Village
properties; from 1988 to July 1993, Regional Vice President--Acquisitions and
Development of Holiday Inn Worldwide; prior thereto, Senior Vice President--
Hotel Division of Webb Companies, a Lexington, Kentucky based real estate
development company.
NELSON L. HENRY--59--Vice President of PTR since December 1994, where he is a
member of the development group with responsibilities for production and
project construction planning; from January 1983 to September 1993,
Construction Vice President for Lincoln Property Company N.C. Inc. where he was
responsible for the coordination of development in Colorado and California;
prior thereto, President of Royal Investment Corporation, a regional
multifamily and single-family developer.
JAY S. JACOBSON--42--Vice President of SCG Multifamily Development since
January 1994 and PTR since July 1993; from 1988 to June 1993, Vice President--
Residential Development for Michael Swerdlow Companies, Inc. and Hollywood
Inc., South Florida real estate development/management companies under common
control, where he was responsible for the planning and development of over
2,200 multifamily units as well as other development projects; from 1981 to
1988, General Partner and Chief Executive Officer of Meridian Land Company, a
Denver-based real estate development company.
13
<PAGE>
W. GEOFFREY JEWETT--46--Vice President of PTR and the REIT Manager since
March 1995, where he is a member of the asset management group, and Vice
President of PACIFIC from November 1994 to March 1995; from May 1994 to
November 1994, Vice President of Security Capital (Atlantic) Incorporated where
he had overall responsibility for the acquisitions group; from September 1993
to April 1994, Mr. Jewett was involved with and then had overall responsibility
for acquisitions for PACIFIC; prior thereto, Vice President of LaSalle Partners
Limited in its acquisitions and property finance group where he provided
investment property sale, financing and acquisition services on behalf of
corporate and institutional clients throughout the western United States.
JOHN JORDANO III--38--Vice President of PTR and the REIT Manager since March
1995, where he is a member of the development group, and Vice President of
PACIFIC from August 1994 to March 1995; from January 1992 to July 1994, Senior
Vice President of Prospect Partners where he was responsible for identifying
and advising individual and corporate clients on financial institution and
Resolution Trust Corporation REO apartment acquisition and investment
opportunities in the western United States; prior thereto, Partner with
Trammell Crow Residential Company where he established the Sacramento office
and was responsible for the development of multifamily projects.
WILLIAM KELL--38--Vice President of the REIT Manager since June 1991 and Vice
President of PTR since October 1993, where he has overall responsibility for
multifamily accounting and financial reporting; from 1987 to 1991, Vice
President, Bohannon Development Corporation, El Paso, Texas (multifamily
development); prior thereto, Manager with KPMG Peat Marwick in its El Paso,
Texas office.
STEVEN R. LEBLANC--37--Vice President of SCG Multifamily Development since
January 1994 and PTR since March 1992; from 1984 to 1992, Operating Partner and
Senior Vice President, Lincoln Property Company, Dallas, Texas (multifamily
real estate owners and operators).
B. THOMAS MILLER, JR.--33--Vice President of Security Capital (U.S.)
Investment Research since January 1994 where he conducts strategic market
analysis for the REIT Manager and affiliated companies; from December 1985 to
December 1993, Senior Manager with the Arthur Andersen Real Estate Services
Group in Washington D.C.; prior thereto, an Associate with Kenneth Leventhal &
Co. in Dallas.
GLENN E. MORGAN--34--Vice President of Security Capital (U.S.) Investment
Research since January 1994, where he is responsible for market research; from
December 1992 to December 1993, Mr. Morgan developed actuarial and econometric
models for American Credit Indemnity, a subsidiary of Dun & Bradstreet.
JOHN R. PATTERSON--43--Vice President of PTR and the REIT Manager since
January 1995, where he has overall responsibility for operations and asset
management of the corporate affordable housing product, Homestead Village
properties; from July 1993 to January 1995, a Senior Vice President in business
development at NationsBank in Atlanta; prior thereto, Division President and
Partner of Trammell Crow Residential Services.
MARK P. PEPPERCORN--32--Vice President of PTR since February 1995 where he is
a member of the development group; from September 1994 to February 1995, he was
a member of the acquisitions group for Security Capital Atlantic Incorporated
and previously, for PTR; from February 1992 to June 1993, Mr. Peppercorn was
responsible for the multifamily brokerage division of Transwestern Property
Company in Houston, Texas; and prior thereto, he was an Associate Vice
President of Eastdil Realty Incorporated.
GREGG A. PLOUFF--38--Vice President of PTR and the REIT Manager since March
1995, where he is a member of the acquisitions group, and Vice President of
PACIFIC from July 1994 to March 1995; prior to November 1993, Mr. Plouff served
in an acquisitions consulting capacity for PTR; prior thereto, Mr. Plouff was
with Trammell Crow Residential, most recently as a partner, where he was
involved with residential development in the Dallas, Chicago and Southern
California markets.
14
<PAGE>
THOMAS L. POE--37--Vice President of the REIT Manager since April 1992, Vice
President of PTR since June 1994 and controller of PTR since October 1994,
where he is responsible for accounting and financial reporting; from 1988 to
1992, Vice President of Finance for the Mischer Corporation, Houston, Texas
(real estate investments).
HAROLD D. RILEY--58--Vice President of the REIT Manager since March 1991,
where he provides accounting and financial reporting services; Vice President
of PTR since 1974.
DAVID K. ROBBINS--43--Vice President of PTR and the REIT Manager since March
1995, where he is responsible for land acquisitions and property development in
Tucson, Arizona; from April 1994 to March 1995, Vice President of Security
Capital Atlantic Incorporated, where he was responsible for land acquisitions
and property development in Richmond, Virginia; from December 1992 to March
1994, Vice President of PTR, where he had overall responsibility for due
diligence; prior thereto, a partner and attorney with the law firm of Hill,
Farrer & Burrill, Los Angeles, California, where he practiced real estate law
for 12 years.
PAUL E. SZUREK--34--Secretary and General Counsel of the REIT Manager and
PTR; Senior Vice President, and from April 1991 to June 1993, Vice President,
Secretary and General Counsel of Security Capital Group; prior thereto, a
shareholder and attorney with the law firm of Kemp, Smith, Duncan & Hammond, El
Paso, Texas, where he practiced securities law for seven years. Mr. Szurek
provides securities offering and corporate acquisition services to PTR and
oversees the provision of legal services to PTR.
MARK N. TENNISON--34--Vice President of SCG Multifamily Development since
January 1994 and PTR since July 1992; from May 1991 to July 1992, Executive
Vice President/Chief Operating Officer of Metro Concap, Inc., an operator of
over 7,100 multifamily units; from January 1991 to May 1991, attorney for the
Federal Deposit Insurance Corporation; and from August 1987 to December 1990,
Partner with Trammell Crow Residential (development, construction and
management of multifamily properties).
In addition, an affiliate of the REIT Manager employs a number of accounting
professionals who provide centralized accounting services for PTR.
Shareholder Relations and Capital Markets. The following persons provide
shareholder relations and capital markets services to PTR:
DOUGLAS K. BALL--54--Senior Vice President of PTR and the REIT Manager since
June 1993, President since May 1994 and Senior Vice President from August 1993
to May 1994 of Capital Markets Group, where he participates in capital markets
and institutional investor relations; from August 1990 to June 1993, Senior
Vice President of Koll-Rubloff in its Strategic Management Division, where he
provided strategic real estate consulting and transaction services to diverse
corporate clients throughout the United States; from August 1988 to July 1990,
engaged in private investment activities; from April 1981 to July 1988,
Managing Director of LaSalle Partners Limited, where he served as Director of
the Services Division. Prior thereto, Mr. Ball was National Director of
Insurance Industry Marketing at IBM Corporation. Mr. Ball is registered with
the National Association of Securities Dealers, Inc.
K. SCOTT CANON--33--Vice President of Capital Markets Group since August 1993
and a member of Capital Markets Group since March 1992; from September 1991 to
March 1992, a personal account director for Chase Manhattan Investment
Services; from August 1987 to September 1991, a member of private client
services for Goldman, Sachs & Co. Mr. Canon is registered with the National
Association of Securities Dealers, Inc.
JEFFREY A. COZAD--30--Senior Vice President of PTR since December 1994 and
Vice President of PTR from June 1992 to December 1994; Senior Vice President of
Capital Markets Group since December 1994, Vice President from September 1992
to November 1994 (in its New York office since June 1993) and a member of
Capital Markets Group since March 1992; from August 1991 to August 1992, a
member of Security Capital Group; in June 1991, Mr. Cozad obtained a M.B.A.
from The University of Chicago; prior
15
<PAGE>
thereto, an analyst with LaSalle Partners Limited, where he provided corporate
real estate services to major institutions from 1986 to 1989. Mr. Cozad is
registered with the National Association of Securities Dealers, Inc.
JAMES L. EVANS--41--Senior Vice President of Capital Markets Group since
December 1994; from December 1992 to November 1994, Managing Director of Copley
Real Estate Advisors, where he was responsible for all acquisitions in Southern
California and worked on capital raising and asset management; prior thereto,
Mr. Evans was a real estate lending officer at Chemical Bank. Mr. Evans is
registered with the National Association of Securities Dealers, Inc.
GERARD DE GUNZBURG--47--Vice President of Capital Markets Group in its New
York office since January 1993; from June 1988 to December 1992, a consultant
to American and European companies; prior thereto, Director and Partner of
Lincoln Property Company, Europe, where he arranged real estate financing from
1976 to 1988. Mr. de Gunzburg is registered with the National Association of
Securities Dealers, Inc.
ALISON C. HEFELE--35--Vice President of Capital Markets Group since February
1994, where she provides capital markets services for affiliates of the firm;
from January 1990 to February 1994, Vice President with Prudential Real Estate
Investors (strategic planning and business development for institutional real
estate investment management services); from September 1985 to January 1990, a
management consultant with McKinsey & Company; prior thereto, a financial
analyst with Morgan Stanley Realty Inc. Ms. Hefele is registered with the
National Association of Securities Dealers, Inc.
JAMES H. POLK III--52--Trustee of PTR; Managing Director of Capital Markets
Group since August 1992. Mr. Polk has been affiliated with the REIT Manager
since March 1991; prior thereto, he was President of PTR for sixteen years. He
is registered with the National Association of Securities Dealers, Inc. and is
a past President of the National Association of Real Estate Investment Trusts,
Inc.
INSURANCE
PTR carries comprehensive general liability coverage on its owned properties,
with limits of liability of $50 million per property and per occurrence
(subject to appropriate deductibles), to insure against liability claims and
provide for the costs of defense. Similarly, PTR is insured against the risk of
direct physical damage in amounts necessary to reimburse PTR on a replacement
cost basis for costs incurred to repair or rebuild each property, including
loss of rental income during the reconstruction period.
COMPETITION
Within its geographic areas of operation, PTR is subject to competition from
a variety of investors, including insurance companies, pension funds, corporate
and individual real estate developers and investors and other REITs with
investment objectives similar to those of PTR. Some of these competitors have
substantial financial resources and staffs and long operating histories. As an
owner of real estate properties, PTR competes with other owners of similar
properties in connection with their financing, sale, lease or other disposition
and use.
ENVIRONMENTAL MATTERS
Many jurisdictions have adopted laws and regulations relating to
environmental controls and the development of real estate. Such laws and
regulations could affect existing PTR properties and/or operate to reduce the
number and attractiveness of investment opportunities available to PTR. The
effect upon PTR of the application of such laws and regulations cannot be
predicted. Such laws and regulations have not had a material effect on PTR's
financial condition and results of operations to date. PTR is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse effect on PTR's financial condition or results of operations.
EMPLOYEES
All management activities of PTR are performed by the REIT Manager. PTR has
no employees.
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<PAGE>
EXECUTIVE OFFICERS
All executive functions of PTR are performed by the REIT Manager. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--REIT Management Agreement." The executive officers of the REIT
Manager are:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
C. Ronald Blankenship................... 45 Chairman
David C. Dressler, Jr................... 41 Managing Director
Constance B. Moore...................... 39 Managing Director
R. Scot Sellers......................... 38 Managing Director
John H. Gardner, Jr..................... 41 Senior Vice President
K. Bruce Webster........................ 38 Senior Vice President
Paul E. Szurek.......................... 34 Secretary and General Counsel
</TABLE>
See "--Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates" for descriptions of the REIT Manager's executive officers.
ITEM 2. PROPERTIES
The information in the following table is as of December 31, 1994 for
properties owned at December 31, 1994 and as of March 23, 1995 for properties
acquired since December 31, 1994 (dollars in thousands).
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
PROPERTIES OWNED AT DE-
CEMBER 31, 1994:
PROPERTIES STABILIZED AT
DECEMBER 31, 1994:
Albuquerque, New Mexi-
co:
Commanche Wells...... 1994 95.5% 179 $ 4,999 $ 5,212
Corrales Pointe...... 1993 99.5 208 6,461 6,856
Entrada Pointe....... 1994 98.1 208 6,892 7,656
Pavilions Phase I.... 1991 94.6 118 7,355 7,355
Pavilions Phase II*.. 1992 94.6 122 8,025 8,239
Sandia Ridge......... 1992 97.8 272 7,344 7,375
Vista del Sol........ 1993 99.4 168 5,899 6,013
Wellington Place..... 1993 100.0 280 9,602 10,316
Austin, Texas:
Anderson Mill Oaks... 1993 98.0 350 12,132 12,350
Cannon Place......... 1993 97.3 184 6,675 6,711
La Mirage*........... 1994 99.1 348 16,989 17,121
The Ridge............ 1993 99.4 326 10,316 10,393
Rock Creek........... 1993 98.4 314 9,862 9,924
Saddle Brook*........ 1994 98.1 308 13,216 13,231
Shadowood............ 1993 99.2 235 6,453 6,497
Spyglass............. 1992 97.3 298 10,391 10,483
Dallas, Texas:
Apple Ridge.......... 1993 98.4 304 10,669 10,841
Custer Crossing...... 1993 97.5 244 10,285 10,432
Homestead Village--
Coit Road*.......... 1994 87.0 134 3,408 3,461
Homestead Village--
North Richland
Hills*.............. 1994 90.0 134 3,513 3,566
Homestead Village--
Skillman*........... 1992 87.2 133 3,069 3,069
Homestead Village--
Stemmons Phase I*... 1992 95.4 132 3,189 3,189
Homestead Village--
Tollway*............ 1993 88.9 120 2,726 2,726
Indian Creek......... 1993 97.3 328 10,696 10,710
Quail Run............ 1993 98.6 278 10,821 11,019
Post Oak Ridge....... 1993 98.8 486 14,799 14,992
Somerset............. 1993 94.9 372 14,755 15,102
Summerstone.......... 1993 100.0 192 6,980 6,984
Woodland Park........ 1993 94.0 216 7,072 7,300
</TABLE>
(see notes following table)
17
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Denver, Colorado:
Cambrian............. 1993 98.4% 383 $ 11,947 $ 12,010
The Cedars........... 1993 97.6 408 16,691 16,957
Fox Creek Phase I.... 1993 100.0 175 6,116 6,401
Hickory Ridge........ 1992 97.2 688 23,182 23,623
Reflections Phase I.. 1993 99.0 208 8,680 8,715
Silvercliff(4)....... 1994 97.8 312 16,142 16,304
Sunwood.............. 1992 95.5 156 5,985 6,081
El Paso, Texas:
Cielo Vista.......... 1993 87.8 378 6,094 6,501
The Crest*........... 1992 94.0 232 7,961 7,968
Doubletree........... 1993 96.8 284 6,121 6,185
Las Flores*.......... (5) 93.6 468 8,003 8,165
Mountain Village..... 1992 98.6 288 7,078 7,251
Park Place, Phase
I*(6)............... 1989 91.1 160 4,458 4,596
Park Place, Phase
II*(6).............. 1991 91.1 132 4,133 4,133
The Phoenix*......... 1993 89.6 336 9,924 10,001
Shadow Ridge Phase I. 1991 92.8 208 5,367 5,409
Spring Park*(6)...... 1990 93.9 180 5,212 5,266
Tigua Village*....... (7) 93.4 184 2,149 2,256
Houston, Texas:
Braeswood Park(8).... 1993 96.7 240 12,434 12,660
Chasewood(9)......... 1994 95.0 260 13,512 13,576
Cranbrook Forest..... 1993 98.1 261 6,823 7,057
Homestead Village--
Park Ten*........... 1994 59.4 135 3,886 3,921
Homestead Village--
West by Northwest*.. 1994 92.4 134 3,426 3,466
Pineloch............. 1993 89.8 440 13,351 13,775
Plaza del Oro........ 1994 93.4 348 11,609 12,255
Seahawk(10).......... 1994 97.8 224 8,391 8,454
Weslayan Oaks........ 1993 96.4 84 3,914 3,944
Woodside Village..... 1975 98.4 196 6,391 6,681
Oklahoma City, Oklaho-
ma:
Cimarron Trail....... 1994 97.8 228 6,676 7,037
Warrington........... 1993 96.1 204 5,897 6,219
Omaha, Nebraska:
Apple Creek(11)...... 1994 96.1 384 13,402 13,632
Phoenix, Arizona:
Bay Club............. 1993 98.7 472 14,785 14,854
Dobson Bay Club...... 1992 97.6 166 6,139 6,190
Moorings at Mesa
Cove................ 1992 96.1 406 16,961 17,132
Papago Crossing...... 1992 96.1 180 3,706 3,814
Pheasant Run......... 1993 98.8 248 8,570 8,686
Presidio at South
Mountain(12)........ 1993 98.5 600 31,214 31,332
The Ridge............ 1993 97.6 380 12,613 12,637
San Antigua*......... 1994 99.7 320 21,338 23,864
San Marin*........... 1993 99.3 276 17,941 17,971
San Marina........... 1992 97.0 400 6,832 6,874
San Marquis South*... 1994 99.2 264 12,373 13,462
Sunstone............. 1993 100.0 242 10,447 10,491
Superstition Park.... 1992 96.3 376 12,385 12,518
San Antonio, Texas:
Applegate............ 1993 94.5 344 9,821 10,294
Camino Real.......... 1993 93.8 176 6,140 6,179
Cobblestone Village.. 1992 93.5 184 4,382 4,636
Contour Place........ 1992 88.1 126 2,572 2,591
The Crescent*........ 1994 97.4 306 15,552 15,574
The Gables........... 1993 97.4 192 6,907 7,091
Lakeside Villas...... 1992 91.8 292 13,520 13,770
</TABLE>
(see notes following table)
18
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Marbach Park......... 1993 93.1% 304 $ 7,746 $ 8,117
Oakhampton Place..... 1992 93.9 280 12,125 12,305
Palisades Park....... 1993 85.4 328 8,005 8,292
Panther Springs...... 1993 86.4 88 3,968 3,997
The Pond............. 1993 89.9 328 11,764 11,959
Rancho Mirage........ 1993 91.7 254 4,697 4,751
Towne East Village... 1993 88.0 100 2,397 2,543
Villas of Castle
Hills............... 1993 95.7 163 5,851 5,972
Villas of St. Tropez
Phase I............. 1992 92.3 273 10,674 10,864
Santa Fe, New Mexico:
The Enclave.......... 1992 97.6 204 9,699 9,719
The Meadows of Santa
Fe*................. 1994 95.3 296 12,759 12,759
Rancho Vizcaya....... 1991 96.2 212 11,969 12,042
Tucson, Arizona:
Cobble Creek......... 1992 96.0 301 7,650 7,716
Craycroft Gardens.... 1992 99.0 101 1,930 1,956
Haystack............. 1993 98.5 272 6,687 7,138
Sonoran Terraces..... 1992 97.9 374 17,773 17,980
Tierra Antigua....... 1992 95.9 147 5,425 5,464
Sundown Village Phase
I................... 1993 99.6 250 8,413 8,490
Villa Caprice........ 1993 97.4 268 8,648 8,758
Windsail(13)......... 1993 98.3 300 9,811 9,861
Tulsa, Oklahoma:
Southern Slope....... 1993 96.5 142 5,266 5,451
----- ------ -------- --------
Subtotals/Average.. 95.8% 26,244 $917,003 $935,716
----- ------ -------- --------
PROPERTIES PRE-STABI-
LIZED AT DECEMBER 31,
1994:
Dallas, Texas:
Timber Ridge......... 1994 98.8% 160 $ 6,648 $ 7,030
El Paso, Texas:
Shadow Ridge Phase
II*................. 1994 92.8 144 6,700 6,899
Houston, Texas:
Beverly Palms........ 1994 98.9 362 9,818 10,187
Brompton Court(14)... 1994 85.5 794 27,651 30,510
Homestead Village--
Bammel-Westfield*... 1994 77.8 134 3,443 3,455
Homestead Village--
Fuqua*.............. 1994 69.2 134 3,327 3,367
Homestead Village--
Westheimer*......... 1994 68.8 134 3,973 4,007
Phoenix, Arizona:
Foxfire.............. 1994 100.0 188 7,209 7,221
North Mountain Vil-
lage................ 1994 98.8 568 18,214 18,374
Peaks at Papago Park
Phase I............. 1994 98.7 624 27,908 28,088
Scottsdale Greens.... 1994 85.3 644 25,078 27,078
San Antonio, Texas:
Dymaxion Phase I..... 1994 97.9 190 4,438 4,574
Homestead Village--
Fredricksburg*...... 1994 66.1 136 4,040 4,098
The Waters of North-
ern Hills........... 1994 85.6 305 8,539 8,739
San Diego, California:
Scripps Landing...... 1994 96.3 160 9,021 9,090
Tierrasanta Ridge.... 1994 83.8 340 19,078 19,603
Tucson, Arizona:
Rio Cancion.......... 1994 97.9 379 19,213 19,477
----- ------ -------- --------
Subtotals/Average.. 90.4% 5,396 $204,298 $211,797
----- ------ -------- --------
DEVELOPMENTS UNDER CON-
STRUCTION AT DECEMBER
31, 1994:
Albuquerque, New Mexi-
co:
La Paloma............ 1993 N/A 424 $ 18,210 $ 24,497
La Ventana........... 1994 N/A 192 3,905 12,043
Austin, Texas:
Homestead Village--
Burnet Road......... 1994 N/A 133 1,837 4,060
Hunters' Run......... 1993 N/A 240 7,642 11,727
Ridgeline Village II. 1993 N/A 456 2,956 24,856
</TABLE>
(see notes following table)
19
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Dallas, Texas:
Homestead Village--
South Arlington..... 1994 N/A 141 $ 2,415 $ 3,987
Homestead Village--
West Arlington...... 1993 N/A 138 2,523 3,979
Homestead Village--
Stemmons Phase II... 1992 N/A 57 654 1,466
Denver, Colorado:
Reflections Phase II. 1993 N/A 208 3,799 11,428
El Paso, Texas:
Acacia Park.......... 1993 N/A 336 11,825 13,703
Patriot Apartments... 1993 N/A 320 4,525 12,320
Houston, Texas:
Homestead Village--
Medical Center...... 1994 N/A 165 1,791 5,299
Homestead Village--
Stafford............ 1993 N/A 134 3,628 3,638
Homestead Village--
Willowbrook......... 1994 N/A 138 1,231 3,916
Memorial Oaks Phase
I................... 1994 N/A 360 5,169 18,769
Phoenix, Arizona:
San Marquis North.... 1993 N/A 208 9,118 10,829
San Antonio, Texas:
Homestead Village--
I10/DeZavala........ 1994 N/A 142 1,806 4,337
Homestead Village--
281/Bitters......... 1994 N/A 154 2,046 4,685
Medical Drive........ 1993 N/A 276 3,543 13,340
Sterling Heights..... 1993 N/A 224 7,722 12,032
Tucson, Arizona:
Sundown Village Phase
II.................. 1993 N/A 80 4,056 4,473
--- ----- -------- --------
Subtotals.......... N/A 4,526 $100,401 $205,384
--- ----- -------- --------
DEVELOPMENTS IN PLANNING
AT DECEMBER 31, 1994
Albuquerque, New Mexi-
co:
Seven Bar Ranch Phase
I................... 1994 N/A 368 $ 2,056 $ 18,293
Seven Bar Ranch Phase
II.................. 1994 N/A 252 1,409 12,527
Austin, Texas:
Hobby Horse.......... 1993 N/A 168 890 10,158
Hobby Horse Railroad. 1993 N/A 168 828 8,575
Ridgeline Village I.. 1993 N/A 168 1,060 9,039
Ridgeline Village
III................. 1993 N/A 448 2,645 26,305
Dallas, Texas:
Homestead Village-Ft.
Worth............... 1994 N/A 99 540 2,803
Homestead Village-Las
Colinas............. 1994 N/A 150 867 4,545
Denver, Colorado:
Fox Creek Phase
II(15).............. 1993 N/A 120 -- 6,000
Homestead Village-
Denver Tech Center.. 1994 N/A 158 1,042 5,122
Homestead Village-
Iliff............... 1994 N/A 138 761 4,445
Houston, Texas:
Memorial Heights
Phase I............. 1994 N/A 360 3,757 17,955
Memorial Heights
Phase II............ 1994 N/A 476 4,946 24,146
Memorial Oaks Phase
II.................. 1994 N/A 264 3,621 13,449
Phoenix, Arizona:
Homestead Village-
Scottsdale.......... 1994 N/A 121 1,071 4,075
Peaks at Papago Park
Phase II............ 1994 N/A 144 1,020 6,957
San Antonio, Texas:
Villas of St. Tropez
Phase II............ 1994 N/A 96 713 4,272
Santa Fe, New Mexico:
St. Francis.......... 1994 N/A 176 2,238 10,232
Tucson, Arizona:
Ventana Canyon....... 1993 N/A 432 3,730 26,093
--- ----- -------- --------
Subtotals.......... N/A 4,306 $ 33,194 $214,991
--- ----- -------- --------
</TABLE>
(see notes following table)
20
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
LAND HELD FOR FUTURE
MULTIFAMILY DEVELOPMENT
AT DECEMBER 31, 1994
El Paso, Texas:
West Ten Apart-
ments(16)........... 1994 N/A -- $ 1,576 $ --
San Antonio, Texas:
Dymaxion Phase
II(17).............. 1994 N/A -- 546 --
Indian Trails Phase
II(18).............. 1994 N/A -- 864 --
Walker Ranch Phase
I(19)............... 1994 N/A -- 2,490 --
Walker Ranch Phase
II(20).............. 1994 N/A -- 1,858 --
Walker Ranch Phase
III(21)............. 1994 N/A -- 643 --
----- ------- ---------- ----------
Total Development
Land.............. N/A N/A $ 7,977 $ --
----- ------- ---------- ----------
Total Multifamily
Owned at December
31, 1994.......... 94.9% 40,472 $1,262,873 $1,567,888
----- ------- ---------- ----------
HOTEL (ROOMS) OWNED AT
DECEMBER 31, 1994:
San Francisco, Cali-
fornia:
Wharf Holiday
Inn(22)............. 1971/90/92 82.8 338 $ 22,870 $ 22,870
----- ------- ---------- ----------
OFFICE/INDUSTRIAL
(SQUARE FEET) OWNED AT
DECEMBER 31, 1994:
Dallas, Texas:
Irving Blvd.......... 1977 100.0% 37,200 $ 541 $ 541
Texas Commerce Bank
Bldg.(23)........... 1985 97.4 114,600 2,815 2,815
El Paso, Texas:
Vista Industrial..... 1989 100.0 130,000 3,134 3,134
Ontario, California:
Ontario Industrial
Building............ 1987 100.0 127,600 3,992 3,992
----- ------- ---------- ----------
Total
Office/Industrial. 99.0% 409,400 $ 10,482 $ 10,482
----- ------- ---------- ----------
Other.................. 100.0% 10,000 $ 63 $ 63
----- ------- ---------- ----------
Total Properties
Owned at December
31, 1994.......... $1,296,288 $1,601,303
---------- ----------
PROPERTIES ACQUIRED
SINCE DECEMBER 31, 1994
AND THROUGH MARCH 23,
1995:
PROPERTIES STABILIZED AT
MARCH 23, 1995:
Las Vegas, Nevada:
Horizons at Peccole
Ranch+.............. 1995 96.3% 408 $ 21,152 $ 21,326
King's Crossing+..... 1995 97.7 440 19,023 19,273
Sunterra+............ 1995 99.8 444 13,910 13,976
Portland, Oregon:
Club at the Green+... 1995 100.0 254 10,933 11,041
Knight's Castle+..... 1995 96.6 296 13,086 13,097
Squire's Court+...... 1995 97.9 235 10,865 10,867
Riverwood Heights+... 1995 99.2 240 9,860 9,975
Salt Lake City, Utah:
Greenpointe+......... 1995 98.4 192 5,941 6,054
Mountain Shadow+..... 1995 99.0 174 5,545 5,565
Seattle, Washington:
Double Tree Phase I+. 1995 99.6 245 10,323 10,344
----- ------- ---------- ----------
Subtotals/Average.. 98.3% 2,928 $ 120,638 $ 121,518
----- ------- ---------- ----------
PROPERTIES PRE-STABI-
LIZED AT MARCH 23,
1995:
Las Vegas, Nevada:
Anchor Village+...... 1995 88.8% 896 $ 39,358 $ 41,539
The Hamptons+........ 1995 95.1 492 19,727 19,998
Omaha, Nebraska:
Oak Brook............ 1995 99.0 162 7,464 7,464
Portland, Oregon:
Meridian at
Murrayhill+......... 1995 97.4 312 16,780 16,810
</TABLE>
(see notes following table)
21
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED(1) FOOTAGE INVESTMENT(2) COST(3)
------------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Salt Lake City, Utah:
Cherry Creek+........ 1995 98.7% 225 $ 8,601 $ 8,836
Seattle, Washington:
Logan's Ridge+....... 1995 99.6 258 13,000 13,226
Mantanza Creek+...... 1995 95.4 152 6,773 6,879
Walden Pond+......... 1995 99.1 316 13,556 13,656
---- ----- ---------- ----------
Subtotals/Average.. 94.7% 2,813 $ 125,259 $ 128,408
---- ----- ---------- ----------
DEVELOPMENTS IN PLANNING
AT MARCH 23, 1995:
Austin, Texas:
Homestead Village--
Round Rock.......... 1995 N/A 157 $ 820 $ 4,978
Phoenix, Arizona:
Homestead Village--
Baseline............ 1995 N/A 138 861 4,020
Reno, Nevada:
Reno Vista Ridge+.... 1995 N/A 324 2,290 17,966
Salt Lake City, Utah:
Remington+........... 1995 N/A 288 2,557 15,121
---- ----- ---------- ----------
Subtotals.......... 907 $ 6,528 $ 42,085
----- ---------- ----------
Total Properties
Acquired Since De-
cember 31, 1994... 6,648 $ 252,425 $ 292,011
----- ---------- ----------
Total Properties
Owned at March 23,
1995.............. $1,548,713 $1,893,314
========== ==========
</TABLE>
--------
*Property developed by PTR.
+Property acquired by PTR in the Merger.
(1) Represents percentage leased at December 31, 1994 for properties owned at
December 31, 1994 and March 23, 1995 for properties acquired since
December 31, 1994.
(2) Represents cost, which is not in excess of net realizable value, as of
December 31, 1994 for properties owned at December 31, 1994 and as of
March 23, 1995 for properties acquired since December 31, 1994.
(3) Represents cost, including planned renovations, for properties owned at
March 23, 1995. Represents budgeted development cost, which includes the
cost of land, fees, permits, payments to contractors, architectural and
engineering fees and interest and property taxes to be capitalized during
the construction period, for properties under development. Does not
include land held for future development, which is less than 1% of assets
based on cost.
(4) The Silvercliff apartments are subject to a deed of trust securing long
term mortgage debt of $7.6 million.
(5) Phase I (120 units) was developed in 1980, Phase II (60 units) was
developed in 1981 and Phase III (288 units) was developed in 1983. The
entire project is subject to a deed of trust securing long term mortgage
debt of $6.0 million.
(6) The Spring Park apartments and the Park Place apartments are subject to
deeds of trust securing long term mortgage debt aggregating $11.4 million.
(7) Phase I (84 units) was developed in 1970 and Phase II (100 units) was
developed in 1978. The entire project is subject to deeds of trust
securing long term mortgage debt aggregating $1.0 million.
(8) The Braeswood Park apartments are subject to a deed of trust securing long
term mortgage debt of $7.0 million.
(9) The Chasewood apartments are subject to a deed of trust securing long term
mortgage debt of $9.6 million.
(10) The Seahawk apartments are subject to a deed of trust securing long term
mortgage debt of $5.6 million.
22
<PAGE>
(11) The Apple Creek apartments are subject to a deed of trust securing long
term mortgage debt of $11.1 million.
(12) The Presidio at South Mountain apartments are subject to a deed of trust
securing long term mortgage debt of $14.7 million.
(13) The Windsail apartments are subject to a deed of trust securing long term
mortgage debt of $4.9 million.
(14) The Brompton Court apartments are subject to a deed of trust securing long
term mortgage debt of $14.8 million.
(15) Subsequent to December 31, 1994, PTR determined that current market
conditions were favorable to develop this tract of land, which was
acquired incidentally with and is contiguous to the land for Fox Creek
Phase I. Therefore, at December 31, 1994 no cost had been allocated to
this parcel.
(16) 25.30 acres of undeveloped land.
(17) 6.49 acres of undeveloped land.
(18) 25.58 acres of undeveloped land.
(19) 38.7 acres of undeveloped land.
(20) 30.5 acres of undeveloped land.
(21) 10.3 acres of undeveloped land.
(22) PTR owns the building and land leased to Holiday Inns of America, Inc. at
Fisherman's Wharf in San Francisco. The lease with Holiday Inns expires in
2018. Occupancy represents average occupancy for the one-year period ended
December 31, 1994.
(23) PTR owns this property through a 40% owned joint venture.
PORTFOLIO COMPOSITION
The following table indicates the composition of PTR's properties at March
23, 1995:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Multifamily...................................... 180 98%
Office/Industrial................................ 4 1
Hotel............................................ 1 1
--- ---
Total.......................................... 185 100%
=== ===
</TABLE>
--------
(1) Represents cost, including planned renovations, for properties owned at
March 23, 1995. Represents budgeted development cost, which includes the
cost of land, fees, permits, payments to contractors, architectural and
engineering fees and interest and property taxes to be capitalized during
the construction period, for properties under development. Does not include
land held for future development, which is less than 1% of assets based on
cost.
23
<PAGE>
GEOGRAPHIC DISTRIBUTION
PTR's multifamily and non-multifamily properties are located in 21
metropolitan areas in 11 states. The table below demonstrates the geographic
distribution of PTR's property investments at March 23, 1995:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Albuquerque, New Mexico.......................... 12 7%
Austin, Texas.................................... 16 10
Dallas/Fort Worth, Texas......................... 21 7
Denver, Colorado................................. 11 6
El Paso, Texas/Las Cruces, New Mexico............ 15 5
Houston, Texas................................... 22 12
Las Vegas, Nevada................................ 5 6
Oklahoma City, Oklahoma.......................... 2 1
Omaha, Nebraska.................................. 2 1
Ontario, California.............................. 1 *
Phoenix, Arizona................................. 21 15
Portland, Oregon/Vancouver, Washington........... 6 4
Reno, Nevada..................................... 1 1
Salt Lake City, Utah............................. 4 2
San Antonio, Texas............................... 24 10
San Diego, California............................ 2 2
San Francisco, California........................ 1 1
Santa Fe, New Mexico............................. 4 2
Seattle, Washington.............................. 3 2
Tucson, Arizona.................................. 11 6
Tulsa, Oklahoma.................................. 1 *
--- ---
Total.......................................... 185 100%
=== ===
</TABLE>
--------
* Less than 1%.
(1) Represents cost, including planned renovations, for properties owned at
March 23, 1995. Represents budgeted development cost, which includes the
cost of land, fees, permits, payments to contractors, architectural and
engineering fees and interest and property taxes to be capitalized during
the construction period, for properties under development. Does not include
land held for future development, which is less than 1% of assets based on
cost.
ITEM 3. LEGAL PROCEEDINGS
On March 17, 1995, the United States District Court for the Western District
of Texas, El Paso Division granted defendants' motion to dismiss, with
prejudice, the action entitled Ferro v. C. Ronald Blankenship, et al. (Case No.
EP 95 CA 004) filed on January 4, 1995 by a party alleging to be a shareholder
of PTR against PTR, PACIFIC, Security Capital Group and the individual members
of the Board. The lawsuit had alleged breaches of fiduciary duties and other
matters pertaining to the Merger. PTR believes that the lawsuit was without
merit and will not have any material adverse effect on PTR's financial
condition or results of operations.
24
<PAGE>
PTR is a party to various claims and routine litigation arising in the
ordinary course of business. PTR does not believe that the results of all
claims and litigation, individually or in the aggregate, will have a material
adverse effect on its business, financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Shares are listed on the NYSE under the symbol "PTR." The
following table sets forth the high and low sale prices of the Common Shares as
reported in the New York Stock Exchange Composite Tape by CompuServe, and
distributions declared, for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------ ------ -------------
<S> <C> <C> <C>
1993
First Quarter............................... $ 20 $ 14 $0.205
Second Quarter.............................. 19 5/8 17 1/8 0.205
Third Quarter............................... 21 5/8 18 3/8 0.205
Fourth Quarter.............................. 21 1/2 17 5/8 0.205
1994
First Quarter............................... 21 5/8 18 1/4 0.250(1)
Second Quarter.............................. 20 1/8 17 3/4 0.250
Third Quarter............................... 18 7/8 17 5/8 0.250
Fourth Quarter.............................. 18 3/8 15 1/2 0.250
1995
First Quarter (through March 30)............ 18 3/8 16 5/8 0.2875(2)
</TABLE>
--------
<TABLE>
<S> <C>
</TABLE>
(1) Declared in the fourth quarter of 1993 for payment in the first quarter of
1994.
(2) Declared in the fourth quarter of 1994 and paid February 13, 1995 to
holders of record on February 2, 1995.
As of March 30, 1995, PTR had approximately 3,500 record holders of Common
Shares and in excess of 22,500 record and beneficial holders of Common Shares.
PTR, in order to qualify as a REIT, is required to make distributions (other
than capital gain distributions) to its shareholders in amounts at least equal
to (i) the sum of (A) 95% of its "REIT taxable income" (computed without regard
to the dividends paid deduction and its net capital gain) and (B) 95% of the
net income (after tax), if any, from foreclosure property, minus (ii) the sum
of certain items of noncash income. PTR's distribution strategy is to
distribute what it believes is a conservative percentage of its cash flow,
permitting PTR to retain funds for capital improvements and other investments
while funding its distributions. PTR has paid 76 consecutive quarterly cash
distributions.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 6, 1994 board meeting, the Board announced a projected increase in the
annual distribution level from $1.00 to $1.15 per Common Share. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the financial condition and operating results of PTR.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed PTR's current and accumulated earnings
25
<PAGE>
and profits (calculated for tax purposes) constitute a return of capital rather
than a dividend and reduce the shareholder's basis in his or her Common Shares.
To the extent that a distribution exceeds both current and accumulated earnings
and profits and the shareholder's basis in his or her Common Shares, it will
generally be treated as gain from the sale or exchange of that shareholder's
Common Shares. PTR annually notifies shareholders of the taxability of
distributions paid during the preceding year. The following summarizes the
taxability of distributions paid in 1994, 1993 and 1992 in respect of the
Common Shares.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary Income....................................... $0.68 $0.65 $0.67
Capital Gains......................................... -- 0.11 0.03
Return of Capital..................................... 0.32 0.06 --
----- ----- -----
Total............................................... $1.00 $0.82 $0.70
===== ===== =====
</TABLE>
On July 21, 1994, in addition to the distributions paid, PTR redeemed the
shareholder purchase rights issued pursuant to the Rights Agreement dated as of
February 23, 1990, as amended. Pursuant to the redemption, each holder of
record at the close of business on July 21, 1994 received $0.01 per shareholder
purchase right. The redemption price was paid on August 12, 1994 and is taxable
as ordinary income for federal income tax purposes.
No portion of the 1992 distributions constituted return of capital, due to
certain acquisition and sale transactions consummated in 1992 that increased
reported earnings and profits for 1992. Under federal income tax rules, PTR's
earnings and profits are first allocated to its Preferred Shares, which
increases the portion of the Common Shares distribution classified as return of
capital. PTR's tax returns have not been examined by the Internal Revenue
Service and, therefore, the taxability of distributions is subject to change.
The portion of distributions characterized as return of capital results
primarily from the excess of distributions over earnings, primarily because
non-cash charges such as depreciation are added to earnings in determining
distribution levels. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations."
For federal income tax purposes, the following summary reflects the
taxability of dividends paid on Preferred Shares for the period from the date
of issuance (November 29, 1993) through December 31, 1993 and the estimated
taxability for 1994:
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
1994 12/31/93
----- -----------
<S> <C> <C>
Per Preferred Share:
Ordinary income....................................... $1.75 $.1231
Capital gains......................................... -- .0227
----- ------
Total............................................... $1.75 $.1458
===== ======
</TABLE>
PTR's tax return for the year ended December 31, 1994 has not been filed, and
the taxability information for 1994 is based upon the best available data.
PTR's tax returns have not been examined by the Internal Revenue Service and,
therefore, the taxability of the dividends is subject to change.
26
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for PTR and should be
read in conjunction with the financial statements included or incorporated by
reference herein (dollars in thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental Income.......... $ 183,472 $ 76,129 $ 30,970 $ 14,721 $ 12,207
Total Revenues......... 186,105 78,418 32,779 15,817 13,314
General and Administra-
tive Expenses......... 784 660 436 697 1,241
REIT Management Fee.... 13,182 7,073 2,711 793 --
Earnings from Opera-
tions(1).............. 46,719 23,191 9,037 2,078 1,969
Gain (loss) on Sale of
Investments........... -- 2,302 (51) (611) 101
Preferred Share Divi-
dends Paid............ 16,100 1,341 -- -- --
Net Earnings Attribut-
able to Common
Shares................ 30,619 24,152 8,986 1,467 2,070
Common Share Distribu-
tions Paid(2)(3)...... $ 46,121 $ 29,162 $ 13,059 $ 4,179 $ 4,259
PER SHARE DATA:
Net Earnings Attribut-
able to Common
Shares................ $ 0.66 $ 0.66 $ 0.46 $ 0.21 $ 0.41
Common Share Distribu-
tions Paid(2)(3)...... 1.00 0.82 0.70 0.64 0.84
Preferred Share Divi-
dends Paid............ $ 1.75 $ 0.1458 $ -- $ -- $ --
Weighted Average Common
Shares
Outstanding........... 46,734 36,549 19,435 7,123 5,071
OTHER DATA:
Funds from Operations
Attributable to
Common Shares(4)...... $ 58,208 $ 36,422 $ 15,268 $ 5,404 $ 4,335
Net Cash Provided by
Operating Activities.. 94,625 49,247 20,252 6,092 1,647
Net Cash Used by In-
vesting Activities.... (368,515) (529,065) (229,489) (33,553) (12,905)
Net Cash Provided by
Financing Activities.. $ 276,457 $ 478,345 $ 185,130 $ 57,259 $ 9,941
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at
cost.................. $1,296,288 $ 872,610 $ 337,274 $117,572 $ 84,892
Total Assets........... 1,295,778 890,301 342,235 141,020 81,544
Line of Credit......... 102,000 51,500 54,802 101 8,522
Long Term Debt......... 200,000 -- -- -- --
Mortgages Payable...... 93,624 48,872 30,824 35,772 32,599
Total Liabilities...... 455,136 135,284 94,186 38,707 44,138
Shareholders' Equity... $ 840,642 $ 755,017 $ 248,049 $102,313 $ 37,406
Number of Common Shares
Outstanding........... 50,456 44,645 27,034 13,161 5,071
</TABLE>
--------
(1) Earnings from operations for the year ended December 31, 1994 and the year
ended December 31, 1993 reflect a $1.6 million and a $2.3 million
provision, respectively, for possible losses relating to investments in
non-multifamily properties.
(2) The 1994 amount includes a distribution of $0.25 per Common Share which was
declared by the Board on December 28, 1993 and paid on February 18, 1994.
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<PAGE>
(3) The 1994 amount excludes the distribution of $.2875 per Common Share which
was declared by the Board on December 6, 1994 and paid on February 13, 1995
to holders of record on February 2, 1995.
(4) Funds from Operations means net earnings computed in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation
and certain amortization, and after adjustments for unconsolidated
partnerships and joint ventures. PTR believes that Funds from Operations is
helpful in understanding a property portfolio in that such calculation
reflects cash flow from operating activities and the properties' ability to
support interest payments and general operating expenses before the impact
of certain activities, such as gains or losses from property sales and
changes in accounts receivable and accounts payable. Funds from Operations
should not be considered as an alternative to net earnings or any other
GAAP measurement of performance as an indicator of PTR's operating
performance or as an alternative to cash flows from operating, investing or
financing activities as a measure of liquidity.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
PTR's operating results depend primarily upon income from multifamily
properties, which is substantially influenced by (i) the demand for and supply
of multifamily units in PTR's target market and submarkets, (ii) operating
expense levels, (iii) the effectiveness of property-level operations and (iv)
the pace and price at which PTR can develop and acquire additional multifamily
properties. Capital and credit market conditions that affect PTR's cost of
equity and debt capital also influence operating results.
PTR's target market and submarkets have benefitted substantially in recent
periods from demographic trends (including job and population growth) that
increase the demand for multifamily units while financing constraints
(specifically, reduced availability of development capital) have limited new
construction to levels substantially below construction activity prior to 1986.
Consequently, rental rates for multifamily units have increased more than the
inflation rate for the last two years and are expected to continue experiencing
such increases for 1995. Expense levels also influence operating results, and
rental expenses (other than real estate taxes) for multifamily properties have
generally increased at approximately the same rate as rents for the past year
and are expected to increase at a comparable rate for 1995.
REIT Management believes that development of multifamily properties from the
ground up that are built for long term ownership and are designed to meet broad
renter preferences and demographic trends will provide a greater source of long
term cash flow growth. Therefore, while land prices are favorable, PTR has
acquired and will acquire, on an unleveraged basis, prudent amounts of zoned
land for future multifamily development. At March 23, 1995 land held for future
development was less than 1% of assets based on cost. The REIT Manager believes
PTR's ability to compete is significantly enhanced relative to other companies
because of the REIT Manager's depth of development and acquisition expertise,
its local market presence and PTR's access to investment capital.
MERGER AND CONCURRENT SUBSCRIPTION OFFERING
On March 23, 1995, PTR completed the Merger. In the Merger, each outstanding
share of PACIFIC common stock was converted into the right to receive 0.611 of
a Common Share. As a result, 8,468,460 Common Shares were issued in the Merger
in exchange for all of the outstanding shares of PACIFIC common stock.
Additionally, PTR changed its name from Property Trust of America to Security
Capital Pacific Trust to more accurately reflect its newly expanded target
market. PTR will continue to be traded on the NYSE under the symbol "PTR". The
Merger expands PTR's target market to include a six-state region of the western
United States with 129 submarkets. As a result, PTR is well-positioned to
deploy capital in the geographic areas of the United States that the REIT
Manager believes are expected to provide some of the most attractive
multifamily growth opportunities.
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<PAGE>
Concurrently with the consummation of the Merger, PTR completed a
subscription offering pursuant to which PTR received subscriptions for $216.6
million (13.2 million Common Shares). The subscription offering was designed to
allow shareholders of PTR to purchase Common Shares at the same price PACIFIC
shareholders were acquiring Common Shares in the Merger ($16.375 per Common
Share). Security Capital Group purchased $50 million (3.1 million Common
Shares) in the subscription offering pursuant to the oversubscription
privilege.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
During 1994, PTR acquired 20 multifamily properties aggregating 6,626 units
for a total purchase price, including planned renovations, of approximately
$266.0 million. In addition, PTR completed development of 15 multifamily
properties aggregating 3,061 units in 1994 with a completed cost of $127.9
million. At December 31, 1994 PTR had 21 multifamily properties under
construction with a budgeted completed cost of $205.4 million and had in the
final planning stages an estimated 4,306 multifamily units with an aggregate
estimated investment cost of $215.0 million. During 1993, PTR acquired 53
multifamily properties aggregating 13,772 units for a total purchase price,
including planned renovations, of approximately $453.7 million, most of which
was invested in the fourth quarter of 1993. In addition, PTR completed
development of three multifamily properties aggregating 732 units in 1993.
The percentage of PTR's total rental income generated by multifamily
properties was 98.3% and 93.2% for the years ended December 31, 1994 and 1993,
respectively. This percentage will continue to increase throughout 1995 due to
the Merger, past and ongoing multifamily property developments and acquisitions
and the periodic sale of non-multifamily properties.
During the period prior to a property being stabilized (see "Item 1.
Business--Investment Analysis"), the REIT Manager's asset managers and the
property managers begin implementing expense controls, reconfigure the resident
mix, supervise renovations and implement a strategy to increase rental income.
The full benefits of these changes are not reflected until after the properties
are stabilized. As of March 23, 1995, 80.5% of the operating multifamily
portfolio was stabilized as compared to 47% at December 31, 1993.
Property Operations
Including the newly developed and acquired assets, net earnings increased
$21.2 million (83.3%) for 1994 over 1993. The increased net earnings related
primarily to property revenue increases of $107.3 million (141.0%), partially
offset by higher rental expenses, which increased by $48.5 million (159.2%) for
the period. Depreciation expense increased $14.1 million (134.2%) for 1994 over
1993. These increases are due to multifamily acquisitions and multifamily
developments placed in service and to rental rate increases. For operating
multifamily properties, which comprise 97.1% of PTR's total operating
properties based on cost at December 31, 1994, rental expenses were 43.6% and
42.2% of rental revenues during the year ended December 31, 1994 and 1993,
respectively.
Multifamily Properties Fully Operating Throughout Both Periods
For the 29 multifamily properties that were fully operating throughout both
1994 and 1993, property level earnings before interest, income taxes,
depreciation and amortization ("EBITDA") as a percentage of PTR's aggregate
investment in these properties increased to 11.14% in 1994 from 10.68% in 1993.
EBITDA does not represent and should not be substituted for net earnings as
defined by GAAP and is not indicative of cash flows from operations or that
cash flows are sufficient to fund all cash needs. This increase in return on
investment, which is a function of rental rate growth, occupancy levels,
expense rate growth and capital expenditure levels, is attributable primarily
to growth in rental rates. This increase in return on investment was achieved
at the same time that PTR increased its investment in these properties by $2.8
million (1.1% of
29
<PAGE>
total investment in these properties) as a result of renovation and other
capital expenditures. The 6.8% increase in rental income (the majority
resulting from a 6.42% rental rate increase) for such properties for 1994 as
compared to 1993 was offset by increases in rental expenses, primarily due to
real estate taxes and turnover expenses.
Interest Income
Interest income for 1994 increased 15.0%, primarily resulting from the
addition of 4 purchase money notes aggregating $12.4 million received in 1993
in conjunction with property sales.
Interest Expense
Interest expense increased $15.5 million (395.6%) for 1994 as compared to
1993. The increase is primarily attributable to interest expense of $12.9
million resulting from the issuance of $200 million of long term notes in
February 1994, as more fully discussed under "--Liquidity and Capital
Resources--Financing Activities."
Mortgage interest expense decreased $288,000 (41.6%) for 1994, compared to
1993. The decrease is attributable to interest savings resulting from
prepayments and payoffs aggregating $10.5 million on mortgages during 1994 and
an increase of $3.2 million (114%) in capitalized interest during 1994 over
1993 due to increased levels of multifamily development activity.
Line of credit interest expense for 1994 was $2.9 million higher than for
1993, principally because of higher average outstanding balances, higher
interest rates and amortization of additional loan costs (commitment fees,
title policies and legal expenses) relating to PTR's revolving credit facility
which was increased from $200 million to $275 million during 1994. Average
borrowings were approximately $59.9 million (with an average interest rate of
7.4%) during 1994, as compared to average borrowings of $40.6 million (with an
average interest rate of 6.3%) during 1993.
General and Administrative Expense including REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow and therefore increased by $6.1 million (86.4%)
in 1994 as compared to 1993 because cash flow increased substantially (see "--
REIT Management Agreement" below). As PTR arranges amortizing long term debt as
more fully described in "--Liquidity and Capital Resources" below, the REIT
Management fee will effectively decline in proportion to PTR's earnings from
operations because actual or assumed regularly scheduled principal payments, as
defined in such agreement, associated with the long term debt will be deducted
from the cash flow amount on which the REIT Management fee is based.
Provision for Possible Loss
PTR develops and acquires properties with a view to effective long term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio allocation, PTR may from time to time seek to dispose of
assets that in management's view do not meet PTR's long term investment
criteria and redeploy the proceeds therefrom, preferably through like-kind
exchanges, into assets that it believes provide better long term growth
opportunities.
PTR is a minority partner with a 40% interest in a partnership that owns and
operates an office building near Dallas, Texas. During the first quarter of
1994, the partnership adopted a strategy of disposing of the property rather
than continuing to hold the property as a long term investment. As a result,
the managing partner evaluated the building for net realizable value, which
resulted in a provision for possible loss of $4 million. PTR's share of the
loss provision is $1.6 million as reflected in the December 31, 1994 statement
30
<PAGE>
of earnings. PTR's net carrying value after the provision is $2.8 million. This
provision has no impact on cash flow from operating activities nor does PTR
have any financial obligation to the partnership.
PTR focuses its investment and development activities on multifamily
properties. PTR will continue to aggressively manage its non-multifamily
properties in order to maximize cash flow, and dispositions of such non-
multifamily properties may occur as opportunities arise. Properties are
periodically evaluated for net realizable value and provisions for possible
losses are made if required.
Preferred Share Dividend
In November 1993, PTR issued $230 million of Preferred Shares at $25 per
share that are entitled to receive an annual dividend of $1.75 per share (7.0%
annual dividend rate), which amounted to $16.1 million for 1994 compared to
$1.3 million for 1993. The Preferred Share dividends do not reduce the amount
PTR has budgeted for Common Share distributions but do increase the percentage
of the Common Share distribution that constitutes a non-taxable return of
capital.
1993 COMPARED TO 1992
During 1993, PTR acquired 53 multifamily properties aggregating 13,772 units
for a total purchase price, including planned renovations, of approximately
$453.7 million, most of which was invested in the fourth quarter of 1993. In
addition, PTR completed development of three multifamily properties aggregating
732 units in 1993. During 1992, PTR acquired 20 multifamily properties
aggregating 5,512 units for a total purchase price, including planned
renovations, of approximately $183.0 million, most of which was invested after
April 30, 1992. In addition, two multifamily properties aggregating 354 units
then under development were completed in 1992. In addition, rental rates from
multifamily assets that were stabilized (see "Item 1. Business--Investment
Analysis") during the fourth quarter of 1992 and throughout 1993 increased
6.98%.
The percentage of PTR's total rental income generated by multifamily
properties was 93.2% in 1993 and 76.4% in 1992. This percentage will continue
to increase in future periods due to multifamily properties acquired in 1993
and 1994 as discussed above and the sale of non-multifamily properties as
discussed below.
During the period prior to a property being stabilized (see "Item 1.
Business--Investment Analysis"), the REIT Manager's asset managers and the
property managers begin implementing expense controls, reconfigure the resident
mix, supervise renovations and implement a strategy to increase rental income.
The full benefits of these changes are not reflected until after the properties
are stabilized. As of December 31, 1993, 47% of the operating multifamily
portfolio was stabilized as compared to 59% at December 31, 1992. For operating
multifamily properties, rental expenses were 42.2% of rental revenues during
1993, compared to 42.1% in 1992.
Including the newly acquired and developed assets, net earnings increased
$16.5 million (184%) for 1993 over 1992. The increased net earnings related
primarily to property revenue increases of $45.2 million (145.8%), partially
offset by higher rental expenses, which increased by $19.0 million (165.7%) for
the period. Depreciation expense increased $5.2 million (97.9%) for 1993 over
1992. This increase is due to multifamily acquisitions and multifamily
developments placed in service.
Properties Fully Operating Throughout Both Periods
Multifamily. Rental income for the nine multifamily properties fully
operating throughout both years increased approximately $705,800 (6.4%) for
1993, compared to 1992, partially offset by increases in rental expenses of
$410,100 (9.0%) and depreciation of $72,700 (4.6%). The increase primarily
related to a 5.74%
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average rental rate increase. Due primarily to commencement of major
renovations at one of these properties and the temporary effects of a new
development in one submarket, average occupancy decreased from 94.4% in 1992 to
92.8% in 1993.
Non-Multifamily. Rental income, rental expenses and depreciation for non-
multifamily properties owned throughout both years decreased $107,300 (3.1%),
$420,300 (97.5%) and $44,000 (8.1%), respectively, for 1993, compared to 1992.
The decrease in rental expense was primarily due to a decrease in land lease
expense as a result of PTR's acquisition of the land underlying PTR's Holiday
Inn building in San Francisco. Not included in these results are operating
results from the eight non-multifamily properties sold during 1993.
All Properties. For multifamily properties that were fully operating
throughout both years and non-multifamily properties that were owned throughout
both years, taken as a whole, rental income increased $598,600 (4.2%), rental
expenses decreased $10,200 (.2%), and depreciation increased $83,900 (4.0%).
Net income from property operations, after depreciation, for these properties
increased $524,800 (7.2%) for 1993 over 1992.
Interest Income
Interest income for 1993 increased 26.5%, primarily resulting from the
addition of five purchase money notes aggregating $6.8 million received in 1992
and four purchase money notes aggregating $12.4 million received in 1993 in
conjunction with property sales.
Interest Expense
Mortgage interest expense decreased $1.4 million (66.3%) for 1993, compared
to 1992. The decrease is attributable to interest savings resulting from
prepayments and pay offs aggregating $8.1 million on mortgages during 1993, an
increase of $1.8 million (184.9%) in capitalized interest during 1993 over 1992
due to increased levels of multifamily development activity, and lower interest
rates on an adjustable rate mortgage.
Line of credit interest expense for 1993 was $2.1 million higher than for
1992, principally because of higher average outstanding balances and
amortization of additional loan costs (commitment fees, title policies and
legal expenses) relating to PTR's revolving credit facility, which was
increased from $72 million to $200 million during 1993. Average borrowings were
approximately $40.6 million (with an average interest rate of 6.3%) during
1993, as compared to average borrowings of $12.7 million (with an average
interest rate of 6.6%) during 1992.
General and Administrative Expense including REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow and therefore increased by $4.4 million (161%) in
1993 as compared to 1992 because cash flow increased substantially. See "--REIT
Management Agreement." As PTR arranges amortizing long term debt as more fully
described in "--Liquidity and Capital Resources" below, the REIT Management fee
will effectively decline in proportion to PTR's earnings from operations
because actual or assumed regularly scheduled principal payments, as defined in
such agreement, associated with the long term debt will be deducted from the
cash flow amount on which the REIT Management fee is based.
Property Sales and Provisions
PTR sold eight non-multifamily properties during 1993 at an aggregate gain of
$2.3 million. The overall result of these dispositions, net of provisions for
possible losses ($2.3 million), was immaterial to PTR's financial position and
results of operations. The provision for possible losses ($2.3 million) relates
to the write-down to the lower of cost and net realizable value of two non-
multifamily properties, Academy Mart Shopping Center and Ontario Industrial
Building. The Academy Mart Shopping Center was sold in the third
32
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quarter of 1993. A provision of $1.2 million to reduce the property to its net
realizable value was made in the second quarter. The single tenant occupant of
the Ontario Industrial Building had indicated to PTR that it was not going to
renew its lease which expired in early 1994. After reviewing the market
conditions, it was determined that a write-down of $1.1 million was
appropriate, which was recorded in the second quarter.
ENVIRONMENTAL MATTERS
PTR does not expect any environmental condition on its properties to have a
material adverse affect upon its results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
The REIT Manager considers PTR's liquidity and ability to generate cash to be
adequate and expects it to continue to be adequate to meet PTR's development,
acquisition, operating, debt service and shareholder distribution requirements.
Net cash flow provided by operating activities increased by $45.4 million
(92.1%) for the year ended December 31, 1994 as compared to 1993. Net cash flow
provided by operating activities increased by $29 million (143.2%) for 1993 as
compared to 1992. These increases are due primarily to multifamily property
acquisitions and developments as described under "--Results of Operations"
above.
Investing Activities
During the year ended December 31, 1994, PTR invested $381.2 million for the
development, acquisition and renovation of multifamily properties and land, net
of $56.6 million in mortgages assumed. During the year ended December 31, 1993,
PTR invested $536.5 million for the acquisition, development and renovation of
multifamily properties and land, net of $27 million in mortgages assumed. These
developments, acquisitions and renovations were financed with cash on hand and
borrowings under PTR's revolving line of credit, which were repaid with the
proceeds from PTR's equity and debt offerings.
PTR's investing activities used $160.6 million (30%) less cash in 1994 as
compared to 1993 as a result of lower levels of multifamily property
acquisitions and $299.6 million (131%) more cash in 1993 as compared to 1992 as
a result of an increase in multifamily property acquisitions and developments.
At March 23, 1995, PTR had unfunded development commitments for developments
under construction of $96.8 million. Additionally, the land PTR owned or
controlled through letters of intent or contingent contracts at such date,
subject to PTR's final due diligence, will allow for the development of 8,197
additional multifamily units, which will be an important generator of growth
for PTR in 1995 and beyond. The foregoing developments are subject to a number
of conditions, and PTR cannot predict with certainty that any of them will be
consummated.
Financing Activities
PTR's financing activities for the year ended December 31, 1994 provided
$276.5 million compared to $478.3 million in 1993 as a result of fewer
acquisitions. Net proceeds of equity offerings aggregated $101.1 million in
1994 as compared to $514.2 million in 1993. PTR also received proceeds from
long term debt of $200 million in 1994. PTR's 1993 financing activities
provided $293.2 million (158%) more cash flow than 1992 financing activities.
The increase in cash flow provided by financing activities was primarily due to
increased offering proceeds: net proceeds from equity offerings aggregating
$514.2 million in 1993 as compared to $143.2 million in 1992. Proceeds from
these offerings were used for development, acquisition and renovation of
multifamily properties or to repay revolving credit balances incurred for such
purposes and, in 1992, to purchase the land under the Holiday Inn.
33
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On August 4, 1994, PTR consummated a conversion of its $200 million revolving
line of credit facility with TCB and the other participating lenders into an
unsecured facility, which was increased to $275 million and extended to August
15, 1996 on October 27, 1994 and was further increased to $350 million on
March 23, 1995. The line of credit may annually be extended for an additional
year with the approval of TCB and the other participating lenders. Borrowings
bear interest at the greater of prime or the federal funds rate plus 0.5% or,
at PTR's option, LIBOR plus 1.625% (which can vary from LIBOR plus 1.25% to
LIBOR plus 2.0% based upon the rating of PTR's senior unsecured debt).
Additionally, there is a commitment fee, ranging from 0.125% to 0.25% per annum
on the average unfunded line of credit balance. All debt incurrences are
subject to covenants that PTR maintain (i) an interest coverage ratio of not
less than 2:1, (ii) a debt to tangible net worth ratio no greater than 1:1,
(iii) a fixed charge ratio of no less than 1.4:1 and (iv) an unencumbered pool
of real estate properties of which certain properties must meet certain
occupancy requirements and which have an aggregate historical cost of at least
175% of unsecured indebtedness. PTR is in compliance with all debt covenants.
Giving effect to the use of the proceeds from the subscription offering that
closed on March 23, 1995, there would be no borrowings outstanding under the
line of credit at March 23, 1995.
PTR expects to finance developments, acquisitions and renovations with cash
on hand and borrowings under its line of credit prior to arranging long term
capital in order to efficiently respond to market opportunities while
minimizing the amount of cash invested in short term investments at lower
yields. PTR believes that its current conservative ratio of long term debt to
total long term capitalization, the sum of long term debt and shareholders'
equity (26% at December 31, 1994 and 22% at March 23, 1995 on a pro forma
basis, giving effect to the Merger and the concurrent subscription offering and
property acquisitions through March 23, 1995), provides it considerable
flexibility to prudently utilize long term debt as a future financing tool. PTR
intends to limit the sum of long term debt and line of credit debt to less than
50% of the sum of total book capitalization. PTR expects to fund additional
growth for the foreseeable future through further issuances of unsecured long
term, fixed rate amortizing debt securities similar to the Notes issued in
February 1994 and through its asset optimization strategy.
Based on the Merger, its recent subscription offering, debt issuance
capacity, asset optimization strategy and current real estate and debt market
conditions, PTR believes it has reached an optimal level of equity
capitalization. Hence, PTR has no plans to raise additional capital through the
equity markets. No assurance can be given that changes in market conditions or
other factors will not affect these plans.
On March 23, 1995, PTR raised $216.3 million of net proceeds from a
subscription offering of 13.2 million Common Shares at a price of $16.375 per
Common Share, which was the same price per Common Share on which the exchange
ratio for the Merger was based. The subscription offering closed concurrently
with the consummation of the Merger. The subscription offering was designed to
allow shareholders the opportunity to purchase Common Shares at the same price
at which PACIFIC shareholders acquired Common Shares in the Merger and to
maintain PTR's balance sheet ratios. Each holder of record of Common Shares on
February 21, 1995 was entitled to subscribe for one Common Share for every 1.94
Common Shares held of record on such date and was entitled to oversubscribe for
additional Common Shares to the extent that other shareholders did not fully
subscribe for all Common Shares to which they were entitled. Security Capital
Group acquired 3,053,435 Common Shares in the subscription offering pursuant to
the oversubscription privilege.
On August 16, 1994, PTR raised $101.8 million of net proceeds from a rights
offering of 5,593,718 Common Shares at a price of $18.25 per Common Share.
PTR's shareholders of record on July 21, 1994 received a distribution of one
right for each Common Share held of record. Eight rights were required to
purchase one Common Share for $18.25 in the rights offering. Security Capital
Group exercised in full its rights to acquire Common Shares in the offering at
the same price paid by the public ($18.25 per Common Share) and acquired
additional rights in open market purchases. Proceeds from the offering were
used to
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fund developments and to invest in additional multifamily properties in PTR's
target market and to repay borrowings under PTR's line of credit.
On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008
(the "2008 Notes") and $100 million of 7.5% Senior Notes due 2014 (the "2014
Notes," together with the 2008 Notes collectively referred to as the "Notes").
The 2008 Notes bear interest at 6.875% per annum and require annual principal
payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear
interest at 7.5% per annum and require aggregate annual principal payments of
$10 million in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million
in 2012, $20 million in 2013 and $25 million in 2014. In February 1994, PTR
received $1.3 million in settlement of an interest protection agreement in the
form of a Forward Treasury Lock Agreement entered into with an investment
banker on January 28, 1994. The agreement included a determination date of
February 1, 1994 and a settlement date of February 2, 1994. The notional
amounts were $100 million with a reference price of 100.90625% and $75 million
with a reference price of 110.4375%. On February 2, 1994, the settlement prices
were 100.32813% and 109.46875%, respectively. There are no such agreements
currently outstanding. Collectively, the Notes have an average life to maturity
of 14.25 years and an average effective interest cost, inclusive of offering
discounts, issuance costs and an interest rate protection agreement, of 7.37%
per annum. The Notes are redeemable at any time at the option of PTR, in whole
or in part, at a redemption price equal to the sum of the principal amount of
the Notes being redeemed plus accrued interest thereon to the redemption date
plus a yield to maturity adjustment. The Notes are governed by the terms and
provisions of an indenture agreement (the "Indenture") between PTR and State
Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, PTR can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%), (ii) the ratio of secured debt to total assets, as
defined in the Indenture, does not exceed 40%, and (iii) PTR's pro forma
interest coverage ratio, as defined in the Indenture, for the four preceding
fiscal quarters is not less than 1.5. PTR is in compliance with all debt
covenants.
Distributions
PTR's current distribution policy is to pay quarterly distributions to
holders of Common Shares based upon what it believes to be a prudent percentage
of cash flow. Because depreciation is a non-cash expense, cash flow typically
will be greater than net earnings attributable to Common Shares. Therefore,
quarterly distributions paid will generally be higher than quarterly net
earnings attributable to Common Shares.
Distributions paid on Common Shares exceeded net earnings attributable to
Common Shares by $15.5 million, $5.0 million and $4.1 million for 1994, 1993
and 1992, respectively, resulting in corresponding decreases in shareholders'
equity for each of the respective periods.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 6, 1994 board meeting, the Board announced a projected increase in the
annual distribution level from $1.00 to $1.15 per Common Share. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the financial condition and operating results of PTR.
Pursuant to the terms of the Preferred Shares, PTR is restricted from
declaring or paying any distributions with respect to its Common Shares unless
all cumulative distributions with respect to the Preferred Shares have been
paid or sufficient funds have been set aside for distributions that have been
declared for the then current distribution period with respect to the Preferred
Shares.
Funds from Operations means net earnings computed in accordance with GAAP,
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and certain amortization, and after
35
<PAGE>
adjustments for unconsolidated partnerships and joint ventures. PTR believes
that Funds from Operations is helpful in understanding a property portfolio in
that such calculation reflects cash flow from operating activities and the
properties' ability to support interest payments and general operating expenses
before the impact of certain activities, such as gains or losses from property
sales and changes in accounts receivable and accounts payable. Funds from
Operations attributable to Common Shares increased $21.8 million (60%) to $58.2
million for 1994 from $36.4 million for 1993, and increased from $15.3 million
to $36.4 million from 1992 to 1993. The increases resulted primarily from
increased properties in operation. Funds from Operations should not be
considered as an alternative to net earnings or any other GAAP measurement of
performance as an indicator of PTR's operating performance or as an alternative
to cash flows from operating, investing or financing activities as a measure of
liquidity.
REIT MANAGEMENT AGREEMENT
Effective March 1, 1991, PTR entered into a REIT management agreement (as
amended and restated, the "REIT Management Agreement") with the REIT Manager to
provide management services to PTR. All officers of PTR are employees of the
REIT Manager and PTR has no employees. See "Item 1. Business--The REIT Manager"
for a description of the services included in the REIT Management fee.
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement
("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash
Flow is calculated by reference to PTR's cash flow from operations before
deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses
incurred at the request of the independent Trustees of PTR, and (iii) 33% of
any interest paid by PTR on convertible subordinated debentures (of which there
have been none since inception of the REIT Management Agreement); and, after
deducting actual or assumed regularly scheduled principal and interest payments
for long term debt. The REIT Management Agreement provides that the long term
debt described above under "--Liquidity and Capital Resources" will be treated
as having regularly scheduled principal and interest payments like a 20-year,
level monthly payment, fully amortizing mortgage, and the assumed principal and
interest payments will be deducted from cash flow in determining the fee for
future periods. Cash Flow does not include realized gains from dispositions of
investments or income from cash equivalent investments. The REIT Manager also
receives a fee of .25% per year on the average daily balance of cash equivalent
investments. REIT management fees aggregated $13,182,000, $7,073,000 and
$2,711,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR, primarily travel expenses incurred in
seeking financing, property acquisitions, property sales, property development
and similar activities on behalf of PTR.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. PTR may terminate the REIT Management Agreement on 60 days' notice.
Because of the year-to-year nature of the agreement, its maximum effect on
PTR's results of operations cannot be predicted, other than that REIT
Management fees will generally increase or decrease in proportion to cash flow
increases or decreases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PTR's Balance Sheets as of December 31, 1994 and 1993, its Statements of
Earnings, Shareholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1994 and Schedule III--Real Estate and
Accumulated Depreciation, together with the report of KPMG Peat Marwick LLP,
independent auditors, are included under Item 14 of this report and are
incorporated herein by reference. Selected quarterly financial data is
presented in Note 8 of Notes to Financial Statements.
36
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding executive officers of PTR's REIT Manager, see "Item
1. Business--Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates." The other information required by this Item 10 is
incorporated herein by reference to the description under the captions
"Election of Trustees" and "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" in PTR's definitive proxy statement for its annual
meeting of shareholders scheduled to be held June 13, 1995 (the "1995 Proxy
Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Trustee Compensation," "PTR Officers--Employees of the REIT Manager" and
"Performance Graph" in the 1995 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the caption
"Principal Shareholders" in the 1995 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 1995 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Financial Statements on page 38 of this report.
2. Financial Statement Schedules:
Schedule III.
All other schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
3. Exhibits:
See Index to Exhibits, which is incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed during
the last quarter of the period covered by this report:
<TABLE>
<CAPTION>
ITEMS FINANCIAL
DATE REPORTED STATEMENTS
---- -------- ----------
<S> <C> <C>
November 30, 1994 Items 5, 7 Yes
</TABLE>
(c) Exhibits:
The Exhibits required by Item 601 of Regulation S-K are listed in the Index
to Exhibits, which is incorporated herein by reference.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
SECURITY CAPITAL PACIFIC TRUST:
Independent Auditors' Report............................................. 39
Balance Sheets as of December 31, 1994 and 1993.......................... 40
Statements of Earnings for the years ended December 31, 1994, 1993 and
1992.................................................................... 41
Statements of Shareholders' Equity for the years ended December 31, 1994,
1993 and 1992........................................................... 42
Statements of Cash Flows for the years ended December 31, 1994, 1993 and
1992.................................................................... 43
Notes to Financial Statements............................................ 44
Schedule III--Real Estate and Accumulated Depreciation as of December 31,
1994.................................................................... 56
</TABLE>
38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
SECURITY CAPITAL PACIFIC TRUST:
We have audited the financial statements of SECURITY CAPITAL PACIFIC TRUST
(formerly Property Trust of America) as listed in the accompanying index. In
connection with our audits of the financial statements, we also have audited
the financial statement schedule listed in the accompanying index. These
financial statements and financial statement schedule are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SECURITY CAPITAL PACIFIC TRUST
as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
El Paso, Texas
February 28, 1995, except as to Note 10,
which is as of March 23, 1995.
39
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
ASSETS 1994 1993
------ ---------- --------
<S> <C> <C>
Real estate.............................................. $1,296,288 $872,610
Less accumulated depreciation............................ 46,199 22,022
---------- --------
1,250,089 850,588
Mortgage notes receivable................................ 22,597 22,624
---------- --------
Total investments.................................... 1,272,686 873,212
Cash and cash equivalents................................ 8,092 5,525
Accounts receivable...................................... 1,657 763
Other assets............................................. 13,343 10,801
---------- --------
Total assets......................................... $1,295,778 $890,301
========== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Line of credit......................................... $ 102,000 $ 51,500
Long term debt......................................... 200,000 --
Mortgages payable...................................... 93,624 48,872
Distributions payable.................................. 14,506 11,161
Accounts payable....................................... 17,230 13,514
Accrued expenses and other liabilities................. 27,776 10,237
---------- --------
Total liabilities.................................... 455,136 135,284
---------- --------
Shareholders' equity:
Series A Preferred shares (9,200,000 shares authorized
and issued; stated liquidation preference of $25 per
share)................................................ 230,000 230,000
Common shares (shares issued--50,620,516 in 1994 and
44,809,208 in 1993)................................... 50,621 44,809
Additional paid-in capital............................. 622,161 523,053
Distributions in excess of net earnings................ (60,211) (40,916)
Treasury shares (164,478 in 1994 and 164,474 in 1993).. (1,929) (1,929)
---------- --------
Total shareholders' equity........................... 840,642 755,017
---------- --------
Total liabilities and shareholders' equity........... $1,295,778 $890,301
========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Rental income...................................... $183,472 $76,129 $30,970
Interest........................................... 2,633 2,289 1,809
-------- ------- -------
186,105 78,418 32,779
-------- ------- -------
Expenses:
Rental expenses.................................... 79,013 30,484 11,473
Depreciation....................................... 24,614 10,509 5,311
Interest........................................... 19,442 3,923 3,214
General and administrative, including REIT manage-
ment fee.......................................... 13,966 7,733 3,147
Provision for possible loss on investments......... 1,600 2,270 400
Other.............................................. 751 308 197
-------- ------- -------
139,386 55,227 23,742
-------- ------- -------
Earnings from operations............................. 46,719 23,191 9,037
Gain (loss) on sale of investments, net.............. -- 2,302 (51)
-------- ------- -------
Net earnings......................................... 46,719 25,493 8,986
Less Series A Preferred share dividends.............. 16,100 1,341 --
-------- ------- -------
Net earnings attributable to common shares......... $ 30,619 $24,152 $ 8,986
======== ======= =======
Weighted average common shares outstanding........... 46,734 36,549 19,435
======== ======= =======
Per share net earnings attributable to common shares. $ 0.66 $ 0.66 $ 0.46
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL INTEREST
$1 PAR VALUE
-------------------
SERIES A
PREFERRED
SHARES AT COMMON DISTRIBUTIONS
AGGREGATE SHARES ADDITIONAL IN EXCESS
LIQUIDATION AT PAR PAID-IN OF NET TREASURY
PREFERENCE VALUE CAPITAL EARNINGS SHARES TOTAL
----------- ------- ---------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1991................... $ -- $13,264 $110,867 $(20,672) $(1,146) $102,313
Net earnings.......... -- -- -- 8,986 -- 8,986
Common Share distribu-
tions................ -- -- -- (13,059) -- (13,059)
Sale of shares, net of
expenses............. -- 13,241 129,992 -- -- 143,233
Dividend Reinvestment
and Share
Purchase Plan, net... -- 471 4,995 -- -- 5,466
Exercise of stock op-
tions, net........... -- 215 1,564 -- -- 1,779
Cost of treasury
shares exchanged..... -- -- -- -- (669) (669)
-------- ------- -------- -------- ------- --------
Balances at December 31,
1992................... -- 27,191 247,418 (24,745) (1,815) 248,049
Net earnings.......... -- -- -- 25,493 -- 25,493
Common share distribu-
tions paid........... -- -- -- (29,162) -- (29,162)
Common share distribu-
tions
accrued.............. -- -- -- (11,161) -- (11,161)
Preferred share divi-
dends paid........... -- -- -- (1,341) -- (1,341)
Sale of shares, net of
expenses............. 230,000 17,072 267,122 -- -- 514,194
Dividend Reinvestment
and Share
Purchase Plan, net... -- 449 7,522 -- -- 7,971
Exercise of stock op-
tions, net........... -- 97 991 -- -- 1,088
Cost of treasury
shares purchased..... -- -- -- -- (114) (114)
-------- ------- -------- -------- ------- --------
Balances at December 31,
1993................... 230,000 44,809 523,053 (40,916) (1,929) 755,017
Net earnings.......... -- -- -- 46,719 -- 46,719
Common share distribu-
tions paid........... -- -- -- (34,960) -- (34,960)
Redemption of share-
holder
purchase rights...... -- -- -- (448) -- (448)
Common share distribu-
tions
accrued.............. -- -- -- (14,506) -- (14,506)
Preferred share divi-
dends paid........... -- -- -- (16,100) -- (16,100)
Sale of shares, net of
expenses............. 5,594 95,482 -- -- 101,076
Dividend Reinvestment
and Share
Purchase Plan, net... -- 216 3,607 -- -- 3,823
Exercise of stock op-
tions, net........... -- 2 19 -- -- 21
-------- ------- -------- -------- ------- --------
Balances at December 31,
1994................... $230,000 $50,621 $622,161 $(60,211) $(1,929) $840,642
======== ======= ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net earnings................................ $ 46,719 $ 25,493 $ 8,986
Adjustments to reconcile net earnings to
cash flows provided
by operating activities
Depreciation and amortization............. 26,517 12,219 5,657
Provision for possible loss on invest-
ments.................................... 1,600 2,270 400
Loss (gain) on investment properties...... -- (2,302) 51
Other, net................................ -- 83 174
Increase in accounts payable................ 3,463 9,996 2,565
Increase in accrued real estate taxes....... 7,874 2,156 1,718
Increase in accrued interest on long term
debt....................................... 5,391 -- --
Increase in accrued expenses and other lia-
bilities................................... 4,264 3,039 1,443
Net change in other operating assets........ (1,203) (3,707) (742)
--------- --------- ---------
Net cash flow provided by operating activ-
ities.................................... 94,625 49,247 20,252
--------- --------- ---------
Investing activities:
Real estate investments..................... (380,688) (536,622) (231,159)
Mortgage notes receivable................... 27 1,323 1,141
Sale of investment properties, net.......... 12,146 6,389 615
Other....................................... -- (155) (86)
--------- --------- ---------
Net cash flow used in investment activi-
ties..................................... (368,515) (529,065) (229,489)
--------- --------- ---------
Financing activities:
Proceeds from sale of shares, net of ex-
penses..................................... 101,076 514,194 143,233
Proceeds from line of credit................ 266,250 282,500 175,099
Proceeds from dividend reinvestment and
share purchase plan, net................... 3,823 7,971 5,466
Proceeds from long term debt................ 200,000 -- --
Proceeds from exercise of stock options,
net........................................ 21 1,088 1,110
Distributions paid on common shares......... (46,121) (29,162) (13,059)
Redemption of shareholder purchase rights... (448) -- --
Dividends paid on preferred shares.......... (16,100) (1,341) --
Debt issuance costs incurred................ (4,422) (3,109) (1,373)
Payments on line of credit.................. (215,750) (285,802) (120,398)
Regularly scheduled principal payments on
mortgages payable.......................... (1,398) (682) (513)
Prepayment of mortgages payable............. (10,474) (7,198) (4,435)
Purchase of treasury shares................. -- (114) --
--------- --------- ---------
Net cash flow provided by financing activ-
ities.................................... 276,457 478,345 185,130
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 2,567 (1,473) (24,107)
Cash and cash equivalents at beginning of
year......................................... 5,525 6,998 31,105
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 8,092 $ 5,525 $ 6,998
========= ========= =========
Non-cash investing and financing activities:
Receipt of purchase money notes from sale of
non-multifamily
properties................................. -- $ 12,413 $ 6,779
Assumption of mortgages payable upon pur-
chase of multifamily properties............ $ 56,624 $ 26,952 $ --
Accrual of common share distributions....... $ 14,506 $ 11,161 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
SECURITY CAPITAL PACIFIC TRUST ("PTR"), formerly Property Trust of America,
is an equity real estate investment trust, organized under the laws of the
state of Maryland, which primarily owns, develops, acquires and operates
income-producing multifamily properties in the western United States.
Principles of Financial Presentation
The accounts of PTR and its wholly owned subsidiaries are consolidated in the
accompanying financial statements. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
PTR considers all cash on hand, demand deposits with financial institutions
and short term, highly liquid investments with original maturities of three
months or less to be cash equivalents.
Real Estate and Depreciation
Real estate is carried at cost, which is not in excess of net realizable
value.
Costs directly related to the acquisition (including certain renovation costs
identified during PTR's pre-acquisition due diligence), development or
improvement of real estate, are capitalized. Costs incurred in connection with
the pursuit of unsuccessful acquisitions or developments are expensed at the
time the pursuit is abandoned.
Depreciation is computed over the expected useful lives of depreciable
property on a straight-line basis. Properties are depreciated principally over
the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements... 20-40 years
Furnishings and other........ 2-10 years
</TABLE>
Repairs and Maintenance
Repairs and maintenance, other than acquisition related renovation
expenditures, are expensed as incurred. PTR expenses carpet and appliance
repairs and replacements after any acquisition related renovation expenditures
for such items have been incurred.
Interest
During 1994, 1993 and 1992, the total interest paid in cash on all
outstanding debt, net of interest capitalized, was $11,949,000, $2,231,000 and
$2,654,000, respectively.
PTR capitalizes interest as part of the cost of real estate properties under
development. Interest capitalized during 1994, 1993 and 1992 aggregated
$6,029,000, $2,818,000 and $989,000, respectively.
Cost of Raising Capital
Costs incurred in connection with the issuance of equity securities are
deducted from shareholders' equity. Costs incurred in connection with the
incurrence or renewal of debt are capitalized, included with
44
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
other assets and amortized over the term of the related loan in the case of
incurrence costs or twelve months in the case of renewal costs. Amortization of
loan costs included in interest expense for the years ended December 31, 1994,
1993 and 1992 was $1,903,000, $1,845,000, and $426,000, respectively.
Revenue Recognition
Rental and interest income are recorded on the accrual method of accounting.
A provision for possible loss is made when collection of receivables is
considered doubtful.
Federal Income Taxes
PTR has made an election to be taxed as a real estate investment trust under
the Internal Revenue Code of 1986, as amended. PTR believes it qualifies as a
real estate investment trust. Accordingly, no provisions have been made for
federal income taxes in the accompanying financial statements.
Per Share Data
Per share data is computed based upon the weighted average number of Common
Shares of Beneficial Interest, par value $1.00 per share ("Common Shares"),
outstanding during the period. Exercise of the outstanding stock options would
not have a material dilutive effect on earnings per share. The assumed
conversion of Cumulative Convertible Series A Preferred Shares of Beneficial
Interest, par value $1.00 per share ("Preferred Shares"), is anti-dilutive in
1994 and 1993.
Reclassifications
Certain of the 1993 and 1992 financial statements and notes to financial
statements amounts have been reclassified to conform to the 1994 presentation.
(2) REAL ESTATE
Investments
Investments in real estate, at cost, were as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1994 1993
----------------- -----------------
INVESTMENT UNITS INVESTMENT UNITS
---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Multifamily:
Operating properties................ $1,121,301 31,640 $730,994 22,493
Developments under construction..... 100,401 4,526 84,395 3,048
Developments in planning............ 33,194 4,306 17,490 2,550
Land held for future development.... 7,977 -- 4,208 --
---------- ------ -------- ------
Total Multifamily................. 1,262,873 40,472 837,087 28,091
====== ======
Non-multifamily....................... 33,415 35,523
---------- --------
Total real estate................. $1,296,288 $872,610
========== ========
</TABLE>
At December 31, 1994 PTR had unfunded commitments for developments under
construction of $115.7 million.
45
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The change in investments in real estate, at cost, consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Balance at January 1..................... $ 872,610 $337,274 $117,572
Acquisitions and renovation expenditures. 270,024 449,500 188,411
Development expenditures, including land
acquisitions............................ 155,849 108,056 41,733
Acquisitions of land held for future
development............................. 7,977 4,208 --
Capital improvements..................... 3,912 1,639 1,015
Real estate sold......................... (12,287) (24,953) (10,814)
Provisions for possible losses........... (1,600) (2,270) (400)
Other.................................... (197) (844) (243)
---------- -------- --------
Balance at December 31................... $1,296,288 $872,610 $337,274
========== ======== ========
</TABLE>
Gains and Losses from Sales of Real Estate
PTR develops and acquires properties with a view to effective long term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio allocation, PTR may from time to time seek to dispose of
assets that in management's view do not meet PTR's long term investment
criteria and redeploy the proceeds therefrom, preferably through like kind
exchanges, into assets that it believes provide better long term growth
opportunities.
PTR focuses its investment and development activities on multifamily
properties. PTR will continue to aggressively manage its non-multifamily
properties in order to maximize cash flow, and disposition of such non-
multifamily properties may occur as opportunities arise. Properties are
periodically evaluated for net realizable value and provisions for possible
losses are made if required.
PTR is a minority partner with a 40% interest in a partnership which owns and
operates an office building near Dallas, Texas. During the first quarter of
1994, the partnership adopted a strategy of disposing of the property rather
than continuing to hold the property as a long term investment. As a result,
the managing partner evaluated the building for net realizable value which
resulted in a provision for possible loss of $4 million. PTR's share of the
loss provision is $1.6 million as reflected in the December 31, 1994 statement
of earnings. PTR's net carrying value after the provision is $2.8 million. This
provision has no impact on cash flow from operating activities nor does PTR
have any financial obligation to the partnership.
(3) BORROWINGS
Line of Credit
During 1994, PTR converted its $200 million revolving line of credit facility
with Texas Commerce Bank, National Association, as agent bank for a group of
lenders ("TCB"), into an unsecured facility and increased this line of credit
from $200 million to $275 million. Borrowings bear interest at the greater of
prime or federal funds rate plus 1/2% or at PTR's option, LIBOR plus 1.75% to
2% (varying depending upon the rating of PTR's senior unsecured debt by
Standard & Poor's Corporation--1.75% at December 31, 1994). Additionally, there
is a commitment fee of .125% per annum of the unfunded line of credit balance.
The TCB line matures August 1996 and may annually be extended for an
additional year with the approval of TCB. All debt incurrences are subject to
covenants, as more fully described in the loan agreement. PTR was in compliance
with all covenants at December 31, 1994. (See Note 10.)
46
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of PTR's line of credit borrowings is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Total line of credit........................... $275,000 $200,000 $86,370
Borrowings outstanding at December 31.......... 102,000 51,500 54,802
Weighted average daily borrowings.............. 59,890 40,555 12,694
Maximum borrowings outstanding at any month
end........................................... $124,000 $ 83,010 $63,550
Weighted average daily interest rate........... 7.4% 6.3% 6.6%
Weighted average interest rate at December 31.. 7.8% 6.0% 6.2%
</TABLE>
Long Term Debt
On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008
("the 2008 Notes") and $100 million of 7.5% Senior Notes due 2014 ("the 2014
Notes", collectively referred to as "the Notes").
The 2008 Notes bear interest at 6.875% per annum and require annual principal
payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear
interest at 7.5% per annum and require annual principal payments of $10 million
in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012, $20
million in 2013 and $25 million in 2014. Collectively, the Notes have an
average life to maturity of 14.25 years and an average effective interest cost,
net of offering discounts, issuance costs and proceeds from an interest rate
protection agreement, of 7.37% per annum. The Notes are redeemable any time at
the option of PTR, in whole or in part, at a redemption price equal to the sum
of the principal amount of the Notes being redeemed plus accrued interest
thereon to the redemption date plus a yield to maturity adjustment. The Notes
are governed by the terms and provisions of an indenture agreement ("the
Indenture") between PTR and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, PTR can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40%, and (iii) PTR's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5. As of December 31, 1994, PTR was in compliance
with all debt covenants.
Based on market borrowing rates available to PTR for long term debt with
similar terms and maturities, the fair value of long term debt was
approximately $175.9 million at December 31, 1994, compared to book value of
$200 million.
47
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Mortgages Payable
Mortgages payable consisted of the following at December 31, 1994 (dollars in
thousands):
<TABLE>
<CAPTION>
BALLOON
PAYMENT
INTEREST MATURITY PERIODIC PAYMENT PRINCIPAL DUE AT
PROPERTY RATE DATE TERMS BALANCE MATURITY
-------- -------- -------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE
Braeswood Park........ 7.500% 01/01/98 (1) $ 7,008 $6,635
Brompton Court........ 8.375% 09/01/00 (1) 14,750 13,340
Chasewood............. 6.750% 06/01/97 (1) 9,612 9,303
Park Place I & II..... 10.250% 11/01/00 (1) 7,091 6,645
Presidio at South
Mountain............. 8.500% 10/01/97 (1) 14,742 14,337
Seahawk............... 8.040% 01/10/98 (1) 5,577 5,350
Silvercliff........... 7.650% 11/10/97 (1) 7,550 7,304
Spring Park........... 10.125% 09/27/00 (1) 4,330 4,063
Tigua Village I....... 10.000% 08/01/95 (1) 305 303
Tigua Village II...... 9.750% 05/01/97 (1) 703 677
-------
71,668
-------
TAX EXEMPT FIXED RATE
Windsail.............. 8.875% 02/01/99 (1) 4,888 4,675
-------
TAX EXEMPT FLOATING RATE
Apple Creek........... (2) 09/01/07 interest only 11,100 11,100
-------
COMBINED(3)
Las Flores............ 7.750% 03/01/25 fully amortizing 5,968 --
-------
$93,624
=======
</TABLE>
--------
(1) Amortizing monthly with a balloon payment due at maturity.
(2) Adjusted weekly by the remarketing agent. Weighted average daily interest
rate was 5.68% for 1994.
(3) In 1990, the Las Flores apartments were refinanced pursuant to multi-family
bonds aggregating $6.2 million. The bonds consist of $4.5 million Series A
tax exempt fixed rate bonds and $1.7 million Series B taxable fixed rate
bonds. The bonds are guaranteed by the GNMA mortgage-backed securities
program.
Mortgages payable are secured by real estate with an aggregate undepreciated
cost of $156,510,000 at December 31, 1994. Based on market borrowing rates
available to PTR for mortgages with similar terms and average maturities, the
fair value of mortgages payable was approximately $96,493,000 and $51,350,000
as compared to a book value of $93,624,000 and $48,872,000 at December 31, 1994
and 1993, respectively.
The mortgages which secure tax exempt housing bonds contain covenants which
require that a minimum percentage of units (generally 20% to 30%) be rented to
individuals whose income does not exceed levels specified by U.S. Government
programs. The tax exempt floating rate mortgage is secured by a letter of
credit of $12,195,000. The fee for this letter of credit is 1.6% per annum of
the outstanding mortgage payable balance. This letter of credit contains
certain covenants, all of which PTR was in compliance with at December 31,
1994.
The change in mortgages payable consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balances at January 1.......................... $48,872 $30,824 $35,772
Notes originated or assumed.................... 56,624 26,952 --
Principal payments............................. (11,872) (7,880) (4,948)
Liquidated upon sale of properties............. -- (1,024) --
------- ------- -------
Balance at December 31......................... $93,624 $48,872 $30,824
======= ======= =======
</TABLE>
48
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Approximate principal payments due during each of the years in the five-year
period ending December 31, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
LONG
TERM
MORTGAGES DEBT TOTAL
--------- -------- --------
<S> <C> <C> <C>
1995.......................................... $ 1,938 $ -- $ 1,938
1996.......................................... 1,008 -- 1,008
1997.......................................... 37,228 -- 37,228
1998.......................................... 7,142 -- 7,142
1999.......................................... 5,181 -- 5,181
Thereafter.................................... 41,127 200,000 241,127
------- -------- --------
$93,624 $200,000 $293,624
======= ======== ========
</TABLE>
(4) DISTRIBUTIONS
PTR's current policy is to pay distributions to shareholders based upon funds
from operations and aggregating annually at least 95% of its taxable income.
Funds from operations is not to be construed as a substitute for "net earnings"
in evaluating operating results nor as a substitute for "cash flow" in
evaluating liquidity. Funds from operations for the three years ended December
31, 1994 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net earnings attributable to common shares...... $30,619 $24,152 $ 8,986
Add (Deduct):
Depreciation and amortization............... 25,989 12,219 5,657
Provision for possible loss on investments.. 1,600 2,270 400
Gain on sale of investments................. -- (2,302) 51
Other....................................... -- 83 174
------- ------- -------
Funds from operations attributable to common
shares......................................... 58,208 36,422 15,268
Distributions paid to common shareholders ...... 46,121 29,162 13,059
------- ------- -------
Excess of funds from operations after distribu-
tions ......................................... $12,087 $ 7,260 $ 2,209
======= ======= =======
Weighted average shares outstanding............. 46,734 36,549 $19,435
======= ======= =======
</TABLE>
For federal income tax purposes, the following summarizes the taxability of
distributions paid on Common Shares in 1993 and 1992 and the estimated
taxability for 1994:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1994 1993 1992
----- ---- ----
<S> <C> <C> <C>
Per Common Share:
Ordinary income......................................... $ .68 $.65 $.67
Capital gains........................................... -- .11 .03
Return of capital....................................... .32 .06 --
----- ---- ----
Total................................................. $1.00 $.82 $.70
===== ==== ====
</TABLE>
On December 6, 1994 PTR declared a distribution of $.2875 per Common Share
payable on February 13, 1995 to shareholders of record as of February 2, 1995.
At the same time, PTR announced that it plans to pay a total distribution of
$1.15 per Common Share in 1995.
49
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On July 21, 1994, in addition to the distributions paid, PTR redeemed the
shareholder purchase rights issued pursuant to the Rights Agreement dated as of
February 23, 1990, as amended. Pursuant to the redemption, each holder of
record at the close of business on July 21, 1994 was entitled to receive $0.01
per shareholder purchase right. The redemption price was paid on August 12,
1994 and is taxable as ordinary income for federal income tax purposes.
For federal income tax purposes, the following summary reflects the
taxability of dividends paid on Preferred Shares for the period from the date
of issuance (November 29, 1993) through December 31, 1993 and the estimated
taxability for 1994:
<TABLE>
<CAPTION>
DATE OF
ISSUANCE
1994 12/31/93
----- --------
<S> <C> <C>
Per Preferred Share:
Ordinary income.......................................... $1.75 $.1231
Capital gains............................................ -- .0227
----- ------
Total.................................................. $1.75 $.1458
===== ======
</TABLE>
PTR's tax return for the year ended December 31, 1994 has not been filed, and
the taxability information for 1994 is based upon the best available data.
PTR's tax returns have not been examined by the Internal Revenue Service and,
therefore, the taxability of the dividends is subject to change.
(5) MORTGAGE NOTES RECEIVABLE
The change in investments in mortgage notes receivable, which have originated
principally in connection with PTR's sale of non-multifamily properties,
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Balances at January 1 ......................... $22,624 $10,981 $ 5,343
Notes originated............................... 162 12,966 6,779
Collection of principal........................ (189) (1,323) (1,141)
------- ------- -------
Balance at December 31......................... $22,597 $22,624 $10,981
======= ======= =======
</TABLE>
Interest rates on mortgage notes receivable range from 7.5% to 11% with a
weighted average rate of 9.19%. Maturity dates on mortgage notes receivable
range from 1995 to 2008.
The aggregate face amount of mortgage notes receivable at December 31, 1994
was $24,176,000. Aggregate cost for federal income tax purposes was the same as
the balance at December 31 for the three years shown above. The carrying value
of mortgage notes receivable at December 31, 1994 and 1993 approximates fair
value.
(6) SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
At December 31, 1994, 150,000,000 Shares of Beneficial Interest, $1.00 par
value per share, were authorized. PTR's Board of Trustees is authorized to
issue, from the authorized but unissued shares of PTR, preferred shares in
series and to establish from time to time the number of preferred shares to be
included in
50
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
such series and to fix the designation and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption of the shares of each
series.
Preferred Shares
The Preferred Shares have a liquidation preference of $25 per share for an
aggregate liquidation preference of $230,000,000 plus any accrued but unpaid
distributions. The net proceeds (after underwriting commission and other
offering costs) of the Preferred Shares issued was $219,670,000. Holders of the
Preferred Shares are entitled only to limited voting rights under certain
conditions. Each Preferred Share is convertible, in whole or in part, at the
option of the holder at any time, unless previously redeemed, into 1.2162 of
PTR's Common Shares (a conversion price of $20.56 per share). Distributions on
the Preferred Shares are cumulative in an amount per share equal to the greater
of $1.75 per annum or the annualized quarterly PTR distribution rate on the
Common Shares into which the Preferred Shares are convertible, payable
quarterly in arrears on the last day of March, June, September and December of
each year. The Preferred Shares are redeemable at the option of PTR after
November 30, 2003.
Option Plan
In January 1987, PTR adopted its Share Option Plan for Outside Trustees (the
"1987 Plan"). Under the 1987 Plan, there are 126,000 Common Shares approved
which can be granted to non-employee Trustees. All options granted are for a
term of five years and are exercisable in whole or in part. The exercise price
of the options granted may not be less than the fair market value on the date
of grant. At December 31, 1994 there were 20,000 options for Common Shares
outstanding and exercisable under the 1987 Plan at exercise prices ranging from
$10.625 to $18.875 per Common Share.
Ownership Restrictions and Significant Shareholder
PTR's Restated Declaration of Trust and the Articles Supplementary, restrict
beneficial ownership (or ownership generally attributed to a person under the
REIT tax rules) of PTR's outstanding shares by a single person, or persons
acting as a group, to 9.8% of the Common Shares and 25% of the Preferred
Shares. The purpose of these provisions are to assist in protecting and
preserving PTR's REIT status and to protect the interests of shareholders in
takeover transactions by preventing the acquisition of a substantial block of
shares unless the acquiror makes a cash tender offer for all outstanding
shares. For PTR to qualify as a REIT under the Internal Revenue Code of 1986,
as amended, not more than 50% in value of its outstanding capital shares may be
owned by five or fewer individuals at any time during the last half of PTR's
taxable year. The provision permits five persons to acquire up to a maximum of
9.8% each of the Common Shares, or an aggregate of 49% of the outstanding
Common Shares, and thus assists the Trustees in protecting and preserving PTR's
REIT status for tax purposes.
Common Shares owned by a person or group of persons in excess of the 9.8%
limit are subject to redemption by PTR. The provision does not apply where a
majority of the Board of Trustees, in its sole and absolute discretion, waives
such limit after determining that the eligibility of PTR to qualify as a REIT
for federal income tax purposes will not be jeopardized or the disqualification
of PTR as a REIT is advantageous to the shareholders.
The Board of Trustees has permitted Security Capital Group Incorporated
(which reflects the imminent name change from Security Capital Realty
Incorporated, referred to herein as "Security Capital Group"), the owner of the
REIT Manager (see Note 7), to acquire up to 49% of PTR's outstanding Common
Shares. Security Capital Group's ownership of Common Shares is attributed for
tax purposes to its shareholders.
51
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Security Capital Group owned 31.85% of PTR's total outstanding Common Shares at
December 31, 1994 (See Note 10). Pursuant to an agreement between Security
Capital Group and PTR, Security Capital Group has agreed to acquire no more
than 49% of the Common Shares outstanding, except pursuant to an all-cash
tender offer for all Common Shares held open for 90 days. Security Capital
Group would have no limitation on making a tender offer if an unrelated third
party commences such a tender offer.
Shareholder Purchase Rights
On February 23, 1990, PTR declared a dividend distribution of one shareholder
purchase right ("Right") for each outstanding Common Share to be distributed to
all holders of record of the Common Shares on February 23, 1990. Each Right
entitled the holder to purchase one Common Share for an exercise price of
$32.50 per share, subject to adjustment as provided in the Rights Agreement.
The Rights were exercisable only if a person or group acquired 20% or more of
PTR's Common Shares (32% in the case of Security Capital Group and certain
defined affiliates) or announced a tender offer for 25% or more of the Common
Shares. Under certain circumstances, including a shareholder acquisition of 20%
or more of the Common Shares, each Right would entitle the holder to purchase
Common Shares or securities of the acquiring company, which would have a
dilutive effect on the acquiring company and deter it from taking coercive
actions against PTR shareholders. The Rights held by certain 20% shareholders
would be exercisable.
On July 11, 1994, the Board of Trustees of PTR announced the redemption,
effective at the close of business on July 21, 1994, of the shareholder
purchase rights issued pursuant to the Rights Agreement, dated as of February
23, 1990, as amended. Pursuant to the redemption, each holder of record at the
close of business on July 21, 1994 was entitled to receive $0.01 per
shareholder purchase right. The redemption price was paid on August 12, 1994.
In addition, the Board of Trustees declared a distribution of one preferred
share purchase right (a "Purchase Right") for each Common Share outstanding,
payable to holders of Common Shares of record at the close of business on July
21, 1994. Each Purchase Right entitles the holder under certain circumstances
to purchase from PTR one one-hundredth of a share of Series B Junior
Participating Preferred Share, par value $1.00 per share (the "Participating
Preferred Shares"), at a price of $60.00 per one one-hundredth of a
Participating Preferred Share, subject to adjustment. Purchase Rights are
exercisable when a person or group of persons acquires 20% or more of the
outstanding Common Shares (49% in the case of Security Capital Group and
certain defined affiliates) or announces a tender offer for 25% or more of the
outstanding Common Shares. Under certain circumstances, each Purchase Right
entitles the holder to purchase, at the Purchase Right's then current exercise
price, a number of Common Shares having a market value of twice the Purchase
Right's exercise price. The acquisition of PTR pursuant to certain mergers or
other business transactions would entitle each holder to purchase, at the
Purchase Right's then current exercise price, a number of the acquiring
company's common shares having a market value at that time equal to twice the
Purchase Right's exercise price. The Purchase Rights will expire in July 2004
and are subject to redemption in whole, but not in part, at a price of $0.01
per Purchase Right payable in cash, shares of PTR or any other form of
consideration determined by PTR's Board of Trustees.
Shelf Registration
On May 13, 1994 and December 1, 1994, PTR filed additional shelf registration
statements with the Securities and Exchange Commission. PTR registered an
aggregate of $650 million of securities ($325 million of securities in each
shelf registration statement) which can be issued in the form of debt
securities, preferred shares of beneficial interest, common shares of
beneficial interest, shareholder purchase rights or subscription rights for
common shares of beneficial interest. As of December 31, 1994, $564.8 million
in securities were available to be issued under PTR's shelf registrations. (See
Note 10)
52
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) REIT MANAGEMENT AND PROPERTY MANAGEMENT AGREEMENTS
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with Security Capital Pacific Incorporated (the
"REIT Manager"), formerly Security Capital (Southwest) Incorporated to provide
management services to PTR. The REIT Manager is a subsidiary of Security
Capital Group (see note 6). All officers of PTR are employees of the REIT
Manager and PTR has no employees. The REIT Manager provides both strategic and
day-to-day management of PTR, including research, investment analysis,
acquisition and development, asset management, capital markets, legal and
accounting services.
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement
("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash
Flow is calculated by reference to PTR's cash flow from operations before
deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses
incurred at the request of the independent Trustees of PTR, and (iii) 33% of
any interest paid by PTR on convertible subordinated debentures (of which there
has been none since inception of the REIT Management Agreement); and, after
deducting actual or assumed regularly scheduled principal and interest payments
on long term debt. The REIT Management Agreement has been amended so that the
long term senior notes described in Note 3 will be treated as if they had
regularly scheduled principal and interest payments like a 20-year level
monthly payment, fully amortizing mortgage and the assumed principal and
interest payments will be deducted from cash flow in determining the fee for
future periods. Cash Flow does not include realized gains from dispositions of
investments or income from cash equivalent investments. The REIT Manager also
receives a fee of .25% per year on the average daily balance of cash equivalent
investments.
REIT management fees aggregated $13,182,000, $7,073,000 and $2,711,000 for
the years ended December 31, 1994, 1993 and 1992, respectively.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR, primarily travel expenses incurred in
seeking financing, property acquisitions and developments, property sales and
similar activities on behalf of PTR.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. PTR may terminate the REIT Management Agreement on 60 days' notice.
Because of the year-to-year nature of the agreement, its maximum effect on
PTR's results of operations cannot be predicted, other than that REIT
management fees will generally increase or decrease in proportion to cash flow
increases or decreases.
SCG Realty Services Incorporated ("SCG Realty Services") has managed and
currently manages a substantial majority of PTR's operating multifamily
properties. For the years ended December 31, 1994, 1993 and 1992, PTR paid SCG
Realty Services aggregate fees of $7,148,000, $3,862,000 and $1,424,000,
respectively. In addition to property management, SCG Realty Services has
performed certain due diligence services for PTR's acquisitions. Effective
October 1, 1994, SCG Realty Services no longer performed due diligence services
for PTR. Security Capital Group is the sole shareholder of SCG Realty Services.
Rates for services performed by SCG Realty Services are subject to annual
approval by PTR's independent Trustees (who receive an annual review from an
independent third party) and are at rates prevailing in the markets in which
PTR operates.
53
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data (in thousands except for per share amounts)
for 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
3-31 6-30 9-30 12-31 TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1994:
Rental Income................. $37,414 $43,390 $50,299 $52,369 $183,472
======= ======= ======= ======= ========
Earnings from operations...... 9,512 10,765 12,727 13,715 46,719
Less Series A Preferred Share
dividends.................... 4,025 4,025 4,025 4,025 16,100
------- ------- ------- ------- --------
Net earnings attributable to
Common Shares................ $ 5,487 $ 6,740 $ 8,702 $ 9,690 $ 30,619
======= ======= ======= ======= ========
Net earnings per Common Share. $ 0.12 $ 0.15 $ 0.18 $ 0.19 $ 0.66
======= ======= ======= ======= ========
Funds from operations attrib-
utable to common shares...... $12,722 $13,271 $15,323 $16,892 $ 58,208
======= ======= ======= ======= ========
Weighted Average Shares 44,668 44,724 47,051 50,413 46,734
======= ======= ======= ======= ========
1993:
Rental Income................. $14,099 $16,881 $19,872 $25,277 $ 76,129
======= ======= ======= ======= ========
Earnings from operations...... 4,488 3,347 6,454 8,902 23,191
Gain on sale of investments... -- 2,302 -- -- 2,302
Less Series A Preferred Share
dividends.................... -- -- -- 1,341 1,341
------- ------- ------- ------- --------
Net earnings attributable to
Common Shares................ $ 4,488 $ 5,649 $ 6,454 $ 7,561 $ 24,152
======= ======= ======= ======= ========
Net earnings per Common Share. $ 0.15 $ 0.16 $ 0.18 $ 0.17 $ 0.66
======= ======= ======= ======= ========
Funds from operations attrib-
utable to common shares...... $ 6,716 $ 8,350 $ 9,513 $11,843 $ 36,422
======= ======= ======= ======= ========
Weighted Average Shares 30,742 35,263 35,742 44,620 36,549
======= ======= ======= ======= ========
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
PTR is a party to various claims and routine litigation arising in the
ordinary course of business. PTR does not believe that the results of all
claims and litigation, individually or in the aggregate, will have a material
adverse effect on its business, financial position or results of operations.
PTR is subject to environmental regulations related to the ownership,
operation, development and acquisition of real estate. As part of due diligence
procedures, since 1984 PTR has conducted Phase I environmental assessments on
each property prior to acquisition. The cost of complying with environmental
regulations was not material to PTR's results of operations for any of the
years in the three year period ended
54
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
December 31, 1994. PTR is not aware of any environmental condition on any of
its properties which is likely to have a material adverse effect on PTR's
financial condition or results of operations.
(10) SUBSEQUENT EVENTS
On March 23, 1995, PTR acquired Security Capital Pacific Incorporated
("PACIFIC"). PACIFIC was a private multifamily REIT controlled by Security
Capital Group, PTR's principal shareholder. Under the terms of the merger PTR
issued 8,468,460 shares to PACIFIC stockholders which represented .611 Common
Shares of PTR for each share of PACIFIC common stock. The exchange ratio was
fixed on the date of the Merger Agreement (December 6, 1994) and was based on
PTR's then trading price per Common Share of $16.375. PTR changed its name to
Security Capital Pacific Trust in conjunction with the merger in order to more
accurately reflect PTR's expanded target market.
Concurrently with the consummation of the merger, PTR completed a
subscription offering of Common Shares pursuant to which PTR received
subscriptions for $216.6 million (13.2 million Common Shares). The subscription
offering was designed to allow shareholders of PTR to purchase Common Shares at
the same price PACIFIC shareholders were acquiring Common Shares in the Merger
($16.375 per Common Share). Security Capital Group purchased $50 million (3.1
million) of Common Shares of the subscription offering.
Concurrent with the merger, PTR increased its unsecured revolving line of
credit facility to $350 million and received a reduction in the interest rate
to the greater of prime or the federal funds rate plus 0.50% or, at PTR's
option, LIBOR plus 1.625% (which can vary from LIBOR plus 1.25% to LIBOR plus
2.0% based upon the rating of PTR's senior unsecured debt).
In connection with such merger, PTR paid off the balance outstanding ($51.9
million) on PACIFIC's line of credit and assumed the following mortgages
relating to PACIFIC properties acquired (unaudited, dollars in thousands):
<TABLE>
<CAPTION>
PRINCIPAL BALLOON
PERIODIC BALANCE AT PAYMENT
INTEREST MATURITY PAYMENT MARCH 23, DUE AT
PROPERTY RATE DATE TERMS 1995 MATURITY
-------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE:
Sunterra................... 8.250% 03/01/00 (1) $ 8,368 $ 7,597
Greenpointe................ 8.500% 03/01/00 (1) 3,737 3,403
Mountain Shadow............ 8.500% 03/01/00 (1) 3,431 3,124
Knight's Castle............ 6.560% 10/01/96 (1) 7,714 7,498
Anchor Village............. 7.875% 12/01/98 (1) 26,742 25,105
-------
49,992
-------
TAX EXEMPT FIXED RATE:
Cherry Creek............... various various (1) 4,410 2,630
-------
$54,402
=======
</TABLE>
--------
(1) Amortizing monthly with a balloon payment due at maturity.
On March 17, 1995, the United States District Court for the Western District
of Texas, El Paso Division granted defendants' motion to dismiss with prejudice
the action entitled Ferro v. C. Ronald Blankenship, et al. (Case No. EP 95 CA
004) filed on January 4, 1995 by a party alleging to be a shareholder of PTR
against PTR, PACIFIC, Security Capital Group and the individual members of the
PTR Board. The lawsuit had alleged breaches of fiduciary duties and other
matters pertaining to the merger of PACIFIC with and into PTR. PTR believes
that the lawsuit was without merit and will not have any material adverse
effect on PTR's financial condition or results of operations.
55
<PAGE>
SCHEDULE III
SECURITY CAPITAL PACIFIC TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO CARRIED AT DECEMBER 31,
PTR COSTS 1994
------------------ CAPITALIZED -------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ----- ------------ ----------- ----- ------------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY:
Albuquerque, New Mexi-
co:
Commanche Wells....... -- $ 719 $4,072 $ 208 $ 719 $4,280 $4,999 $ 79 1985 1994
Corrales Pointe....... -- 944 5,351 166 944 5,517 6,461 172 1986 1993
Entrada Pointe........ -- 1,014 5,744 134 1,014 5,878 6,892 150 1986 1994
La Ventana............ -- 2,210 -- 1,695 2,302 1,603 3,905 (b) (b) 1994
La Paloma............. -- 4,135 -- 14,075 4,242 13,968 18,210 9 (b) 1993
Pavilions I & II...... -- 2,182 7,624 5,574 2,182 13,198 15,380 1,084 1992 1991
Sandia Ridge.......... -- 1,339 5,358 647 1,339 6,005 7,344 481 1986 1992
Seven Bar Ranch Phase
I.................... -- 1,299 -- 758 1,302 755 2,057 (b) (b) 1994
Seven Bar Ranch Phase
II................... -- 1,298 -- 111 1,298 111 1,409 (b) (b) 1994
Vista del Sol......... -- 1,105 4,419 375 1,105 4,794 5,899 192 1987 1993
Wellington Place...... -- 1,881 7,523 198 1,881 7,721 9,602 270 1981 1993
Austin, Texas:
Anderson Mill Oaks.... -- 1,794 10,165 173 1,794 10,338 12,132 304 1984 1993
Cannon Place.......... -- 1,220 4,879 576 1,220 5,455 6,675 152 1984 1993
Hobby Horse........... -- 257 -- 633 764 126 890 (b) (b) 1993
Hobby Horse Railroad.. -- 788 -- 40 789 39 828 (b) (b) 1993
Homestead Village--
Burnet Road.......... -- 525 -- 1,312 544 1,293 1,837 (b) (b) 1994
Hunters' Run.......... -- 1,400 -- 6,242 1,412 6,230 7,642 (b) (b) 1993
La Mirage............. -- 2,350 -- 14,639 2,966 14,023 16,989 354 1994 1992
The Ridge............. -- 1,669 6,675 1,972 1,669 8,647 10,316 329 1978 1993
Ridgeline Village I... -- 672 -- 388 687 373 1,060 (b) (b) 1993
Ridgeline Village II.. -- 1,823 -- 1,133 1,865 1,091 2,956 (b) (b) 1993
Ridgeline Village III. -- 1,792 -- 853 1,833 812 2,645 (b) (b) 1993
Rock Creek............ -- 1,311 7,431 1,120 1,311 8,551 9,862 222 1979 1993
Saddle Brook.......... -- 800 -- 12,416 1,148 12,068 13,216 351 1994 1992
Shadowood............. -- 1,197 4,787 469 1,197 5,256 6,453 186 1985 1993
Spyglass.............. -- 1,744 6,976 1,671 1,744 8,647 10,391 446 1981 1992
Dallas, Texas:
Apple Ridge........... -- 1,986 7,942 741 1,986 8,683 10,669 248 1984 1993
Custer Crossing....... -- 1,532 8,683 70 1,532 8,753 10,285 259 1985 1993
Homestead Village--
Skillman............. -- 400 -- 2,669 400 2,669 3,069 187 1993 1992
Homestead Village--
Stemmons Phase I..... -- 356 -- 2,833 356 2,833 3,189 168 1993 1992
Homestead Village--
Tollway.............. -- 275 -- 2,451 353 2,373 2,726 205 1993 1993
Homestead Village--
North Richland Hills. -- 470 -- 3,043 544 2,969 3,513 121 1994 1993
Homestead Village--
Coit Road............ -- 425 -- 2,983 496 2,912 3,408 120 1994 1993
Homestead Village--
West Arlington -- 585 -- 1,938 603 1,920 2,523 (b) (b) 1993
Homestead Village--
South Arlington...... -- 550 -- 1,865 569 1,846 2,415 (b) (b) 1994
Homestead Village--
Stemmons Phase II.... -- -- -- 654 -- 654 654 (b) (b) 1992
Homestead Village--Ft.
Worth................ -- 350 -- 190 369 171 540 (b) (b) 1994
Homestead Village--Las
Colinas.............. -- 800 -- 67 802 65 867 (b) (b) 1994
Indian Creek.......... -- 1,582 8,962 152 1,582 9,114 10,696 268 1985 1993
Post Oak Ridge........ -- 2,137 12,111 551 2,137 12,662 14,799 363 1983 1993
Quail Run............. -- 1,613 9,140 68 1,613 9,208 10,821 274 1983 1993
Somerset.............. -- 2,908 11,632 215 2,908 11,847 14,755 365 1986 1993
</TABLE>
(see notes following table)
56
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO CARRIED AT DECEMBER 31,
PTR COSTS 1994
------------------ CAPITALIZED -------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ----- ------------ ----------- ----- ------------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summerstone........... -- 1,028 5,823 129 1,028 5,952 6,980 176 1983 1993
Timber Ridge.......... -- 997 5,651 -- 997 5,651 6,648 26 1984 1994
Woodland Park......... -- 1,386 5,543 143 1,386 5,686 7,072 176 1986 1993
Denver, Colorado:
Cambrian.............. -- 2,256 9,026 665 2,256 9,691 11,947 391 1983 1993
The Cedars............ -- 3,128 12,512 1,051 3,128 13,563 16,691 542 1984 1993
Fox Creek Phase I..... -- 1,167 4,669 280 1,167 4,949 6,116 160 1984 1993
Hickory Ridge......... -- 4,402 17,607 1,173 4,402 18,780 23,182 1,099 1984 1992
Homestead Village--
Denver Tech Center... -- 876 -- 166 876 166 1,042 (b) (b) 1994
Homestead Village--
Iliff................ -- 615 -- 146 615 146 761 (b) (b) 1994
Reflections Phase I... -- 1,591 6,362 727 1,591 7,089 8,680 282 1980 1993
Reflections Phase II.. -- 805 -- 2,994 839 2,960 3,799 (b) (b) 1993
Silvercliff........... 7,550 2,410 13,656 76 2,410 13,732 16,142 257 1991 1994
Sunwood............... -- 1,030 4,596 359 1,030 4,955 5,985 265 1981 1992
El Paso, Texas:
Acacia Park........... -- 1,130 -- 10,695 1,176 10,649 11,825 15 (b) 1993
Cielo Vista........... -- 1,111 4,445 538 1,111 4,983 6,094 186 1962 1993
The Crest............. -- 865 -- 7,096 1,026 6,935 7,961 628 1991 1992
Doubletree............ -- 1,106 4,423 592 1,106 5,015 6,121 213 1980 1993
Las Flores............ 5,968 625 6,624 754 625 7,378 8,003 2,971 (a) (a)
Mountain Village...... -- 1,203 4,824 1,051 1,203 5,875 7,078 532 1982 1992
Patriot Apartments.... -- 1,027 -- 3,498 1,036 3,489 4,525 (b) (b) 1993
The Phoenix........... -- 454 -- 9,470 658 9,266 9,924 489 1993 1993
Shadow Ridge Phase I.. -- 584 3,993 790 584 4,783 5,367 434 1991 1991
Shadow Ridge Phase II. -- 940 -- 5,760 1,084 5,616 6,700 67 1994 1993
Spring Park........... 4,330 734 4,428 50 734 4,478 5,212 764 1990 1989
Tigua Village......... 1,008 161 146 1,842 161 1,988 2,149 1,075 (f) (f)
Houston, Texas:
Beverly Palms......... -- 1,393 7,893 532 1,393 8,425 9,818 200 1970 1994
Braeswood Park........ 7,008 1,861 10,548 25 1,862 10,572 12,434 315 1984 1993
Brompton Court........ 14,750 4,058 22,993 600 4,058 23,593 27,651 265 1972 1994
Chasewood............. 9,612 2,016 11,427 69 2,016 11,496 13,512 211 1992 1994
Cranbrook Forest...... -- 1,326 5,302 195 1,326 5,497 6,823 171 1984 1993
Homestead Village--
West by Northwest.... -- 519 -- 2,907 568 2,858 3,426 115 1994 1993
Homestead Village--Fu-
qua.................. -- 416 -- 2,911 491 2,836 3,327 74 1994 1993
Homestead Village--
Westheimer........... -- 796 -- 3,177 897 3,076 3,973 33 1994 1993
Homestead Village--
Park Ten............. -- 791 -- 3,095 860 3,026 3,886 30 1994 1993
Homestead Village--
Stafford............. -- 575 -- 3,053 592 3,036 3,628 7 1994 1993
Homestead Village--
Bammel-Westfield..... -- 516 -- 2,927 595 2,848 3,443 27 1994 1993
Homestead Village--
Medical Center....... -- 1,530 -- 261 1,530 261 1,791 (b) (b) 1994
Homestead Village--
Willowbrook.......... -- 575 -- 656 584 647 1,231 (b) (b) 1994
Memorial Oaks Phase I. -- 4,372 -- 797 4,372 797 5,169 (b) (b) 1994
Memorial Oaks Phase
II................... -- 3,206 -- 415 3,206 415 3,621 (b) (b) 1994
Memorial Heights Phase
I.................... -- 3,150 -- 607 3,267 490 3,757 (b) (b) 1994
Memorial Heights Phase
II................... -- 4,166 -- 780 4,319 627 4,946 (b) (b) 1994
Pineloch.............. -- 1,980 11,221 150 1,980 11,371 13,351 336 1984 1993
Plaza Del Oro......... -- 1,713 9,706 190 1,713 9,896 11,609 134 1984 1994
Seahawk............... 5,577 1,258 7,125 8 1,258 7,133 8,391 134 1984 1994
Weslayan Oaks......... -- 581 3,293 40 581 3,333 3,914 104 1984 1993
Woodside Village...... -- 710 2,811 2,870 710 5,681 6,391 2,148 1972 1975
Las Cruces, New Mexico:
Park Place I & II..... 7,091 992 7,409 190 992 7,599 8,591 1,201 1991 1989
Oklahoma City, Oklaho-
ma:
Cimarron Trail........ -- 981 5,591 104 981 5,695 6,676 77 1984 1994
Warrington............ -- 882 4,883 132 882 5,015 5,897 158 1984 1993
</TABLE>
(see notes following table)
57
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO CARRIED AT DECEMBER 31,
PTR COSTS 1994
------------------ CAPITALIZED -------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION YEAR
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR ACQUIRED
---------- ------- ----- ------------ ----------- ----- ------------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Omaha, Nebraska:
Apple Creek............ 11,100 1,953 11,069 380 1,953 11,449 13,402 153 1987 1994
Phoenix, Arizona:
Bay Club............... -- 2,797 11,188 800 2,797 11,988 14,785 380 1985 1993
Dobson Bay Club........ -- 1,132 4,529 478 1,132 5,007 6,139 463 1986 1992
Foxfire................ -- 1,055 5,976 178 1,055 6,154 7,209 110 1985 1994
Homestead Village--
Scottsdale............ -- 876 -- 195 944 127 1,071 (b) (b) 1994
Moorings at Mesa Cove.. -- 3,261 13,045 655 3,261 13,700 16,961 723 1985 1992
North Mountain Village. -- 2,704 15,323 187 2,704 15,510 18,214 318 1986 1994
Papago Crossing........ -- 630 2,519 557 630 3,076 3,706 156 1980 1992
Peaks at Papago Park
Phase I............... -- 4,131 23,408 369 4,131 23,777 27,908 445 1988 1994
Peaks at Papago Park
Phase II.............. -- 1,000 -- 20 1,000 20 1,020 (b) (b) 1994
Pheasant Run........... -- 1,607 6,428 535 1,607 6,963 8,570 221 1985 1993
Presidio at South Moun-
tain.................. 14,742 4,638 26,280 296 4,638 26,576 31,214 787 1989 1993
The Ridge.............. -- 1,852 10,492 269 1,852 10,761 12,613 314 1987 1993
San Antigua............ -- 4,200 -- 17,138 4,705 16,633 21,338 362 1994 1991
San Marin.............. -- 3,332 -- 14,609 3,798 14,143 17,941 900 1993 1993
San Marina............. -- 1,208 4,831 793 1,208 5,624 6,832 579 1986 1992
San Marquis North...... -- 1,215 -- 7,903 1,247 7,871 9,118 5 (b) 1993
San Marquis South...... -- 2,312 -- 10,061 2,665 9,708 12,373 225 1994 1993
Scottsdale Greens...... -- 3,489 19,774 1,815 3,489 21,589 25,078 522 1980 1994
Sunstone............... -- 1,542 8,738 167 1,542 8,905 10,447 261 1986 1993
Superstition Park...... -- 2,340 9,362 683 2,340 10,045 12,385 520 1985 1992
San Antonio, Texas:
Applegate.............. -- 1,455 8,248 118 1,455 8,366 9,821 247 1983 1993
Camino Real............ -- 1,084 4,338 718 1,084 5,056 6,140 241 1979 1993
Cobblestone Village.... -- 786 3,120 476 786 3,596 4,382 372 1984 1992
Contour Place.......... -- 456 1,829 287 456 2,116 2,572 236 1984 1992
The Crescent........... -- 1,145 -- 14,407 1,647 13,905 15,552 410 1994 1992
Dymaxion............... -- 683 3,740 15 683 3,755 4,438 9 1984 1994
The Gables............. -- 1,025 5,809 73 1,025 5,882 6,907 174 1983 1993
Homestead Village--
Fredricksburg......... -- 800 -- 3,240 892 3,148 4,040 27 1994 1993
Homestead Village--I-
10/De Zavala ......... -- 844 -- 962 846 960 1,806 (b) (b) 1994
Homestead Village--
281/Bitters........... -- 1,000 -- 1,046 1,007 1,039 2,046 (b) (b) 1994
Lakeside Villas........ -- 2,597 10,388 535 2,597 10,923 13,520 638 1986 1992
Marbach Park........... -- 1,122 6,361 263 1,122 6,624 7,746 191 1985 1993
The Waters at Northern
Hills................. -- 1,252 7,091 196 1,252 7,287 8,539 161 1982 1994
Medical Drive.......... -- 1,631 -- 1,912 1,634 1,909 3,543 (b) (b) 1993
Oakhampton Place....... -- 2,292 9,170 663 2,292 9,833 12,125 573 1984 1992
Palisades Park......... -- 1,167 6,613 225 1,167 6,838 8,005 198 1983 1993
Panther Springs........ -- 585 3,317 66 585 3,383 3,968 99 1985 1993
The Pond............... -- 1,728 9,794 242 1,728 10,036 11,764 293 1982 1993
Rancho Mirage.......... -- 724 2,871 1,102 724 3,973 4,697 124 1974 1993
Sterling Heights....... -- 1,644 -- 6,078 1,736 5,986 7,722 (b) (b) 1993
Towne East............. -- 350 1,985 62 350 2,047 2,397 59 1983 1993
Villas of Castle Hills. -- 1,037 4,148 666 1,037 4,814 5,851 159 1971 1993
Villas of St. Tropez
Phase I............... -- 2,013 8,054 607 2,013 8,661 10,674 506 1982 1992
Villas of St. Tropez
Phase II.............. -- 605 -- 108 606 107 713 (b) (b) 1994
San Diego, California:
Scripps Landing........ -- 1,332 7,550 139 1,332 7,689 9,021 202 1985 1994
Tierrasanta Ridge...... -- 2,859 16,130 89 2,859 16,219 19,078 260 1994 1994
Santa Fe, New Mexico:
The Enclave............ -- 1,810 7,242 647 1,810 7,889 9,699 413 1986 1992
The Meadows of Santa
Fe.................... -- 760 -- 11,999 992 11,767 12,759 255 1994 1993
Rancho Vizcaya......... -- 1,906 9,458 605 1,906 10,063 11,969 948 1990 1991
St. Francis............ -- 1,941 -- 297 1,972 266 2,238 (b) (b) 1994
Tucson, Arizona:
Cobble Creek........... -- 1,422 5,690 538 1,422 6,228 7,650 571 1980 1992
</TABLE>
(see notes following table)
58
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1994
--------------------- CAPITALIZED --------------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR
---------- ------- -------- ------------ ----------- -------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Craycroft Gar-
dens........... -- 348 1,392 190 348 1,582 1,930 123 1963
Haystack........ -- 966 5,474 247 966 5,721 6,687 165 1979
Rio Cancion..... -- 2,854 16,175 184 2,854 16,359 19,213 335 1984
Sonoran Terrac-
es............. -- 3,020 14,150 603 3,020 14,753 17,773 1,452 1986
Sundown Village
Phase I........ -- 1,606 6,424 383 1,606 6,807 8,413 317 1984
Sundown Village
Phase II....... -- 403 -- 3,653 414 3,642 4,056 (b) (b)
Tierra Antigua.. -- 992 3,967 466 992 4,433 5,425 362 1979
Ventana Canyon.. -- 3,177 -- 553 3,188 542 3,730 (b) (b)
Villa Caprice... -- 1,279 7,248 121 1,279 7,369 8,648 217 1972
Windsail........ 4,888 1,852 7,407 552 1,852 7,959 9,811 333 1986
Tulsa, Oklahoma:
Southern Slope.. -- 779 4,413 74 779 4,487 5,266 143 1982
------- -------- -------- -------- -------- ---------- ---------- -------
Total Multifami-
ly............. $93,624 $230,036 $746,562 $278,298 $235,796 $1,019,100 $1,254,896 $42,104
------- -------- -------- -------- -------- ---------- ---------- -------
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
El Paso, Texas:
West Ten Apart-
ments.......... -- 1,576 -- -- 1,576 -- 1,576 -- N/A
San Antonio, Tex-
as:
Dymaxion Phase
II............. -- 546 -- -- 546 -- 546 -- N/A
Indian Trails
Phase II....... -- 864 -- -- 864 -- 864 -- N/A
Walker Ranch
Phase I........ -- 2,078 -- 412 2,141 349 2,490 -- N/A
Walker Ranch
Phase II....... -- 1,635 -- 223 1,685 173 1,858 -- N/A
Walker Ranch
Phase III...... -- 552 -- 91 569 74 643 -- N/A
------- -------- -------- -------- -------- ---------- ---------- -------
Total Develop-
ment Land...... $ -- $ 7,251 $ -- $ 726 $ 7,381 $ 596 $ 7,977 $ --
------- -------- -------- -------- -------- ---------- ---------- -------
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn............ $ -- $ 12,861 $ 1,935 $ 8,074 $ 12,861 $ 10,009 $ 22,870 $ 2,838 1972
------- -------- -------- -------- -------- ---------- ---------- -------
OFFICE / INDUS-
TRIAL:
Dallas, Texas:
Irving Blvd..... -- 109 303 129 109 432 541 219 1968
Texas Commerce
Bank Building.. -- -- 4,616 (1,801) -- 2,815 2,815 -- 1984
El Paso, Texas:
Vista Industri-
al............. -- 567 2,504 63 567 2,567 3,134 374 1987
Ontario, Califor-
nia:
Ontario Indus-
trial Building. -- 1,200 3,828 (1,036)(c) 1,200 2,792 3,992 628 1987
------- -------- -------- -------- -------- ---------- ---------- -------
Total Office/Industrial. $ -- $ 1,876 $ 11,251 $ (2,645) $ 1,876 $ 8,606 $ 10,482 $ 1,221
------- -------- -------- -------- -------- ---------- ---------- -------
OTHER............ $ -- $ 16 $ 46 $ 1 $ 16 $ 47 $ 63 $ 36 1971
------- -------- -------- -------- -------- ---------- ---------- -------
Total............ $93,624 $252,040 $759,794 $284,453 $257,930 $1,038,358 $1,296,288 $46,199
======= ======== ======== ======== ======== ========== ========== =======
<CAPTION>
YEAR
PROPERTIES ACQUIRED
---------- --------
<S> <C>
Craycroft Gar-
dens........... 1992
Haystack........ 1993
Rio Cancion..... 1994
Sonoran Terrac-
es............. 1992
Sundown Village
Phase I........ 1993
Sundown Village
Phase II....... 1993
Tierra Antigua.. 1992
Ventana Canyon.. 1993
Villa Caprice... 1993
Windsail........ 1993
Tulsa, Oklahoma:
Southern Slope.. 1993
Total Multifami-
ly.............
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
El Paso, Texas:
West Ten Apart-
ments.......... 1994
San Antonio, Tex-
as:
Dymaxion Phase
II............. 1994
Indian Trails
Phase II....... 1994
Walker Ranch
Phase I........ 1994
Walker Ranch
Phase II....... 1994
Walker Ranch
Phase III...... 1994
Total Develop-
ment Land......
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn............ 1975
OFFICE / INDUS-
TRIAL:
Dallas, Texas:
Irving Blvd..... 1977
Texas Commerce
Bank Building.. 1985
El Paso, Texas:
Vista Industri-
al............. 1989
Ontario, Califor-
nia:
Ontario Indus-
trial Building. 1987
Total Office/Industrial.
OTHER............ 1972
Total............
</TABLE>
-------
(a) Phase I (120 units) was developed in 1980; Phase II (60 units) was
developed in 1981; and Phase III (288 units) was developed in 1983.
(b) As of 12/31/94, property was undergoing development.
(c) The Ontario Industrial property was written down by $1,100,000 in June
1993 to more properly reflect the property's net realizable value.
(d) As of December 31, 1994, the aggregate cost and net investment cost for
federal income tax purposes of PTR's investment in real estate amounted to
$1,283,894,000 and $1,238,634,000, respectively.
(e) Other investments represent PTR's ownership percentage in a joint venture,
as well as investment in a financing lease.
(f) Phase I (84 units) was developed in 1970 and Phase II (100 units) was
developed in 1981.
59
<PAGE>
The following is a reconciliation of the carrying amount and related
accumulated depreciation of PTR's investment in real estate, at cost (in
thousands):
<TABLE>
<CAPTION>
CARRYING AMOUNTS 1994 1993 1992
---------------- ---------- -------- --------
<S> <C> <C> <C>
Balance at January 1........................ $ 872,610 $337,274 $117,572
Acquisitions, including renovation expendi-
tures...................................... 270,024 449,500 188,411
Development expenditures, including land ac-
quisition.................................. 155,849 108,056 41,733
Acquisition of land held for future develop-
ment....................................... 7,977 4,208 --
Capital improvements........................ 3,912 1,639 1,015
Real estate sold............................ (12,287) (24,953) (10,814)
Provision for possible losses............... (1,600) (2,270) (400)
Other....................................... (197) (844) (243)
---------- -------- --------
Balance at December 31...................... $1,296,288 $872,610 $337,274
========== ======== ========
<CAPTION>
ACCUMULATED DEPRECIATION 1994 1993 1992
------------------------ ---------- -------- --------
<S> <C> <C> <C>
Balance at January 1........................ $ 22,022 $ 19,360 $ 17,742
Depreciation for the year................... 24,614 10,241 5,045
Accumulated depreciation of real estate
sold....................................... (151) (7,429) (3,370)
Other....................................... (286) (150) (57)
---------- -------- --------
Balance at December 31...................... $ 46,199 $ 22,022 $ 19,360
========== ======== ========
</TABLE>
60
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Pacific Trust,
a real estate investment trust, and the undersigned Trustees and officers of
Security Capital Pacific Trust, hereby constitutes and appoints C. Ronald
Blankenship, William Kell, Paul E. Szurek, Ariel Amir, Edward J. Schneidman and
Michael T. Blair its or his true and lawful attorneys-in-fact and agents, for
it or him and in its or his name, place and stead, in any and all capacities,
with full power to act alone, to sign any and all amendments to this report,
and to file each such amendment to this report, with all exhibits thereto, and
any and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as it or he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them may
lawfully do or cause to be done by virtue hereof.
61
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
SECURITY CAPITAL PACIFIC TRUST
/s/ C. Ronald Blankenship
By: _________________________________
C. Ronald Blankenship
Chairman (Principal Executive
Officer)
Date: March 30, 1995
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. Ronald Blankenship Chairman (Principal March 30, 1995
____________________________________ Executive Officer) and
C. Ronald Blankenship Trustee
/s/ William Kell Vice President (Principal March 30, 1995
____________________________________ Financial and Accounting
William Kell Officer)
/s/ James A. Cardwell Trustee March 30, 1995
____________________________________
James A. Cardwell
/s/ John T. Kelley III Trustee March 30, 1995
____________________________________
John T. Kelley III
/s/ Calvin K. Kessler Trustee March 30, 1995
____________________________________
Calvin K. Kessler
/s/ William G. Myers Trustee March 30, 1995
____________________________________
William G. Myers
/s/ James H. Polk III Trustee March 30, 1995
____________________________________
James H. Polk III
/s/ John C. Schweitzer Trustee March 30, 1995
____________________________________
John C. Schweitzer
</TABLE>
62
<PAGE>
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
4.1 Restated Declaration of Trust of PTR (Incorporated by
reference to Exhibit 4 to PTR's Form 10-Q for the
quarter ended June 30, 1991).
4.2 First Certificate of Amendment of Restated Declaration
of Trust of PTR (Incorporated by reference to Exhibit 4
to PTR's Form 10-Q for the quarter ended June 30, 1992).
4.3 Second Certificate of Amendment of Restated Declaration
of Trust of PTR (Incorporated by reference to Exhibit
3.1 to PTR's Form 8-K dated May 3, 1994).
4.4 Third Articles of Amendment of Restated Declaration of
Trust of PTR (Incorporated by reference to Exhibit 4.4
to PTR's Registration Statement No. 33-86444).
4.5 Articles Supplementary relating to PTR's Cumulative
Convertible Series A Preferred Shares of Beneficial
Interest (Incorporated by reference to Exhibit 3.1 to
PTR's Form 8-K dated November 22, 1993).
4.6 Articles of Merger of PACIFIC with and into PTR.
4.7 Bylaws of PTR (Incorporated by reference to Exhibit 4.1
to PTR's Form 8-K dated November 22, 1993).
4.8 Indenture, dated as of February 1, 1994, between PTR and
Morgan Guaranty Trust Company of New York, as Trustee,
relating to PTR's unsecured senior debt securities
(Incorporated by reference to Exhibit 4.2 to PTR's Form
10-K for the year ended December 31, 1993).
4.9 First Supplemental Indenture, dated as of February 2,
1994, among PTR, Morgan Guaranty Trust Company of New
York and State Street Bank and Trust Company, as
successor Trustee (Incorporated by reference to Exhibit
4.3 to PTR's Form 10-K for the year ended December 31,
1993).
4.10 6 7/8% Senior Note due February 15, 2008 (Incorporated
by reference to Exhibit 4.4 to PTR's Form 10-K for the
year ended December 31, 1993).
4.11 7 1/2% Senior Note due February 15, 2014 (Incorporated
by reference to Exhibit 4.5 to PTR's Form 10-K for the
year ended December 31, 1994).
4.12 Rights Agreement (the "Rights Agreement") dated as of
July 21, 1994 between PTR and Chemical Bank, including
form of Rights Certificate (Incorporated by reference to
Exhibit 4.2 to PTR's Form 8-K dated July 19, 1994).
4.13 First Amendment dated as of February 8, 1995 to the
Rights Agreement.
10.1 1987 Share Option Plan for Outside Trustees
(Incorporated by reference to Exhibit 10.5 to PTR's Form
10-K for the year ended December 31, 1986).
10.2 Second Amended and Restated Investor Agreement dated as
of July 11, 1994 between PTR and Security Capital Group
(Incorporated by reference to Exhibit 10.1 to PTR's Form
8-K dated July 19, 1994).
10.3 Form of Indemnification Agreement entered into between
PTR and all of its officers and Trustees (Incorporated
by reference to Exhibit 10.50 to Registration Statement
No. 33-43201).
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
10.4 Supplemental Investment Agreement dated as of October 1,
1991, by and between PTR and Security Capital Group
(Incorporated by reference to Exhibit 10.70 to
Registration Statement No. 33-43201).
10.5 Second Supplemental Investment Agreement dated as of
December 7, 1993 between PTR and Security Capital Group
(Incorporated by reference to Exhibit 10.2 to PTR's Form
8-K dated May 3, 1994).
10.6 Third Supplemental Investment Agreement dated as of
December 6, 1994 between PTR and Security Capital Group.
10.7 Management Agreement dated as of September 1, 1991
between PTR and SCG Realty Services (Incorporated by
reference to Exhibit 19.2 to PTR's Form 10-Q for the
quarter ended September 30, 1991).
10.8 Letter Amendment dated as of November 1, 1993 to
Management Agreement between PTR and SCG Realty
Services.
10.9 Letter Amendment dated as of October 1, 1994 to
Management Agreement between PTR and SCG Realty
Services.
10.10 Amended and Restated Credit Agreement dated as of March
23, 1995 among PTR, Texas Commerce Bank National
Association and Wells Fargo Realty Advisors Funding,
Incorporated, as co-agents, and the banks named therein.
10.11 Third Amended and Restated REIT Management Agreement
dated as of March 1, 1994 between PTR and the REIT
Manager (Incorporated by reference to Exhibit 10.2 to
PTR's Form 10-Q for the quarter ended September 30,
1994).
10.12 First Amendment to Third Amended and Restated REIT
Management Agreement, dated October 1, 1994 between PTR
and the REIT Manager.
10.13 Second Amendment to Third Amended and Restated REIT
Management Agreement, dated December 6, 1994 between PTR
and the REIT Manager.
10.14 Third Amendment to Third Amended and Restated REIT
Management Agreement, dated March 23, 1995 between PTR
and the REIT Manager.
10.15 Agreement and Plan of Merger dated as of December 6,
1994 among PTR, PACIFIC and Security Capital Group.
(Incorporated by Reference to Exhibit 2.1 to
Registration Statement No. 33-87184).
23.1 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included at page 61).
27.1 Financial Data Schedule.
</TABLE>
64
<PAGE>
EXHIBIT 4.6
ARTICLES OF MERGER
Merging
SECURITY CAPITAL PACIFIC INCORPORATED
(a corporation of the State of Maryland)
Into
PROPERTY TRUST OF AMERICA
(a real estate investment trust of the State of Maryland)
Security Capital Pacific Incorporated, a corporation organized and existing
under the laws of the State of Maryland ("PACIFIC"), and Property Trust of
America, a real estate investment trust organized and existing under the laws of
the State of Maryland ("PTR"), agree that PACIFIC shall be merged with and into
PTR. The terms and conditions of the merger and the mode of carrying the same
into effect are as herein set forth in these Articles of Merger.
FIRST: The parties to these Articles of Merger are Property Trust of
America, a real estate investment trust organized and existing under the laws of
the State of Maryland, and Security Capital Pacific Incorporated, a corporation
organized and existing under the laws of the State of Maryland.
SECOND: PACIFIC shall be merged with and into PTR in accordance with the
Corporations and Associations Article of the Annotated Code of Maryland (the
"Maryland Code"), and PTR shall survive the merger and continue under the name
"Security Capital Pacific Trust" (the "Surviving Entity"). At the effective
time of the merger (the "Effective Time"), the separate existence of PACIFIC
shall cease in accordance with the provisions of the Maryland Code. From and
after the Effective Time, the Surviving Entity shall continue its existence
under the name "Security Capital Pacific Trust," shall succeed to all of the
properties, liabilities and other assets and shall be subject to all of the
liabilities and obligations of PACIFIC without further action by either of the
parties hereto, and will continue to be governed by the laws of the State of
Maryland, including the Maryland Code. At the Effective Time, the bylaws of PTR
in effect immediately prior to the Effective Time shall become the bylaws of the
Surviving Entity and the trustees and officers in office of PTR immediately
prior to the Effective Time shall be the trustees and officers of the Surviving
Entity, all of whom shall hold their trusteeships and offices until the election
and qualification of their respective successors or until their tenure is
otherwise terminated in accordance with the declaration of trust and bylaws of
the Surviving Entity.
<PAGE>
THIRD: The resident agent and office of each of PACIFIC and PTR is
located at 11 East Chase Street, Baltimore, State of Maryland 21202. The
principal office of each of PACIFIC and PTR is located at 7777 Market Center
Avenue, City of El Paso, State of Texas 79912. Neither PACIFIC nor PTR owns any
interest in land in any county in the State of Maryland.
FOURTH: The terms and conditions of the transaction set forth in these
Articles of Merger were advised, authorized and approved by each party to these
Articles of Merger in the manner and by the vote required by PACIFIC's articles
of incorporation or PTR's declaration of trust, as the case may be, and the laws
of the State of Maryland.
FIFTH: The merger was duly (a) advised by the board of directors of
PACIFIC by the adoption of a resolution declaring that the merger set forth in
these Articles of Merger was advisable on substantially the terms and conditions
set forth or referred to in the resolution and directing that the proposed
merger be submitted for consideration at a special meeting of the shareholders
of PACIFIC and (b) approved by the shareholders of PACIFIC by the vote required
by its articles of incorporation and the Maryland Code.
SIXTH: The merger was duly (a) advised by the board of trustees of PTR
by the adoption of a resolution declaring that the merger set forth in these
Articles of Merger was advisable on substantially the terms and conditions set
forth or referred to in the resolution and directing that the proposed merger be
submitted for consideration at a special meeting of the shareholders of PTR and
(b) approved by the shareholders of PTR by the vote required by its declaration
of trust and the Maryland Code.
SEVENTH: At the Effective Time, Article 1, Section 1 of the declaration of
trust of PTR shall be amended to read in its entirety as follows and such
declaration of trust, as so amended, shall become the declaration of trust of
the Surviving Entity:
" SECTION 1. NAME. The Trust created by this Declaration of Trust is herein
referred to as the "Trust" and shall be known by the name "Security Capital
Pacific Trust." So far as may be practicable, legal and convenient, the
affairs of the Trust shall be conducted and transacted under that name,
which name shall not refer to the Trustees individually or personally or to
the beneficiaries or Shareholders of the Trust, or to any officers,
employees or agents of the Trust.
Under circumstances in which the Trustees determine that the use of
the name "Security Capital Pacific Trust" is not practicable, legal or
convenient, they may as appropriate use their names with suitable reference
to their trustee status, or some other suitable designation, or they may
adopt another name under which the Trust may hold property or operate in
any jurisdiction which name shall not, to the knowledge of the Trustees,
refer to beneficiaries or Shareholders of the Trust. Legal title to all
the properties subject from time to time to this Declaration of Trust shall
be transferred to,
2
<PAGE>
vested in, and held by the Trust in its own name or by the Trustees as
joint tenants with right of survivorship as Trustees of this Trust, except
that the Trustees shall have the power to cause legal title to any property
of this Trust to be held by and/or in the name of one or more of the
Trustees, or any other person as nominee, on such terms, in such manner,
and with such powers as the Trustees may determine, provided that the
interest of the Trust therein is appropriately protected.
The Trust shall have the authority to operate under an assumed name or
names in such state or states or any political subdivision thereof where it
would be legal, practical or convenient to operate in the name of the
Trust. The Trust shall have the authority to file such assumed name
certificates or other instruments in such places as may be required by
applicable law to operate under such assumed name or names.
If for any reason neither Security Capital (Southwest) Incorporated, a
Delaware corporation, nor any affiliate thereof, nor any other affiliate of
Security Capital Realty Incorporated, a Maryland corporation, shall any
longer be rendering to the Trust the services of Advisor, as defined in
Article 4, Section 7 hereof, to be rendered pursuant to the contract
referred to in Article 4, Section 7 hereof, and any renewal or extension of
such contract, then, if requested in writing by Security Capital Realty
Incorporated or its successor to do so, the Trustees shall forthwith and
are hereby required and authorized, without further vote or consent of the
Shareholders, to (a) cease to use the name "Security Capital" or any name
or names similar thereto, (b) amend this Article 1, Section 1 to change the
name of the Trust to one which does not include the name "Security Capital"
or any name or names similar thereto, and (c) cause to be executed and
delivered all instruments necessary to evidence such change of name in each
public registry where the name of the Trust shall have been registered and
to disclaim any right, title or interest in or to the name "Security
Capital.""
These amendments do not increase the authorized capital of PTR.
EIGHTH: The total number of shares of beneficial interest of all classes
which PTR has authority to issue is one hundred fifty million (150,000,000)
shares of beneficial interest, of the par value of one dollar ($1.00) each, all
such shares having an aggregate par value of one hundred fifty million dollars
($150,000,000). Of such one hundred fifty million shares of beneficial
interest, nine million two hundred thousand have been classified as Cumulative
Convertible Series A Preferred Shares of Beneficial Interest.
The total number of shares of stock of all classes which PACIFIC has
authority to issue is two hundred fifty million (250,000,000) shares of common
stock, of the par value of one cent ($0.01) each, all such shares having an
aggregate par value of two million five hundred thousand dollars ($2,500,000).
3
<PAGE>
NINTH: At the Effective Time, each issued share common stock of PACIFIC
shall automatically and without further action by either of the parties hereto
be converted into 0.611 common shares of beneficial interest of PTR. At the
Effective Time, each right, option or warrant to acquire a share of common stock
of PACIFIC shall automatically be converted into a right, option or warrant to
acquire 0.611 common shares of beneficial interest of PTR. At the Effective
Time, each issued share of beneficial interest of PTR issued immediately prior
to the Effective Time shall not be converted or exchanged in any manner but
shall remain issued.
TENTH: The parties hereto intend that the execution of these Articles of
Merger constitutes the adoption of a "plan of reorganization" within the meaning
of Treasury Regulations (S) 1.368-1(c).
4
<PAGE>
IN WITNESS WHEREOF, Security Capital Pacific Incorporated, a Maryland
corporation, and Property Trust of America, a Maryland real estate investment
trust, the entities parties to the merger, have caused these Articles of Merger
to be signed in their respective names and on their behalf and witnessed or
attested all as of the 23rd day of March 1995. Each of the individuals signing
these Articles of Merger on behalf of Security Capital Pacific Incorporated or
Property Trust of America acknowledges these Articles of Merger to be the act of
such respective entity and, as to all other matters or facts required to be
verified under oath, that to the best of his or her knowledge, information and
belief, these matters are true in all material respects, and that this statement
is made under the penalties of perjury.
SECURITY CAPITAL PACIFIC INCORPORATED,
a Maryland corporation
By: /s/ David C. Dressler, Jr.
----------------------------
David C. Dressler, Jr.
Senior Vice President
Attest:
/s/ Leanne L. Gallagher
------------------------
Leanne L. Gallagher
Assistant Secretary
PROPERTY TRUST OF AMERICA,
a Maryland real estate investment trust
By: /s/ C. Ronald Blankenship
------------------------------
C. Ronald Blankenship, Trustee
By: /s/ Calvin K. Kessler
------------------------------
Calvin K. Kessler, Trustee
By: /s/ James H. Polk, III
------------------------------
James H. Polk, III, Trustee
By: /s/ John C. Schweitzer
------------------------------
John C. Schweitzer, Trustee
By: /s/ William G. Myers
------------------------------
William G. Myers, Trustee
By: /s/ John T. Kelley
------------------------------
John T. Kelley, III, Trustee
By: /s/ James A. Cardwell
-----------------------------
James A. Cardwell, Trustee
5
<PAGE>
EXHIBIT 4.13
FIRST AMENDMENT
TO
RIGHTS AGREEMENT
This First Amendment (this "Amendment") to that certain Rights Agreement
dated as of July 21, 1994 (the "Agreement") is made and entered into as of
February 8, 1995 by and between Property Trust of America, a Maryland real
estate investment trust (the "Trust"), and Chemical Bank, a New York banking
corporation (the "Rights Agent").
WHEREAS, pursuant to the authority contained in Section 27 of the
Agreement, the Trust and the Rights Agent desire to amend the Agreement as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
that the Agreement is hereby amended by amending and restating the definition of
"REALTY Group" in Section 1 of the Agreement as follows:
"REALTY Group" shall mean REALTY, together with its wholly owned
subsidiaries and any Person that owns, directly or indirectly, more than
20% of REALTY's then outstanding voting securities.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year above written.
PROPERTY TRUST OF AMERICA
By: /s/ Paul E. Szurek
----------------------------------
Name: Paul E. Szurek
----------------------------------
Title: Secretary
---------------------------------
CHEMICAL BANK
By: /s/ Joseph J. Carraturo
-----------------------------------
Name: Joseph J. Carraturo
-----------------------------------
Title: Assistant Vice President
----------------------------------
<PAGE>
EXHIBIT 10.6
THIRD SUPPLEMENTAL INVESTMENT AGREEMENT
THIS THIRD SUPPLEMENTAL INVESTMENT AGREEMENT (this "Agreement") is made and
entered into as of December 6, 1994, by and between Property Trust of America, a
Maryland real estate investment trust (the "Company"), and Security Capital
Realty Incorporated, a Maryland corporation (the "Purchaser").
WHEREAS, the parties hereto have entered into a Supplemental Investment
Agreement dated as of October 1, 1991 and a Second Supplemental Investment
Agreement dated as of December 7, 1993; and
WHEREAS, the Purchaser desires to purchase additional common shares of
beneficial interest, $1.00 par value per share, of the Company (the "Shares") in
the Company's proposed subscription offering; and
WHEREAS, the Purchaser is willing to purchase such Shares upon the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
1. Purchase of Shares. Subject to the terms and conditions set forth
herein, the Purchaser agrees to subscribe for and purchase a minimum of $50
million of Shares in the Company's proposed subscription offering (the
"Offering"), the closing of which will occur simultaneously with, and will be
conditioned upon, the closing of the proposed merger of Security Capital Pacific
Incorporated with and into the Company; provided, however, that the $50 million
minimum purchase amount of the Purchaser shall be reduced by one dollar for each
dollar of subscriptions that the Company receives from parties other than the
Purchaser in the Offering.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) Due Organization and Qualification. The Company is a real estate
investment trust duly organized, validly existing and in good standing under the
laws of the State of Maryland, with full power to own its properties and to
conduct its business as now conducted. The Company is duly qualified to do
business, and is in good standing, in each jurisdiction where such qualification
is required, except where the failure to so qualify will not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(b) Authorization. The Company has the requisite power to enter into
this Agreement and to carry out its obligations hereunder. This Agreement has
been duly authorized,
<PAGE>
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company enforceable in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles and except as the
enforceability of rights to indemnification or contribution hereunder may be
limited by applicable federal or state securities laws or rules. Neither the
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor compliance with the terms, conditions or provisions of
this Agreement will result in a violation or breach of any of the terms,
conditions or provisions of the Company's Restated Declaration of Trust, as
amended and supplemented (the "Declaration of Trust"), or bylaws or any material
agreement or instrument to which the Company is a party or by which the Company
or any of its properties is bound, or constitute a default or create a right of
termination or acceleration thereunder, or result in the creation or imposition
of any security interest, mortgage, lien, charge or encumbrance of any nature
whatsoever upon the Company or any of its properties or assets, which in any
such case would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(c) Issuance. The Shares, when sold and delivered by the Company to
the Purchaser pursuant to this Agreement, will be duly authorized, validly
issued and, when paid for, will be fully paid and, except as described in the
prospectus supplement relating to the Offering, nonassessable.
3. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Due Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
with full power to own its properties and to conduct its business as now
conducted.
(b) Authorization. The Purchaser has the requisite power to enter
into this Agreement and to carry out its obligations hereunder. This Agreement
has been duly authorized, executed and delivered by the Purchaser and
constitutes a valid and binding agreement of the Purchaser enforceable in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles and except as the enforceability of rights to indemnification or
contribution hereunder may be limited by applicable federal or state securities
laws or rules. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor compliance with the
terms, conditions or provisions of this Agreement will result in a violation or
breach of any of the terms, conditions or provisions of the Purchaser's charter
or bylaws.
4. Conditions to the Obligations of the Company. The obligations of the
Company under this Agreement are subject to the fulfillment of each of the
following conditions:
2
<PAGE>
(a) Representations and Warranties. The representations and
warranties in this Agreement made by the Purchaser shall be true in all material
respects on the date hereof.
(b) Performance. The Purchaser shall have performed and complied in
all material respects with all agreements required by this Agreement to be
performed or complied with by the Purchaser.
(c) Merger Closing. The merger of Security Capital Pacific
Incorporated with and into the Company shall have occurred simultaneously with
the closing of the Offering.
5. Conditions to the Obligations of the Purchaser. The obligations of
the Purchaser under this Agreement are subject to the fulfillment of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties in this Agreement made by the Company shall be true in all material
respects on the date hereof.
(b) Performance. The Company shall have performed and complied in all
material respects with all agreements required by this Agreement to be performed
or complied with by the Company.
(c) Merger Closing. The merger of Security Capital Pacific
Incorporated with and into the Company shall have occurred simultaneously with
the closing of the Offering.
(d) Offering. The Shares shall have been offered and sold in the
Offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act") and a prospectus supplement
specifically relating to the Offering. The Offering shall have complied in all
material respects with the Securities Act and all applicable rules and
regulations of the Securities and Exchange Commission (the "Commission") and all
applicable state securities laws.
(e) Listing on NYSE. The Shares to be sold to the Purchaser in the
Offering shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
(f) Material Adverse Change. There shall not have occurred since the
date hereof any material adverse change in the business, properties or financial
condition of the Company not caused by any action of the Purchaser or any of its
affiliates (other than the Company).
6. Registration Rights.
(a) Demand. If at any time after the second anniversary of the date
of this Agreement, the Purchaser is unable to sell any of its Registrable
Securities (as hereinafter
3
<PAGE>
defined) pursuant to Rule 144 under the Securities Act for any reason (including
the volume and holding period limitations) the Purchaser may request one
registration of all or any part of its Registrable Securities pursuant to Rule
415 under the Securities Act by delivering written notice to the Company
specifying the number of Registrable Securities that the Purchaser desires to
sell and the Company shall use its reasonable efforts to effect the registration
of such Registrable Securities under the Securities Act.
(b) Registration Procedures. If and whenever the Company is required
by any of the provisions of this Section 6 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, the Company shall:
(i) prepare and file with the Commission a registration
statement with respect to such securities and use its reasonable efforts to
cause such registration statement to become effective and remain effective for
as long as shall be necessary to complete the distribution of at least 90% of
the Registrable Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
so long as shall be necessary to complete the distribution of at least 90% of
the Registrable Securities so registered and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement whenever the Purchaser shall
desire to sell or otherwise dispose of Registrable Securities within such
period;
(iii) furnish to the Purchaser such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement, including any preliminary prospectus,
and any amendment or supplement thereto, and such other documents, as the
Purchaser may reasonably request in order to facilitate the sale or other
disposition of the Registrable Securities owned by the Purchaser;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under the securities laws of
such jurisdictions as the Purchaser may reasonably request, and do any and all
other acts and things reasonably requested by the Purchaser to assist the
Purchaser to consummate the public sale or other disposition in such
jurisdictions of the Registrable Securities owned by the Purchaser, except that
the Company shall not for any such purpose be required to qualify to do business
as a foreign corporation in any jurisdiction wherein it is not so qualified or
to file therein any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earning statement
covering a period of at least twelve months, beginning with the first fiscal
quarter beginning after the effective date of the registration
4
<PAGE>
statement, which earning statement shall satisfy the provisions of Section 11(a)
of the Securities Act; and
(vi) notify the Purchaser, at any time when a prospectus is
required to be delivered under the Securities Act, of the happening of any event
of which it has knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(c) Company's Ability to Postpone. The Company shall have the right
to postpone the filing of a registration statement under this Section 6 for a
reasonable period of time (not exceeding 60 days) if the Company furnishes the
Purchaser with a certificate signed by the Chairman of the Board or the
President of the Company stating that, in its good faith judgment, the Company's
Board of Trustees has determined that effecting the registration at such time
would adversely affect a material financing, acquisition, disposition of assets
or stock, merger or other comparable transaction or would require the Company to
make public disclosure of information not otherwise required to be disclosed at
such time, the public disclosure of which would have a material adverse effect
upon the Company.
(d) Expenses.
(i) Except as set forth in Section 6(d)(ii), all expenses
incurred in the registration of Registrable Securities under this Agreement
shall be paid by the Purchaser. The expenses shall include, without limitation,
the expenses of preparing the registration statement and the prospectus used in
connection therewith and any amendment or supplement thereto, printing and
photocopying expenses, fees and disbursements of the Purchaser's counsel, all
registration and filing fees under federal and state securities laws, and
expenses of complying with the securities laws of any jurisdictions.
(ii) The Company shall pay the expenses of any audits to which
the Company shall agree and that shall be necessary to comply with government
requirements in connection with such registration.
(e) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 6:
(i) Indemnity by Company. Without limitation of any other
indemnity provided to the Purchaser, to the extent permitted by law, the Company
will indemnify and hold harmless the Purchaser and its officers and directors
and each individual, partnership, corporation, trust or unincorporated
organization (a "Person") if any, who controls the Purchaser (within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), against any losses, claims, damages, liabilities and expenses
(joint or
5
<PAGE>
several) to which they may become subject under the Securities Act, the Exchange
Act or any other federal or state law, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (A) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement (including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto), (B) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or (C) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law, and the Company will reimburse the Purchaser and its officers
and directors and any controlling person thereof for any reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability, expense or action; provided, however,
that the Company shall not be liable in any such case for any such loss, claim,
damage, liability, expense or action to the extent that it arises out of or is
based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by the Purchaser or any officer, director or controlling person
thereof.
(ii) Indemnity by the Purchaser. In connection with any
registration statement in which the Purchaser is participating, the Purchaser
will furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify the
Company, its trustees and officers and each Person who controls the Company
(within the meaning of the Securities Act or Exchange Act) against any losses,
claims, damages, liabilities and expenses resulting from any Violation, but only
to the extent that such Violation is contained in any information or affidavit
so furnished in writing by the Purchaser; provided, that the obligation to
indemnify will be several and not joint and several with any other Person and
will be limited to the net amount received by the Purchaser from the sale of
securities pursuant to such registration statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 6(e) of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 6(e), deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, if the indemnifying party agrees in writing that it will be
responsible for any costs, expenses, judgments, damages and losses incurred by
the indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if the indemnified party reasonably
believes that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due
6
<PAGE>
to actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 6(e) only if and to the
extent that such failure is prejudicial to its ability to defend such action,
and the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party other than
under this Section 6(e).
(iv) Contribution. If the indemnification provided for in this
Section 6(e) is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage or
expense referred to herein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding the foregoing, the amount the Purchaser
shall be obligated to contribute pursuant to this Section 6(e)(iv) shall be
limited to an amount equal to the proceeds to the Purchaser of the securities
sold pursuant to the registration statement that gives rise to such obligation
to contribute (less the aggregate amount of any damages that the Purchaser has
otherwise been required to pay in respect of such loss, claim, damage, liability
or action or any substantially similar loss, claim, damage, liability or action
arising from the sale of such securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 6(e) shall be a continuing right to indemnification and shall survive
the registration and sale of any securities by any Person entitled to
indemnification hereunder and the expiration or termination of this Agreement.
(f) Limitations on Registration Rights.
(i) The Company shall not, without the prior written consent of
the Purchaser include in any registration in which the Purchaser has a right to
participate pursuant to this Agreement any securities of any Person other than
the Purchaser.
(ii) The Purchaser shall not, without the prior written consent
of the Company, effect any public sale or distribution (including sales pursuant
to Rule 144 under the Securities Act) of securities of the Company during any
period commencing 30 days prior to (or
7
<PAGE>
such later date as the Purchaser is first notified or otherwise aware of the
filing or proposed filing of a registration statement) and ending 60 days after
the effective date of any registration statement filed by the Company on behalf
of any Person (including the Company), other than a registration statement on
Form S-8 or any successor form.
(g) Registrable Security. The term Registrable Security means (i) any
Shares issued to the Purchaser pursuant to the terms of this Agreement and (ii)
any Shares or other securities that may subsequently be issued with respect to
such Shares as a result of a stock split or dividend or any sale, transfer,
assignment or other transaction by the Company involving the Shares and any
securities into which the Shares may thereafter be changed as a result of
merger, consolidation, recapitalization or otherwise. As to any particular
Registrable Securities, such securities will cease to be Registrable Securities
when they have been resold to the public pursuant to an offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 under the Securities Act.
(h) Assignment. The Purchaser may assign without the consent of the
Company its rights under this Section 6 with respect to any Registrable
Securities to any party to whom it pledges, assigns or hypothecates such
Registrable Securities.
7. Rule 144. In order to permit the Purchaser to sell the Registrable
Securities it holds, if it so desires, from time to time pursuant to Rule 144
under the Securities Act, or any successor to such rule, the Company shall keep
available adequate current public information and file with the Commission in a
timely manner all reports and other documents required of the Company under the
Exchange Act.
8. Miscellaneous.
(a) Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements contained herein shall survive the
execution of this Agreement and shall remain in full force and effect following
the consummation of the sale and purchase of the Shares.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates, but shall not be assignable
by any party hereto without the prior written consent of the other party hereto,
except as set forth in Section 6(h).
(c) Notices. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be given by
delivery, by telex, telecopier or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
8
<PAGE>
If to the Company:
Property Trust of America
7777 Market Center Avenue
El Paso, Texas 79912
Attention: Paul E. Szurek
Facsimile: (915) 877-3301
If to the Purchaser:
Security Capital Realty Incorporated
7777 Market Center Avenue
El Paso, Texas 79912
Attention: Paul E. Szurek
Facsimile: (915) 877-3301
or to such other address with respect to a party as such party shall notify the
other in writing.
(d) Amendment. This Agreement may be amended only by a writing duly
executed by both the Company and the Purchaser.
(e) Severability. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
(f) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(h) Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the State of Maryland.
(i) Limitation of Liability. Under the terms of the Declaration of
Trust, all persons dealing with the Company shall look solely to the Company
property for satisfaction of claims of any nature, and no trustee, officer,
agent or shareholder of the Company shall be held liable to any person in tort,
contract or otherwise as a result of the execution and delivery of this
Agreement by the Company.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
PROPERTY TRUST OF AMERICA
By: /s/ Paul E. Szurek
--------------------------
Name: Paul E. Szurek
------------------------
Title: Secretary
----------------------
SECURITY CAPITAL REALTY INCORPORATED
By: /s/ Anthony R. Manno
--------------------------
Name: Anthony R. Manno
------------------------
Title: Managing Director
-----------------------
10
<PAGE>
EXHIBIT 10.8
November 1, 1993
Mr. Paul E. Szurek
Secretary
Property Trust of America
1790 Commerce Park Drive
El Paso, Texas 79912
Re: AMENDMENT TO MANAGEMENT AGREEMENT
Dear Paul:
This letter shall serve as an Amendment to the original property management
agreement dated September 1, 1991 between Property Trust of America ("PTR") and
WilsonSchanzer, Inc. and each subsequent Annexation letter.
It is understood and agreed that effective October 1, 1993, PTR agrees to pay
WilsonSchanzer, Inc. the following property management fees with respect to each
property owned by PTR and managed by WilsonSchanzer, Inc.:
1. MANAGEMENT FEE: A fee of 4% of the monthly gross collections.
2. MODERNIZATION, REHAB OR CONSTRUCTION - WHETHER PLANNED OR DUE TO
NATURAL DISASTER: Fees to be negotiated on a project-by-project basis.
3. DIRECT COSTS AND OTHER CHARGES: Reimbursement to WilsonSchanzer, Inc.
of the actual costs approved pursuant to the November 16, 1993 Memorandum
of Chris Harris, which is attached hereto and incorporated herein by
reference, under the column titled "New Agreement."
4. COURTROOM TESTIMONY AND PLANS: A range of $30 to $150 per hour for
preparation, depositions, and court time.
THE FOLLOWING COSTS AND CHARGES IN THE ORIGINAL AGREEMENT ARE HEREBY ELIMINATED:
CORPORATE CHARGES, THE DIRECT COSTS OF OVERNIGHT MAIL, COURIER SERVICES, LONG
DISTANCE AND FACSIMILE, AND TRAINING COSTS.
Yours truly, AGREED TO:
WilsonSchanzer, Inc.
/s/ C. Christopher Harris /s/ Paul E. Szurek
_______________________________ _______________________________
C. Christopher Harris Paul E. Szurek, Secretary
Chief Financial Officer
<PAGE>
Property Trust of America
11-01-93
Date:_______________________
<PAGE>
EXHIBIT 10.9
October 1, 1994
Mr. Paul E. Szurek
Secretary
Property Trust of America
7777 Market Center Avenue
El Paso, Texas 79912
Re: AMENDMENT TO MANAGEMENT AGREEMENT
Dear Paul:
This letter shall serve as an Amendment to the original property management
agreement dated September 1, 1991 between Property Trust of America ("PTR") and
SCG Realty Services Incorporated (formerly known as WilsonSchanzer, Inc.) ("SCG
Realty Services"), each subsequent Annexation letter, and the Amendment to the
Management Agreement dated November 1, 1993.
It is understood and agreed that effective October 1, 1994, PTR agrees to pay
SCG Realty Services the following property management fees with respect to each
property owned by PTR and managed by SCG Realty Services:
1. MANAGEMENT FEE: A fee of 4% of the monthly gross collections except
for properties of 350 units or larger where the fee will be set at 3.75%.
2. MODERNIZATION, REHAB OR CONSTRUCTION - WHETHER PLANNED OR DUE TO
NATURAL DISASTER: Fees to be negotiated on a project-by-project basis.
3. DIRECT COSTS AND OTHER CHARGES: Reimbursement to SCG Realty Services
of the actual costs approved.
4. COURTROOM TESTIMONY AND PLANS: A range of $30 to $150 per hour for
preparation, depositions, and court time.
THE FOLLOWING COSTS AND CHARGES IN THE ORIGINAL AGREEMENT ARE HEREBY ELIMINATED:
ALL CORPORATE CHARGES AND TRAINING COSTS PLUS THE DIRECT COSTS OF OVERNIGHT
MAIL, COURIER SERVICES, LONG DISTANCE AND FACSIMILE COSTS TO THE EXTENT
ORIGINATING OFFSITE OR AT THE CORPORATE LEVEL.
Yours truly, AGREED TO:
SCG Realty Services Incorporated
/s/ Patrick R. Whelan /s/ Paul E. Szurek
_______________________________
Paul E. Szurek, Secretary
<PAGE>
Patrick R. Whelan Property Trust of America
President 10-1-94
Date:_______________________
<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is made and
entered into as of March 23, 1995, by and among SECURITY CAPITAL PACIFIC TRUST,
a Maryland real estate investment trust, formerly known as PROPERTY TRUST OF
AMERICA (the "Borrower"), the financial institutions (including TCB and Wells
Fargo Realty Advisors Funding, Incorporated, the "Lenders") which are now or may
hereafter become signatory hereto, TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association ("TCB"), as administrative agent for Lenders (in
such capacity, "Agent"), and WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED,
as co-agent for Lenders (in such capacity, "Co-Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Agent and some of the Lenders (the "Existing
Lenders") entered into an Amended and Restated Credit Agreement dated as of
October 27, 1994 (the "Original Credit Agreement"); and
WHEREAS, the Borrower, the Agent, the Co-Agent, and the Lenders desire to
amend and restate the Original Credit Agreement upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE in consideration of the mutual covenants, agreements and
undertakings herein contained, the parties hereto agree as follows:
1. Definitions.
-----------
Unless a particular word or phrase is otherwise defined or the context
otherwise requires, capitalized words and phrases used in Credit Documents have
the meanings provided below.
Accounts, Equipment and Inventory shall have the respective meanings assigned
to them in the Texas Business and Commerce Code in force on the date the
document using such term was executed.
Adjusted Eurodollar Interbank Rate shall mean, with respect to each Interest
Period applicable to a Eurodollar Rate Borrowing, a rate per annum equal to the
quotient, expressed as a percentage, of (a) the Eurodollar Interbank Rate with
respect to such Interest Period divided by (b) 1.0000 minus the Eurodollar
Reserve Requirement in effect on each day during such Interest Period.
Affiliate shall mean any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
Annual Audited Financial Statements shall mean the annual financial statements
of a Person, including all notes thereto, which statements shall include a
balance sheet as of the end of such fiscal year and an income statement and a
statement of cash flows, all setting forth in comparative form the corresponding
figures from the previous fiscal year, all prepared in conformity with Generally
Accepted Accounting Principles and accompanied by a report and opinion of
independent certified public accountants
<PAGE>
satisfactory to the Agent, which shall state that such financial statements, in
the opinion of such accountants, present fairly the financial position of such
Person as of the date thereof and the results of its operations for the period
covered thereby in conformity with Generally Accepted Accounting Principles.
Such statements shall be accompanied by a certificate of such accountants that
in making the appropriate audit and/or investigation in connection with such
report and opinion, such accountants did not become aware of any Default or, if
in the opinion of such accountant any such Default exists, a description of the
nature and status thereof. The Annual Audited Financial Statements shall be
prepared on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
Applicable Margin shall mean 1.75% for Eurodollar Rate Borrowings and zero for
Base Rate Borrowings through and including March 31, 1995, and thereafter the
following percentage which will be in effect when and for so long as the
Borrower has received the corresponding S&P Rating or Moody's Rating, whichever
is lower:
<TABLE>
<CAPTION>
S&P RATING/ APPLICABLE MARGIN
----------- ----------------------------
MOODY'S RATING EURODOLLAR RATE RATE BASE
-------------- --------------- ---------
BORROWING BORROWING
--------------- ---------
<S> <C> <C>
A/A2 or better 1.250% 0
A-/A3 1.375% 0
BBB+/Baa1 1.500% 0
BBB/Baa2 1.625% 0
BBB-/Baa3 1.750% 0
Worse than BBB-/Baa3 2.000% .50%
</TABLE>
Base Rate shall mean for any day a rate per annum equal to the Applicable
Margin on that day plus the greater on a daily basis of (a) the Prime Rate for
that day, or (b) the Federal Funds Effective Rate for that day plus one-half of
one percent (1/2%).
Base Rate Borrowing shall mean that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.
Borrower's REIT Manager shall mean Security Capital (Southwest) Incorporated,
manager to the Borrower, or any successor manager to the Borrower permitted by
this Agreement.
Business Day shall mean a day other than (a) a day when the main office of the
Agent is not open for business, or (b) a day that is a federal banking holiday
in the United States of America.
Ceiling Rate shall mean, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas laws permits
the higher interest rate, stated as a rate per annum. On each day, if any, that
Chapter One establishes the Ceiling Rate, the Ceiling Rate shall be the
"indicated rate ceiling" (as defined in Chapter One) for that day. The Agent
may from time to time, as to current and future balances, implement any other
ceiling under Chapter One by notice to the Borrower, if and to the extent
permitted by Chapter One. Without notice to the Borrower or any other person or
entity, the Ceiling Rate shall automatically fluctuate upward and downward as
and in the amount by which such maximum nonusurious rate of interest permitted
by applicable law fluctuates.
-2-
<PAGE>
Chapter One shall mean Chapter One of Title 79, Texas Revised Civil Statutes,
1925, as amended.
Code shall mean the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Commitment shall mean the commitment of the Lenders to lend funds under
Section 2.1 of this Agreement, other than Swing Loans.
Construction Interest shall mean Borrower's interest expense for the
construction of projects, which is capitalized in accordance with Generally
Accepted Accounting Principles.
Coverage Ratio shall mean the ratio of (a) the Borrower's Funds From
Operations plus all of the Borrower's Interest Expense for the period used to
calculate Funds From Operations, to (b) dividends of any kind or character or
other proceeds paid or payable with respect to any Disqualified Stock plus all
of the Borrower's Interest Expense, in each case for the period used to
calculate the Funds From Operations.
Credit Documents shall mean this Agreement, the Notes, all instruments,
certificates and agreements now or hereafter executed or delivered to the Agent
or the Lenders pursuant to any of the foregoing, and all amendments,
modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.
Debt to Tangible Net Worth Ratio shall mean the ratio of Indebtedness to
Tangible Net Worth.
Disqualified Stock shall mean any of the Borrower's capital stock which by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable or exercisable) (a) matures or is subject to mandatory
redemption, pursuant to a sinking fund obligation or otherwise, (b) is
convertible into or exchangeable or exercisable for Indebtedness or
Disqualified Stock, (c) is redeemable at the option of the holder of such stock,
or (d) otherwise requires any payments by Borrower, in each case on or before
the Maturity Date.
Eurodollar Business Day shall mean a Business Day on which transactions in
United States dollar deposits between banks may be carried on in the London
Eurodollar interbank market.
Eurodollar Interbank Rate shall mean, for each Interest Period, the rate of
interest per annum, rounded, if necessary, to the next highest whole multiple of
one-sixteenth percent (1/16%), quoted by Agent at or before 11:00 a.m., London
time (or as soon thereafter as practicable), on the date two (2) Eurodollar
Business Days before the first day of such Interest Period, to be the arithmetic
average of the prevailing rates per annum at the time of determination and in
accordance with the then existing practice in the applicable market, for the
offering to Agent by one or more prime banks selected by Agent in its sole
discretion, in whatever Eurodollar interbank market may be selected by Agent in
its sole discretion, of deposits in United States dollars for delivery on the
first day of such Interest Period and having a maturity equal to the length of
such Interest Period and in an amount equal (or as nearly equal as may be) to
the Eurodollar Rate Borrowing to which such Interest Period relates. Each
-3-
<PAGE>
determination by Agent of the Eurodollar Interbank Rate shall be prima facie
evidence thereof.
Eurodollar Rate shall mean for any day a rate per annum equal to the sum of
the Applicable Margin for that day plus the Adjusted Eurodollar Interbank Rate
in effect on the first day of the Interest Period for the applicable Eurodollar
Rate Borrowing. Each Eurodollar Rate is subject to adjustments for reserves,
insurance assessments and other matters as provided for in Section 3.5 hereof.
Eurodollar Rate Borrowing shall mean that portion of the principal balance of
the Loans at any time bearing interest at a Eurodollar Rate.
Eurodollar Reserve Requirement shall mean, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth) which is in effect on such day for determining all reserve
requirements (including, without limitation, basic, supplemental, marginal and
emergency reserves) applicable to "Eurocurrency liabilities," as currently
defined in Regulation D, all as specified by any Governmental Authority,
including but not limited to those imposed under Regulation D. Each
determination of the Eurodollar Reserve Requirement by Agent shall be prima
facie evidence thereof.
Event of Default shall mean any of the events specified as an event of default
in Section 7 of this Agreement, and Default shall mean any of such events,
whether or not any requirement for notice, grace or cure has been satisfied.
Federal Funds Effective Rate shall to the extent necessary be determined by
the Agent separately for each day and shall for each such day be a rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for each such day (or if any such day is not a
Business Day, for the next immediately preceding Business Day) by the Federal
Reserve Bank of New York, or if the weighted average of such rates is not so
published for any such day which is a Business Day, the average of the
quotations for any such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent.
Fixed Charge Coverage Ratio shall mean the ratio of (a) the Borrower's Funds
From Operations plus all of the Borrower's Interest Expense for the period used
to calculate Funds From Operations, less Unit Capital Expenditures, to (b)
dividends of any kind or character or other proceeds paid or payable with
respect to any Disqualified Stock, plus all of the principal payable and
principal paid on the Borrower's Indebtedness other than (i) in the case of the
Borrower, any scheduled principal payments on the Term Loan and (ii) any
regularly scheduled principal payments on any Indebtedness which pays such
Indebtedness in full, to the extent the amount of such final scheduled principal
payment is greater than the scheduled principal payment immediately preceding
such final scheduled principal payment, plus all of the Borrower's Interest
Expense, in each case for the period used to calculate the Funds From
Operations.
Funding Loss shall mean, with respect to (a) Borrower's payment or prepayment
of principal of a Eurodollar Rate Borrowing
-4-
<PAGE>
on a day other than the last day of the applicable Interest Period; (b)
Borrower's failure to borrow a Eurodollar Rate Borrowing on the date specified
by Borrower; (c) Borrower's failure to make any prepayment of the Loans (other
than Base Rate Borrowings) on the date specified by Borrower, or (d) any
cessation of a Eurodollar Rate to apply to the Loans or any part thereof
pursuant to Section 3.5, in each case whether voluntary or involuntary, any
direct loss, expense, penalty, premium or liability incurred by any Lender
(including but not limited to any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender to
fund or maintain a Loan).
Funds From Operations shall mean gross cash revenues (excluding unforfeited
security deposits) actually received by the Borrower, less all cash
disbursements characterized as expenses and all proper charges against income,
plus depreciation of Property and deferred taxes, reserves and other non-cash
charges, all determined in accordance with Generally Accepted Accounting
Principles; provided, that there shall not be included in such revenues (i) any
proceeds of any insurance policy other than rental or business interruption
insurance received by the Borrower, (ii) any gain which is classified as
"extraordinary" in accordance with Generally Accepted Accounting Principles, or
(iii) any capital gains. Funds From Operations will be calculated, on an
annualized basis, on the four (4) calendar quarters immediately preceding the
date of the calculation. Funds From Operations shall not be increased or
decreased by gains or losses from sales of Property. Funds From Operations
shall be calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Generally Accepted Accounting Principles shall mean, as to a particular
Person, such accounting practice as, in the opinion of the independent
accountants of recognized national standing regularly retained by such Person
and acceptable to the Agent, conforms at the time to generally accepted
accounting principles, consistently applied. Generally Accepted Accounting
Principles means those principles and practices (a) which are recognized as such
by the Financial Accounting Standards Board, (b) which are applied for all
periods after the date hereof in a manner consistent with the manner in which
such principles and practices were applied to the most recent audited financial
statements of the relevant Person furnished to the Lenders or where a change
therein has been concurred in by such Person's independent auditors, and (c)
which are consistently applied for all periods after the date hereof so as to
reflect properly the financial condition, and results of operations and changes
in financial position, of such Person. If there is a change in such accounting
practice as to the Borrower that could affect the Borrower's ability to comply
with the terms of this Agreement, the parties hereto agree to review and discuss
such changes in accounting practice and the terms of this Agreement for a period
of no more than thirty (30) days with a view to amending this Agreement so that
the financial measures of the Borrower's operating performance and financial
condition are substantially the same after such change as they were immediately
before such change.
Governmental Authority shall mean any foreign governmental authority, the
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any agency, department, commission,
board, bureau, court or other
-5-
<PAGE>
tribunal having jurisdiction over the Agent, any Lender or the Borrower or their
respective Property.
Historical Value shall mean the purchase price of Property (including
improvements) and ordinary related purchase transaction costs, plus the cost of
subsequent capital improvements made by the Borrower, less any provision for
losses, all determined in accordance with Generally Accepted Accounting
Principles. If the Property is purchased as a part of a group of properties,
the Historical Value shall be calculated based upon a reasonable allocation of
the aggregate purchase price by the Borrower for all purposes, and consistent
with Generally Accepted Accounting Principles.
Indebtedness shall mean and include, without duplication (1) all obligations
for borrowed money, (2) all obligations evidenced by bonds, debentures, notes or
other similar agreements, (3) all obligations to pay the deferred purchase price
of Property or services, except trade accounts payable arising in the ordinary
course of business (unless included in (7) below), (4) all guaranties,
endorsements and other contingent obligations in respect of, or any obligations
to purchase or otherwise acquire, Indebtedness of others, (5) all Indebtedness
secured by any Lien existing on any interest of the Person with respect to which
Indebtedness is being determined in Property owned subject to such Lien whether
or not the Indebtedness secured thereby shall have been assumed, (6) the pro
rata share of all Indebtedness of an Unconsolidated Affiliates, and (7) accounts
payable, dividends of any kind or character or other proceeds payable with
respect to any stock and accrued expenses which in the aggregate are in excess
of four percent (4%) of the value of the assets of the Borrower, in each case
including Non-recourse Debt. Indebtedness shall be calculated on a consolidated
basis in accordance with Generally Accepted Accounting Principles including, to
the extent required by the foregoing definition, any of its Unconsolidated
Affiliates.
Interest Expense shall mean all of a Person's paid, accrued or capitalized
interest expense on such Person's Indebtedness (whether direct, indirect or
contingent, and including, without limitation, interest on all convertible
debt), but excluding Construction Interest.
Interest Options shall mean the Base Rate and the Eurodollar Rate, and
"Interest Option" means either of them.
Interest Payment Dates shall mean (a) for Base Rate Borrowings, the first
(1st) day of each calendar month and the Maturity Date; and (b) for Eurodollar
Rate Borrowings, the first (1st) day of each calendar month, the end of the
applicable Interest Period, and the Maturity Date.
Interest Period shall mean, for each Eurodollar Rate Borrowing, a period
commencing on the date such Eurodollar Rate Borrowing was made and ending on the
numerically corresponding day which is, subject to availability, one (1), two
(2), three (3) or six (6) months thereafter; provided, (v) any Interest Period
which would otherwise end on a day which is not a Eurodollar Business Day shall
be extended to the next succeeding Eurodollar Business Day, unless such
Eurodollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar Business Day; (w) any
Interest Period which begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is
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no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Eurodollar Business Day of the
appropriate calendar month; (x) no Interest Period shall ever extend beyond the
Maturity Date; and (y) Interest Periods shall be selected by Borrower in such a
manner that the Interest Period with respect to any portion of the Loans which
shall become due shall not extend beyond such due date.
Legal Requirement shall mean any law, statute, ordinance, decree, requirement,
order, judgment, rule, regulation (or interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental
Authority.
Lender Commitment means, for any Lender, the amount set forth opposite such
Lender's name on its signature page of this Agreement, or as may hereafter
become a signatory hereto.
Lien shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions.
Loans shall mean the Loans described in Sections 2.1 and 2.2 hereof. Loan
shall mean any such Loan.
Majority Lenders shall mean the Lenders with an aggregate amount of at least
sixty-six and 67/100 percent (66.67%) of the amount of the Commitment then
outstanding.
Material Adverse Change shall mean a change which could reasonably be expected
to have a Material Adverse Effect.
Material Adverse Effect means a material adverse effect on (a) the financial
condition, or results of operations of Borrower and its Subsidiaries taken as a
whole, (b) the ability of Borrower to perform its obligations under any Credit
Document to which it is a party, (c) the validity or enforceability of any of
such Credit Documents, or (d) the rights and remedies of Lenders and Agent under
any of the Credit Documents.
Maturity Date shall mean (a) the Revolving Credit Termination Date prior to
any conversion of the Loans to the Term Loan, and (b) the Termination Date as to
the Term Loan.
Moody's Rating shall mean the senior unsecured debt rating from time to time
received by the Borrower from Moody's Investor Service.
Non-recourse Debt shall mean any Indebtedness the payment of which the
Borrower or any of its Subsidiaries is not obligated to make other than to the
extent of any security therefor.
Notes shall mean the promissory notes of the Borrower described in Section 2.1
hereof, including the Swing Loan Note, any and all renewals, extensions,
modifications, rearrangements and replacements thereof and any and all
substitutions therefor, and Note shall mean any one of them.
Obligations shall mean, as at any date of determination thereof, the sum of
(a) the aggregate amount of Loans outstanding
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hereunder plus (b) all other liabilities, obligations and Indebtedness of any
Parties under any Credit Document.
Officer's Certificate shall mean a certificate in the form attached hereto as
Exhibit A.
Organizational Documents shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Credit Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Lenders.
Opinion Letters shall mean the opinion letters of independent counsel for the
Borrower, each in Proper Form.
Parties shall mean all Persons other than the Agent, the Co-Agent or any
Lender executing any Credit Document.
Past Due Rate shall mean, on any day, a rate per annum equal to the Ceiling
Rate for that day, or only if applicable law imposes no maximum nonusurious rate
of interest for that day, then the Past Due Rate for that day shall be a rate
per annum equal to the Base Rate plus an additional three percent (3%) per
annum, but in any event not to exceed the Ceiling Rate.
Percentage shall mean the amount, expressed as a percentage, of each Lender
Commitment as compared to the Commitment, set forth opposite the Lender's name
on its signature page of this Agreement, or as may hereafter become signatory
hereto.
Permitted Encumbrances shall mean (a) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
provided that such items do not materially impair the use of such property for
the purposes intended and none of which is violated in any material respect by
existing or proposed structures or land use; (b) the following: (i) Liens for
taxes not yet due and payable, or being diligently contested in good faith, or
where no Material Adverse Effect could reasonably be expected to result from
such nonpayment or the imposition of such Lien; or (ii) materialmen's,
mechanic's, warehousemen's and other like Liens arising in the ordinary course
of business, securing payment of Indebtedness whose payment is not yet due, or
that are being contested in good faith by appropriate proceedings diligently
conducted, and for or against which the Borrower has established adequate
reserves in accordance with Generally Accepted Accounting Principles; (c) Liens
for taxes, assessments and governmental charges or assessments that are being
contested in good faith by appropriate proceedings diligently conducted, and for
or against which the Borrower has established adequate reserves in accordance
with Generally Accepted Accounting Principles; (d) Liens on real property which
are insured around or against by title insurance; (e) Liens securing assessments
or charges payable to a property owner association or similar entity which
assessments are not yet due and payable or are being diligently contested in
good faith; and (f) Liens securing this Agreement and Indebtedness hereunder.
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Person shall mean any individual, corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
Prime Rate shall mean, as of a particular date, the prime rate of interest per
annum most recently determined by the Agent and thereafter entered in the
minutes of the Agent's Loan and Discount Committee, automatically fluctuating
upward or downward with and at the time specified in each such determination
without notice to Borrower or any other Person; each change in the Prime Rate
shall be effective on the date such change is determined; which Prime Rate may
not necessarily represent the Agent's lowest or best rate actually charged to a
customer.
Proper Form shall mean in form and substance satisfactory to the Lenders.
Property shall mean any interest in any kind of property or asset, whether
real, personal or mixed, tangible or intangible.
Quarterly Unaudited Financial Statements shall mean the quarterly financial
statements of a Person, including all notes thereto, which statements shall
include a balance sheet as of the end of such quarter and an income statement
for such fiscal quarter, and for the fiscal year to date, a statement of cash
flows for such quarter and for the fiscal year to date, subject to normal year-
end adjustments, and a detailed listing of the Borrower's Property and the
Historical Value thereof, all setting forth in comparative form the
corresponding figures for the corresponding fiscal period of the preceding year
(or, in the case of the balance sheet, the end of the preceding fiscal year),
prepared in accordance with Generally Accepted Accounting Principles except that
the Quarterly Unaudited Financial Statements may contain condensed footnotes as
permitted by regulations of the United States Securities and Exchange
Commission, and certified as true and correct by a managing director or vice
president of Borrower's REIT Manager. The Quarterly Unaudited Financial
Statements shall be prepared on a consolidated basis in accordance with
Generally Accepted Accounting Principles.
Rate Designation Date shall mean 10:00 a.m., Houston, Texas time, on the date
three (3) Eurodollar Business Days preceding the first day of any proposed
Interest Period.
Rate Designation Notice shall mean a written notice substantially in the form
of Exhibit B.
Regulation D shall mean Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation relating to reserve requirements applicable to member lenders
of the Federal Reserve System.
Revolving Credit Termination Date shall mean the earlier to occur of (a)
August 13, 1996 as the same may hereafter be accelerated pursuant to the
provisions of any of the Credit Documents, and (b) the date on which the Loans
are converted into the Term Loan pursuant to Section 2.2 hereof.
S&P Rating shall mean the senior unsecured debt rating from time to time
received by the Borrower from Standard & Poor's Corporation.
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Stated Rate shall, on any day, mean whichever of the Base Rate or the
Eurodollar Rate has been designated and provided pursuant to this Agreement;
provided, that if on any day such rate shall exceed the Ceiling Rate for that
day, the Stated Rate shall be fixed at the Ceiling Rate on that day and on each
day thereafter until the total amount of interest accrued at the Stated Rate on
the unpaid principal balance of the Notes equals the total amount of interest
which would have accrued if there had been no Ceiling Rate. If the Notes mature
(or are prepaid) before such equality is achieved, then, in addition to the
unpaid principal and accrued interest then owing pursuant to the other
provisions of the Credit Documents, Borrower promises to pay on demand to the
order of the holders of the Notes interest in an amount equal to the excess (if
any) of (a) the lesser of (i) the total interest which would have accrued on the
Notes if the Stated Rate had been defined as equal to the Ceiling Rate from time
to time in effect and (ii) the total interest which would have accrued on the
Notes if the Stated Rate were not so prohibited from exceeding the Ceiling Rate,
over (b) the total interest actually accrued on the Notes to such maturity (or
prepayment) date.
Subsidiary shall mean, as to a particular parent entity, any entity of which
more than fifty percent (50%) of the indicia of voting equity or ownership
rights (whether outstanding capital stock or otherwise) is at the time directly
or indirectly owned by, such parent entity, or by one or more of its other
Subsidiaries.
Swing Loan shall mean a Loan made pursuant to Section 2.1(c) hereof.
Swing Loan Note shall mean that certain promissory note dated of even date
herewith in the original principal amount of $200,000,000.00 executed by the
Borrower payable to the order of TCB.
Tangible Net Worth shall mean total assets (valued at cost less depreciation),
less (1) all intangibles and (2) all liabilities (including contingent and
indirect liabilities), all determined in accordance with Generally Accepted
Accounting Principles. The term "intangibles" shall include, without
limitation, (i) deferred charges, (ii) the amount of any write-up in the book
value of any assets contained in any balance sheet resulting from revaluation
thereof or any write-up in excess of the cost of such assets acquired, and (iii)
the aggregate of all amounts appearing on the assets side of any such balance
sheet for franchises, licenses, permits, patents, patent applications,
copyrights, trademarks, trade names, goodwill, treasury stock, experimental or
organizational expenses and other like intangibles. The term "liabilities"
shall include, without limitation, (i) Indebtedness secured by Liens on Property
of the Person with respect to which Tangible Net Worth is being computed whether
or not such Person is liable for the payment thereof, (ii) deferred liabilities,
and (iii) obligations under leases which have been capitalized. Tangible Net
Worth shall be calculated on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Taxes means any tax, levy, impost, duty, charge or fee.
Term Loan has the meaning given it in Section 2.2 hereof.
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Termination Date means the date two (2) years after the Revolving Credit
Termination Date, as the same may hereafter be accelerated pursuant to the
provisions of any of the Credit Documents.
Unconsolidated Affiliate shall mean, in respect of any Person, any other
Person in whom such Person holds a voting equity or ownership interest and whose
financial results would not be consolidated under Generally Accepted Accounting
Principles with the financial results of such Person on the consolidated
financial statements of such Person.
Unit Capital Expenditure shall mean, on an annual basis, an amount equal to
the product of (a) the number of apartment units contained in each completed,
operating Property owned by Borrower, any Subsidiary, and any Unconsolidated
Affiliate, pro rated with respect to Unconsolidated Affiliates to reflect
Borrower's interest in such Unconsolidated Affiliate, multiplied by (b) $200.00
prorated to reflect the period of completion, operation and ownership of the
Property by Borrower, the Subsidiary or the Unconsolidated Affiliate.
The following terms shall have the respective meanings ascribed to them in the
Uniform Commercial Code as enacted and in force in the State of Texas on the
date hereof:
accessions, continuation statement, fixtures, general intangibles,
proceeds, security interest and security agreement.
2. The Loans.
---------
2.1 Advances. (a) Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Loans (other than Swing Loans) prior to the
Revolving Credit Termination Date to the Borrower not to exceed an amount (in
the aggregate, the "Commitment") at any one time outstanding equal to the
Lender's Lender Commitment. Each such request for a Loan by Borrower shall be
deemed a request for a Loan from each Lender equal to such Lender's Percentage
of the aggregate amount so requested, and such aggregate amount shall be in an
amount equal to a multiple of $250,000.00 or the difference between the
Commitment and the aggregate principal balance of the Notes, whichever is less.
Each repayment of the Loans shall be deemed a repayment of each Lender's Loan
equal to such Lender's Percentage of the amount so repaid. The obligations of
the Lenders hereunder are several and not joint, and the preceding two sentences
will give rise to certain inappropriate results if special provisions are not
made to accommodate the failure of a Lender to fund a Loan as and when required
by this Agreement; therefore, notwithstanding anything herein to the contrary,
(A) no Lender shall be required to make Loans at any one time outstanding in
excess of such Lender's Percentage of the Commitment and (B) if a Lender fails
to make a Loan as and when required hereunder and Borrower subsequently makes a
repayment on the Loans, such repayment shall be split among the non-defaulting
Lenders ratably in accordance with their respective Percentages until each
Lender has its Percentage of all of the outstanding Loans, and the balance of
such repayment shall be divided among all of the Lenders in accordance with
their respective Percentages. Notwithstanding the foregoing, borrowings and
payments of Swing Loans shall be for TCB's own account. The Loans (other than
Swing Loans) shall be evidenced by the Notes substantially in the form of
Exhibit C attached hereto. The Borrower, the Agent and the Lenders agree
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that Chapter 15 of the Texas Credit Code shall not apply to this Agreement, the
Notes or any Loan.
(b) The Borrower shall give the Agent notice of each borrowing to be made
hereunder as provided in Section 3.1 hereof, and the Agent shall deliver same to
each Lender promptly thereafter. Not later than 11:00 a.m., Houston, Texas
time, on the date specified for each such borrowing hereunder other than Swing
Loans, each Lender shall make available the amount of the Loan, if any, to be
made by it on such date to the Agent at the Agent's principal office in Houston,
Texas, in immediately available funds, for the account of the Borrower. Such
amounts received by the Agent will be held in Agent's general ledger account.
The amounts so received by the Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Borrower by wiring or otherwise
transferring, in immediately available funds not later than 12:00 noon, Houston,
Texas time, such amount to an account designated by the Borrower and maintained
with Texas Commerce Bank National Association in El Paso, Texas or any other
account or accounts which the Borrower may from time to time designate to the
Agent by a written notice as the account or accounts to which borrowings
hereunder are to be wired or otherwise transferred. TCB shall make available the
amount of each Swing Loan by depositing the same in immediately available funds,
in the foregoing account by 12:00 noon, Houston, Texas time, on the date of the
borrowing.
(c) Subject to the terms and conditions hereof, if necessary to meet the
Borrower's funding deadlines, TCB agrees to make Swing Loans to the Borrower at
any time on or prior to the Revolving Credit Termination Date, not to exceed an
amount at any one time outstanding equal to the lesser of (i) $200,000,000.00,
or (ii) the difference between the Commitment and the unpaid principal balance
of all Loans. Swing Loans shall constitute "Loans" for all purposes hereunder,
except that Swing Loans shall not be considered a utilization of any Lender's
Lender Commitment. Notwithstanding the foregoing, the aggregate amount of all
Loans (including, without limitation, all Swing Loans) shall not at any time
exceed the Commitment. Each request for a Swing Loan shall be in an amount
equal to a multiple of $250,000.00. If necessary to meet the Borrower's funding
deadlines, the Agent may treat any Request for Loan as a request for a Swing
Loan from TCB and TCB may fund it as a Swing Loan. Within two (2) Business Days
after each Swing Loan is funded, TCB shall request that each Lender, and each
Lender shall, on the first Business Day after such request is made, purchase a
portion of any one or more Swing Loans in an amount equal to that Lender's
Percentage of such Swing Loans by funding under such Lender's Note, such
purchase to be made in accordance with the terms of Section 2.1(b) of this
Agreement just as if the Lender were funding directly to the Borrower under its
Note (such that all Lenders other than TCB shall fund only under their
respective Note and not under the Swing Loan Note). Unless the Agent knew or
should have known when TCB funded a Swing Loan that the Borrower had not
satisfied the conditions in this Agreement to obtain a Loan, each Lender's
obligation to purchase an interest in the Swing Loans shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender or any other Person may have against TCB or any other Person
for any reason whatsoever; (ii) the occurrence or continuance of a Default or
Event of Default or the termination of any Lender Commitment; (iii) any adverse
change in the condition (financial or otherwise) of the Borrower
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or any of its Subsidiaries; (iv) any breach of this Agreement or any other
Credit Documents by the Borrower, any of its Subsidiaries, the Agent or any
other Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. Any portion of a Swing Loan not
so purchased and converted may be treated by TCB as a Loan which was not funded
by the non-purchasing Lenders as contemplated in Section 2.1(a) of this
Agreement, and as a funding by TCB under the Commitment in excess of TCB's
Percentage. Each Swing Loan, once so sold, shall cease to be a Swing Loan for
the purposes of this Agreement, but shall be a Loan made under the Commitment
and each Lender's Lender Commitment. The Swing Loans shall be evidenced by the
Swing Loan Note substantially in the form of Exhibit C-1 attached hereto.
2.2 Term Loan Conversion.
(a) Subject to the terms and conditions of this Agreement, if any
Extension Request (as defined in Section 9) shall be denied, the Borrower may
elect to convert the aggregate unpaid principal amount of the Loans (other than
the Swing Loans) outstanding on the date one (1) year prior to the then existing
Revolving Credit Termination Date into a term loan owing to each of the Lenders
(each a "Term Loan"), so long as (i) the Borrower has given the Agent at least
fifteen (15) days prior written notice of the Borrower's intention to so convert
the Loans, (ii) no amounts remain unpaid under the Swing Loan Note, and (iii)
the conditions to make a Loan set forth in Section 3 are satisfied as of the
date of the conversion. Upon the effectiveness of the conversion of the
aggregate unpaid principal amount of the Loans into the Term Loan as
contemplated by this Section, the Borrower shall have no further right to
receive, and no Lender shall have the obligation to make, any advances of Loans.
(b) The Borrower shall repay the principal balance of the Term Loans in
eight (8) equal quarterly installments due on November 13 first following the
Revolving Credit Termination Date, and continuing on the thirteenth (13th) day
of each subsequent February, May, August and November until the Term Loan is
paid in full. The amount of each aggregate quarterly principal installment
shall be equal to the result of dividing the aggregate unpaid principal balance
of the Loans on the Revolving Credit Termination Date by eight (8). Accrued and
unpaid interest on the unpaid principal balance of the Term Loan shall continue
to be due and payable on the Interest Payment Dates. The entire unpaid
principal balance, and all accrued and unpaid interest thereon, of the Term
Loan, together with all other amounts due under this Agreement, shall be due and
payable in full on the Termination Date.
2.3 Payments. (a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower
hereunder, under the Notes and under the other Credit Documents shall be made in
immediately available funds to the Agent at its principal office in Houston,
Texas (or in the case of a successor Agent, at the principal office of such
successor Agent in the United States), not later than 12:00 noon Houston, Texas
time on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
(b) The Borrower may, at the time of making each payment hereunder, under any
Note or under any other Credit Document,
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specify to the Agent the Loans or other amounts payable by the Borrower
hereunder or thereunder to which such payment is to be applied (and in the event
that it fails so to specify, such payment shall be applied to the Loans (first
to the Swing Loans) or, if no Loans are outstanding, to other amounts then due
and payable, provided that if no Loans or other amounts are then due and payable
or an Event of Default has occurred and is continuing, the Agent may apply such
payment to the Obligations in such order as it may elect in its sole discretion,
but subject to the other terms and conditions of this Agreement, including
without limitation Section 2.4 hereof). Each payment received by the Agent
hereunder, under any Note or under any other Credit Document for the account of
a Lender shall be paid promptly to such Lender, in immediately available funds.
If the Agent receives a payment for the account of a Lender prior to 12:00 noon
Houston, Texas time, such payment must be delivered to the Lender on that same
day and if it is not so delivered due to the fault of the Agent, the Agent shall
pay to the Lender entitled to the payment the interest accrued on the amount of
the payment pursuant to said Lender's Note from the date the Agent receives the
payment to the date the Lender received the payment. The Agent may apply
payments received from the Borrower to pay any unpaid principal and interest on
the Swing Loans before making payment to each Lender of amounts due under the
Notes other than the Swing Loan Note.
(c) If the due date of any payment hereunder or under any Note falls on a day
which is not a Business Day or a Eurodollar Business Day, as the case may be,
the due date for such payments shall be extended to the next succeeding Business
Day or Eurodollar Business Day, respectively, and interest shall be payable for
any principal so extended for the period of such extension; provided, however,
that with respect to Eurodollar Rate Borrowings if such extension would cause
the Eurodollar Business Day of payment to fall in another calendar month, the
payment shall be due on the Eurodollar Business Day next preceding the due date
of the payment.
(d) The Borrower shall give the Agent at least one (1) Business Day's prior
written notice of the Borrower's intent to make any payment of principal or
interest under the Credit Documents not scheduled to be paid under the Credit
Documents. Any such notification of payment shall be irrevocable after it is
made by the Borrower. Upon receipt by the Agent of such notification of
payment, it shall deliver same to the other Lenders.
2.4 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Lenders under Section 2.1(a) hereof shall be made
ratably from the Lenders on the basis of their respective Percentages, each
payment of the Fee (hereinafter defined) shall be made for the account of the
Lenders, and shall be applied, prorata, according to the Lenders' respective
Lender Commitment; and (b) each payment by the Borrower of principal or
interest on the Loans other than the Swing Loans, of any other sums advanced by
the Lenders pursuant to the Credit Documents, and of any other amount owed to
the Lenders other than the Fee, payments of Swing Loans, or any other sums
designated by this Agreement as being owed to a particular Lender, shall be made
to the Agent for the account of the Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans (other than Swing Loans) held
by the Lenders. Payments of Swing Loans shall be for TCB's own account.
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2.5 Non-Receipt of Funds by the Agent. Unless the Agent shall have been
notified by a Lender or the Borrower (the "Payor") prior to the date on which
such Lender is to make payment to the Agent of the proceeds of a Loan (or
purchase of a portion of a Swing Loan) to be made by it hereunder or the
Borrower is to make a payment to the Agent for the account of one or more of the
Lenders, as the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required Payment to the Agent, the Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the Required
Payment to the Agent, the recipient of such payment shall, on demand, pay to the
Agent the amount made available by the Agent together with interest thereon in
respect of the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to (a) the Past Due Rate for such period if the recipient returning a
Required Payment is the Borrower, or (b) the Federal Funds Effective Rate for
such period if the recipient returning a Required Payment is the Agent or a
Lender.
2.6 Sharing of Payments, Etc. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall be entitled, at its option, to
offset balances held by it for the account of the Borrower at any of its
offices, against any principal of or interest on any of such Lender's Loans to
the Borrower hereunder, or other Obligations of the Borrower hereunder,
which is not paid (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower and the Agent
thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof. If a Lender shall obtain payment of any principal
of or interest on any Loan made by it under this Agreement (other than Swing
Loans made by TCB), or other Obligation then due to such Lender hereunder,
through the exercise of any right of set-off, banker's lien, counterclaim or
similar right, or otherwise, it shall promptly purchase from the other Lenders
portions of the Loans made or other Obligations held (other than Swing Loans
made by TCB), by the other Lenders in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Lenders shall share the benefit of such payment (net of any expenses which may
be incurred by such Lender in obtaining or preserving such benefit) pro rata in
accordance with the unpaid principal and interest on the Obligations then due to
each of them. To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. Nothing contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of the Borrower.
2.7 Fees. The Borrower shall pay to the Agent for the account of each Lender
fees (collectively, the "Fee") equal to (a) an amount payable as a commitment
fee by the Borrower to the Agent for the account of each Lender equal to the
portion of the daily unused amount of the Commitment listed below multiplied by
the corresponding rate per annum applicable to that portion:
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Unused Commitment Rate
----------------- ----
Up to but not including $115,000,000 0.1250%
$115,000,000 up to and including
$230,000,000 0.1875%
Over $230,000,000 0.2500%
such commitment fee to be payable in arrears on or before the tenth (10th) day
of each April, July, October and January, and (b) if the Revolving Credit
Termination Date is extended pursuant to Section 9 of this Agreement, or if the
Loans are converted to the Term Loan pursuant to Section 2.2 of this Agreement,
an amount payable as an extension or conversion fee, as the case may be, by the
Borrower to the Agent for the account of each Lender that extends or converts,
as the case may be, equal to one-fourth of one percent (1/4%) of (i) each
Lender's Lender Commitment at that time if the Revolving Credit Termination Date
is extended, or (ii) the aggregate unpaid principal balance of each Loan payable
to each Lender on the Revolving Credit Termination Date, if converted to a Term
Loan. The Fee shall not be refundable (except as required by Section 3.1(c) of
this Agreement). Any portion of the Fee which is not paid by the Borrower when
due shall bear interest at the Past Due Rate from the date due until the date
paid by the Borrower. The Fee shall be calculated on the actual number of days
elapsed in a year deemed to consist of 360 days.
3. Conditions.
----------
3.1 All Loans. The obligation of any Lender to make any Loan is subject to
the accuracy of all representations and warranties of the Borrower on the date
of such Loan, to the performance by the Borrower of its obligations under the
Credit Documents and to the satisfaction of the following further conditions:
(a) the Agent shall have received the following, all of which shall be duly
executed and in Proper Form: (1) a Request for Loan, substantially in the form
of Exhibit D and an Officer's Certificate in the form of Exhibit A (i) by 9:00
a.m., Houston, Texas time, one (1) Business Day before the date (which shall
also be a Business Day) of the proposed Loan which is to be a Base Rate
Borrowing (other than Swing Loans), (ii) by 9:00 a.m., Houston, Texas time, on
the same Business Day of any proposed Swing Loan, provided that prior to 5:00
p.m., Houston, Texas time one (1) Business Day before the date of the proposed
Swing Loan, Borrower shall have notified TCB, in writing or by telephone, of its
intent to submit a request for a Swing Loan, or (iii) by the Rate Designation
Date of the proposed Loan which is to be a Eurodollar Rate Borrowing; and (2)
such other documents as the Agent may reasonably require to satisfy itself or
the request of any Lender; (b) no Default or Event of Default shall have
occurred and be continuing; (c) the making of the Loan shall not be prohibited
by any Legal Requirement (in which event the applicable portion of the Fee will
not be charged to the Borrower); (d) the Borrower shall have paid all legal fees
and expenses of the type described in Section 5.10 hereof through the date of
such Loan; and (e) in the case of a Loan other than a Swing Loan, all Swing
Loans then outstanding shall have been paid or shall be paid with the proceeds
of such Loan.
3.2 First Loan. In addition to the matters described in Section 3.1 hereof,
the obligation of the Lenders to make the first Loan hereunder is subject to the
receipt by the Lenders of
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each of the following, in Proper Form: (a) the Notes, executed by the Borrower;
(b) a certificate executed by the Secretary of the Borrower dated as of the date
hereof; (c) a certificate from the Secretary of State or other appropriate
public official of Maryland as to the continued existence and good standing of
the Borrower; (d) a certificate from the appropriate public official of every
state where the location of the Borrower's Property requires it to be qualified
to do business as to the due qualification and good standing of the Borrower;
(e) a legal opinion from independent counsel for the Borrower as to the matters
set forth on Exhibit E acceptable to the Lenders; (f) policies of insurance
addressed to the Agent reflecting the insurance required by Section 5.7 hereof;
and (g) an Officer's Certificate in the form of Exhibit A; and to the further
condition that, at the time of the initial Loan, all legal matters incident to
the transactions herein contemplated shall be satisfactory to Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., counsel for the Agent.
3.3 Options Available. The outstanding principal balance of the Notes shall
bear interest at the Base Rate; provided, that (1) all past due amounts, both
principal and accrued interest, shall bear interest at the Past Due Rate, and
(2) subject to the provisions hereof, Borrower shall have the option of having
all or any portion of the principal balance of the Notes, other than the Swing
Loan Note, from time to time outstanding bear interest at a Eurodollar Rate.
The records of the Lenders with respect to Interest Options, Interest Periods
and the amounts of Loans to which they are applicable shall be prima facie
evidence thereof. Interest on the Loans shall be calculated at the Base Rate
except where it is expressly provided pursuant to this Agreement that a
Eurodollar Rate is to apply.
3.4 Designation and Conversion. Borrower shall have the right to designate or
convert its Interest Options in accordance with the provisions hereof. Provided
no Event of Default has occurred and is continuing and subject to the provisions
of Section 3.5, Borrower may elect to have a Eurodollar Rate apply or continue
to apply to all or any portion of the principal balance of the Notes, other than
the Swing Loan Note. Each change in Interest Options shall be a conversion of
the rate of interest applicable to the specified portion of the Loans, but such
conversion shall not change the respective outstanding principal balance of the
Notes. The Interest Options shall be designated or converted in the manner
provided below:
(a) Borrower shall give Agent telephonic notice, promptly confirmed by a Rate
Designation Notice. Each such telephonic and written notice shall specify the
amount of Loan which is the subject of the designation, if any; the amount of
borrowings into which such borrowings are to be converted or for which an
Interest Option is designated; the proposed date for the designation or
conversion and the Interest Period, if any, selected by Borrower. Such
telephonic notice and the Rate Designation Notice shall be irrevocable and shall
be given to Agent no later than the applicable Rate Designation Date. The Agent
shall promptly deliver the Rate Designation Notice to the Lenders.
(b) No more than twelve (12) Eurodollar Rate Borrowings with twelve (12)
Interest Periods shall be in effect at any time.
(c) Each designation or conversion of a Eurodollar Rate Borrowing shall occur
on a Eurodollar Business Day.
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(d) Except as provided in Section 3.5 hereof, no Eurodollar Rate Borrowing
shall be converted on any day other than the last day of the applicable Interest
Period.
(e) Unless a Rate Designation Notice to the contrary is received as provided
in this Agreement, each Eurodollar Rate Borrowing will convert to a Base Rate
Borrowing after the expiration of the Interest Period.
3.5 Special Provisions Applicable to Eurodollar Rate Borrowings.
(a) Options Unlawful. If the adoption of any applicable Legal Requirement or
any change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by the
Lenders with any request or directive (whether or not having the force of law)
of any central bank or other Governmental Authority shall at any time make it
unlawful or impossible for any Lender to permit the establishment of or to
maintain any Eurodollar Rate Borrowing, the commitment of the Lenders to
establish or maintain such Eurodollar Rate Borrowing shall forthwith be
suspended until such condition shall cease to exist and Borrower shall
forthwith, upon demand by Agent to Borrower, (1) convert the Eurodollar Rate
Borrowing with respect to which such demand was made to a Base Rate Borrowing;
(2) pay all accrued and unpaid interest to date on the amount so converted; and
(3) pay any amounts required to compensate the Lenders for any additional cost
or expense which the Lenders may incur as a result of such adoption of or change
in such Legal Requirement or in the interpretation or administration thereof and
any Funding Loss which the Lenders may incur as a result of such conversion.
If, when Agent so notifies Borrower, Borrower has given a Rate Designation
Notice specifying a Eurodollar Rate Borrowing but the selected Interest Period
has not yet begun, such Rate Designation Notice shall be deemed to be of no
force and effect, as if never made, and the balance of the Loans specified in
such Rate Designation Notice shall bear interest at the Base Rate until a
different available Interest Option shall be designated in accordance herewith.
(b) Increased Cost of Borrowings. If the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Lender with any request or directive of general applicability
(whether or not having the force of law) of any central bank or Governmental
Authority shall at any time as a result of any portion of the principal balance
of the Notes being maintained on the basis of a Eurodollar Rate:
(1) subject any Lender (or make it apparent that any Lender is subject) to
any Taxes, or any deduction or withholding for any Taxes, on or from
any payment due under any Eurodollar Rate Borrowing or other amount
due hereunder, other than income and franchise taxes of the United
States and its political subdivisions; or
(2) change the basis of taxation of payments due from Borrower to any
Lender under any Eurodollar Rate Borrowing (otherwise than by a change
in the rate of taxation of the overall net income of a Lender); or
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(3) impose, modify, increase or deem applicable any reserve requirement
(excluding that portion of any reserve requirement included in the
calculation of the applicable Eurodollar Rate), special deposit
requirement or similar requirement (including, but not limited to,
state law requirements and Regulation D) imposed, modified, increased
or deemed applicable by any Governmental Authority against assets held
by any Lender, or against deposits or accounts in or for the account
of any Lender, or against loans made by any Lender, or against any
other funds, obligations or other property owned or held by any
Lender; or
(4) impose on any Lender any other condition regarding any Eurodollar Rate
Borrowing;
and the result of any of the foregoing is to increase the cost to any
Lender of agreeing to make or of making, renewing or maintaining such
Eurodollar Rate Borrowing, or reduce the amount of principal or interest
received by any Lender, then, upon demand by Agent, Borrower shall pay to
such Lender, from time to time as specified by such Lender, additional
amounts which shall compensate such Lender for such increased cost or
reduced amount. Agent will promptly notify Borrower in writing of any
event which will entitle any Lender to additional amounts pursuant to this
paragraph. A Lender's determination of the amount of any such increased
cost, increased reserve requirement or reduced amount shall be prima facie
evidence thereof. Borrower shall have the right, if it receives from Agent
any notice referred to in this paragraph, upon three Business Days' notice
to Agent, either (i) to repay in full (but not in part) any borrowing with
respect to which such notice was given, together with any accrued interest
thereon, or (ii) to convert the Eurodollar Rate Borrowing which is the
subject of the notice to a Base Rate Borrowing; provided, that any such
repayment or conversion shall be accompanied by payment of (x) the amount
required to compensate a Lender for the increased cost or reduced amount
referred to in the preceding paragraph; (y) all accrued and unpaid interest
to date on the amount so repaid or converted, and (z) any Funding Loss
which any Lender may incur as a result of such repayment or conversion.
(c) Inadequacy of Pricing and Rate Determination. If for any reason with
respect to any Interest Period Agent shall have determined (which
determination shall be prima facie evidence thereof) that:
(1) Agent is unable through its customary general practices to determine
any applicable Eurodollar Rate, or
(2) by reason of circumstances affecting the applicable market generally,
Agent is not being offered deposits in United States dollars in such
market, for the applicable Interest Period and in an amount equal to
the amount of any applicable Eurodollar Rate Borrowing requested by
Borrower, or
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<PAGE>
(3) any applicable Eurodollar Rate will not adequately and fairly reflect
the cost to the Lenders of making and maintaining such Eurodollar Rate
Borrowing hereunder for any proposed Interest Period,
then Agent shall give Borrower notice thereof and thereupon, (A) any Rate
Designation Notice previously given by Borrower designating the applicable
Eurodollar Rate Borrowing which has not commenced as of the date of such
notice from Agent shall be deemed for all purposes hereof to be of no force
and effect, as if never given, and (B) until Agent shall notify Borrower
that the circumstances giving rise to such notice from Agent no longer
exist, each Rate Designation Notice requesting the applicable Eurodollar
Rate shall be deemed a request for a Base Rate Borrowing, and any
applicable Eurodollar Rate Borrowing then outstanding shall be converted,
without any notice to or from Borrower, upon the termination of the
Interest Period then in effect with respect to it, to a Base Rate
Borrowing.
(d) Funding Losses. Borrower shall indemnify the Agent and each Lender
against and hold the Agent and each Lender harmless from any Funding Loss. This
agreement shall survive the payment of the Notes. A certificate as to any
additional amounts payable pursuant to this subsection and setting forth the
reasons for the Funding Loss submitted by Agent to Borrower shall be prima facie
evidence thereof.
3.6 Funding Offices; Adjustments Automatic; Calculation Year. Any Lender may,
if it so elects, fulfill its obligation as to any Eurodollar Rate Borrowing by
causing a branch or affiliate of such Lender to make such Loan and may transfer
and carry such Loan at, to, or for the account of, any branch office or
affiliate of such Lender; provided, that in such event for the purposes of this
Agreement such Loan shall be deemed to have been made by such Lender and the
obligation of Borrower to repay such Loan shall nevertheless be to such Lender
and shall be deemed held by it for the account of such branch or affiliate.
Without notice to Borrower or any other person or entity, each rate required to
be calculated or determined under this Agreement shall automatically fluctuate
upward and downward in accordance with the provisions of this Agreement.
3.7 Funding Sources, Payment Obligations. Notwithstanding any provision of
this Agreement to the contrary, each Lender shall be entitled to fund and
maintain its funding of all or any part of the Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Lender had actually funded and
maintained each Eurodollar Rate Borrowing during each Interest Period through
the purchase of deposits having a maturity corresponding to such Interest Period
and bearing an interest rate equal to the Eurodollar Rate for such Interest
Period. Notwithstanding the foregoing, Funding Losses, increased costs and
other obligations relating to Eurodollar Rate Borrowings described in Section
3.5 of this Agreement will only be paid by the Borrower as and when actually
incurred by the Lenders.
3.8 Mitigation, Non-Discrimination. (a) Each Lender will notify the Borrower
through the Agent of any event occurring
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after the date of this Agreement which will require or enable such Lender to
take the actions described in Sections 3.5(a) or (b) of this Agreement as
promptly as practicable after it obtains knowledge thereof and determines to
request such action, and (if so requested by the Borrower through the Agent)
will designate a different lending office of such Lender for the applicable
Eurodollar Rate Borrowing or will take such other action as the Borrower
reasonably requests if such designation or action is consistent with the
internal policy of such Lender and legal and regulatory restrictions, can be
undertaken at no additional cost, will avoid the need for, or reduce the amount
of, such action and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender (provided that such Lender will have no
obligation to designate a different lending office which is located in the
United States of America).
(b) None of the Lenders shall be able to pass through to the Borrower
changes and costs under Section 3.5 of this Agreement on a discriminating basis,
such that such changes and costs are not also passed through by each Lender to
other customers of such Lender similarly situated where such customer is subject
to documents providing for such pass through.
(c) If any Lender elects under Section 3.5 of this Agreement to suspend or
terminate the availability of Eurodollar Rate Borrowings for any material period
of time, and the event giving rise to such election is not generally applicable
to all of the Lenders, the Borrower may within sixty (60) days after
notification of such Lender's election, and so long as no Event of Default is
then in existence, either (i) demand that such Lender, and upon such demand,
such Lender shall promptly, assign its Lender Commitment to another financial
institution subject to and in accordance with the provisions of Section 10.6 of
this Agreement for a purchase price equal to the unpaid balance of principal,
accrued interest, the unpaid balance of the Fee and expenses owing to such
Lender pursuant to this Agreement, or (ii) pay such Lender the unpaid balance of
principal, accrued interest, the unpaid balance of the Fee and expenses owing to
such Lender pursuant to this Agreement, whereupon, such Lender shall no longer
be a party to this Agreement or have any rights or obligations hereunder or
under any other Credit Documents, and the Commitment shall immediately and
permanently be reduced by an amount equal to the Lender Commitment of such
Lender.
4. Representations and Warranties.
------------------------------
To induce the Lenders to enter into this Agreement and to make the Loans, the
Borrower represents and warrants to the Agent and the Lenders as follows:
4.1. Organization. The Borrower is duly organized, validly existing and in
good standing as a real estate investment trust under the laws of the state of
Maryland; has all power and authority to conduct its business as presently
conducted; and is duly qualified to do business and in good standing in every
state where the location of its Property requires it to be qualified to do
business, unless the failure to be so qualified could not reasonably be expected
to have a Material Adverse Effect.
4.2 Financial Statements. The financial statements delivered to the Agent
fairly present, in accordance with Generally Accepted Accounting Principles
(provided, however, that the Quarterly Unaudited Financial Statements are
subject to
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normal year-end adjustments and may contain condensed footnotes as
permitted by regulations of the United States Securities and Exchange
Commission), the financial condition and the results of operations of the
Borrower as at the dates and for the periods indicated. No Material Adverse
Change has occurred since the dates of such financial statements. The Borrower
is not subject to any instrument or agreement which would materially prevent it
from conducting its business as it is now conducted or as it is contemplated to
be conducted.
4.3 Enforceable Obligations; Authorization. The Credit Documents are legal,
valid and binding obligations of the Parties, enforceable in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency and
other laws affecting creditors' rights generally and by general equitable
principles. The execution, delivery and performance of the Credit Documents
have all been duly authorized by all necessary action; are within the power and
authority of the Parties; do not and will not contravene or violate any Legal
Requirement or the Organizational Documents of the Parties; do not and will not
result in the breach of, or constitute a default under, any agreement or
instrument by which the Parties or any of their respective Property may be bound
or affected, except where such breach or default could not reasonably be
expected to have a Material Adverse Effect; and do not and will not result in
the creation of any Lien upon any Property of any of the Parties except as
expressly contemplated therein. All necessary permits, registrations and
consents for such making and performance have been obtained except where the
lack thereof could not reasonably be expected to have a Material Adverse Effect.
4.4 Other Debt. The Borrower is not in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security agreement
or lease to which it is a party which default could reasonably be expected to
have a Material Adverse Effect.
4.5 Litigation. There is no litigation or administrative proceeding pending
or, to the knowledge of the Borrower, threatened against, or any outstanding
judgment, order or decree affecting, the Borrower before or by any Governmental
Authority which is not adequately covered by insurance or which, if determined
adversely to the Borrower could reasonably be expected to have a Material
Adverse Effect. The Borrower is not in default with respect to any judgment,
order or decree of any Governmental Authority which default could reasonably be
expected to have a Material Adverse Effect.
4.6 Taxes. The Borrower has filed all tax returns required to have been filed
and paid all taxes shown thereon to be due, except those for which extensions
have been obtained, those which are being contested in good faith and those for
which the Borrower's failure to file a return or pay could not reasonably be
expected to have a Material Adverse Effect.
4.7 Regulation U. None of the proceeds of any Loan will be used for the
purpose of purchasing or carrying directly or indirectly any margin stock or for
any other purpose that would constitute this transaction a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System.
4.8 Subsidiaries. The Borrower has no Subsidiaries which individually or in
the aggregate own more than twenty-five
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percent (25%) in value of the Borrower's and the Subsidiaries' consolidated
assets determined in accordance with Generally Accepted Accounting Principles.
Each of the Borrower's Subsidiaries is a "qualified REIT subsidiary" under
Section 856 of the Code.
4.9 Securities Act of 1933. Other than the Agent's efforts in syndicating the
Loans (for which the Agent is responsible) neither the Borrower nor any agent
acting for it has offered the Notes or any similar obligation of the Borrower
for sale to or solicited any offers to buy the Notes or any similar obligation
of the Borrower from any Person other than the Agent or any Lender, and neither
the Borrower nor any agent acting for it will take any action which would
subject the sale of the Note to the provisions of Section 5 of the Securities
Act of 1933, as amended.
4.10 No Contractual or Corporate Restrictions. The Borrower is not a party
to, or bound by, any contract, agreement or charter or other corporate
restriction materially and adversely affecting its business, Property, assets,
operations or condition, financial or otherwise.
4.11 Investment Company Act Not Applicable. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
4.12 Public Utility Holding Company Act Not Applicable. The Borrower is not
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company", or an affiliate of a "subsidiary company" of
a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
4.13 ERISA Not Applicable. The Borrower is not subject to any requirements
of the Employee Retirement Income Security Act of 1974 as amended from time to
time, or any rules, regulations, rulings or interpretations adopted by the
Internal Revenue Service or the Department of Labor thereunder.
5. Affirmative Covenants.
---------------------
The Borrower covenants and agrees with the Agent and the Lenders that prior to
the termination of this Agreement it will do, and if necessary cause to be done,
each and all of the following:
5.1 Taxes, Insurance, Existence, Regulations, Property, etc. At all times (a)
pay when due all taxes and governmental charges of every kind upon it or against
its income, profits or Property, unless and only to the extent that the same
shall be contested in good faith and reserves which are adequate under Generally
Accepted Accounting Principles have been established therefor, or unless such
failure to pay could not reasonably be expected to have a Material Adverse
Effect; (b) do all things necessary to preserve its existence, qualifications,
rights and franchises in all States where such qualification is necessary or
desirable, except where failure to obtain the same could not reasonably be
expected to have a Material Adverse Effect; (c) comply with all applicable Legal
Requirements in respect of the conduct of its business and the ownership of its
Property except where failure to so comply could not reasonably be expected to
have a Material Adverse Effect; and (d) cause its Property to be protected,
maintained and kept in good repair
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(reasonable wear and tear excepted) and make all replacements and additions to
its Property as may be reasonably necessary to conduct its business.
5.2 Financial Statements and Information. Furnish to the Agent each of the
following: (a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, Annual Audited Financial Statements of
the Borrower (which shall include an unaudited statement of Funds From
Operations); (b) as soon as available and in any event within 45 days after the
end of each quarter (except the last quarter) of each fiscal year of the
Borrower, Quarterly Unaudited Financial Statements of the Borrower (which shall
include a statement of Funds From Operations); (c) concurrently with the
financial statements provided for in Subsections 5.2(a) and (b) hereof, an
Officer's Certificate, together with such schedules, computations and other
information (including, without limitation, if provided to Borrower information
as to Unconsolidated Affiliates of the Borrower), in reasonable detail, as may
be required by the Agent to demonstrate compliance with the covenants set forth
herein or reflecting any non-compliance therewith as of the applicable date, all
certified as true, correct and complete by a managing director, vice president
or controller of Borrower's REIT Manager; (d) promptly after the filing thereof,
all reports to or filings made by the Borrower or any of its Subsidiaries with
the Securities and Exchange Commission, including, without limitation,
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents); (e) within two (2) Business Days after the receipt thereof, a copy
of the notification to the Borrower of the Borrower's S&P Rating or Moody's
Rating, or change therein, and (f) such other information relating to the
financial condition and affairs of the Borrower as from time to time may be
reasonably requested by any Lender. The Agent will send to each Lender the
information received by the Agent pursuant to this Section 5.2 promptly after
the receipt thereof by Agent.
5.3 Financial Tests. Have and maintain, on a consolidated basis in accordance
with Generally Accepted Accounting Principles: (a) a Debt to Tangible Net Worth
Ratio no greater than 1.0:1.0 at all times; (b) a Coverage Ratio of not less
than 2.0:1.0 at all times; and (c) a Fixed Charge Coverage Ratio of not less
than 1.4:1.0 at all times.
5.4 Inspection. In order to permit the Agent to ascertain compliance with the
Credit Documents, permit the Agent to inspect its Property, to examine its
files, books and records and make and take away copies thereof, and to discuss
its affairs with its officers and accountants, all at such times and intervals
and to such extent as a Lender may reasonably desire.
5.5 Further Assurances. Promptly execute and deliver any and all other and
further instruments which may be requested by the Agent to cure any defect in
the execution and delivery of any Credit Document or more fully to describe
particular aspects of the Borrower's agreements set forth in the Credit
Documents or so intended to be.
5.6 Books and Records. Maintain books of record and account in accordance
with Generally Accepted Accounting Principles.
5.7 Insurance. Maintain insurance with such insurers, on such of its
properties, in such amounts and against such risks as
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is consistent with insurance maintained by businesses of comparable type and
size in the industry, and furnish the Agent satisfactory evidence thereof
promptly upon request.
5.8 Notice of Certain Matters. Notify the Agent promptly upon acquiring
knowledge of the occurrence of any of the following: the institution or
threatened institution of any lawsuit or administrative proceeding affecting the
Borrower in which the claim exceeds $250,000.00 and if determined adversely
could have a Material Adverse Effect; when the Borrower believes that there has
been a Material Adverse Change; or the occurrence of any Event of Default or any
Default. The Borrower will notify the Agent in writing at least thirty (30)
Business Days prior to the date that the Borrower changes its name or the
location of its chief executive office or principal place of business or the
place where it keeps its books and records.
5.9 Use of Proceeds. The proceeds of the Loans will be used for general
business purposes including (without limitation) for acquisition of multi-family
real estate properties, for the development and enhancement of multi-family real
estate properties, or for the costs of construction of multi-family real estate
projects owned or to be acquired by the Borrower. Notwithstanding the
foregoing, none of the proceeds of the Loans will be used to finance, fund or
complete any hostile acquisition of any Person.
5.10 Expenses of and Claims Against the Agent and the Lenders. To the
extent not prohibited by applicable law, the Borrower will pay all reasonable
costs and expenses incurred to third parties and reimburse the Agent and each
Lender, as the case may be, for any and all reasonable expenditures of every
character incurred or expended from time to time, in connection with (a)
regardless of whether a Default or Event of Default shall have occurred, the
Agent's preparation, negotiation and completion of the Credit Documents, and (b)
during the continuance of an Event of Default, all costs and expenses relating
to the Agent's and such Lender's exercising any of its rights and remedies under
this or any other Credit Document, including, without limitation, attorneys'
fees, legal expenses, and court costs; provided, that no rights or option
granted by the Borrower to the Agent or any Lender or otherwise arising pursuant
to any provision of this or any other instrument shall be deemed to impose or
admit a duty on the Agent or any Lender to supervise, monitor or control any
aspect of the character or condition of any property or any operations conducted
in connection with it for the benefit of the Borrower or any other
person or entity other than the Agent or such Lender. Notwithstanding the
foregoing, the Borrower shall not be charged with any cost or expense incurred
by the Agent or any Lender relating to disputes or claims among or between the
Agent, the Lenders, or any of them unless during the continuance of an Event of
Default and related to details of enforcement of the Lenders' rights under the
Credit Documents.
5.11 Legal Compliance; Indemnification. The Borrower shall operate its
Property and businesses in full compliance with all Legal Requirements. It
shall not constitute an Event of Default if there is a failure to comply with
any Legal Requirement which failure could not reasonably be expected to have a
Material Adverse Effect. The Borrower shall indemnify the Agent and each
Lender, their directors, officers, employees and shareholders (the "Indemnified
Parties") for and defend and hold the Indemnified Parties harmless against any
and all claims, demands,
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liabilities, causes of action, penalties, obligations, damages, judgments,
deficiencies, losses, costs or expenses (including, without limitation,
interest, penalties, attorneys' fees, and amounts paid in settlement) threatened
or incurred by reason of, arising out of or in any way related to any failure of
the Borrower to so comply with the provisions of any Legal Requirement, this
Agreement or the other Credit Documents, and any and all matters arising out of
any act, omission, event or circumstance, regardless of whether the act,
omission, event or circumstance constituted a violation of any such Legal
Requirement, this Agreement or the other Credit Documents at the time of its
existence or occurrence. THE BORROWER SHALL INDEMNIFY THE AGENT AND EACH LENDER
PURSUANT TO THIS SECTION REGARDLESS OF WHETHER THE ACT, OMISSION, FACTS,
CIRCUMSTANCES OR CONDITIONS GIVING RISE TO SUCH INDEMNIFICATION WERE CAUSED IN
WHOLE OR IN PART BY THE AGENT'S OR SUCH LENDER'S NEGLIGENCE (SIMPLE, BUT NOT
GROSS NEGLIGENCE). The Borrower will comply with all Legal Requirements to
maintain, and will at all times qualify as and maintain, its status as a real
estate investment trust under Section 856(c)(1) of the Code.
5.12 Borrower's Performance. If the Borrower should fail to comply with any of
the agreements, covenants or obligations of the Borrower under this Agreement or
any other Credit Document, then the Agent (in the Borrower's name or in Agent's
name) may perform them or cause them to be performed for the account of the
Borrower and at the Borrower's sole expense, but shall not be obligated to do
so. Any and all expenses thus incurred or paid by the Agent and by any Lender
shall be the Borrower's demand obligations to the Agent or such Lender and shall
bear interest from the date of demand therefor until the date that the Borrower
repays it to the Agent or the applicable Lender at the Past Due Rate. Upon
making any such payment or incurring any such expense, the Agent or the
applicable Lender shall be fully subrogated to all of the rights of the Person
receiving such payment. Any amounts owing by the Borrower to the Agent or any
Lender pursuant to this provision or any other provision of this Agreement shall
automatically and without notice be secured by any collateral provided by the
Credit Documents. The amount and nature of any such expense and the time when
paid shall, absent manifest error, be fully established by the affidavit of the
Agent or the applicable Lender or any of the Agent's or the applicable Lender's
officers or agents.
5.13 Professional Services. Promptly upon the Agent's request to satisfy
itself or the request of any Lender, the Borrower, at the Borrower's sole cost
and expense, provided, however, that so long as no Event of Default has occurred
and is continuing, such items will not be at the Borrower's expense, shall: (a)
allow an inspection and/or appraisal of the Borrower's Property to be made by a
Person approved by the Agent in its sole discretion; and (b) if the Agent
believes that an Event of Default has occurred or is about to occur, cause to be
conducted or prepared any other written report, summary, opinion, inspection,
review, survey, audit or other professional service relating to the Borrower's
Property or any operations in connection with it (all as designated in the
Agent's request), including, without limitation, any accounting, auctioneering,
architectural, consulting, engineering, design, legal, management, pest control,
surveying, title abstracting or other technical, managerial or professional
service relating to such property or its operations.
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5.14 Capital Adequacy. (a) If after the date of this Agreement, the Agent or
any Lender shall have determined that the adoption or effectiveness of any
applicable law, rule or regulation regarding capital adequacy of general
applicability, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Agent or any Lender with any request or directive regarding capital
adequacy of general applicability (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Agent's or any Lender's
capital as a consequence of its obligations hereunder to a level below that
which the Agent or such Lender could have achieved but for such adoption, change
or compliance (taking into consideration the Agent's or such Lender's policies
with respect to capital adequacy) by an amount deemed by the Agent or such
Lender to be material, then from time to time, the Borrower shall pay to the
Agent or such Lender such additional amount or amounts as will compensate the
Agent or such Lender for such reduction.
(b) A certificate of the Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate the Agent or such Lender as
specified in Section 5.14(a) hereof and making reference to the applicable law,
rule or regulation shall be delivered as soon as practicable to the Borrower and
shall be prima facie evidence thereof. The Borrower shall pay the Agent or such
Lender the amount shown as due on any such certificate within fourteen (14)
Business Days after the Agent or such Lender delivers such certificate. In
preparing such certificate, the Agent or such Lender may employ such assumptions
and allocations of costs and expenses as it shall in good faith deem reasonable
and may use any reasonable averaging and attribution method.
5.15 Property Pool. The Borrower will at all times own fee simple title to
real estate properties that are not mortgaged, pledged, hypothecated, or
encumbered in any manner other than Permitted Encumbrances (the "Pool") with an
aggregate Historical Value of at least one hundred seventy-five percent (175%)
of the Borrower's unsecured Indebtedness outstanding from time to time, with the
following characteristics: (a) the Pool must include income producing operating
properties (the "Operating Sub-Pool") with an aggregate Historical Value of at
least one hundred fifty percent (150%) of the Borrower's unsecured Indebtedness
outstanding from time to time, (b) the properties included in the Operating Sub-
Pool must have an aggregate occupancy level based on bona fide tenant leases
requiring current rent payments of at least ninety percent (90%), with each
individual property in the Operating Sub-Pool having such an occupancy level of
at least eighty percent (80%), where the occupancy level is the average of the
occupancy level for each of the immediately preceding three (3) months, (c) the
aggregate Historical Value of the properties included in the Operating Sub-Pool
that are located in any one Standard Metropolitan Statistical Area, may not be
more than twenty-five percent (25%) of the aggregate Historical Value of the
Operating Sub-Pool, (d) the aggregate Historical Value of properties included in
the Operating Sub-Pool that are not in cities included as one of the Borrower's
proposed target market cities (as listed on Exhibit F attached hereto and hereby
made a part hereof) may not be more than twenty percent (20%) of the aggregate
Historical Value of the Operating Sub-Pool, (e) the aggregate Historical Value
of the properties included in the
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Operating Sub-Pool that are located in the State of California may not be more
than thirty-five percent (35%) of the aggregate Historical Value of the
Operating Sub-Pool, (f) the average age of the properties included in the
Operating Sub-Pool shall not exceed the sum of ten (10) years increased by one
(1) year on each December 31 after December 31, 1994, (g) the percentage of one
bedroom and efficiency (less than one bedroom or a one bedroom combination)
units to total units in the properties included in the Operating Sub-Pool shall
not exceed sixty-five percent (65%) in the aggregate, (h) any properties added
to the Operating Sub-Pool after the date of this Agreement must be multifamily
properties, and (i) the Borrower must have received from third party independent
environmental consultants, written assessments for each property in, or to be
added to, the Operating Sub-Pool that do not disclose any material environmental
conditions or risks related to such properties.
6. Negative Covenants.
------------------
The Borrower covenants and agrees with the Agent and the Lenders that prior to
the termination of this Agreement it will not do any of the following:
6.1 Indebtedness. Create, incur, suffer or permit to exist, or assume or
guarantee, directly or indirectly, contingently or otherwise, or become or
remain liable with respect to any Indebtedness with a final maturity of five (5)
years or less (not including any renewal or extension options) in excess of
$400,000,000.00 in the aggregate, in all cases whether direct, indirect,
absolute, contingent or otherwise; except (a) Non-recourse Debt, (b)
Indebtedness in the final five (5) years or less of a full payment amortization
schedule providing for periodic payments over the remaining life where no more
than fifty percent (50%) of the original loan amount is amortized in said final
five (5) year or less period, (c) credit enhancement provided by or on behalf of
the Borrower for tax exempt bonds if said credit enhancement has an expiration
date or a maturity date of one (1) year or more, and (d) Indebtedness incurred
by Borrower under its medium term note program consisting of fixed rate,
unsecured, recourse notes issued under the Indenture described in Section 7.1(b)
of this Agreement not to exceed $100,000,000.00 in the aggregate. For the
purposes of the foregoing calculation under (b) above, simultaneously issued
tranches of Indebtedness under the same indenture shall be combined and treated
as a single debt issuance.
6.2 Mergers, Consolidations and Acquisitions of Assets. In any single
transaction or series of related transactions, directly or indirectly: (a)
liquidate or dissolve; (b) other than a merger or consolidation in which the
Borrower is the surviving entity and the value of the assets of the other party
to such merger or consolidation is less than twenty percent (20%) of the value
of the assets of the Borrower on a consolidated basis (in accordance with
Generally Accepted Accounting Principles) after such merger or consolidation, be
a party to any merger or consolidation; (c) other than a merger or consolidation
in which the Borrower is the surviving entity and the value of the assets of the
other party to such merger or consolidation is less than twenty percent (20%) of
the value of the assets of the Borrower on a consolidated basis (in accordance
with Generally Accepted Accounting Principles) after such merger or
consolidation, acquire all or substantially all of the assets of any Person, or
any shares of stock of or similar interest in any other Person; or (d) except
for periodic sales not exceeding
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twenty-five percent (25%) of the Borrower's total assets on a consolidated basis
(in accordance with Generally Accepted Accounting Principles) in any calendar
year, or sales or leases executed in the ordinary course of business, sell,
convey or lease all or any substantial part of its assets.
6.3 Redemption. At any time redeem, retire or otherwise acquire, directly or
indirectly, any shares of its capital stock if such action would cause the
Borrower to not be in compliance with this Agreement.
6.4 Nature of Business; Management. Change the nature of its business or
enter into any business which is substantially different from the business in
which it is presently engaged; amend the Borrower's agreements with Borrower's
REIT Manager if such amendments would materially increase amounts payable
thereunder to Borrower's REIT Manager or which would violate any provision of
the Credit Documents; or terminate or allow the termination (whether voluntary
or involuntary) of the Borrower's agreements with Borrower's REIT Manager unless
within thirty (30) days thereafter Borrower's REIT Manager is replaced by an
advisor or management team pursuant to an agreement which is in compliance with
the requirements of the North American Security Administrators Association's
Statement of Policy for Real Estate Investment Trusts and which is otherwise
satisfactory to the Agent and the Majority Lenders.
6.5 Transactions with Related Parties. Enter into any transaction or
agreement with any officer, director, or holder of more than five percent (5%)
(based on voting rights) of the issued and outstanding capital stock of the
Borrower (or any Affiliate of the Borrower), unless the same is upon terms
substantially similar to those obtainable from qualified wholly unrelated
sources, or complies with the requirements of the Statement of Policy for Real
Estate Investment Trusts promulgated by the North American Security
Administrators Association, as amended from time to time.
6.6 Loans and Investments. Make any loan, advance, extension of credit or
capital contribution to, or make or have any investment in, any Person, or make
any commitment to make any such extension of credit or investment, except (a)
travel advances in the ordinary course of business to officers, employees and
agents; (b) readily marketable securities issued or fully guaranteed by the
United States of America (or investments or money market accounts consisting of
the same); (c) commercial paper rated "Prime 1" by Moody's Investors Service,
Inc. or A-1 by Standard and Poor's Corporation (or investments or money market
accounts consisting of the same); (d) certificates of deposit or repurchase
certificates issued by financial institutions acceptable to the Agent (or
investments or money market accounts consisting of the same), all of the
foregoing b, c and d not having a maturity of more than one (1) year from the
date of issuance thereof; (e) securities received in settlement of liabilities
created in the ordinary course of business, or securities in other real estate
investment trusts received in exchange for Property sold to such real estate
investment trusts so long as the market value of such securities does not exceed
ten percent (10%) of the value of the assets of the Borrower on a consolidated
basis (in accordance with Generally Accepted Accounting Principles) prior to
such investment; (f) investments in Subsidiaries through which the Borrower
invests in real estate assets and acquisition and/or construction loans
encumbered by Property of or to be acquired by the Borrower; (g) investments in
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Unconsolidated Affiliates through which the Borrower invests in real estate
assets and acquisition and/or construction loans encumbered by Property of or to
be acquired by the Borrower so long as the aggregate amount of such investments
does not exceed ten percent (10%) of the value of the assets of the Borrower on
a consolidated basis (in accordance with Generally Accepted Accounting
Principles); (h) loans, advances, and extensions of credit to PTR Development
Services secured by valid and enforceable first priority liens on real estate;
and (i) loans, advances, and extensions of credit to Persons (who are not
Affiliates of the Borrower) secured by valid and enforceable first priority
liens on real estate for the purpose of acquiring and developing multifamily
properties for eventual ownership by, or to be acquired by, the Borrower prior
to, or within a reasonable period of time consistent with a business purpose
after, the completion of construction or development of such multifamily
property. The Borrower will not mortgage, pledge, hypothecate or encumber in any
manner the loans, advances or extensions of credit made pursuant to Sections
6.6(h) or (i).
6.7 Limiting Agreements. Without affecting the provisions of Section 5.15 of
this Agreement, but cumulative of and in addition thereto:
(a) Except for the Indenture dated February 1, 1994 between the Borrower and
Morgan Guaranty Trust Company of New York, as Trustee, neither Borrower nor any
of its Subsidiaries has entered into, and after the date hereof, neither
Borrower nor any of its Subsidiaries shall enter into, any agreement, instrument
or transaction which has or may have the effect of prohibiting or limiting
Borrower's ability to pledge to Agent as security for the Loans assets now or
hereafter owned by Borrower up to the value described in this Section 6.7.
Borrower shall take, and shall cause its Subsidiaries to take, such actions as
are necessary (including, without limitation, otherwise limiting the amount of
secured indebtedness of the Borrower and its Subsidiaries) to preserve the right
and ability of Borrower to pledge assets up to the value described in this
Section 6.7 as security for the Loans without any such pledge after the date
hereof causing or permitting the acceleration (after the giving of notice or the
passage of time, or otherwise) of any other indebtedness of Borrower or any of
its Subsidiaries. For the purpose of this paragraph, the Historical Value of
the assets to be kept available by Borrower to be pledged as security for the
Loans shall be assets having an aggregate Historical Value of not less than one
hundred thirty-three percent (133%) of the Commitment; provided however that the
foregoing shall not be construed as a maximum amount of collateral which could
be required or accepted by the Lenders under any other agreement or in any
proceeding.
(b) Borrower shall, upon demand, provide to the Lenders such evidence as the
Lenders may reasonably require to evidence Borrower's compliance with this
covenant, which evidence shall include, without limitation (i) copies of any
agreements or instruments which would in any way restrict or limit Borrower's
ability to pledge assets as security for indebtedness, or which provide for the
occurrence of a default (after the giving of notice or the passage of time, or
otherwise) if assets are pledged in the future as security for indebtedness of
the Borrower or any of its Subsidiaries, (ii) a summary of the total debt of
Borrower and its Subsidiaries, and (iii) a summary of any of such debt which is
secured by any mortgage, pledge, lien, charge, encumbrance or other security
interest.
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(c) Nothing in this covenant shall be construed as an obligation of Borrower
to, or request by the Lenders that Borrower, grant any mortgage, pledge or
security interest in any of its properties.
6.8 Nature of Assets. (a) In its own name or the name of any of its
Subsidiaries, own or lease, directly or indirectly, land not improved for
multifamily use, other than land that is either under development or planned for
commencement of development within one (1) year from the date it was acquired,
with an aggregate Historical Value in excess of ten percent (10%) of the value
of the assets of the Borrower on a consolidated basis (in accordance with
Generally Accepted Accounting Principles), or (b) allow the Historical Value of
the income producing properties owned or leased, directly or indirectly, by the
Borrower and its Subsidiaries which are not multifamily properties, to exceed
five percent (5%) of the value of the assets of the Borrower on a consolidated
basis (in accordance with Generally Accepted Accounting Principles).
7. Events of Default and Remedies.
------------------------------
7.1. Events of Default. If any of the following events shall occur, then, as
to the events described in Sections 7.1(b), (c), and (d), if the event has not
been waived, cured or remedied within twenty (20) days after the Agent gives the
Borrower notice of such event, at any time thereafter, and as to all of the
other events described herein, at any time, the Agent may do any or all of the
following: (1) without notice to the Borrower, declare the Notes to be, and
thereupon the Notes shall forthwith become, immediately due and payable,
together with all accrued interest thereon, without notice of any kind, notice
of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to the
Borrower, terminate the Commitment; (3) exercise, as may any other Lender, its
rights of offset against each account and all other Property of the Borrower in
the possession of the Agent or any such Lender, which right is hereby granted by
the Borrower to the Agent and each Lender; and (4) exercise any and all other
rights pursuant to the Credit Documents:
(a) The Borrower shall fail to pay or prepay any principal of or
interest on the Notes or any fee or any other obligation hereunder within
five (5) days after it was due; or
(b) The Borrower shall (i) fail to pay when due, or within any
applicable period of grace, any principal of or interest on any other
Indebtedness or Disqualified Stock in excess of $5,000,000.00 in principal
amount; or (ii) fail to comply with Section 1004 of the Indenture dated
February 1, 1994 between the Borrower and Morgan Guaranty Trust Company of
New York, as Trustee, as said Section 1004 may be amended with the consent
of the Majority Lenders; or
(c) Any written representation or warranty made in any Credit Document
by or on behalf of the Borrower, when taken as a whole shall prove to have
been incorrect, false or misleading in any material respect; or
(d) Default shall occur in the punctual and complete performance of any
covenant of the Borrower or any other Person contained in any Credit
Document not specifically set forth in this Section; or
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(e) A final judgment or judgments in the aggregate for the payment of
money in excess of $5,000,000.00 shall be rendered against the Borrower and
the same shall remain undischarged for a period of thirty (30) days during
which execution shall not be effectively stayed; or
(f) Any court shall finally determine, that the Agent or any Lender
does not have a valid Lien as provided for herein on any security which may
have been provided to the Agent or any Lender by the Borrower under the
Credit Documents, or such other Person; or
(g) Any order shall be entered in any proceeding against the Borrower
decreeing the dissolution, liquidation or split-up thereof, and such order
shall remain in effect for more than thirty (30) days; or
(h) The Borrower shall make a general assignment for the benefit of
creditors or shall petition or apply to any tribunal for the appointment of
a trustee, custodian, receiver or liquidator of all or any substantial part
of its business, estate or assets or shall commence any proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect; or
(i) Any such petition or application shall be filed or any such
proceeding shall be commenced against the Borrower and the Borrower by any
act or omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the
assets of the Borrower or granting relief to the Borrower or approving the
petition in any such proceeding, and such order shall remain in effect for
more than ninety (90) days; or
(j) The Borrower shall fail generally to pay its debts as they become
due or suffer any writ of attachment or execution or any similar process to
be issued or levied against it or any substantial part of its Property
which is not released, stayed, bonded or vacated within thirty (30) days
after its issue or levy; or
(k) The Borrower shall have concealed, removed, or permitted to be
concealed or removed, any part of its Property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid.
7.2 Remedies Cumulative. No remedy, right or power conferred upon the Agent or
the Lenders is intended to be exclusive of any other remedy, right or power
given hereunder or now or hereafter existing at law, in equity, or otherwise,
and all such remedies, rights and powers shall be cumulative.
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8. The Agent.
---------
8.1 Appointment, Powers and Immunities. (a) Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under the
other Credit Documents with such powers as are specifically delegated to the
Agent by the terms hereof and thereof, together with such other powers as are
reasonably incidental thereto. The Agent (i) shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents, and shall not by reason of this Agreement or any other
Credit Document be a trustee for any Lender; (ii) shall not be responsible to
any Lender for any recitals, statements, representations or warranties contained
in this Agreement or any other Credit Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Credit Document, or for the value, validity,
effectiveness, genuineness, enforceability, execution, filing, registration,
collectibility, recording, perfection, existence or sufficiency of this
Agreement or any other Credit Document or any other document referred to or
provided for herein or therein or any property covered thereby or for any
failure by any Party or any other Person to perform any of its obligations
hereunder or thereunder, and shall not have any duty to inquire into or pass
upon any of the foregoing matters; (iii) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or any other Credit
Document except to the extent requested by the Majority Lenders; (iv) SHALL NOT
BE RESPONSIBLE FOR ANY MISTAKE OF LAW OR FACT OR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT REFERRED TO OR PROVIDED FOR HEREIN OR THEREIN OR IN
CONNECTION HEREWITH OR THEREWITH, INCLUDING, WITHOUT LIMITATION, PURSUANT TO ITS
OWN NEGLIGENCE, BUT NOT INCLUDING AND EXCEPT FOR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT; (v) shall not be bound by or obliged to recognize any
agreement among or between the Borrower, the Agent, and any Lender other than
this Agreement and the other Credit Documents, regardless of whether the Agent
has knowledge of the existence of any such agreement or the terms and provisions
thereof; (vi) shall not be charged with notice or knowledge of any fact or
information not herein set out or provided to the Agent in accordance with the
terms of this Agreement or any other Credit Document; (vii) shall not be
responsible for any delay, error, omission or default of any mail, telegraph,
cable or wireless agency or operator, and (viii) shall not be responsible for
the acts or edicts of any Governmental Authority. The Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care.
(b) Except as specifically provided to the contrary in Section 8.3 of this
Agreement, without the prior written consent of all of the Lenders, Agent shall
not (i) modify or amend in any respect whatsoever the interest rate provisions
of the Credit Documents, (ii) increase the Commitment above $350,000,000.00,
(iii) extend the Maturity Date other than in accordance with the express
provisions of the Credit Documents, (iv) make or consent to any materially
adverse amendment, modification or waiver of any of the terms, covenants,
provisions or conditions of the Credit Documents, (v) waive, compromise or
settle any material claim against Borrower or other person or entity liable for
payment of the Loan in whole or part or for the observance and performance by
the Borrower of any of the terms, covenants, provisions and conditions of the
Credit Documents, or release the
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Borrower from any material obligation or liability under the Credit Documents,
or (vi) waive any material monetary default (that is, one that can be cured by
the payment of money) under the Credit Documents. In its capacity as lead lender
and servicer and without obtaining the prior consent of Lenders, Agent may (1)
extend for reasonable periods the time for the observance or performance by
Borrower of the terms and conditions other than the payment terms of the Credit
Documents, provided that in the reasonable judgment of Agent such extension will
not have a materially adverse effect on the Loan or Borrower's performance of
its obligations under the Credit Documents, (2) agree or consent to any non-
material amendment, modification or waiver of the terms, covenants, provisions
or conditions of the Credit Documents, (3) waive, compromise or settle any non-
material claim against the Borrower or release the Borrower from any non-
material obligation or liability under the Credit Documents, (4) waive any non-
material default under the Credit Documents, and (5) do or perform any act or
thing which in Agent's reasonable judgment is necessary to enable Agent to
discharge and perform its duties under this Agreement. From time to time upon
Agent's request, each Lender shall execute and deliver such documents and
instruments as may be reasonably necessary to enable Agent to effectively
administer and service the Loan in its capacity as lead lender and servicer and
in the manner contemplated by the provisions of this Agreement.
(c) All information provided to the Agent under or pursuant to the Credit
Documents, and all rights of the Agent to receive or request information, or to
inspect information or Property, shall be by the Agent on behalf of the Lenders.
If any Lender requests that it be able to receive or request such information,
or make such inspections, in its own right rather than through the Agent, the
Borrower will cooperate with the Agent and such Lender in order to obtain such
information or make such inspection as such Lender may reasonably require.
(d) The Borrower shall be entitled to rely upon a written notice or a written
response from the Agent as being pursuant to concurrence or consent of the
Majority Lenders unless otherwise expressly stated in the Agent's notice or
response.
8.2 Reliance. The Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telex,
telecopy, telegram or cable) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of legal counsel (which may be counsel for the
Borrower), independent accountants and other experts selected by the Agent. The
Agent shall not be required in any way to determine the identity or authority of
any Person delivering or executing the same. As to any matters not expressly
provided for by this Agreement or any other Credit Document, the Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
and thereunder in accordance with instructions of the Majority Lenders, and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders. If any order, writ, judgment or decree shall be made or entered by any
court affecting the rights, duties and obligations of the Agent under this
Agreement or any other Credit Document, then and in any of such events the Agent
is authorized, in its sole discretion, to rely upon and comply with such order,
writ, judgment or decree which it is advised by legal counsel of its own
choosing is binding upon it under the terms of this Agreement, the relevant
Credit Document or otherwise; and if the
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Agent complies with any such order, writ, judgment or decree, then it shall not
be liable to any Lender or to any other Person by reason of such compliance even
though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
8.3 Defaults. The Agent shall not be deemed to have constructive knowledge of
the occurrence of a Default (other than the non-payment of principal of or
interest on Loans) unless it has received notice from a Lender or the Borrower
specifying such Default and stating that such notice is a "Notice of Default".
In the event that the Agent receives such a notice of the occurrence of a
Default, or whenever the Agent has actual knowledge of the occurrence of a
Default, the Agent shall give prompt written notice thereof to the Lenders (and
shall give each Lender prompt notice of each such non-payment). The Agent shall
(subject to Section 8.7 hereof) take such action with respect to such Default as
shall be directed by the Majority Lenders and within its rights under the Credit
Documents and at law or in equity, provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, permitted hereby with
respect to such Default as it shall deem advisable in the best interests of the
Lenders and within its rights under the Credit Documents in order to preserve,
protect or enhance the collectibility of the Loans, at law or in equity.
Provided, however, that if there is an occurrence of an Event of Default, then
in no event or under any circumstances shall (a) the interest rate applicable to
the Loan be modified, (b) the Commitment or the maximum principal amount of the
Loans be increased above $350,000,000.00, (c) the Maturity Date be extended
other than as provided for in this Agreement, (d) any material claim against
Borrower be waived, compromised or settled or the Borrower released from any
material obligation or liability under the Credit Documents, (e) any material
monetary default (that is, one that can be cured by the payment of money) under
the Credit Documents be waived, or (f) any of the actions described in Section
8.1(b)(i) through (vi) of this Agreement be taken, without in each instance the
written consent of Agent and all of the Lenders.
8.4 Rights as a Lender. With respect to the Commitment and the Loans made,
Agent, in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting in its agency capacity, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may (without having to account therefor to any other
Lender) as a Lender, and to the same extent as any other Lender, accept deposits
from, lend money to and generally engage in any kind of banking, trust, letter
of credit, agency or other business with the Borrower (and any of its
Affiliates) as if it were not acting as the Agent but solely as a Lender. The
Agent may accept fees and other consideration from the Borrower (in addition to
the fees heretofore agreed to between the Borrower and the Agent) for services
in connection with this Agreement or otherwise without having to account for the
same to the Lenders.
8.5 Indemnification. The Lenders agree to indemnify the Agent, its
officers, directors, agents and Affiliates, ratably in accordance with each
Lender's respective Percentage, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of
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any kind and nature whatsoever (INCLUDING BUT NOT LIMITED TO, THE CONSEQUENCES
OF THE NEGLIGENCE OF THE AGENT) which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this Agreement or any
other Credit Document or any other documents contemplated by or referred to
herein or therein, or the transactions contemplated hereby or thereby
(including, without limitation, interest, penalties, reasonable attorneys' fees
and amounts paid in settlement in accordance with the terms of this Section 8,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, INCLUDING BUT NOT LIMITED TO THE NEGLIGENCE OF THE
AGENT, provided that no Lender shall be liable for any of the foregoing to the
extent they arise from the gross negligence or willful misconduct of the party
to be indemnified, or from the Agent's default in the express obligations of the
Agent to the Lenders provided for in this Agreement. The obligations of the
Lenders under this Section 8.5 shall survive the termination of this Agreement
and the repayment of the Obligations.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has
received current financial information with respect to the Borrower and that it
has, independently and without reliance on the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and decision to enter into this Agreement
and that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Credit Documents. The
Agent shall not be required to keep itself informed as to the performance or
observance by any Party of this Agreement or any of the other Credit Documents
or any other document referred to or provided for herein or therein or to
inspect the properties or books of the Borrower or any Party except as
specifically required by the Credit Documents. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder or the other Credit Documents, the Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower or any other Party (or any of their affiliates) which may come into the
possession of the Agent. Each Lender assumes all risk of loss in connection
with its Percentage in the Loans to the full extent of its Percentage therein.
The Agent assumes all risk of loss in connection with its Percentage in the
Loans to the full extent of its Percentage therein.
8.7 Failure to Act. Except for action expressly required of the Agent, as the
case may be, hereunder, or under the other Credit Documents, the Agent shall in
all cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction by the
Lenders of their indemnification obligations under Section 8.5 hereof against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
8.8 Resignation of Agent. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may
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resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation, (i) the Majority Lenders without the consent of the
Borrower shall have the right to appoint a successor Agent so long as such
successor Agent is also a Lender at the time of such appointment and (ii) the
Majority Lenders shall have the right to appoint a successor Agent that is not a
Lender at the time of such appointment so long as the Borrower consents to such
appointment (which consent shall not be unreasonably withheld). If no successor
Agent shall have been so appointed by the Majority Lenders and accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Lenders, and with the
consent of the Borrower which shall not be unreasonably withheld, appoint a
successor Agent. Any successor Agent shall be a bank which has an office in the
United States and a combined capital and surplus of at least $250,000,000.00.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as Agent thereafter
arising hereunder and under any other Credit Documents, but shall not be
discharged from any liabilities for its actions as Agent prior to the date of
discharge. Such successor Agent shall promptly specify by notice to the Borrower
its principal office referred to in Section 2.1 and Section 2.3 hereof. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Section 8 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent.
8.9 No Partnership. Neither the execution and delivery of this Agreement nor
any of the other Credit Documents nor any interest the Lenders, the Agent or any
of them may now or hereafter have in all or any part of the Obligations shall
create or be construed as creating a partnership, joint venture or other joint
enterprise between the Lenders or among the Lenders and the Agent. The
relationship between the Lenders, on the one hand, and the Agent, on the other,
is and shall be that of principals and agent only, and nothing in this Agreement
or any of the other Credit Documents shall be construed to constitute the Agent
as trustee or other fiduciary for any Lender or to impose on the Agent any duty,
responsibility or obligation other than those expressly provided for herein and
therein.
9. Renewal and Extension.
---------------------
Neither the Agent nor any Lenders have any agreement or obligation to extend
or renew the Revolving Credit Termination Date. But in the event such an
extension is requested by the Borrower and any Lender decides to consider such
renewal and extension request, such request and consideration will be governed
by the following terms and conditions:
9.1 Procedure for Consideration of Renewal and Extension Requests.
(a) The Borrower may request the Agent and the Lenders to extend the current
Revolving Credit Termination Date by successive one (1) year intervals by
executing and delivering to the Agent a written request for extension at least
seventy-five (75) days (but not more than ninety (90) days) prior to the date
one (1) year prior to the current Revolving Credit Termination
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Date (the "Extension Request"). If all of the Lenders shall have notified the
Agent on or prior to the date which is forty-five (45) days prior to the date
one (1) year prior to the current Revolving Credit Termination Date that they
accept such Extension Request, the Revolving Credit Termination Date shall be
extended for one (1) year. If any Lender shall not have notified Agent on or
prior to the date which is forty-five (45) days prior to the date one (1) year
prior to the current Revolving Credit Termination Date that it accepts such
Extension Request, the Revolving Credit Termination Date shall not be extended.
The Agent shall promptly notify the Borrower whether the Extension Request has
been accepted or rejected as well as which Lender or Lenders rejected the
Borrower's Extension Request (each such Lender a "Rejecting Lender").
(b) Notwithstanding the preceding subsection (a), within thirty (30) days
after notification from the Agent that the Extension Request has been rejected
(a "Notice of Rejection"), and provided that the aggregate amount of Lender
Commitments of the Rejecting Lenders does not exceed fifteen percent (15%) of
the Commitment, the Borrower may either (i) demand that the Rejecting Lender,
and upon such demand the Rejecting Lender shall promptly, assign its Lender
Commitment to another financial institution subject to and in accordance with
the provisions of Section 10.6 of this Agreement for a purchase price equal to
the unpaid balance of principal, accrued interest, the unpaid balance of the Fee
and expenses owing to the Rejecting Lender pursuant to this Agreement, or (ii)
pay to the Rejecting Lender the unpaid balance of principal, accrued interest,
the unpaid balance of the Fee and expenses owing to the Rejecting Lender
pursuant to this Agreement, whereupon the Rejecting Lender shall no longer be a
party to this Agreement or have any rights or obligations hereunder or under any
other Credit Documents, and the Commitment shall immediately and permanently be
reduced by an amount equal to the Lender Commitment of the Rejecting Lender. If
all Rejecting Lenders have either assigned their Lender Commitments to other
financial institutions as contemplated by the preceding clause (i) or have been
paid the amounts specified in the preceding clause (ii), then the Borrower's
Extension Request which was initially rejected shall be deemed to have been
granted and accordingly the Revolving Credit Termination Date shall be extended
by one (1) year, otherwise the Revolving Credit Termination Date shall not be
extended. If the aggregate of Lender Commitments of the Rejecting Lenders
exceeds fifteen percent (15%) of the Commitment, the Revolving Credit
Termination Date shall not be extended.
9.2 Conditions to Renewal and Extension. Any agreement of the Lenders to
extend the Revolving Credit Termination Date under Section 9.1 of this Agreement
shall be conditioned upon, among other things, the following terms and
conditions (which shall be in addition to those required by Sections 3 and 9.1
of this Agreement):
(a) Execution by the Borrower of a renewal and extension agreement for
each Note in Proper Form.
(b) Such other documents, instruments and items as Agent or any Lender
shall require in its sole discretion.
9.3 No Obligation to Renew and Extend. Notwithstanding the procedures and
terms and conditions for any renewal and extension of the Revolving Credit
Termination Date, neither the Agent nor any Lender has any obligation,
commitment or present intent to
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extend the Revolving Credit Termination Date, and the Revolving Credit
Termination Date may not be extended except in accordance with a written
agreement signed by the Agent, the Lenders, the Borrower and any other Person to
be charged with compliance therewith.
10. Miscellaneous.
-------------
10.1. No Waiver. No waiver of any Default shall be deemed to be a waiver
of any other Default. No failure to exercise or delay in exercising any right
or power under any Credit Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power preclude any further
or other exercise thereof or the exercise of any other right or power. No
amendment, modification or waiver of any Credit Document shall be effective
unless the same is in writing and signed by the Person against whom such
amendment is sought to be enforced. No notice to or demand on the Borrower or
any other Person shall entitle the Borrower or any other Person to any other or
further notice or demand in similar or other circumstances.
10.2 Notices. All notices under the Credit Documents shall be in writing and
either (i) delivered against receipt therefor, or (ii) mailed by registered or
certified mail, return receipt requested, in each case addressed as set forth
herein, or to such other address as a party may designate. Notices shall be
deemed to have been given (whether actually received or not) when delivered (or,
if mailed, on the next Business Day). Provided, however, that as between the
Agent and the Lenders and among the Lenders, notice may be given by telecopy or
facsimile effective upon the earlier of actual receipt or confirmation of
receipt by telephone.
10.3 Venue. HARRIS COUNTY, TEXAS SHALL BE A PROPER PLACE OF VENUE TO ENFORCE
PAYMENT OR PERFORMANCE OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, UNLESS
THE AGENT SHALL GIVE ITS PRIOR WRITTEN CONSENT TO A DIFFERENT VENUE. THE
BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY PROCEEDING ARISING OUT OF ANY OF
THE CREDIT DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY TEXAS LAW. THE
BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE CREDIT DOCUMENTS
IN THE DISTRICT COURTS OF HARRIS COUNTY, TEXAS, OR IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND HEREBY FURTHER
IRREVOCABLY WAIVES ANY CLAIMS THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER (A)
AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN THE STATE OF
TEXAS IN CONNECTION WITH ANY SUCH SUIT, ACTION OR PROCEEDING AND TO DELIVER TO
THE AGENT EVIDENCE THEREOF AND (B) IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY NOTICE GIVEN AS PROVIDED FOR IN THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY JURISDICTION OR TO SERVE
PROCESS IN ANY MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST THE AGENT OR ANY
LENDER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER
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CREDIT DOCUMENTS SHALL BE BROUGHT AND MAINTAINED IN THE DISTRICT COURTS OF
HARRIS COUNTY, TEXAS, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS, HOUSTON DIVISION.
10.4 Choice of Law. THIS AGREEMENT, THE NOTES AND THE OTHER CREDIT DOCUMENTS
HAVE BEEN NEGOTIATED, EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS, INCLUDING ALL APPLICABLE FEDERAL LAW, FROM TIME TO TIME IN FORCE
IN THE STATE OF TEXAS.
10.5 DTPA Waiver. The Borrower hereby waives all rights, remedies, claims,
demands and causes of action based upon or related to the Texas Deceptive Trade
Practices-Consumer Protection Act as described in the Texas Business & Commerce
Code, Sections 17.41 et. seq. as the same pertains or may pertain to this
Agreement, any of the other Credit Documents, or any of the transactions
contemplated herein or therein. In furtherance of said waiver, the Borrower
hereby represents and warrants to the Agent and the Lenders that (a) the
Borrower is represented by legal counsel in connection with the negotiations,
execution and delivery of this Agreement and the other Credit Documents; (b) the
Borrower has a choice other than to enter into said waiver in that it can obtain
the Loan from another institution; and (c) the Borrower does not consider itself
to be in a significantly disparate bargaining position relative to the Agent and
the Lenders with respect to this Agreement and the other Credit Documents.
10.6 Survival; Parties Bound; Successors and Assigns. All representations,
warranties, covenants and agreements made by or on behalf of the Borrower in
connection herewith shall survive the execution and delivery of the Credit
Documents, shall not be affected by any investigation made by any Person, and
shall bind the Borrower and its successors, trustees, receivers and assigns and
inure to the benefit of the successors and assigns of the Agent and the Lenders;
provided, however, that the Borrower may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the Agent
and all of the Lenders, and any such assignment or transfer without such consent
shall be null and void. Any assignment or sale of an interest in all or any
part of the Loans or a Lender Commitment shall (a) include the voting rights
attributable thereto, and (b) require the consent of the Borrower and the Agent
if to a Person not already a Lender, such consent not to be unreasonably
withheld. None of the Lenders may assign or sell participations in all or part
of any Loans other than Swing Loans, the Notes other than the Swing Loan Note,
or the Commitment to any Person not already a Lender without the prior written
approval of the Agent, the Borrower, and all of the other Lenders (in each case
such approval not to be unreasonably withheld), but assignments and
participations of all or any part of the Loans, the Notes or the Commitment may
be made by and between the Lenders without the prior written consent of the
Borrower or any other Lender. The Agent will not assign or sell participations
in $30,000,000.00 of its Lender Commitment to any Person other than an Affiliate
of the Agent. The term of this Agreement shall be until the final maturity of
the Notes and the payment of all amounts due under the Credit Documents.
10.7 Counterparts. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such
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separate counterparts shall constitute but one and the same instrument.
10.8. Usury Not Intended; Refund of Any Excess Payments. It is the intent of
the parties in the execution and performance of this Agreement to contract in
strict compliance with the usury laws of the State of Texas and the United
States of America from time to time in effect. In furtherance thereof, the
Agent, the Lenders and the Borrower stipulate and agree that none of the terms
and provisions contained in this Agreement or the other Credit Documents shall
ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate in excess of the Ceiling Rate and
that for purposes hereof "interest" shall include the aggregate of all charges
which constitute interest under such laws that are contracted for, reserved,
taken, charged or received under this Agreement. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds the
Ceiling Rate, the Borrower, the Agent and the Lenders shall, to the maximum
extent permitted under applicable law, (a) characterize any nonprincipal payment
as an expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) "spread" the total amount of
interest throughout the entire contemplated term of the Loans. The provisions of
this paragraph shall control over all other provisions of the Credit Documents
which may be in apparent conflict herewith.
10.9 Captions. The headings and captions appearing in the Credit Documents
have been included solely for convenience and shall not be considered in
construing the Credit Documents.
10.10 Severability. If any provision of any Credit Documents shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired thereby.
10.11 Disclosures. Every reference in the Credit Documents to disclosures of
the Borrower to the Agent and the Lenders in writing, to the extent that such
references refer to disclosures at or prior to the execution of this Agreement,
shall be deemed strictly to refer only to written disclosures delivered to the
Agent and the Lenders in an orderly manner concurrently with the execution
hereof.
10.12 NO NOVATION. THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT AND
THE OTHER CREDIT DOCUMENTS SOLELY TO AMEND, RESTATE AND RESTRUCTURE THE TERMS
OF, AND THE OBLIGATIONS TO THE EXISTING LENDERS OWING UNDER AND IN CONNECTION
WITH, THE ORIGINAL CREDIT AGREEMENT. THE PARTIES DO NOT INTEND THIS AGREEMENT
NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY
OF THE OBLIGATIONS OWING BY THE BORROWER UNDER OR IN CONNECTION WITH THE
ORIGINAL CREDIT AGREEMENT.
10.13 LIMITATION OF LIABILITY. NO OBLIGATION OR LIABILITY WHATSOEVER OF THE
BORROWER WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR
LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER CREDIT DOCUMENT
SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF
BE HAD TO THE PRIVATE PROPERTY OF, ANY OF THE BORROWER'S TRUSTEES OR
SHAREHOLDERS REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE
OF CONTRACT, TORT OR OTHERWISE.
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10.14 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS
TOGETHER CONSTITUTE A WRITTEN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.
SECURITY CAPITAL PACIFIC TRUST
/s/ Thomas L. Poe
By:___________________________
Thomas L. Poe
Name:_________________________
Vice President
Title:________________________
Address:
7777 Market Center Avenue
El Paso, Texas 79912
Attention: Secretary
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Lender Commitment: $50,000,000.00 TEXAS COMMERCE BANK
Percentage: 14.285714% NATIONAL ASSOCIATION,
as Agent and as a Lender
/s/ Brian M. Kouns
By:___________________________
Brian M. Kouns
Name:_________________________
Vice President
Title:________________________
Address:
712 Main Street
Houston, Texas 77002
Attention: Manager,
Real Estate Group
Telecopy No.: 713-216-7713
Telephone No.: Brian Kouns
713-216-5133
Lender Commitment: $50,000,000.00 WELLS FARGO REALTY ADVISORS
Percentage: 14.285714% FUNDING, INCORPORATED, as
Co-Agent and as a Lender
/s/ Robert W. Belson
By:___________________________
Robert W. Belson
Name:_________________________
Vice President
Title:________________________
/s/ Matoka D. Benefield
By:___________________________
Matoka D. Benefield
Name:_________________________
Assistant Secretary
Title:________________________
Address:
2859 Paces Ferry Road
Suite 1210
Atlanta, Georgia 30339
Attention: Bob Belson
Telecopy No: 404-435-2262
Telephone No. Bob Belson
404-435-3800
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Lender Commitment: $30,000,000.00 GUARANTY FEDERAL BANK, F.S.B.
Percentage: 8.571429%
/s/ Phyllis Milstead
By:___________________________
Phyllis Milstead
Name:_________________________
Vice President
Title:________________________
Address:
301 Congress, Suite 1075
Austin, Texas 78701
Attention: Phyllis Milstead
Telecopy No.: 512-320-1041
Telephone No.: Phyllis Milstead
512-320-1007
Lender Commitment: $20,000,000.00 NORWEST BANK NEW MEXICO,
Percentage: 5.714286% NATIONAL ASSOCIATION
/s/ Bill Synnamon
By:___________________________
Bill Synnamon
Name:_________________________
Managing Officer
Title:________________________
Address:
1048 Paseo de Peralta
Santa Fe, New Mexico 87501
Attention: Bill Synnamon
Telecopy No.: 505-983-6232
Telephone No.: Bill Synnamon
505-984-8500
Lender Commitment: $10,000,000.00 STATE NATIONAL BANK
Percentage: 2.857143%
/s/ Robert A. Estrada
By:___________________________
Robert A. Estrada
Name:_________________________
Senior Vice President
Title:________________________
Address:
221 North Kansas
El Paso, Texas 79901
Attention: Robert A. Estrada
Telecopy No.: 915-546-4345
Telephone No.: Robert A. Estrada
915-546-4699
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Lender Commitment: $30,000,000.00 THE FIRST NATIONAL BANK OF
Percentage: 8.571429% BOSTON
/s/ Daniel J. Sullivan
By:___________________________
Daniel J. Sullivan
Name:_________________________
Vice President
Title:________________________
Address:
400 Perimeter Center Terrace
Suite 745
Atlanta, Georgia 30346
Attention: Daniel J. Sullivan
Telecopy No.: 404-393-4166
Telephone No.: Daniel J. Sullivan
404-390-6565
Lender Commitment: $25,000,000.00 BANK OF AMERICA NATIONAL TRUST
Percentage: 7.142857% AND SAVINGS ASSOCIATION
/s/ Mary Bowman
By:___________________________
Mary Bowman
Name:_________________________
Vice President
Title:________________________
Address:
555 South Flower Street
6th Floor
Los Angeles, California 90071
Attention: Kelly M. Allred
Telecopy No.: 213-228-5389
Telephone No.: Kelly M. Allred
213-228-4027
Lender Commitment: $25,000,000.00 FIRST INTERSTATE BANK OF TEXAS,
Percentage: 7.142857% N.A.
/s/ Todd Graham
By:___________________________
Todd Graham
Name:_________________________
Vice President
Title:________________________
Address:
1000 Louisiana
3rd Floor - Real Estate
Houston, Texas 77002
Attention: Todd C. Graham
Telecopy No: 713-250-4894
Telephone No. Todd C. Graham
713-250-1621
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Lender Commitment: $25,000,000.00 FLEET NATIONAL BANK
Percentage: 7.142857%
/s/ John G. Christensen
By:___________________________
John G. Christensen
Name:_________________________
Vice President
Title:________________________
Address:
111 Westminster, Suite 800
Providence, Rhode Island 02903
Attention: John Christensen
Telecopy No: 401-278-3674
Telephone No. John Christensen
401-278-6328
Lender Commitment: $20,000,000.00 THE NIPPON CREDIT BANK, LTD.
Percentage: 5.714286%
/s/ Neil J. Crawford
By:____________________________
Neil J. Crawford
Name:__________________________
Assistant Vice President
Title:_________________________
Address:
245 Park Avenue
30th Floor
New York, New York 10167
Attention: Neil Crawford
Telecopy No: 212-490-3895
Telephone No. Neil Crawford
212-984-1319
Lender Commitment: $15,000,000.00 BANK HAPOALIM, B.M.,
Percentage: 4.285714% Los Angeles Branch
/s/ Robert Polleb
By:___________________________
Robert Polleb
Name:_________________________
Vice President
Title:________________________
By: /s/ C. M. Ciebiera
Name: C. M. Ciebiera
Title: Vice President
Address:
6222 Wilshire Blvd.
Los Angeles, California 90048
Attention: Shohre Afshar or
Lori Lake
Telecopy No: 213-937-1439
Telephone No. Shohre Afshar or
Lori Lake
213-937-2322
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Lender Commitment: $15,000,000.00 CORESTATES BANK, N.A.
Percentage: 4.285714%
/s/ Kathleen M. Palmer
By:____________________________
Kathleen M. Palmer
Name:__________________________
Vice President
Title:_________________________
Address:
1339 Chestnut Street
Real Estate Department
Philadelphia, Pennsylvania 19107
Attention: R. Scott Relick
Telecopy No: 215-786-6381
Telephone No. R. Scott Relick
215-786-4224
Lender Commitment: $17,500,000.00 BANK ONE, ARIZONA, NA
Percentage: 5.000000%
/s/ Daniel A. Nunes
By:____________________________
Daniel A. Nunes
Name:__________________________
Assistant Vice President
Title:_________________________
Address:
Real Estate Banking Group
241 N. Central, 20th Floor
Phoenix, Arizonia 85004
Attention: Daniel Nunes
Telecopy No: 602-221-2977
Telephone No. Daniel Nunes
602-221-1909
Lender Commitment: $17,500,000.00 UNION BANK
Percentage: 5.000000%
/s/ Michael Stirrat
By:____________________________
Michael Stirrat
Name:__________________________
Vice President
Title:_________________________
/s/ Kathy Ormseth
By:____________________________
Kathy Ormseth
Name:__________________________
Vice President & Manager
Title:_________________________
Address:
Real Estate Capital Markets
Division
99 Almaden Boulevard
San Jose, California 95113
Attention: Michael Stirrat
Telecopy No: 408-294-6631
Telephone No. Michael Stirrat
408-279-7222
-47-
<PAGE>
-48-
<PAGE>
The undersigned legal counsel for the Borrower signs this Agreement not as a
party hereto but solely for the purpose of complying with the provisions of
Section 17.42(a)(3) of the Texas Deceptive Trade Practices-Consumer Protection
Act described in Section 10.5.
MAYER, BROWN & PLATT
/s/ Edward J. Schneidman
By:___________________________
Edward J. Schneidman
Name:_________________________
EXHIBITS
--------
A - Officer's Certificate
B - Rate Designation Notice
C - Note Form
C-1 - Swing Loan Note
D - Request for Loan
E - Legal Opinion
F - Target Market Cities
-49-
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT
TO
THIRD AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT
THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED REIT MANAGEMENT
AGREEMENT (this "Amendment") is made and entered into as of the 1st day of
October, 1994, by and between Property Trust of America, a Maryland real estate
investment trust (the "Trust"), and Security Capital (Southwest) Incorporated, a
Delaware corporation (the "REIT Manager").
WHEREAS, the Trust and the REIT Manager are parties to that certain Third
Amended and Restated REIT Management Agreement, dated as of the 1st day of
March, 1994 (the "Agreement"), pursuant to which the REIT Manager provides
strategic planning, day-to-day management, accounting, reporting, financing and
other services to the Trust, subject to the supervision of the Board of Trustees
of the Trust; and
WHEREAS, the REIT Manager receives a monthly fee pursuant to the Agreement
based on the Trust's cash flow and the REIT Manager also currently receives
incentive fees on gains realized by the Trust on sales, exchanges or other
dispositions of Trust assets; and
WHEREAS, the REIT Manager believes that it is important for the Trust to
continue to evaluate its assets and from time to time exchange assets with less
favorable cash flow prospects for assets with greater cash flow prospects, and
the REIT Manager believes that incentive fees should not be paid on exchanges of
assets because they do not generate capital gain proceeds for distribution to
the Trust's shareholders and the Trust and the REIT Manager desire to amend the
Agreement accordingly; and
WHEREAS, the Agreement currently provides for a term ending on December 31,
1994, renewable annually by the Trust, and the Trust and the REIT Manager desire
to amend the Agreement to provide for a term ending on March 1, 1995, renewable
annually by the Trust;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Trust and the REIT Manager agree that the Agreement is hereby
amended as follows:
A. Section 1.1(r) of the Agreement is amended and restated in its
entirety as follows:
(r) "Sale" means any sale or other disposition for cash
proceeds of any Trust Property or interest therein, condemnation,
recovery of damage award or insurance proceeds (other than business or
rental interruption insurance proceeds and the portion of any
condemnation or damage award or insurance proceeds used to repair or
restore a Trust Property).
<PAGE>
B. Section 3.1(b)(1)(ii) of the Agreement is amended and restated in its
entirety as follows:
(ii) In the event that the REIT Manager accomplishes an
exchange transaction that is nontaxable under the Code with respect to
any Trust Property, for purposes of computing the Incentive REIT
Management Fee (or, in the case of Trust Properties acquired or placed
in service after March 1, 1991, the offset against Incentive REIT
Management Fees pursuant to Section 3.1(b)(1)(i)) related to a
subsequent Sale of the Trust Property received in exchange for the
original Trust Property, the original cost of the new Trust Property
shall be deemed to be the same as the original cost plus the cost of
any subsequent capital improvements of the original Trust Property
exchanged for such new Trust Property.
C. Section 4.2 of the Agreement is amended by deleting the date "December
31, 1994" from the first sentence thereof and replacing such date with the date
"March 1, 1995."
-2-
<PAGE>
IN WITNESS WHEREOF, the Trust and the REIT Manager have executed this
Amendment as of the day and year first above written.
PROPERTY TRUST OF AMERICA
By: /s/ Paul E. Szurek
-------------------------------------
Paul E. Szurek
Secretary
Address: 7777 Market Center Avenue
El Paso, Texas 79912
SECURITY CAPITAL (SOUTHWEST) INCORPORATED
By: /s/ Constance B. Moore
--------------------------------------
Constance B. Moore
Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
-3-
<PAGE>
EXHIBIT 10.13
SECOND AMENDMENT
TO
THIRD AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REIT MANAGEMENT
AGREEMENT (this "Amendment") is made and entered into as of the 6th day of
December, 1994, by and between Property Trust of America, a Maryland real estate
investment trust (the "Trust"), and Security Capital (Southwest) Incorporated, a
Delaware corporation (the "REIT Manager").
WHEREAS, the Trust and the REIT Manager are parties to that certain Third
Amended and Restated REIT Management Agreement, dated as of March 1, 1994, as
amended by that certain First Amendment thereto, dated as of October 1, 1994 (as
so amended, the "Agreement"), pursuant to which the REIT Manager provides
strategic planning, day-to-day management, accounting, reporting, financing and
other services to the Trust, subject to the supervision of the Board of Trustees
of the Trust; and
WHEREAS, the REIT Manager receives a monthly fee pursuant to the Agreement
based on the Trust's cash flow and the REIT Manager also currently is entitled
to receive incentive fees on gains realized by the Trust on dispositions of
Trust assets; and
WHEREAS, the REIT Manager believes that it is important for the Trust to
continue to evaluate its assets and from time to time dispose of assets with
less favorable cash flow prospects and the REIT Manager believes that incentive
fees should not be paid on such dispositions so that the Trust may more fully
invest the proceeds in new-income producing assets and the Trust and the REIT
Manager desire to amend the Agreement to eliminate the payment of all incentive
fees to the REIT Manager under the Agreement; and
WHEREAS, the Agreement currently prohibits the REIT Manager from
recommending or consummating any transaction which would involve the acquisition
by the Trust of property in which the REIT Manager or an Affiliate thereof has
an ownership interest; and
WHEREAS, the Trust and the REIT Manager desire to amend the Agreement to
provide that the REIT Manager may recommend and consummate transactions which
involve the acquisition or sale by the Trust of property from or to PTR
Development Services Incorporated ("PTR Development Services") or in which PTR
Development Services has an interest provided that the Trust owns a substantial
majority of the economic interest in PTR Development Services and that a
majority of the Trustees of the Trust (including a majority of the Independent
Trustees) not otherwise interested in such transaction approve the transaction
as being fair, competitive and commercially reasonable and no less favorable to
the Trust than acquisitions or sales between unaffiliated parties under similar
circumstances;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Trust and the REIT Manager agree that the Agreement is hereby
amended as follows:
A. Sections 1.1(j), 1.1(o), 1.1(r) and 3.1(b) of the Agreement are
deleted in their entirety; provided, however, that the various sections and
paragraphs of the Agreement shall not be renumbered in any way as a result of
such deletions.
B. Clause (v) of Section 1.1(t) is deleted in its entirety and clause
(vi) of such section is renumbered as clause (v) thereof.
C. Section 3.1(c) of the Agreement is amended by deleting the words "and
the Incentive REIT Management Fee, if any," from clause (ii) of the first
sentence thereof and by deleting the words "and Incentive REIT Management Fee"
from the second sentence thereof.
D. Section 3.6(a) of the Agreement is amended by (i) deleting the period
at the end of the first sentence of such section and replacing it with the
clause: "; provided, however, that the REIT Manager may recommend and
consummate transactions which involve the acquisition or sale by the Trust of
property from or to PTR Development Services Incorporated ("PTR Development
Services") or in which PTR Development Services has an interest, provided that
the Trust owns a substantial majority of the economic interest in PTR
Development Services and that a majority of the Trustees of the Trust (including
a majority of the Independent Trustees) not otherwise interested in such
transaction approve the transaction as being fair, competitive and commercially
reasonable and no less favorable to the Trust than acquisitions or sales between
unaffiliated parties under similar circumstances." and (ii) deleting the period
at the end of the second sentence of such section and replacing it with the
clause: "; provided, however, that PTR Development Services may purchase or
otherwise acquire from the Trust any Trust Property, subject to and in
accordance with the provisions of the first sentence of this Section 3.6 (a)."
E. Section 4.3 of the Agreement is amended by deleting the words ", and
thereafter shall pay any fees payable to the REIT Manager pursuant to Section
3.1(b) hereof" at the end of such section.
-2-
<PAGE>
IN WITNESS WHEREOF, the Trust and the REIT Manager have executed this
Amendment as of the day and year first above written.
PROPERTY TRUST OF AMERICA
By: /s/ Paul E. Szurek
-----------------------
Paul E. Szurek
Secretary
Address: 7777 Market Center Avenue
El Paso, Texas 79912
SECURITY CAPITAL (SOUTHWEST)
INCORPORATED
By: /s/ Constance B. Moore
-----------------------
Constance B. Moore
Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
-3-
<PAGE>
EXHIBIT 10.14
THIRD AMENDMENT
TO
THIRD AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT
THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED REIT MANAGEMENT
AGREEMENT (this "Amendment") is made and entered into as of the 23rd day of
March, 1995, by and between Security Capital Pacific Trust (formerly known as
Property Trust of America), a Maryland real estate investment trust (the
"Trust"), and Security Capital Pacific Incorporated (formerly known as Security
Capital (Southwest) Incorporated), a Delaware corporation (the "REIT Manager").
WHEREAS, the Trust and the REIT Manager are parties to that certain Third
Amended and Restated REIT Management Agreement, dated as of March 1, 1994, as
amended by that certain First Amendment thereto, dated as of October 1, 1994 and
as further amended by that certain Second Amendment thereto, dated as of
December 6, 1994 (as so amended, the "Agreement"), pursuant to which the REIT
Manager provides strategic planning, day-to-day management, accounting,
reporting, financing and other services to the Trust, subject to the supervision
of the Board of Trustees of the Trust; and
WHEREAS, the Agreement currently provides for a term ending on March 1,
1995, renewable annually by the Trust, and the Trust and the REIT Manager desire
to amend the Agreement to provide for a term ending on June 30, 1995, renewable
annually by the Trust;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Trust and the REIT Manager agree that the Agreement is hereby
amended as follows:
A. Section 4.2 of the Agreement is amended by deleting the date "March 1,
1995" from the first sentence thereof and replacing such date with the date
"June 30, 1995."
<PAGE>
IN WITNESS WHEREOF, the Trust and the REIT Manager have executed this
Amendment as of the day and year first above written.
SECURITY CAPITAL PACIFIC
TRUST
By: /s/ Paul E. Szurek
------------------------
Paul E. Szurek
Secretary
Address: 7777 Market Center Avenue
El Paso, Texas 79912
SECURITY CAPITAL PACIFIC
INCORPORATED
By: /s/ Constance B. Moore
-------------------------
Constance B. Moore
Managing Director
Address: 125 Lincoln Avenue
Santa Fe, New Mexico 87501
2
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Security Capital Pacific Trust:
We consent to incorporation by reference in the registration statements No.
33-86444 (Form S-3), No. 33-78402 (Form S-3), No. 33-71040 (Form S-3), No. 33-
44631 (Form S-3) and No. 33-25317 (Form S-8) of Security Capital Pacific Trust
(formerly Property Trust of America) of our report dated February 28, 1995,
except as to note 10, which is as of March 23, 1995, relating to the balance
sheets of Security Capital Pacific Trust as of December 31, 1994 and 1993, and
the related statements of earnings, shareholders' equity, and cash flows and
related schedule for each of the years in the three-year period ended December
31, 1994, which report appears in the December 31, 1994 annual report on Form
10-K of Security Capital Pacific Trust.
KPMG Peat Marwick LLP
El Paso, Texas
March 29, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-K for the year ended December 31, 1994 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 8,092
<SECURITIES> 0
<RECEIVABLES> 24,254
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,296,288
<DEPRECIATION> 46,199
<TOTAL-ASSETS> 1,295,778
<CURRENT-LIABILITIES> 0
<BONDS> 93,624
<COMMON> 50,621
0
230,000
<OTHER-SE> 560,021
<TOTAL-LIABILITY-AND-EQUITY> 1,295,778
<SALES> 183,472
<TOTAL-REVENUES> 186,105
<CGS> 0
<TOTAL-COSTS> 118,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,600
<INTEREST-EXPENSE> 19,442
<INCOME-PRETAX> 30,619
<INCOME-TAX> 0
<INCOME-CONTINUING> 30,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,619
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
