<PAGE>
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FORM 10-K/A NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1993
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
PROPERTY TRUST OF AMERICA
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-6056896
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
SECURITY CAPITAL GROUP INCORPORATED
ADMINISTRATIVE CENTER
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
</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 February 11, 1994,
the aggregate market value of the voting stock held by non-affiliates of the
registrant was $637,093,846.
At February 11, 1994, there were outstanding approximately 44,644,734 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 May 3, 1994 are incorporated
by reference in Part III of this report.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---- ----------- ----
PART I
<C> <S> <C>
2. Properties......................................................... 3
Geographic Distribution............................................ 7
3. Legal Proceedings.................................................. 7
PART II
Market for the Registrant's Common Equity and Related Stockholder
5. Matters............................................................ 8
Dividend Reinvestment and Share Purchase Plan...................... 8
6. Selected Financial Data............................................ 10
Management's Discussion and Analysis of Financial Condition and
7. Results of Operations.............................................. 11
Overview........................................................... 11
Results of Operations.............................................. 11
Environmental Matters.............................................. 14
Liquidity and Capital Resources.................................... 15
REIT Management Agreement.......................................... 17
8. Financial Statements and Supplementary Data........................ 18
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 19
</TABLE>
2
<PAGE>
ITEM 2. PROPERTIES
The information in the following table is for properties owned at December
31, 1993.
<TABLE>
<CAPTION>
YEAR PERCENTAGE RENTABLE
ACQUIRED LEASED AT UNITS OR
METROPOLITAN OR DECEMBER 31, SQUARE PTR
AREA COMPLETED 1993 FOOTAGE INVESTMENT(1)
- ------------ ---------- ------------ -------- ---------------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C> <C> <C> <C>
MULTIFAMILY (UNITS):
Albuquerque, New Mexico:
Corrales Pointe............ 1993 94% 208 $ 6,299
La Paloma(2)............... 1993 n/a 424 4,697
The Pavilions Phase I(3)... 1991 98 118 7,340
The Pavilions Phase II(3).. 1992 98 122 8,016
Sandia Ridge(3)............ 1992 96 272 7,298
Vista del Sol(3)........... 1993 85 168 5,701
Wellington Place........... 1993 96 280 9,472
Austin, Texas:
Anderson Mill.............. 1993 97 350 11,827
Cannon Place............... 1993 87 184 6,138
Saddle Brook(2)............ 1992 n/a 308 11,264
La Mirage(2)............... 1992 n/a 348 14,067
The Ridge(3)............... 1993 94 326 9,939
Rock Creek................. 1993 99 314 8,735
Hunters' Run(2)............ 1993 n/a 240 1,469
San Marcos Place........... 1993 95 258 5,909
Shadowood.................. 1993 99 235 6,064
Spyglass(3)................ 1992 96 298 10,280
Dallas, Texas:
Apple Ridge................ 1993 93 304 9,947
Custer Crossing............ 1993 95 244 10,175
Homestead Village I-
Skillman Rd............... 1992 96 133 3,020
Homestead Village II-
Stemmons Fwy.............. 1992 92 132 3,162
Homestead Village III-
Tollway................... 1993 94 120 2,712
Homestead Village V-N.
Richland Hills(2)......... 1993 n/a 134 2,689
Homestead Village VI-Coit
Road(2)................... 1993 n/a 134 2,679
Homestead Village XIII-Ar-
lington(2)................ 1993 n/a 138 659
Indian Creek............... 1993 94 328 11,924
Pine Hills................. 1993 93 280 5,898
Post Oak Ridge............. 1993 100 486 14,107
Quail Run.................. 1993 96 278 10,711
Somerset................... 1993 94 372 14,556
Summerstone................ 1993 94 192 7,019
Woodland Park.............. 1993 98 216 6,939
Denver, Colorado:
Cambrian Apartments(3)..... 1993 94 384 11,802
The Cedars(3).............. 1993 97 408 16,315
Fox Creek.................. 1993 93 175 5,889
Hickory Ridge(3)........... 1992 99 688 23,038
Reflections Phase I(3)..... 1993 93 208 8,459
Reflections Phase II(2).... 1993 n/a 208 858
Sunwood.................... 1992 98 156 5,914
El Paso, Texas:
Acacia Park(2)............. 1993 n/a 360 1,371
Cielo Vista................ 1993 98 378 5,675
The Crest(3)............... 1992 93 232 7,951
Double Tree(3)............. 1993 95 284 5,950
Las Flores................. (4) 93 468 7,904
Mountain Village(3)........ 1992 98 288 6,951
</TABLE>
(see notes following table)
3
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENTAGE RENTABLE
ACQUIRED LEASED AT UNITS OR
METROPOLITAN OR DECEMBER 31, SQUARE PTR
AREA COMPLETED 1993 FOOTAGE INVESTMENT(1)
- ------------ ---------- ------------ -------- ---------------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C> <C> <C> <C>
The Phoenix.......... 1993 95% 336 $ 9,529
Shadow Ridge Phase
I(3)................ 1991 97 208 5,275
Shadow Ridge Phase
II(2)............... 1993 n/a 164 1,143
Spring Park(5)....... 1990 100 180 5,191
Tigua Village........ (6) 95 184 2,097
Houston, Texas:
Braeswood Park(7).... 1993 95 240 12,355
Cranbrook Forest..... 1993 96 261 6,649
Homestead Village IV-
West by North-
west(2)............. 1993 n/a 134 2,554
Homestead Village
VII-Southpoint(2)... 1993 n/a 134 1,769
Homestead Village
VIII-Westheimer(2).. 1993 n/a 134 1,447
Homestead Village IX-
Park Ten(2)......... 1993 n/a 134 988
Homestead Village X-
Southwest Techniplex
(2)................. 1993 n/a 134 718
Homestead Village XI-
Bammel Westfield(2). 1993 n/a 134 773
Pineloch............. 1993 94 440 13,195
Weslayan Oaks........ 1993 96 84 4,540
Woodside Village..... 1975 92 196 5,605
Las Cruces, New Mexi-
co:
Park Place Phase
I(5)................ 1989 98 160 4,416
Park Place Phase
II(5)............... 1991 98 132 4,109
Oklahoma City, Oklaho-
ma:
Warrington........... 1993 90 204 5,757
Phoenix, Arizona:
Dobson Bay Club(3)... 1992 100 166 6,092
Moorings at Mesa
Cove(3)............. 1992 95 406 16,784
Papago Crossing...... 1992 99 180 3,667
Pelican Bay.......... 1993 96 472 14,116
Pheasant Run(3)...... 1993 98 248 8,169
Presidio at South
Mountain(8)......... 1993 93 600 30,819
The Ridge............ 1993 96 380 12,318
San Antigua(2)....... 1993 n/a 320 14,852
San Marin(3)......... 1993 98 276 17,894
San Marina(3)........ 1992 98 400 6,781
San Marquis Phase
I(2)................ 1993 n/a 264 8,094
San Marquis Phase
II(2)............... 1993 n/a 208 1,590
Sunstone............. 1993 91 242 10,243
Superstition Park(3). 1992 96 376 12,173
San Antonio, Texas:
Applegate............ 1993 95 344 9,309
Camino Real(3)....... 1993 95 176 6,008
Cobblestone Vil-
lage(3)............. 1992 97 184 4,342
Contour Place........ 1992 96 126 2,525
The Crescent Phase
I(2)................ 1992 n/a 306 13,390
The Crescent Phase
II(2)............... 1993 n/a 216 1,749
The Gables........... 1993 94 192 6,868
Homestead Village
XII-Medical Cen-
ter(2).............. 1993 n/a 134 1,099
Indian Trails........ 1993 92 254 3,779
Lakeside Villas(3)... 1992 95 292 13,466
Marbach Park......... 1993 93 304 6,571
The Marina........... 1993 96 72 1,946
Medical Drive(2)..... 1993 n/a 276 1,642
Oakhampton Place(3).. 1992 98 280 12,081
Palisades Park....... 1993 100 328 7,430
Panther Spring....... 1993 97 88 4,141
The Pond............. 1993 94 328 11,031
</TABLE>
(see notes following table)
4
<PAGE>
<TABLE>
<CAPTION>
YEAR PERCENTAGE RENTABLE
ACQUIRED LEASED AT UNITS OR
METROPOLITAN OR DECEMBER 31, SQUARE PTR
AREA COMPLETED 1993 FOOTAGE INVESTMENT(1)
- ------------ ---------- ------------ -------- ---------------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C> <C> <C> <C>
The Shores........... 1993 96% 160 $ 4,298
Towne East........... 1993 98 100 2,234
Villas of Castle
Hills............... 1993 93 163 5,339
Villas of St.
Tropez(3)........... 1992 97 273 10,605
Santa Fe, New Mexico:
The Enclave(3)....... 1992 87 204 9,620
The Meadows(2)....... 1993 n/a 296 8,011
Rancho Vizcaya(3).... 1991 81 212 11,955
Tucson, Arizona:
Cobble Creek(3)...... 1992 99 301 7,600
Craycroft Gardens.... 1992 99 101 1,902
Haystack............. 1993 99 272 6,445
Sonoran Terraces(3).. 1992 99 374 17,615
Sundown Village Phase
I(3)................ 1993 100 250 8,315
Sundown Village Phase
II(2)............... 1993 n/a 76 539
Tierra Antigua(3).... 1992 99 147 5,396
Ventana Canyon....... 1993 n/a 240 1,766
Villa Caprice........ 1993 92 268 8,517
Windsail(10)......... 1993 100 300 9,662
Tulsa, Oklahoma:
Southern Slope....... 1993 95 142 5,192
--- ------- ----------
Total Multifamily.. 95% 28,091 $ 832,879
=== ======= ==========
LAND HELD FOR FUTURE
MULTIFAMILY DEVELOP-
MENT:
Austin, Texas:
Ridge Line........... 1993 n/a% (11) $ 2,599
Saddle Brook Phase
III................. 1993 n/a (12) 787
Saddle Brook Phase
IV.................. 1993 n/a (13) 822
--- ------- ----------
Total Development
Land.............. n/a% n/a $ 4,208
=== ======= ==========
HOTEL (ROOMS):
San Francisco, Cali-
fornia:
Wharf Holiday
Inn(14)............. 1971/90/92 80% 338 $ 22,870
=== ======= ==========
OFFICE/INDUSTRIAL
(SQUARE FEET):
Dallas, Texas:
Irving Blvd(15)...... 1977 100% 37,200 $ 540
Texas Commerce Bank
Bldg.(16)........... 1985 97 114,600 4,616
Valwood.............. 1983 n/a (17) 331
El Paso, Texas:
Vista Industrial(18). 1989 100 130,000 3,121
Ontario, California:
Ontario Industrial
Building............ 1987 100 127,600 3,928
--- ------- ----------
Total
Office/Industrial. 99% 409,400 $ 12,536
=== ======= ==========
Other(9)........... 100% 49,000 $ 622
=== ======= ==========
Total.............. $ 873,115
- --------
==========
</TABLE>
(1) Represents the lower of cost or net realizable value at December 31,
1993, not including planned renovations, for properties owned at December
31, 1993.
(2) Under development.
(3) Pledged to secure PTR's $200 million line of credit.
(4) 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 $6.1 million.
(5) The Spring Park Apartments and the Park Place Apartments are subject to
deeds of trust securing long term mortgage debt aggregating $11.5
million.
5
<PAGE>
(6) 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.
(7) PTR assumed $7.1 million of long term mortgage debt in connection with
the acquisition of this property.
(8) PTR assumed $14.9 million of long term mortgage debt in connection with
the acquisition of this property.
(9) Includes Avondale Shopping Center ($505) which is under a master lease
containing a purchase option in favor of the lessee.
(10) The Windsail Apartments are subject to a deed of trust securing long term
mortgage debt of $4.9 million.
(11) 104.9 acres of undeveloped land. Approximately 38 acres of commercial
frontage are subject to a purchase option in favor of an unrelated third
party which expires on September 9, 1996.
(12) 16.5 acres of undeveloped land.
(13) 8.7 acres of undeveloped land.
(14) PTR owns the building and land leased to Holiday Inns of America, Inc. at
Fisherman's Wharf in San Francisco. The improvements and the leasehold
interest are mortgaged to secure $0.8 million of long term debt. The
lease with Holiday Inns expires in 1995, subject to the lessee's option
to renew until 2018. The lessee has recently renovated portions of this
building at its own expense.
(15) The Irving Building is subject to a deed of trust securing long term
mortgage debt of $0.2 million.
(16) PTR owns this property though a 40% owned joint venture. Represents PTR's
investment as recorded on the equity method of accounting.
(17) Four acres of undeveloped land.
(18) The Vista Industrial building is subject to a deed of trust securing long
term mortgage debt of $2.3 million.
6
<PAGE>
GEOGRAPHIC DISTRIBUTION
PTR's properties are located in 16 metropolitan areas in six states. The
table below demonstrates the geographic distribution of PTR's operating
properties at February 11, 1994 at their cost, including planned renovations,
and properties under development at their budgeted development cost. This chart
does not include land held for future development, which is less than 1% of
assets, based on cost.
<TABLE>
<CAPTION>
PRO FORMA
PERCENTAGE
OF ASSETS
NUMBER OF BASED ON
PROPERTIES COST
---------- ----------
<S> <C> <C>
Albuquerque, New Mexico............................. 8 7%
Austin, Texas....................................... 10 9
Dallas, Texas....................................... 17 11
Denver, Colorado.................................... 8 8
El Paso, Texas...................................... 13 8
Houston, Texas...................................... 12 7
Las Cruces, New Mexico.............................. 2 1
Oklahoma City, Oklahoma............................. 1 1
Ontario, California................................. 1 *
Phoenix, Arizona.................................... 15 20
San Antonio, Texas.................................. 21 14
San Diego, California............................... 1 1
San Francisco, California........................... 1 2
Santa Fe, New Mexico................................ 3 3
Tucson, Arizona..................................... 10 8
Tulsa, Oklahoma..................................... 1 *
--- ---
Total............................................. 124 100%
=== ===
</TABLE>
--------
*Less than 1%.
ITEM 3. LEGAL PROCEEDINGS
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.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PTR's Common Shares are listed on the New York Stock Exchange (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 DISTRIBUTION
------- ------ ------------
<S> <C> <C> <C>
1992
First Quarter............................... $12 1/8 $9 3/4 $0.175
Second Quarter.............................. 11 3/4 10 0.175
Third Quarter............................... 12 3/4 10 7/8 0.175
Fourth Quarter.............................. 14 1/2 11 3/4 0.175*
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 (through February 11, 1994)... 20 1/8 18 1/4 0.250**
</TABLE>
- --------
*Declared in the third quarter for payment in the fourth quarter.
**Declared in the fourth quarter of 1993 for payment in the first quarter of
1994.
On February 11, 1994, PTR had approximately 3,600 holders of record of the
Common Shares.
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 71 consecutive quarterly cash distributions.
In November 1991, the Board of Trustees adopted a policy of announcing the
following year's projected annual distribution level after the Board's annual
budget review and approval in December of each year. In December 1993, the
Board of Trustees announced a projected increase in the annual distribution
level from $0.82 to $1.00 per Common Share. On December 28, 1993, PTR's
Trustees declared a distribution of $0.25 per Common Share paid February 18,
1994 to shareholders of record on February 4, 1994. The payment of
distributions is subject to the discretion of the Board of Trustees 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 which exceed PTR's current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in his securities. To the extent
that a distribution exceeds both current and accumulated earnings and profits
and the shareholder's basis in his securities, it will generally be treated as
gain from the sale or exchange of that shareholder's securities. PTR annually
notifies shareholders of the taxability of distributions paid during the
preceding year. The following summarizes the taxability of distributions paid
in 1993, 1992 and 1991 in respect of the Common Shares:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary Income....................................... $0.65 $0.67 $0.25
Capital Gains......................................... 0.11 0.03 --
Return of Capital..................................... 0.06 -- 0.39
----- ----- -----
Total............................................... $0.82 $0.70 $0.64
===== ===== =====
</TABLE>
8
<PAGE>
No portion of the 1992 dividends constituted return of capital, due to
certain acquisition and sale transactions consummated in 1992 which increased
reported earnings and profits for 1992. Under federal tax rules, PTR's earnings
and profits will first be allocated to the Preferred Shares, which will
increase the portion of the Common Shares dividend 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. Depreciation has increased as new properties have been
added. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Results of Operations."
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
PTR has a Dividend Reinvestment and Share Purchase Plan (the "Plan") which
allows holders of Common Shares to acquire additional Common Shares by
automatically reinvesting distributions. Common Shares are acquired pursuant to
the Plan at a price equal to 98% of the market price of such Common Shares,
without payment of any brokerage commission or service charge. The Plan also
allows shareholders to purchase a limited amount of additional Common Shares at
98% of the market price of such Common Shares, by making optional cash
payments, without payment of any brokerage commission or service charge.
Shareholders who do not participate in the Plan continue to receive
distributions as declared. At February 11, 1994, shareholders owning 8.10% of
the outstanding Common Shares were participating in the Plan.
9
<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 incorporated by reference
herein (amounts in thousands, except ratio and per share data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental Income............ $ 76,186 $ 31,010 $ 14,721 $ 12,207 $ 10,101
Total Revenues........... 78,418 32,779 15,817 13,314 10,856
General and Administra-
tive Expenses........... 660 436 697 1,241 984
REIT Management Fee...... 7,073 2,711 793 -- --
Earnings from Opera-
tions(2)................ 23,191 9,037 2,078 1,969 989
Gain (loss) on Sale of
Investments............. 2,302 (51) (611) 101 --
Net Earnings............. 25,493 8,986 1,467 2,070 989
Common Share Distribu-
tions Paid(4)........... 29,162 13,059 4,179 4,259 4,204
Preferred Share Distribu-
tions Paid.............. $ 1,341 $ -- $ -- $ -- $ --
Ratio of Earnings to Com-
bined Fixed Charges and
Preferred Share Distri-
butions(3).............. 3.4 2.9 1.5 1.5 1.4
PER SHARE DATA:
Net Earnings............. $ 0.66 $ 0.46 $ 0.21 $ 0.41 $ 0.20
Common Share Distribu-
tions Paid(4)........... 0.82 0.70 0.64 0.84 0.83
Preferred Share Distribu-
tions Paid.............. $ 0.1458 $ -- $ -- $ -- $ --
Weighted Average Common
Shares Outstanding...... 36,549 19,435 7,123 5,071 5,065
OTHER DATA:
Funds from Operations(1). $ 37,763 $ 15,268 $ 5,404 $ 4,335 $ 3,626
Net cash provided by op-
erating activities...... 49,275 20,252 6,092 1,647 4,533
Net cash used by invest-
ing activities.......... (529,093) (229,489) (33,553) (12,905) (11,797)
Net cash provided by fi-
nancing activities...... $ 478,345 $ 185,130 $ 57,259 $ 9,941 $ 7,327
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at
cost.................... $873,115 $337,274 $117,572 $84,892 $70,117
Total Assets............. 890,301 342,235 141,020 81,544 69,278
Line of Credit........... 51,500 54,802 101 8,522 10,416
Mortgages Payable........ 48,872 30,824 35,772 32,599 15,634
Total Liabilities........ 135,284 94,186 38,707 44,138 29,682
Shareholders' Equity..... $755,017 $248,049 $102,313 $37,406 $39,596
Number of Common Shares
Outstanding............. 44,645 27,034 13,161 5,071 5,071
</TABLE>
- --------
(1) 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 generally
accepted accounting principles ("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.
(2) Earnings from operations for 1993 reflect a $2.27 million provision for
possible loss relating to investments in non-multifamily properties.
(3) For purposes of computing the ratio of earnings to combined fixed charges
and Preferred Share distributions, earnings consist of earnings from
operations plus fixed charges other than capitalized interest. Fixed
charges consist of interest on borrowed funds (including capitalized
interest) and amortization of debt discount and expense.
(4) In addition, a distribution of $0.25 per Common Share was declared by PTR's
Trustees on December 28, 1993 to be paid on February 18, 1994 to
shareholders of record as of February 4, 1994.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
PTR's operating results depend primarily upon net operating 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 and (iii) the pace and price at which PTR can acquire
and develop additional multifamily properties.
PTR's target market and submarkets have benefited substantially in recent
periods from demographic trends (including job and population growth) which
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 from multifamily units have increased more than the
inflation rate for the last two years and are expected to continue experiencing
such increases for the next twelve months. 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 the next twelve months. Real estate taxes have increased at a slightly
higher rate due to revaluations of purchased properties, for which PTR budgets
in analyzing acquisitions.
The reduced availability of real estate financing in PTR's target market has
also created favorable conditions for the acquisition and development of
multifamily properties, although available capital has increased the
competition for acquiring multifamily units in recent months. The REIT Manager
believes PTR's ability to compete is significantly enhanced relative to other
companies because of the REIT Manager's depth of acquisition personnel and
presence in local markets combined with PTR's access to investment capital. As
a result, PTR has been able to acquire large numbers of multifamily units on
favorable terms throughout 1992 and 1993. Over the longer term, multifamily
developments are expected to constitute a greater percentage of PTR's growth
than acquisitions. Capital and credit market conditions which affect PTR's cost
of equity and debt capital may also influence operating results.
RESULTS OF OPERATIONS
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. At February 11, 1994, PTR had 4,204 multifamily units under
construction with a budgeted completed cost of $177.5 million and had in the
final planning stages an estimated 1,706 multifamily units with an aggregate
estimated investment cost of $73.6 million. During 1992, PTR acquired 20
multifamily properties aggregating 5,512 units for a total purchase price,
including 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 addition,
rental rates from multifamily assets which 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 93.4% in 1993 and 76.3% in 1992. This percentage will continue
to increase in 1994 due to multifamily properties acquired in 1993 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,
11
<PAGE>
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 February 11, 1994, 44% of the
operating multifamily portfolio was stabilized as compared to 59% at December
31, 1992. Per unit rental expenses were 42.33% of per unit rental revenues
during 1993, compared to 42.08% 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 rental income increases of $45.2 million (145.6%), partially
offset by higher rental expenses, which increased by $19.0 million (165.7%) for
the period and depreciation expense which increased $5.2 million (97.8%) for
1993 over 1992. This increase is due to multifamily acquisitions and
multifamily developments placed in service.
Properties Stabilized Throughout Both Periods
Multifamily. Rental income for the nine multifamily properties stabilized
throughout both years increased approximately $705,800 (6.4%) for 1993,
compared to 1992, partially offset by increases in rental expenses of $419,100
(9.0%) and depreciation of $72,700 (4.6%). The increase primarily related to a
5.74% 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. PTR's 78 other operating properties generally continue to
experience strong occupancies and comparable rent increases.
Non-Multifamily. Rental income, rental expenses and depreciation for non-
multifamily properties 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 which were stabilized throughout
both years and non-multifamily properties which 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 for these properties increased $524,800 (7.2%) for 1993 over 1992.
Interest and Other Income
Interest and other income for 1993 increased 26.2%, 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, when
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 (185%) 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.
12
<PAGE>
PTR's interest expense will increase in future periods due to $200 million of
long term, fully amortizing, senior unsecured notes issued in February 1994.
See "--Liquidity and Capital Resources--Financing Activities."
General and Administrative Expense and 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 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
the 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 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 and was recorded in the second
quarter.
1992 COMPARED TO 1991
During 1992, PTR acquired 20 multifamily properties aggregating 5,512 units
for a total cost, including renovations of approximately $183.0 million, most
of which was invested after April 30. In addition, two multifamily properties
under development were completed. During the third and fourth quarters of 1991,
PTR acquired three multifamily properties aggregating 538 units for a total
cost of approximately $24 million (which includes the price of an adjacent
tract of land developed to expand one of the acquired complexes) and completed
development of 132 units at a total cost of approximately $4.1 million.
Net earnings for 1992 increased $7.5 million (513%) over net earnings for
1991. The aggregate increase resulted primarily from increased multifamily
assets in operation. In addition, rental rates from the five multifamily
properties which were stabilized throughout both years increased 7.7%.
Rent increases were partially offset by higher rental expenses, which
increased overall by $6.5 million (129%) for the period and depreciation
expense increased $2.4 million (84%) over the same period of the prior year.
This increase is due to multifamily acquisitions and multifamily developments
placed in service.
Properties Stabilized Throughout Both Periods
Multifamily. Properties which were owned by PTR at both dates were 97% and
94% leased at December 31, 1992 and 1991, respectively.
Non-Multifamily. Although occupancies and rental rates for office/industrial
and shopping centers remained constant, repair and maintenance expenses at
certain properties increased.
13
<PAGE>
All Properties. For multifamily properties which were stabilized throughout
both years and non-multifamily properties which were owned throughout both
years, taken as a whole, rents increased $357,100 (3%), rental operating
expenses increased $235,800 (6%), and depreciation decreased $86,000 (4%).
Despite substantial increases from the multifamily portfolio, cash flow from
property operations, before depreciation, for properties fully operating in
both periods increased only $181,300 (2%) for 1992 over the same period of the
prior year.
Interest and Other Income
Interest and other income for 1992 increased as a result of higher average
cash balances in 1992 than in 1991, resulting from the approximately $69.8
million in net proceeds from PTR's April 1992 public offering, and
approximately $45.6 million from PTR's November 1991 offering, which were
partially offset by lower interest rates. As a result, PTR recognized short
term interest income of $950,900 for 1992, compared to $510,100 for the prior
year. In addition, interest income from notes receivable increased $241,100
during 1992, when compared to 1991, as a result of five purchase money notes
aggregating $6.8 million received in 1992 in conjunction with property sales.
Interest Expense
Mortgage interest decreased $1.4 million (41%) for 1992 when compared to
1991. The decrease is attributable to interest savings resulting from the
repayment of a $2 million mortgage in January 1992, $989,400 of capitalized
interest during 1992, the sale of three properties in 1992 which had underlying
mortgages and lower interest rates on an adjustable rate mortgage. The decrease
was offset by interest on debt incurred for the construction and permanent
financing of Phase II of the Park Place Apartments in September 1991 ($3.6
million principal amount).
Line of credit interest expense for 1992 was $687,000 higher than for 1991,
principally because of higher average borrowings and amortization of higher
loan costs (commitment fees, title policies and legal expenses) relating to the
secured revolving credit facility from TCB, all of which were partially offset
by lower average interest rates. Average borrowings were approximately $12.7
million (with an average interest rate of 6.6%) during 1992, as compared to
average borrowings of $8.1 million (with an average interest rate of 9.3%)
during 1991.
General and Administrative Expense and 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 $1.9 million (242%) in
1992 as compared to 1991 primarily because pre-REIT Management fee cash flow
increased substantially. In addition, the REIT Management agreement was only in
effect for ten months during 1991.
Approximately $108,000 of general and administrative expenses in 1991 related
to one-time payments to employees to terminate severance compensation
agreements and compensation paid for accrued and unused vacation for employees
upon their separation of service from PTR when the REIT Manager assumed
management.
ENVIRONMENTAL MATTERS
PTR does not expect any environmental condition on its properties to
materially adversely affect its results of operations or financial position.
14
<PAGE>
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 acquisition,
development, operating and shareholder dividend requirements.
Net cash flow provided by operating activities increased by $29.0 million
(143%) for 1993 compared to 1992. Net cash flow provided by operating
activities increased $14.1 million (232%) for 1992 compared to 1991. These
increases are due to multifamily property acquisitions as described under "--
Results of Operations" above.
Investing Activities
In 1993, PTR invested $532.0 million for the acquisition and development of
multifamily properties, net of $26.9 million in mortgages assumed. In 1992, PTR
invested $218.8 million for the acquisition and development of multifamily
properties. These acquisitions and developments 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 offerings.
PTR's investing activities used $299.6 million( 131%) more cash in 1993
compared to 1992 and $195.6 million (583%) more cash in 1992 compared to 1991.
The increase in investing activity was due to increased levels of multifamily
property acquisitions and developments.
At February 11, 1994, PTR had unfunded development commitments for properties
under construction of $82.9 million. Additionally, at February 11, 1994, PTR
had letters of intent or contingent contracts, subject to PTR's final due
diligence, for the acquisition or near term development of 4,122 multifamily
units in various southwestern cities with an aggregate acquisition, improvement
and development cost of $180.9 million. The foregoing transactions are subject
to a number of conditions, and PTR cannot predict with certainty that any of
them will be consummated.
Periodic sales of non-multifamily assets may occur as PTR implements its
strategy of focusing on multifamily properties. PTR sold five non-multifamily
properties in 1992 and eight in 1993, at prices approximating book value, net
of provisions for possible losses on non-multifamily properties retained. PTR's
remaining shopping center is under a master lease with a purchase option in
favor of the lessee.
Financing Activities
PTR's 1993 financing activities provided $293.2 million (158%) more cash flow
than 1992 financing activities which provided $127.8 million (223%) more cash
flow than 1991 financing activities. The increases in cash flow provided by
financing activities are primarily due to proceeds from various equity
offerings conducted by PTR during each the years. Net proceeds from equity
offerings aggregated $514.2 million, $143.2 million and $66.9 million,
respectively, during 1993, 1992 and 1991. Proceeds from these offerings were
used for acquisition, development 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.
In November 1993, PTR consummated an extension of its line of credit to
August 1995 with an increase to $200 million, and a reduction in interest rate
to prime or, at PTR's option, LIBOR plus 2%. The line may be extended annually
for an additional year with the approval of TCB and the other participating
lenders. All debt incurrences are subject to a covenant that PTR maintain a
debt to tangible net worth ratio of not greater than 1:1. At February 11, 1994,
there were no borrowings outstanding under the line of credit. PTR is currently
discussing conversion of the line to an unsecured facility. No assurances can
be given that this conversion will be completed.
15
<PAGE>
PTR expects to finance developments, acquisitions and renovations with
borrowings under its line of credit prior to equity and long term debt
offerings in order to efficiently respond to market opportunities while
minimizing the amount of cash invested in short term investments at low yields.
Through December 31, 1993, PTR has financed substantially all of its
multifamily acquisitions and developments with equity offerings proceeds. As a
result, PTR believes that it's current conservative ratio of long term debt to
total book capitalization (25% at February 11, 1994) 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 book capitalization (sum of long term debt and shareholders'
equity) and line of credit 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 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. 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 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.
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 earnings from operations and net earnings. Therefore,
quarterly distributions will generally be higher than quarterly net earnings.
Distributions paid on Common Shares exceeded net earnings attributable to
Common Shares by $5.0 million, $4.1 million and $2.7 million for 1993, 1992 and
1991, respectively, resulting in corresponding decreases in shareholders'
equity for each of the respective periods.
Pursuant to the terms of the Preferred Shares, PTR is restricted from
declaring or paying any distribution with respect to its Common Shares unless
all cumulative distributions with respect to the Preferred Shares have been
paid and sufficient funds have been paid or declared for the payment of the
distribution for the then current distribution period with respect to the
Preferred Shares.
Funds from Operations
Funds from Operations increased from $15.3 million to $37.8 million from 1992
to 1993. The aggregate increase resulted primarily from increased properties in
operation. 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
16
<PAGE>
impact of certain activities, such as gains or losses from property sales and
changes in accounts receivable and accounts payable. Cash flow from financing
activities (before distribution payments) is expected to be substantially
equivalent to cash used in investing activities, as PTR utilizes revolving
credit borrowings, to be refunded with sales of equity and long term, fixed
rate, fully amortized debt securities, to fund its investment activities. Funds
from Operations represents PTR's net earnings from operations (computed in
accordance with GAAP) plus depreciation, amortization of loan costs and
provision for possible loss on investments. Funds from Operations should not be
considered as an alternative to net earnings from operations 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 (the
"REIT Management Agreement") with the REIT Manager to provide management
services to PTR. The REIT Manager is an affiliate of Security Capital Realty,
which currently owns approximately 26.93% of PTR's Common Shares. All officers
of PTR are employees of the REIT Manager and PTR has no other 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
has 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 has been amended to assume
that the long term debt described above under "Liquidity and Capital Resources"
will have 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.
The REIT Management Agreement also requires PTR to pay the REIT Manager an
incentive fee upon sale of PTR's real estate assets. For assets owned at March
1, 1991, the fee is equal to 10% of the gain above an agreed asset valuation
prepared by an unrelated investment bank. For assets acquired after March 1,
1991, the fee equals 10% of the gain above PTR's all-in cost for the assets,
including transaction costs and capital improvements, as increased by the
inflation rate since the date of acquisition. All incentive fees are averaged
over three-year periods to avoid any windfalls related to sales in any
particular year. Any incentive fees earned by the REIT Manager will be paid in
Common Shares at the then market price.
REIT management fees aggregated $7,073,000, $2,711,000 and $793,000 for the
years ended December 31, 1993 and 1992 and ten months ended December 31, 1991,
respectively. No incentive fees have been earned by the REIT Manager.
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 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. In
the event that the REIT Management Agreement is terminated, or not renewed, by
PTR as a result of the merger, consolidation, acquisition or liquidation of
PTR, PTR's properties shall be deemed to be sold
17
<PAGE>
at the net aggregate consideration paid to PTR's shareholders upon such event,
and the REIT Manager shall be paid an incentive fee accordingly. If the REIT
Management Agreement is otherwise terminated or not renewed by PTR without
cause, PTR shall pay the REIT Manager an incentive fee on any sale or
refinancing which occurs within two years of such termination so long as the
property was owned by PTR at the time of termination. 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, 1993 and 1992, its Statements of
Earnings, Shareholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1993 and Schedule XI--Real Estate and
Accumulated Depreciation, together with the report of KPMG Peat Marwick,
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.
18
<PAGE>
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 33 of this
report.
2.Financial Statement Schedules:
Schedule XI.
All other schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
(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>
DATE ITEM REPORTED FINANCIAL STATEMENTS
---- ------------- --------------------
<S> <C> <C>
November 4 Items 5,7 Yes
November 22 Item 5 No
December 17 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.
19
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Property Trust of America:
Independent Auditors' Report.............................................. 34
Balance Sheets............................................................ 35
Statements of Earnings.................................................... 36
Statements of Shareholders' Equity........................................ 37
Statements of Cash Flows.................................................. 38
Notes to Financial Statements............................................. 39
Schedule XI--Real Estate and Accumulated Depreciation..................... 48
</TABLE>
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
PROPERTY TRUST OF AMERICA:
We have audited the financial statements of 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 Property Trust of America as
of December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1993,
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
January 18, 1994, except as to Note 10,
which is as of February 8, 1994
21
<PAGE>
PROPERTY TRUST OF AMERICA
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1993 1992
------ -------- --------
<S> <C> <C>
Real estate................................................ $873,115 $337,274
Less accumulated depreciation.............................. 22,022 19,360
-------- --------
851,093 317,914
Mortgage notes receivable.................................. 22,099 10,981
-------- --------
Total investments...................................... 873,192 328,895
Cash and cash equivalents.................................. 5,525 6,998
Accounts receivable........................................ 783 1,096
Other assets............................................... 10,801 5,246
-------- --------
Total assets........................................... $890,301 $342,235
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Line of credit........................................... $ 51,500 $ 54,802
Mortgages payable........................................ 48,872 30,824
Distributions payable.................................... 11,161 --
Accounts payable......................................... 13,514 3,518
Accrued expenses and other liabilities................... 10,237 5,042
-------- --------
Total liabilities...................................... 135,284 94,186
-------- --------
Shareholders' Equity:
Series A Preferred shares (9,200,000 shares authorized
and issued; stated liquidation preference of $25 per
share).................................................. 230,000 --
Common shares (shares issued -- 44,809,208 in 1993 and
27,191,377 in 1992)..................................... 44,809 27,191
Additional paid-in capital............................... 523,053 247,418
Distributions in excess of net earnings.................. (40,916) (24,745)
-------- --------
756,946 249,864
Less treasury shares..................................... 1,929 1,815
-------- --------
Total shareholders' equity............................. 755,017 248,049
-------- --------
Total liabilities and shareholders' equity............. $890,301 $342,235
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
PROPERTY TRUST OF AMERICA
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Revenues:
Rental income........... $76,186 $31,010 $14,721
Interest and other in-
come................... 2,232 1,769 1,096
------- ------- -------
78,418 32,779 15,817
------- ------- -------
Expenses:
Rental expenses......... 30,484 11,473 5,009
Depreciation of real es-
tate owned............. 10,509 5,311 2,886
Interest................ 3,923 3,214 3,952
General and administra-
tive and REIT manage-
ment fee............... 7,733 3,147 1,490
Provision for possible
loss on investments.... 2,270 400 400
Other................... 308 197 2
------- ------- -------
55,227 23,742 13,739
------- ------- -------
Earnings from operations.. 23,191 9,037 2,078
Gain (loss) on sale of in-
vestments, net........... 2,302 (51) (611)
------- ------- -------
Net earnings.............. 25,493 8,986 1,467
Less Series A Preferred
share distributions...... 1,341 -- --
------- ------- -------
Net earnings attribut-
able to common shares.. $24,152 $ 8,986 $ 1,467
======= ======= =======
Weighted average common
shares outstanding....... 36,549 19,435 7,123
======= ======= =======
Per share amounts attrib-
utable to common shares:
Net earnings............ $ 0.66 $ 0.46 $ 0.21
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
PROPERTY TRUST OF AMERICA
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1991, 1992, AND 1993
(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,
1990................... $ -- $ 5,173 $ 51,339 $(17,960) $(1,146) $ 37,406
Net earnings.......... -- -- -- 1,467 -- 1,467
Common share
distributions........ -- -- -- (4,179) -- (4,179)
Sale of shares, net of
expenses............. -- 8,091 58,856 -- -- 66,947
Cancellation of
option............... -- -- 672 -- -- 672
-------- ------- -------- -------- ------- --------
Balances at December 31,
1991................... -- 13,264 110,867 (20,672) (1,146) 102,313
Net earnings.......... -- -- -- 8,986 -- 8,986
Common share
distributions........ -- -- -- (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
options, 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
distributions paid... -- -- -- (29,162) -- (29,162)
Common share
distributions
accrued.............. -- -- -- (11,161) -- (11,161)
Preferred share
distributions 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
options, 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
======== ======= ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
PROPERTY TRUST OF AMERICA
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Operating activities:
Net earnings................................. $ 25,493 $ 8,986 $ 1,467
Items not requiring (providing) cash:
Depreciation and amortization.............. 12,219 5,657 2,886
Provision for possible loss on investments. 2,270 400 400
Loss (gain) on investment properties....... (2,302) 51 611
Other, net................................. 83 174 40
Accounts payable............................. 9,996 2,565 677
Accrued expenses and other liabilities....... 5,195 3,161 (188)
Net change in other operating assets and
liabilities................................. (3,679) (742) 199
--------- --------- --------
Net cash flow provided by operating
activities................................ 49,275 20,252 6,092
--------- --------- --------
Investing activities:
Real estate investments...................... (536,622) (231,159) (33,398)
Mortgage notes receivable.................... 1,295 1,141 (214)
Sale of investment properties, net........... 6,389 615 3
Other........................................ (155) (86) 56
--------- --------- --------
Net cash flow used in investment
activities................................ (529,093) (229,489) (33,553)
--------- --------- --------
Financing activities:
Proceeds from sale of shares, net of
expenses.................................... 514,194 143,233 66,947
Proceeds from line of credit................. 282,500 175,099 19,424
Proceeds from dividend reinvestment and share
purchase plan, net.......................... 7,971 5,466 --
Proceeds from mortgage financing............. -- -- 3,600
Proceeds from exercise of stock options, net. 1,088 1,110 --
Cash distributions paid on common shares..... (29,162) (13,059) (4,179)
Cash distributions paid on preferred shares.. (1,341) -- --
Debt issuance costs incurred................. (3,109) (1,373) (261)
Principal payments on line of credit......... (285,802) (120,398) (27,845)
Principal payments on mortgages payable...... (7,880) (4,948) (427)
Purchase of treasury shares.................. (114) -- --
--------- --------- --------
Net cash flow provided by financing
activities................................ 478,345 185,130 57,259
--------- --------- --------
Net increase (decrease) in cash and cash
equivalents................................... (1,473) (24,107) 29,798
Cash at beginning of year...................... 6,998 31,105 1,307
--------- --------- --------
Cash at end of year............................ $ 5,525 $ 6,998 $ 31,105
========= ========= ========
Non-cash investing and financing activities:
Receipt of purchase money notes from sale of
non-multifamily properties.................. $ 12,413 $ 6,779 $ 65
Assumption of mortgages payable upon purchase
of multifamily properties................... $ 26,952 $ -- $ --
Accrual of common share distributions........ $ 11,161 $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Property Trust of America ("PTR"), is an equity real estate investment trust,
organized under the laws of the state of Maryland, which primarily owns,
acquires, develops and operates income-producing multifamily properties in the
southwestern United States.
Principles of Financial Presentation
The accounts of PTR and its wholly owned subsidiaries and partnerships and
joint ventures in which PTR has a controlling interest 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 the lower of cost or net realizable value.
Costs directly related to the acquisition, renovation or development of real
estate, are capitalized. Costs incurred in connection with the pursuit of
unsuccessful acquisitions are expensed at the time the acquisition is deemed
terminated.
Repairs and maintenance are expensed as incurred. Renovations and
improvements are capitalized and depreciated over their estimated useful lives.
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>
Capital Markets Costs
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 other assets and
amortized over the term of the related loan using the effective interest
method.
Revenue Recognition
Rental and interest income is recorded on the accrual method of accounting
for financial reporting and tax purposes. Gain or loss on sales of real estate
are recorded when criteria required by FAS-66 have been met. 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.
Earnings per Common Share
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
26
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 1993.
Reclassifications
Certain of the 1992 and 1991 financial statement and notes to financial
statements amounts have been reclassified to conform to the 1993 presentation.
(2) REAL ESTATE
Investments
Investments in real estate, at cost, were as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1993 1992
----------------- ----------------
INVESTMENT UNITS INVESTMENT UNITS
---------- ------ ---------- -----
<S> <C> <C> <C> <C>
Multifamily:
Operating properties................. $730,994 22,493 $250,278 7,989
Developments under construction...... 84,395 3,048 23,710 1,694
Developments in planning............. 17,490 2,550 -- --
Land held for future development..... 4,208 -- -- --
-------- ------ -------- -----
Total Multifamily.................. 837,087 28,091 273,988 9,683
====== =====
Non-multifamily........................ 36,028 63,286
-------- --------
Total real estate.................. $873,115 $337,274
======== ========
</TABLE>
At December 31, 1993 PTR had unfunded commitments for developments under
construction of $42,200,000.
The following is a reconciliation of the carrying amount of PTR's investments
in real estate, at cost (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1....................... $337,274 $117,572 $ 84,892
Acquisitions, including renovation expendi-
tures..................................... 449,500 188,411 23,972
Development expenditures, including land
acquisitions.............................. 108,056 41,733 8,291
Acquisitions of land held for future devel-
opment.................................... 4,208 -- --
Capital improvements....................... 1,639 1,015 899
Real estate sold........................... (24,953) (10,814) (121)
Provisions for possible losses............. (2,270) (400) (400)
Other...................................... (339) (243) 39
-------- -------- --------
Balance at December 31..................... $873,115 $337,274 $117,572
======== ======== ========
</TABLE>
Gains and Losses from Sales of Real Estate
PTR's strategy is to focus on the ownership of multifamily properties.
Accordingly, periodic sales of non-multifamily assets have occurred and may
continue to occur as favorable sales opportunities arise. Properties are
periodically evaluated for net realizable value and provisions for possible
losses are made if required.
27
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Capitalized Interest
PTR capitalizes interest as part of the cost of real estate properties under
development. Interest capitalized during 1993, 1992 and 1991 aggregated
$2,818,000, $989,000 and $157,000, respectively.
Repairs and Maintenance
Repairs and maintenance charged to rental expenses for the years ended
December 31, 1993, 1992 and 1991 were $5,203,000, $2,116,000 and $877,000,
respectively.
Property Taxes
Property taxes charged to rental operating expenses for the years ended
December 31, 1993, 1992 and 1991 were $5,957,000, $1,856,000 and $674,000,
respectively.
(3) DISTRIBUTIONS
For federal income tax purposes, the following summarizes the taxability of
distributions paid on Common Shares in 1992 and 1991 and the estimated
taxability for 1993:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Per Common Share:
Ordinary income.......................................... $.65 $.67 $.25
Capital gains............................................ .11 -- --
Return of capital........................................ .06 .03 .39
---- ---- ----
Total.................................................. $.82 $.70 $.64
==== ==== ====
</TABLE>
On December 28, 1993 PTR declared a distribution of $.25 per Common Share
payable on February 18, 1994 to shareholders of record as of February 4, 1994.
At the same time, PTR announced that it plans to pay a total distribution of
$1.00 per Common Share in 1994.
Distributions paid in 1993 on Preferred Shares for the period from the date
of issuance (November 29, 1993) through December 31, 1993 and are estimated to
be taxable as follows:
<TABLE>
<S> <C>
Per Preferred Share:
Ordinary income.................................................. $.1231
Capital gains.................................................... .0227
------
Total.......................................................... $.1458
======
</TABLE>
PTR's tax return for the year ended December 31, 1993 has not been filed, and
the taxability information for 1993 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 distributions is subject to change.
(4) LINE OF CREDIT AND MORTGAGES PAYABLE
Line of Credit
PTR has a $200 million revolving line of credit facility with Texas Commerce
Bank, National Association, as agent bank for a group of lenders ("TCB").
Borrowings bear interest at prime, or at PTR's
28
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
option, LIBOR plus 2%. Additionally, there is a commitment fee of .125% per
annum of the unfunded line of credit balance. The line is secured by operating
multifamily properties having an aggregate undepreciated cost of $309,211,000
at December 31, 1993.
The TCB line matures August 1995 and may annually be extended for an
additional year with the approval of TCB. All debt incurrences are subject to a
covenant that PTR maintain a debt to tangible net worth ratio of not greater
than 1:1. At December 31, 1993, PTR's debt to tangible net worth ratio was
.18:1.
A summary of PTR's line of credit borrowings is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Total line of credit......................... $200,000 $86,370 $34,300
Borrowings outstanding at December 31........ 51,500 54,802 101
Weighted average daily borrowings............ 40,555 12,694 8,104
Maximum borrowings outstanding at any month
end......................................... $ 83,010 $63,550 $14,234
Weighted average daily interest rate......... 6.3% 6.6% 9.3%
</TABLE>
Mortgages Payable
Mortgages payable are secured by real estate with an undepreciated cost of
$103,079,000, at December 31, 1993 and are due in installments over various
terms extending to 2025, with interest rates ranging from 7.00% to 10.25% and a
weighted average interest rate of 9.20%.
A summary of activity in mortgages payable is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Balances at January 1.......................... $30,824 $35,772 $32,599
Notes originated or assumed.................... 26,952 -- 3,600
Principal payments............................. (7,880) (4,948) (427)
Liquidated upon sale of properties............. (1,024) -- --
------- ------- -------
Balance at December 31......................... $48,872 $30,824 $35,772
======= ======= =======
</TABLE>
Approximate principal payments due during each of the years in the five-year
period ending December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1994............................. $ 1,073
1995............................. 3,329
1996............................. 516
1997............................. 15,530
1998............................. 6,912
-------
$27,360
=======
</TABLE>
Based on market borrowing rates available to PTR for mortgages with similar
terms and average maturities, the fair value of mortgages payable was
approximately $51,350,000 at December 31, 1993 and $32,100,000 at December 31,
1992.
29
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
General
During 1993, 1992 and 1991, the total interest paid in cash on all
outstanding debt, net of interest capitalized, was $1,603,000, $2,654,000 and
$4,038,000, respectively.
Amortization of loan costs included in interest expense for the years ended
December 31, 1993, 1992 and 1991 was $1,845,000, $426,000, $98,000,
respectively.
(5) MORTGAGE NOTES RECEIVABLE
A summary of activity in mortgage notes receivable, which have originated
principally in connection with PTR's sale of non-multifamily properties, is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
------------------------
1993 1992 1991
------- ------- ------
<S> <C> <C> <C>
Balances at January 1........................... $10,981 $ 5,343 $5,754
Notes originated................................ 12,413 6,779 65
Collection of principal......................... (1,295) (1,141) (70)
Other........................................... -- -- (406)
------- ------- ------
Balance at December 31.......................... $22,099 $10,981 $5,343
======= ======= ======
</TABLE>
Interest rates on mortgage notes receivable range from 7.5% to 11% with a
weighted average rate of 9.08%. Maturity dates on mortgage notes receivable
range from 1994 to 2008.
The aggregate face amount of mortgage notes receivable at December 31, 1993
was $23,593,000. 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, 1993 and 1992 approximates fair
value.
(6) SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
At December 31, 1993, 150,000,000 Shares of Beneficial Interest, $1 par
value, 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
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. At December 31, 1993 and 1992, there were 44,809,208 and 27,191,377
Common Shares issued, respectively. At December 31, 1993 and 1992, there were
164,473 and 157,844 Common Shares held in treasury, respectively.
Preferred Shares
At December 31, 1993, there were 9,200,000 Preferred Shares outstanding,
issued in November 1993. 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
30
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
Dividend Reinvestment Plan
PTR has a Dividend Reinvestment and Share Purchase Plan (the "DRIP") which
allows participating investors to reinvest their distributions. Reinvestment
under the DRIP is at a 2% discount from the greater of the average closing
price of the common shares for the ten preceding days or the average of the
high and low sales price on the investment date. Proceeds from the DRIP for the
years ended December 31, 1993, 1992 and 1991 were $7,971,000, $5,466,000 and
none, respectively. Common Shares issued in connection with the DRIP were
448,902, 471,199 and none for the years ended December 31, 1993, 1992 and 1991,
respectively.
Option Plan
In January 1987, PTR adopted the Property Trust of America Share Option Plan
for Outside Trustees (the "1987 Plan"). Under the 1987 Plan, there are 134,000
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, 1993 there were 16,000
options for Common Shares outstanding and exercisable under the 1987 Plan at
exercise prices ranging from $10.625 to $18.50 per Common Share.
Ownership Restrictions and Significant Shareholder
PTR's Restated Declaration of Trust and the Articles Supplementary, restrict
beneficial ownership of PTR's outstanding Common Shares by a single person, or
persons acting as a group, to 9.8% of PTR's Common Shares and 25% of the
Preferred Shares. The purpose of this provision is 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 stock 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 these limits
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 Realty Incorporated ("Security Capital Realty"), an
affiliate of the REIT Manager (see Note 7), to acquire up to 32% of PTR's
outstanding Common Shares. Security Capital Realty's ownership of Common Shares
is attributed for tax purposes to its shareholders.
Security Capital Realty currently owns 26.93% of PTR's total outstanding
Common Shares. Pursuant to an agreement between Security Capital Realty and
PTR, Security Capital Realty has agreed to acquire no more than 32% of the
Common Shares outstanding, except pursuant to an all-cash tender offer for all
Common Shares held open for 90 days. Security Capital Realty would have no
limitation on making a tender offer if an unrelated third party commences such
a tender offer.
31
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Shareholder Rights Plan
On February 23, 1990, PTR declared a dividend distribution of one share
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
entitles 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 will be exercisable only if a person or group acquires 20% or more
of PTR's Common Shares (32% in the case of Security Capital Realty and certain
defined affiliates) or announces 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 will 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
will not be exercisable. The Rights will expire February 23, 2000 and are
subject to redemption at a price of $0.01 per Right under certain
circumstances. The beneficial ownership by Security Capital Realty and certain
of its affiliates of up to 32% of the outstanding Common Shares will not
trigger any consequences under the current Rights Agreement.
(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 (Southwest) Incorporated
(the "REIT Manager") to provide management services to PTR. The REIT Manager is
an affiliate of Security Capital Realty (see note 6). All officers of PTR are
employees of the REIT Manager and PTR has no other 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 10 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.
The REIT Management Agreement also requires PTR to pay the REIT Manager an
incentive fee upon any sale of PTR's real estate assets. For assets owned at
March 1, 1991, the fee is equal to 10% of the gain above an agreed asset
valuation prepared by an unrelated investment bank. For assets acquired after
March 1, 1991, the fee equals 10% of the gain above PTR's all-in cost for the
assets, including transaction costs and capital improvements, as increased by
the inflation rate since the date of acquisition. All incentive fees are
averaged over three-year periods to avoid any windfalls related to sales in any
particular year. Any incentive fees earned by the REIT Manager will be paid in
common shares at the then market price.
REIT management fees aggregated $7,073,000, $2,711,000 and $793,000 for the
years ended December 31, 1993 and 1992 and ten months ended December 31, 1991,
respectively. No incentive fees have been earned by the REIT Manager.
32
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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. In
the event that the REIT Management Agreement is terminated, or not renewed, by
PTR as a result of the merger, consolidation, acquisition or liquidation of
PTR, PTR's properties shall be deemed to be sold at the net aggregate
consideration paid to PTR's shareholders upon such event, and the REIT Manager
shall be paid an incentive fee accordingly. If the REIT Management Agreement is
otherwise terminated or not renewed by PTR without cause, PTR shall pay the
REIT Manager an incentive fee on any sale or refinancing which occurs within
two years of such termination so long as the property was owned by PTR at the
time of termination. 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.
WilsonSchanzer, Inc. ("WilsonSchanzer") a property management firm
headquartered in San Antonio, Texas, currently manages approximately 80% of
PTR's multifamily properties. In addition to property management,
WilsonSchanzer performs, among other things, certain due diligence services for
PTR's acquisitions. An affiliate of PTR's REIT Manager owns 100% of
WilsonSchanzer's voting stock. For the years ended December 31, 1993, 1992 and
1991, PTR paid an aggregate of $3,862,000, $1,424,000 and $148,000,
respectively, to WilsonSchanzer, including $2,872,000, $1,060,000 and $148,000,
respectively, in property management fees. Rates for services performed by
WilsonSchanzer are subject to approval by PTR's Board of Trustees and are at
rates prevailing in the markets in which PTR operates.
(8) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data (in thousands except for per share amounts)
for 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
3-31 6-30 9-30 12-31 TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1993:
Rental Income.................... $14,109 $16,903 $19,889 $25,285 $76,186
======= ======= ======= ======= =======
Earnings from operations......... 4,488 3,347 6,454 8,902 23,191
Gain on sale of investments...... -- 2,302 -- -- 2,302
------- ------- ------- ------- -------
Net earnings..................... $ 4,488 $ 5,649 $ 6,454 $ 8,902 $25,493
======= ======= ======= ======= =======
Net earnings per Common Share.... $ 0.15 $ 0.16 $ 0.18 $ 0.17 $ 0.66
======= ======= ======= ======= =======
1992:
Rental Income.................... $ 4,787 $ 6,511 $ 8,247 $11,465 $31,010
======= ======= ======= ======= =======
Earnings from operations......... 1,371 2,192 2,584 2,890 9,037
Loss on sale of investments...... -- -- -- (51) (51)
------- ------- ------- ------- -------
Net earnings..................... $ 1,371 $ 2,192 $ 2,584 $ 2,839 $ 8,986
======= ======= ======= ======= =======
Net earnings per Common Share.... $ 0.10 $ 0.12 $ 0.13 $ 0.11 $ 0.46
======= ======= ======= ======= =======
</TABLE>
33
<PAGE>
PROPERTY TRUST OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(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 December 31, 1993. PTR is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse affect on PTR's financial condition or results of operations.
(10) SUBSEQUENT EVENTS
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 will bear interest at 6.875% per annum and require annual
principal payments of $12.5 million, commencing February 15, 2001. The 2014
Notes will 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.
Shown below is PTR's unaudited pro forma and condensed balance sheet at
December 31, 1993 adjusted to give effect to the Notes, and application of
proceeds therefrom, as if they had been issued on December 31, 1993 (in
thousands):
<TABLE>
<S> <C>
Investments................................................... $ 873,192
Cash.......................................................... 151,774
Other assets.................................................. 13,835
----------
Total assets................................................ $1,038,801
==========
Mortgages payable............................................. $ 48,872
Long term unsecured debt...................................... 200,000
Other liabilities............................................. 34,912
Shareholders' equity.......................................... 755,017
----------
Total liabilities and shareholders' equity.................. $1,038,801
==========
</TABLE>
34
<PAGE>
SCHEDULE XI
PROPERTY TRUST OF AMERICA
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO CARRIED AT DECEMBER 31,
PTR COSTS 1993
------------------ 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 Mexico:
Corrales Point......... $-- $ 944 $5,347 $ 8 $ 944 $5,355 $6,299 $25 1986 1993
La Paloma.............. -- 4,233 -- 464 4,255 442 4,697 (b) (b) 1993
The Pavilions I & II... (f) 1,794 7,976 5,586 2,182 13,174 15,356 708 1991 1991
Sandia Ridge........... (f) 1,339 5,358 601 1,339 5,959 7,298 277 1986 1992
Vista del Sol.......... (f) 1,105 4,419 177 1,105 4,596 5,701 74 1987 1993
Wellington Place....... -- 1,881 7,522 69 1,881 7,591 9,472 78 1981 1993
Austin, Texas:
Anderson Mill.......... -- 1,774 10,051 2 1,774 10,053 11,827 23 1984 1993
Cannon Place........... -- 1,219 4,874 45 1,219 4,919 6,138 30 1984 1993
Hunters' Run........... -- 1,401 -- 68 1,408 61 1,469 (b) (b) 1993
La Mirage.............. -- 2,355 -- 11,712 2,899 11,168 14,067 (b) (b) 1992
The Ridge.............. (f) 1,669 6,675 1,595 1,669 8,270 9,939 125 1978 1993
Rock Creek............. -- 1,310 7,421 4 1,310 7,425 8,735 17 1979 1993
Saddle Brook........... -- 832 -- 10,432 1,097 10,167 11,264 14 1993 1992
San Marcos Place....... -- 886 5,021 2 886 5,023 5,909 12 1983 1993
Shadowood.............. -- 1,196 4,782 86 1,196 4,868 6,064 60 1985 1993
Spyglass............... (f) 1,746 6,984 1,550 1,858 8,422 10,280 204 1981 1992
Dallas, Texas:
Apple Ridge............ -- 1,985 7,939 23 1,985 7,962 9,947 50 1984 1993
Custer Crossing........ -- 1,525 8,642 8 1,525 8,650 10,175 20 1985 1993
Homestead I--
Skillman Rd........... -- 400 -- 2,620 400 2,620 3,020 105 1993 1992
Homestead II--
Stemmons Fwy.......... -- 356 -- 2,806 356 2,806 3,162 87 1993 1992
Homestead III--Tollway. -- 294 -- 2,418 353 2,359 2,712 77 1993 1993
Homestead V--
North Richland........ -- 476 -- 2,213 532 2,157 2,689 (b) (b) 1993
Homestead VI--
Coit Road............. -- 440 -- 2,239 479 2,200 2,679 (b) (b) 1993
Homestead XIII--
Arlington............. -- 588 -- 71 598 61 659 (b) (b) 1993
Indian Creek........... -- 1,789 10,135 -- 1,789 10,135 11,924 23 1985 1993
Pine Hills............. -- 884 5,011 3 884 5,014 5,898 11 1983 1993
Post Oak Ridge......... -- 2,116 11,988 3 2,116 11,991 14,107 28 1983 1993
Quail Run.............. -- 1,605 9,097 9 1,605 9,106 10,711 21 1983 1993
Somerset............... -- 2,907 11,628 21 2,907 11,649 14,556 73 1986 1993
Summerstone............ -- 1,053 5,966 -- 1,053 5,966 7,019 14 1983 1993
Woodland Park.......... -- 1,384 5,536 19 1,384 5,555 6,939 35 1986 1993
Denver, Colorado:
Cambrian Apartments.... (f) 2,258 9,031 513 2,258 9,544 11,802 151 1983 1993
The Cedars............. (f) 3,128 12,512 675 3,128 13,187 16,315 202 1984 1993
Fox Creek.............. -- 1,166 4,664 59 1,166 4,723 5,889 39 1984 1993
Hickory Ridge.......... (f) 4,403 17,611 1,024 4,403 18,635 23,038 602 1984 1992
Reflections Phase I.... (f) 1,591 6,364 504 1,591 6,868 8,459 106 1980 1993
Reflections Phase II... -- 805 -- 53 808 50 858 (b) (b) 1993
Sunwood................ -- 1,030 4,120 764 1,030 4,884 5,914 120 1981 1992
</TABLE>
(see notes following table)
35
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT DECEMBER 31,
INITIAL COST TO PTR COSTS 1993
------------------- 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>
El Paso, Texas:
Acacia Park.......... $ -- $1,147 $ -- $ 224 $1,184 $ 187 $1,371 $ (b) (b) 1993
Cielo Vista.......... -- 1,111 4,445 119 1,111 4,564 5,675 65 1962 1993
The Crest............ (f) 887 828 6,236 1,026 6,925 7,951 375 1991 1992
Double Tree.......... (f) 1,106 4,423 421 1,106 4,844 5,950 92 1980 1993
Las Flores........... 6,056 228 1,591 6,085 617 7,287 7,904 2,767 (a) (a)
Mountain Village..... (f) 1,205 4,822 924 1,205 5,746 6,951 313 1982 1992
The Phoenix.......... -- 484 -- 9,045 658 8,871 9,529 159 1993 1993
Shadow Ridge Phase I. (f) 584 3,993 698 584 4,691 5,275 272 1991 1991
Shadow Ridge Phase
II.................. -- 941 -- 202 947 196 1,143 (b) (b) 1993
Spring Park.......... 4,363 734 4,422 35 734 4,457 5,191 593 1990 1989
Tigua Village........ 1,021 162 1,617 318 162 1,935 2,097 998 1970 1966
Houston, Texas:
Braeswood............ 7,127 1,853 10,500 2 1,853 10,502 12,355 24 1984 1993
Cranbrook Forest..... -- 1,325 5,298 26 1,325 5,324 6,649 33 1984 1993
Homestead IV--West by
Northwest........... -- 506 -- 2,048 538 2,016 2,554 (b) (b) 1993
Homestead VII--
Southpoint.......... -- 418 -- 1,351 472 1,297 1,769 (b) (b) 1993
Homestead VIII--West-
heimer.............. -- 798 -- 649 815 632 1,447 (b) (b) 1993
Homestead IX--Park
Ten................. -- 791 -- 197 806 182 988 (b) (b) 1993
Homestead X--South-
west Techniplex..... -- 579 -- 139 591 127 718 (b) (b) 1993
Homestead XI--Bammel
Westfield........... -- 517 -- 256 532 241 773 (b) (b) 1993
Pineloch............. -- 1,979 11,213 3 1,979 11,216 13,195 26 1984 1993
Weslayan Oaks........ -- 681 3,859 -- 681 3,859 4,540 9 1984 1993
Woodside Village..... -- 710 2,490 2,405 710 4,895 5,605 1,964 1972 1975
Las Cruces, New Mexi-
co:
Park Place I & II.... 7,144 529 6,997 999 992 7,533 8,525 925 1989 1989
Oklahoma City, Oklaho-
ma:
Warrington........... -- 861 4,876 20 861 4,896 5,757 22 1984 1993
Phoenix, Arizona:
Dobson Bay Club...... (f) 1,132 4,529 431 1,132 4,960 6,092 274 1986 1992
Moorings at Mesa
Cove................ (f) 3,261 13,045 478 3,261 13,523 16,784 354 1985 1992
Papago Crossing...... -- 631 2,526 510 631 3,036 3,667 69 1980 1992
Pelican Bay.......... -- 2,796 11,183 137 2,796 11,320 14,116 93 1985 1993
Pheasant Run......... (f) 1,605 6,421 143 1,605 6,564 8,169 54 1985 1993
Presidio at South
Mountain............ 14,867 4,621 26,187 11 4,621 26,198 30,819 60 1989 1993
The Ridge............ -- 1,848 10,470 -- 1,848 10,470 12,318 24 1987 1993
San Antigua.......... -- 4,347 -- 10,505 4,511 10,341 14,852 (b) (b) 1991
San Marin............ (f) 3,798 -- 14,096 3,798 14,096 17,894 450 1993 1993
San Marina........... (f) 1,207 4,829 745 1,207 5,574 6,781 341 1986 1992
San Marquis Phase I.. -- 2,348 -- 5,746 2,516 5,578 8,094 (b) (b) 1993
San Marquis Phase II. -- 1,239 -- 351 1,348 242 1,590 (b) (b) 1993
Sunstone............. -- 1,536 8,701 6 1,536 8,707 10,243 20 1986 1993
Superstition Park.... (f) 2,340 9,362 471 2,340 9,833 12,173 254 1985 1992
San Antonio, Texas:
Applegate............ -- 1,396 7,913 -- 1,396 7,913 9,309 18 1983 1993
Camino Real.......... (f) 1,083 4,334 591 1,083 4,925 6,008 99 1979 1993
Cobblestone Village.. (f) 786 3,145 411 786 3,556 4,342 233 1984 1992
Contour Place........ -- 457 1,827 241 457 2,068 2,525 141 1984 1992
The Crescent Phase I. -- 1,257 -- 12,133 1,613 11,777 13,390 8 1993 1992
The Crescent Phase
II.................. -- 1,654 -- 95 1,658 91 1,749 (b) (b) 1993
The Gables........... -- 1,030 5,838 -- 1,030 5,838 6,868 13 1983 1993
</TABLE>
(see notes following table)
36
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO PTR COSTS AT DECEMBER 31, 1993
--------------------- 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>
Homestead XII--
Medical Center. $ -- $ 817 $ -- $ 282 $ 836 $ 263 $ 1,099 $ (b) (b) 1993
Indian Trails... -- 724 2,895 160 724 3,055 3,779 36 1974 1993
Lakeside Villas. (f) 2,597 10,388 481 2,597 10,869 13,466 353 1986 1992
Marbach Park.... -- 986 5,585 -- 986 5,585 6,571 13 1985 1993
The Marina...... -- 292 1,652 2 292 1,654 1,946 4 1982 1993
Medical Drive... -- 1,634 -- 8 1,634 8 1,642 -- (b) 1993
Oakhampton
Place.......... (f) 2,293 9,170 618 2,293 9,788 12,081 314 1984 1992
Palisades Park.. -- 1,114 6,314 2 1,114 6,316 7,430 15 1983 1993
Panther Spring.. -- 621 3,520 -- 621 3,520 4,141 8 1985 1993
The Pond........ -- 1,655 9,376 -- 1,655 9,376 11,031 22 1982 1993
The Shores...... -- 644 3,652 2 644 3,654 4,298 8 1982 1993
Towne East...... -- 335 1,897 2 335 1,899 2,234 4 1983 1993
Villas of Castle
Hills.......... -- 1,036 4,145 158 1,036 4,303 5,339 52 1971 1993
Villas of St.
Tropez......... (f) 2,013 8,054 538 2,013 8,592 10,605 276 1982 1992
Santa Fe, New
Mexico:
The Enclave..... (f) 1,810 7,241 569 1,810 7,810 9,620 197 1986 1992
The Meadows..... -- 818 -- 7,193 954 7,057 8,011 (b) (b) 1993
Rancho Vizcaya.. (f) 1,908 9,458 589 1,908 10,047 11,955 659 1990 1991
Tucson, Arizona:
Cobble Creek.... (f) 1,423 5,691 486 1,423 6,177 7,600 339 1980 1992
Craycroft Gar-
dens........... -- 347 1,392 163 348 1,554 1,902 69 1963 1992
Haystack........ -- 965 5,469 11 965 5,480 6,445 13 1979 1993
Sonoran Terrac-
es............. (f) 3,020 14,150 445 3,020 14,595 17,615 902 1986 1992
Sundown Village
Phase I........ (f) 1,606 6,423 286 1,606 6,709 8,315 147 1984 1993
Sundown Village
Phase II....... -- 409 -- 130 425 114 539 (b) (b) 1993
Tierra Antigua.. (f) 992 3,967 437 992 4,404 5,396 205 1979 1992
Ventana Canyon.. -- 1,705 -- 61 1,715 51 1,766 (b) (b) 1993
Villa Caprice... -- 1,277 7,238 2 1,277 7,240 8,517 17 1972 1993
Windsail........ 4,930 1,851 7,407 404 1,852 7,810 9,662 139 1986 1993
Tulsa, Oklahoma:
Southern Slope.. -- 777 4,408 7 778 4,414 5,192 20 1982 1993
------- -------- -------- -------- -------- -------- -------- -------
Total Multifami-
ly............. 45,508 154,044 537,850 140,985 157,887 674,992 832,879 18,365
======= ======== ======== ======== ======== ======== ======== =======
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
Austin, Texas:
Ridge Line...... -- 2,599 -- -- 2,599 -- 2,599 -- N/A 1993
Saddle Brook
Phase III...... -- 758 -- 29 787 -- 787 -- N/A 1993
Saddle Brook
Phase IV....... -- 822 -- -- 822 -- 822 -- N/A 1993
------- -------- -------- -------- -------- -------- -------- -------
Total Develop-
ment Land...... -- 4,179 -- 29 4,208 -- 4,208 --
======= ======== ======== ======== ======== ======== ======== =======
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn............ 833 -- 2,999 19,871 -- 22,870 22,870 2,537 1972 1975
======= ======== ======== ======== ======== ======== ======== =======
OFFICE/INDUSTRIAL:
Dallas, Texas:
Irving Blvd..... 201 109 302 129 109 431 540 200 1968 1977
Valwood......... -- 649 -- (318)(c) 331 -- 331 -- N/A 1983
El Paso, Texas:
Vista Industri-
al............. 2,330 567 2,504 50 567 2,554 3,121 313 1987 1989
Ontario,
California:
Ontario
Industrial
Building....... -- 1,200 3,828 (1,100)(c) 1,200 2,728 3,928 574 1987 1987
------- -------- -------- -------- -------- -------- -------- -------
Total
Office/Industrial. 2,531 2,525 6,634 (1,239) 2,207 5,713 7,920 1,087
======= ======== ======== ======== ======== ======== ======== =======
Other:
Circle K Stores. -- 26 286 (249) 15 48 63 33 1971 1972
Miscellaneous -- -- 5,175 -- -- 5,175 5,175 -- Various Various
------- -------- -------- -------- -------- -------- -------- -------
Total Other..... -- 26 5,461 (249) 15 5,223 5,238 33
======= ======== ======== ======== ======== ======== ======== =======
Total........... $48,872 $160,774 $552,944 $159,397 $164,317 $708,798 $873,115 $22,022
======= ======== ======== ======== ======== ======== ======== =======
</TABLE>
(see notes following table)
37
<PAGE>
- --------
(a) Phase I, 120 units completed in 1980; Phase II 60 units completed in 1981;
and Phase III, 288 units completed in 1983.
(b) As of December 31, 1993, property was under development.
(c) The Valwood and Ontario Industrial properties were written down by $318,211
in December 1991 and $1,100,000 in June 1993, respectively, to more
properly reflect the properties' net realizable values.
(d) As of December 31, 1993, the aggregate cost for federal income tax purposes
of PTR's investment in real estate amounted to $855,804,000.
(e) Miscellaneous investments represent PTR's ownership percentage of a
partnership, a joint venture, as well as an investment in a financing
lease.
(f) Pledged to secure PTR's $200 million revolving line of credit to Texas
Commerce Bank.
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>
DECEMBER 31,
----------------------------
CARRYING AMOUNTS 1993 1992 1991
---------------- -------- -------- --------
<S> <C> <C> <C>
Balance at January 1.......................... $337,274 $117,572 $ 84,892
Acquisitions, including renovation expendi-
tures........................................ 449,500 188,411 23,972
Development expenditures, including land ac-
quisition.................................... 108,056 41,733 8,291
Acquisition of land held for future develop-
ment......................................... 4,208 -- --
Capital improvements.......................... 1,639 1,015 899
Real estate sold.............................. (24,953) (10,814) (121)
Provision for possible losses................. (2,270) (400) (400)
Other......................................... (339) (243) 39
-------- -------- --------
Balance at December 31........................ $873,115 $337,274 $117,572
======== ======== ========
<CAPTION>
DECEMBER 31,
----------------------------
ACCUMULATED DEPRECIATION 1993 1992 1991
------------------------ -------- -------- --------
<S> <C> <C> <C>
Balance at January 1.......................... $ 19,360 $ 17,742 $ 15,140
Depreciation for the year..................... 10,241 5,045 2,664
Accumulated depreciation of real estate sold.. (7,429) (3,370) (62)
Other......................................... (150) (57) --
-------- -------- --------
Balance at December 31........................ $ 22,022 $ 19,360 $ 17,742
======== ======== ========
</TABLE>
38
<PAGE>
PROPERTY TRUST OF AMERICA
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.
PROPERTY TRUST OF AMERICA
/s/ William Kell
By: _________________________________
William Kell
Vice President
Date: February 1, 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*
- ------------------------------------
C. Ronald Blankenship Chairman (Principal
Executive Officer) and
Trustee
/s/ William Kell
- ------------------------------------
William Kell Vice President (Principal
Financial and Accounting
Officer)
/s/ James A. Cardwell*
- ------------------------------------
James A. Cardwell Trustee
/s/ John T. Kelley, III*
- ------------------------------------
John T. Kelley, III Trustee February 1, 1995
/s/ Calvin K. Kessler*
- ------------------------------------
Calvin K. Kessler Trustee
/s/ James H. Polk, III*
- ------------------------------------
James H. Polk, III Trustee
/s/ John C. Schweitzer*
- ------------------------------------
John C. Schweitzer Trustee
- ------------------------------------
William G. Myers Trustee
</TABLE>
/s/ William Kell
*By: __________________________
William Kell
Attorney-in-fact
39
<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 126-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
3.1 Amended and Restated Declaration of Trust dated June 18,
1991 (Incorporated by reference to Exhibit 4 to PTR's
Form 10-Q for the quarter ended June 30, 1991).
3.2 First Amendment dated June 2, 1992, to Restated
Declaration of Trust (Incorporated by reference to
Exhibit 4 to PTR's Form 10-Q for the quarter ended June
30, 1992).
3.3 Bylaws of PTR, as amended through February 22, 1990
(Incorporated by reference to Exhibit 19.9 to PTR's Form
10-K for the year ended December 31, 1989).
4.1 Articles Supplementary, dated November 22, 1993,
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).
4.2* Indenture, dated as of February 1, 1994, between PTR and
Morgan Guaranty Trust Company of New York, as Trustee.
4.3* First Supplemental Indenture, dated as of February 2,
1994, between PTR, Morgan Guaranty Trust Company of New
York and State Street Bank and Trust Company, as
successor Trustee.
4.4* 6 7/8% Senior Note due February 15, 2008.
4.5* 7 1/2% Senior Note due February 15, 2014.
4.6 Rights Agreement (the "Rights Agreement") dated as of
February 23, 1990 between PTR and First City, Texas-
Houston, N.A., including form of Rights Certificate
(Incorporated by reference to Exhibit 19.11 to PTR's
Form 10-K for the year ended December 31, 1989).
4.7 First Amendment dated as of February 23, 1991 to the
Rights Agreement (Incorporated by reference to Exhibit
4.5 to Registration Statement No. 33-43201).
4.8 Second Amendment dated as of October 31, 1991 to the
Rights Agreement (Incorporated by reference to Exhibit
4.6 to Registration Statement No. 33-43201).
4.9 Third Amendment dated as of January 2, 1992 to the
Rights Agreement (Incorporated by reference to Exhibit
4.7 to Registration No. 33-46369).
4.10 Fourth Amendment dated as of February 29, 1992 to the
Rights Agreement (Incorporated by reference to Exhibit
4.8 to Registration No. 33-46369).
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 Amended and Restated Investor Agreement dated February
23, 1990 between PTR and Southwest Realty Investors
Incorporated (Incorporated by reference to Exhibit 19.12
to PTR's Form 10-K for the year ended December 31,
1989).
10.3 First Amendment dated May 14, 1991 to the Amended and
Restated Investor Agreement between PTR and Southwest
Realty Investors Incorporated (Incorporated by reference
to Exhibit No. 10.68 to Registration Statement No. 33-
39766).
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
10.5 Term Loan Agreement dated June 25, 1990 between PTR and
Sumitomo Bank of California with related Commercial Loan
Note from PTR to Sumitomo Bank providing for an
$8,000,000 mortgage financing secured by PTR's leasehold
interest in the Holiday Inn at Fisherman's Wharf in San
Francisco and Deed of Trust and Assignment of Rents
(Incorporated by reference to Exhibit 28.1 to PTR's Form
8-K dated June 28, 1990).
10.6 Form of Indemnity 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).
10.7 Supplemental Agreement with Exhibits dated May 14, 1991
between PTR and Southwest Realty Investors Incorporated,
now known as Security Capital Realty Incorporated
(Incorporated by reference to Exhibit 10.67 to
Registration Statement No. 33-39766).
10.8 Supplemental Investment Agreement dated as of October 1,
1991, by and between PTR and Southwest Realty Investors
Incorporated, now known as Security Capital Realty
Incorporated (Incorporated by reference to Exhibit 10.70
to Registration Statement No. 33-43201).
10.9 Management Agreement dated as of September 1, 1991
between PTR and WilsonSchanzer, Inc. relating to the
management of PTR's multifamily properties (Incorporated
by reference to Exhibit 19.2 to PTR's Form 10-Q for the
quarter ended September 30, 1991).
10.10 Credit Agreement (the "Credit Agreement") dated as of
August 13, 1992 between PTR and Texas Commerce Bank
National Association and other Lenders (Incorporated by
reference to Exhibit 10.2 to PTR's September 4, 1992
Form 8-K).
10.11* Agreement and First Amendment to the Credit Agreement,
dated March 10, 1993.
10.12* Agreement and Second Amendment to the Credit Agreement,
dated November 10, 1993.
10.13 Dividend Reinvestment and Share Purchase Plan
(Incorporated by reference to the Prospectus included in
Registration Statement No. 33-71040).
10.14* Second Amended and Restated Advisory Agreement, dated as
of March 1, 1993.
10.15* Amendment No. 1 to Second Amended and Restated Advisory
Agreement, dated October 1, 1993.
10.16* Amendment No. 2 to Second Amended and Restated Advisory
Agreement, dated February 8, 1994.
12.1* Statement re Computation of Ratios.
23.1 Consent of KPMG Peat Marwick LLP.
24.1* Power of Attorney pursuant to which amendments to this
Form 10-K may be filed.
27 Financial Data Schedule.
</TABLE>
- --------
*Previously filed.
41
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Trustees
PROPERTY TRUST OF AMERICA:
We consent to incorporation by reference in registration statements No. 33-86444
(Form S-3), No. 33-71040 (Form S-3), and No. 33-25317 on Form S-8 of Property
Trust of America of our report dated January 18, 1994, except as to Note 10,
which is as of February 8, 1994, relating to the balance sheets of Property
Trust of America as of December 31, 1993 and 1992, 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, 1993, which report appears
in the December 31, 1993 annual report on Form 10-K/A No. 1 of Property Trust of
America.
KPMG PEAT MARWICK LLP
El Paso, Texas
February 1, 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, 1993, as amended by Form 10-K/A
No. 1 dated February 1, 1995, 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-31-1993
<PERIOD-START> JAN-01-1993
<PERIOD-END> DEC-31-1993
<CASH> 5,525
<SECURITIES> 0
<RECEIVABLES> 22,882
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 873,115
<DEPRECIATION> 22,022
<TOTAL-ASSETS> 890,301
<CURRENT-LIABILITIES> 0
<BONDS> 48,872
<COMMON> 44,809
0
230,000
<OTHER-SE> 480,208
<TOTAL-LIABILITY-AND-EQUITY> 890,301
<SALES> 76,186
<TOTAL-REVENUES> 78,418
<CGS> 0
<TOTAL-COSTS> 30,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,270
<INTEREST-EXPENSE> 3,923
<INCOME-PRETAX> 24,152
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,152
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
