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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-10272
SECURITY CAPITAL PACIFIC TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-6056896
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares of Beneficial Interest, par value New York Stock Exchange
$1.00 per share
Cumulative Convertible Series A Preferred Shares New York Stock Exchange
of Beneficial Interest, par value $1.00 per
share
Series B Cumulative Redeemable Preferred Shares New York Stock Exchange
of Beneficial Interest, par value $1.00 per
share
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Based on the closing price of the registrant's shares on March 20, 1996, the
aggregate market value of the voting shares held by non-affiliates of the
registrant was $971,468,531.25.
At March 20, 1996, there were outstanding approximately 72,210,918 Common
Shares of Beneficial Interest of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 1996 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
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PART I
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1. Business........................................................... 3
Security Capital Pacific Trust..................................... 3
Strategy for Cash Flow and Distribution Growth..................... 4
Multifamily Properties............................................. 5
Non-Multifamily Properties......................................... 6
Investment Analysis................................................ 7
Strategic Accomplishments.......................................... 7
The REIT Manager................................................... 10
Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates............................................. 12
Insurance.......................................................... 18
Competition........................................................ 18
Environmental Matters.............................................. 18
Employees.......................................................... 19
Executive Officers................................................. 19
2. Properties......................................................... 19
Portfolio Composition.............................................. 28
Geographic Distribution............................................ 29
3. Legal Proceedings.................................................. 29
4. Submission of Matters to a Vote of Security Holders................ 29
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................... 30
6. Selected Financial Data............................................ 32
7. Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations............................................... 33
Overview........................................................... 33
Merger and Concurrent Subscription Offering........................ 33
Results of Operations.............................................. 33
Environmental Matters.............................................. 38
Liquidity and Capital Resources.................................... 38
REIT Management Agreement.......................................... 41
8. Financial Statements and Supplementary Data........................ 42
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure Matters....................... 42
PART III
10. Directors and Executive Officers of the Registrant................. 42
11. Executive Compensation............................................. 42
12. Security Ownership of Certain Beneficial Owners and Management..... 42
13. Certain Relationships and Related Transactions..................... 42
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 43
</TABLE>
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PART I
ITEM 1. BUSINESS
SECURITY CAPITAL PACIFIC TRUST
The objective of Security Capital Pacific Trust ("PTR") is to be the
preeminent real estate operating company focusing on multifamily property in
its western United States target market. PTR's REIT manager is Security Capital
Pacific Incorporated (the "REIT Manager" or "REIT Management"). Through its
REIT Manager, PTR is a fully integrated operating company which focuses on
development, acquisition, operation and long-term ownership of multifamily
properties. At January 31, 1996, PTR owned and operated or was developing
55,445 multifamily units with a total expected cost of $2.3 billion, including
budgeted costs of planned renovations and development expenditures. PTR's
recent investment activity is focused primarily on the following metropolitan
areas: Portland, Oregon; Salt Lake City, Utah; San Diego, California; San
Francisco (Bay Area), California; and Seattle, Washington. PTR's properties are
located in 23 metropolitan areas in 12 states. See "Item 2. Properties."
PTR seeks to achieve long-term sustainable growth in cash flow by maximizing
the operating performance of its core portfolio through value-added operating
systems and concentrating its experienced team of professionals on developing
and acquiring industry-leading product in targeted submarkets exhibiting strong
job growth and favorable demographic trends.
PTR highlights include:
. Net operating income increased 7.8% in 1995 for PTR's multifamily
properties that were fully operating throughout both 1994 and 1995. At
January 31, 1996, PTR's operating multifamily properties were 95.9%
leased.
. PTR believes that development of multifamily properties that are built
for long-term ownership and that target an underserved market (moderate
income households, defined as those households earning 65% to 90% of a
submarket's median income; for PTR's submarkets, $25,870 to $35,821 based
on a weighted average median income using the number of households in
each submarket) will provide a substantial source of long-term cash flow
growth. At January 31, 1996, PTR had completed $326.6 million of
multifamily developments, had $316.8 million of developments under
construction, had $391.8 million of developments in planning for which
construction is anticipated to commence within 12 months and owned $30.0
million of land held for future development. See "Item 1. Business--
Strategy for Cash Flow and Distribution Growth--Development."
. Security Capital Group Incorporated ("SCG"), PTR's largest shareholder,
which owned 37.9% of PTR's common shares of beneficial interest, par
value $1.00 per share (the "Common Shares"), at March 18, 1996, is the
owner of the REIT Manager and has provided common equity investment
capital to PTR, at the same times and on the same terms made available to
public investors.
. Based on forecasts published by Woods & Poole Economics, Inc., the
projected growth in population of PTR's target market cities is 29.2% for
the years 1995-2015, whereas the projected growth in population in the
United States as a whole for such period is 18.0%. For the same time
period, job growth is projected to be 26.4% in PTR's target market
cities, and 20.8% in the United States as a whole.
. PTR develops and acquires properties with a view to effective long-term
operation and ownership. The REIT Manager utilizes its affiliate,
Security Capital Investment Research Incorporated ("Security Capital
Investment Research"), to conduct comprehensive evaluations of PTR's
target market to identify those submarkets and product types that offer
above average prospects for long-term cash flow growth. These detailed
market evaluations, combined with PTR's extensive development experience,
and as one of the largest multifamily property owners in its target
market, assist PTR in identifying the submarkets and product types that
will offer above average opportunities for long-term cash flow growth.
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. The REIT Manager provides both strategic and day-to-day management for
PTR, including research, investment analysis, acquisition and development
services, asset management, capital markets services, disposition of
assets and legal and accounting services. As of March 20, 1996, 134
professionals were employed by the REIT Manager and its specialized
service affiliates, including 6 professionals focused solely on research
and 64 professionals focused on property development, acquisition,
disposition and due diligence. Through the REIT Manager and its
affiliates, PTR functions as a fully integrated operating company.
. The REIT Manager, through its affiliated capital markets group, has
arranged for over $1.5 billion of capital for PTR since PTR's inception,
including $835.1 million in common equity financing, $335 million in
preferred equity financing and $350 million in long-term debt financing
(including $150 million in long-term debt financing raised in February
1996).
. PTR's long-term debt as a percentage of total long-term undepreciated
book capitalization (the sum of long-term debt and shareholders' equity
after adding back accumulated depreciation) was 21% at December 31, 1995
on an historical basis and 27% at January 31, 1996 on a pro forma basis,
giving effect to PTR's offering of $150 million of long-term unsecured
senior debt in February 1996 and the application of the net proceeds
therefrom. At March 20, 1996, PTR had $30.5 million of outstanding
borrowings under its $350 million unsecured bank line of credit.
PTR has elected to be taxed as a real estate investment trust ("REIT") for
federal income tax purposes. PTR was formed in 1963 and is a real estate
investment trust organized under the laws of Maryland. Its principal executive
offices are located at 7777 Market Center Avenue, El Paso, Texas 79912, and its
telephone number is (915) 877-3900.
STRATEGY FOR CASH FLOW AND DISTRIBUTION GROWTH
PTR seeks to achieve long-term sustainable growth in cash flow by maximizing
the operating performance of its core portfolio through value-added operating
systems and concentrating its experienced team of professionals on developing
and acquiring industry-leading product in targeted submarkets exhibiting strong
job growth and favorable demographic trends.
Commitment to Fundamental Real Estate Research. The REIT Manager utilizes its
affiliate, Security Capital Investment Research, to conduct comprehensive
evaluations of PTR's target market to identify those submarkets and product
types that offer above average prospects for long-term cash flow growth. These
detailed market evaluations, combined with PTR's extensive development
experience, and as one of the largest multifamily property owners in its target
market, assist PTR in identifying the submarkets and product types that will
offer above average opportunities for long-term cash flow growth.
Asset Review and Reallocation. PTR develops and acquires properties with a
view to effective long-term operation and ownership. Each year, REIT Management
actively reviews PTR's asset base. These reviews generate operating and capital
plans and, with guidance from Security Capital Investment Research, identify
submarkets and product types that PTR believes represent above average long-
term growth opportunities. For each submarket, PTR's research evaluates 24 key
variables that PTR has identified as having the most impact on multifamily
operating performance. This research provides PTR with the information needed
to target specific resident profiles and identify unit mix, density and
amenities for each community which will provide the greatest opportunity for
consistent rental increases and high occupancies. Based upon PTR's market
research and in an effort to optimize its portfolio composition, PTR may from
time to time seek to dispose of assets that in management's view do not meet
PTR's long-term investment criteria. The proceeds therefrom will be redeployed,
preferably through like-kind exchanges, into assets that are more consistent
with PTR's investment objectives.
Development. At January 31, 1996, PTR had completed $326.6 million of
multifamily developments, had $316.8 million of developments under construction
and had $391.8 million of developments in planning.
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The term "in planning" means developments owned or under control (land which is
under control through contingent contract or letter of intent) with
construction anticipated to commence within 12 months. At January 31, 1996, PTR
also owned $30.0 million of land held for future development. PTR has engaged
in multifamily development since 1970. PTR has developed from the ground up, or
has in development, a total of $1.0 billion of properties which represent
44.5%, based on expected cost, of its multifamily portfolio as of January 31,
1996. Historically, actual operating results on properties developed by PTR
have generally exceeded projected operating results and the results available
from properties that were acquired rather than developed by PTR. PTR's
development strategy is to focus on developing state of the art product in
attractive submarkets to address specific renter preferences and demographic
trends. PTR believes that developing communities designed for long-term appeal
to the largest segment of the renter population (moderate income households)
will allow PTR to achieve more consistent rental increases and higher
occupancies over the long-term and, thereby, realize cash flow growth. Moderate
income residents are typically longer-term residents due, in part, to the
financial resources required to purchase single-family homes. As a result,
turnover expenses associated with properties designed for moderate income
households are generally lower than those designed for upper middle or middle
income households. PTR carefully manages development risks by obtaining zoning
and public approvals prior to purchasing land. PTR does not take construction
risk, but instead uses qualified third party general contractors to build its
properties, using guaranteed maximum price contracts. To enhance its
flexibility in developing and acquiring properties, PTR may also from time to
time enter into presale agreements with third party owner-developers to acquire
properties developed by such owner-developers where the developments meet PTR's
investment criteria. PTR targets development in submarkets with high occupancy
rates where population and job growth trends indicate increasing future demand.
PTR cannot eliminate all development risk but believes that the opportunities
to better control product and realize higher returns from development
properties more than compensate for the retained risk.
Development opportunities also permit PTR to incorporate into multifamily
communities proprietary technologies and designs aimed at enhancing long-term
rental growth while reducing ongoing maintenance costs. PTR has had the
opportunity to evaluate and refine its multifamily product through its long
history of development. PTR, unlike a typical merchant builder, intends to own
the properties that it develops for the long-term. Hence, PTR emphasizes long-
term durability by using materials and designs with an added view towards
minimizing long-term operating and maintenance costs.
REIT Management believes that development of multifamily units that are built
from the ground up for long-term ownership and are designed to address specific
renter preferences and demographic trends will provide a substantial source of
long-term cash flow growth. Therefore, while land prices are favorable, PTR has
acquired and will acquire, on an unleveraged basis, prudent amounts of land
zoned for future multifamily development. For purposes of the property chart
and other information contained herein, land held for these future
developments, which approximates 2% of assets, based on cost, has not been
aggregated with the multifamily properties.
MULTIFAMILY PROPERTIES
PTR categorizes operating multifamily properties (which include all
properties not in development) as either "stabilized" or "pre-stabilized." The
term "stabilized" means that renovation, repositioning, new management and new
marketing programs (or development and marketing in the case of newly-developed
properties) have been completed and in effect for a sufficient period of time
(but in no case longer than 12 months or, in the case of properties requiring
major rehabilitation, as long as 18 months) to achieve 93% occupancy at market
rents. Prior to being "stabilized," an acquired property is considered "pre-
stabilized." For operating properties that PTR has acquired, stabilized
operations generally have been achieved six to twelve months after acquisition.
For properties that PTR has developed, stabilized operations generally have
been achieved 12 to 18 months after construction commenced. Due to its active
development and acquisition
5
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programs, 88.0% of PTR's operating multifamily properties, based on expected
cost, were classified by PTR as stabilized as of January 31, 1996. At January
31, 1996, PTR's operating multifamily properties were 95.9% leased and PTR's
stabilized multifamily properties were 96.6% leased. PTR's multifamily
properties are primarily garden style, two-story multifamily dwellings that
range in size from 84 units to 896 units. Resident leases are generally for
six-month to twelve-month terms and require security deposits. PTR believes
that its multifamily communities generally occupy strategic locations in
growing submarkets.
PTR also develops and operates Homestead Village(R) properties that are
comprised of moderately priced corporate efficiency units which are rented for
terms generally shorter than six months. As of January 31, 1996, PTR owned 20
operating Homestead Village properties and had 29 Homestead Village properties
in development.
After a detailed review of Homestead Village's performance, the Board of
Trustees (the "Board") has asked REIT Management to evaluate all options
relating to the operation of Homestead Village assets in order to maximize PTR
shareholder value. The analysis will include whether Homestead Village assets
should continue to be developed within PTR, be spun out as a new stand-alone
entity with a target market extending beyond PTR's current market area, or be
offered for sale, merger or disposition to a national operator. The Board has
asked that the analysis be completed during 1996 and has engaged Goldman, Sachs
& Co. to advise it on this matter. It is possible that certain actions, if
pursued, may require approval of the Board and possible shareholder vote. A
special committee of independent Trustees has been appointed to consider this
matter.
At January 31, 1996, excluding Homestead Village properties, the average unit
size for properties operating and in development was 838 square feet, with
53.5% of the units having two or more bedrooms. Many units have washer/dryer
connections and walk-in closets, which REIT Management believes substantially
enhance marketability. PTR enhances attractiveness by investing in extensive
landscaping when developing or repositioning multifamily units. Other features
frequently included in PTR's multifamily communities are playgrounds, fitness
centers and community rooms.
PTR expects to continue to focus a large portion of its future development
and acquisition efforts on moderate income multifamily housing priced to appeal
to the largest segment of the renter population, based on income, age and
household size.
NON-MULTIFAMILY PROPERTIES
PTR focuses its investment and development activities on multifamily
properties. It will continue to aggressively manage its non-multifamily
properties in order to maximize cash flow, and periodic sales of non-
multifamily properties may occur as opportunities arise. The percentage of
PTR's rental income generated by non-multifamily properties was less than 2% of
total rental income during 1995.
Hotel. PTR owns a 338-room, five-story hotel building and land located in the
Fisherman's Wharf area of San Francisco, California. The hotel building is
leased to Holiday Inns of America, Inc. The lease expires in 2018. The
effective annual rent is 25% of the hotel's gross room revenues and 5% of gross
food and beverage sales. Holiday Inns operates this building jointly with its
243-room building across the street, and PTR's rental income is based on total
revenues for both buildings, prorated based on the number of rooms in PTR's
building. Average occupancy for the one-year period ended December 31, 1995 was
87.7%, at an average daily room rate of $92.35.
Office/Industrial. In October 1995, a single asset partnership in which PTR
owns a 40% interest sold its only real estate asset, an office building located
in the Dallas, Texas metropolitan area. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations--1995 Compared to 1994--Gains and Provision for Loss on Real Estate
and Investments." PTR owns three industrial properties which are
warehouse/showroom facilities located in Texas and California, ranging in size
from 37,200 square feet to 130,000 square feet and were 100% leased at December
31, 1995.
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INVESTMENT ANALYSIS
Prospective property investments are analyzed pursuant to several
underwriting criteria, including purchase price, competition and other market
factors, and prospects for long-term growth in cash flow. PTR's investment
decision is based upon the expected contribution of the property to long-term
cash flow growth on an unleveraged basis. The expected economic contribution is
based on an estimate of all cash revenues from leases and other revenue
sources, minus expenses incurred in operating the property (generally, real
estate taxes, insurance, maintenance, personnel costs and utility charges, but
excluding depreciation, debt service and amortization of loan costs) and a
reserve for capital expenditures.
The economic contribution of properties cannot be predicted with certainty,
and no assurance can be given that developed or acquired properties will
contribute to increased cash flow, or that developments and acquisitions will
be available on comparable terms in the future.
STRATEGIC ACCOMPLISHMENTS
Developments and Acquisitions
The REIT Manager's development and acquisition professionals are each
assigned to a specific metropolitan area within PTR's target market where they
review available properties, meet with potential sellers, process planning
approvals and monitor construction in progress. PTR has selectively developed
and acquired multifamily properties where land costs, demographic trends and
market trends indicate a high likelihood of achieving expected operating
results. This system has produced multifamily property developments and
acquisitions on favorable terms. As of January 31, 1996, the multifamily
portfolio consisted of the following (dollars in thousands):
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NUMBER
OF TOTAL EXPECTED
UNITS COST(1)
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Properties Acquired................................. 33,571 $1,291,694
Developments Completed.............................. 8,356 326,617
Developments Under Construction..................... 6,252 316,792
Developments in Planning:
Developments Owned................................ 3,271 188,901
Developments Under Control........................ 3,995 202,853
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Total Developments in Planning.................. 7,266 391,754
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Totals........................................ 55,445 $2,326,857
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(1) Represents cost, including planned renovations, for properties owned or in
planning and under control at January 31, 1996. Represents budgeted
development cost, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period, for
properties in development. Does not include land held for future
development, which approximates 2% of assets based on cost.
Property Management
The REIT Manager believes that a successful REIT must actively manage its
properties in order to increase cash flow and enhance the long-term economic
performance of the properties. Prior to retaining the REIT Manager, PTR's
properties were managed by several different property managers for whom PTR was
one of many customers. In order to gain more control over multifamily
operations, the REIT Manager retained SCG Realty Services Incorporated ("SCG
Realty Services") to replace other firms as the property manager for most of
PTR's garden style properties and Homestead Realty Services Incorporated
("Homestead Realty Services") as property manager for all of PTR's Homestead
Village properties. SCG
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owns each of SCG Realty Services and Homestead Realty Services. At January 31,
1996, SCG Realty Services and Homestead Realty Services managed 88.8% of PTR's
operating multifamily properties, based on expected cost, with the balance in
various stages of transition to SCG Realty Services' management.
SCG Realty Services has over 950 employees dedicated to the management of
PTR's properties. SCG Realty Services emphasizes locally-based management of
PTR's properties and has opened 11 local offices to serve PTR's target market.
Homestead Realty Services has over 270 employees dedicated to the management of
PTR's Homestead Village properties and has opened seven local offices to serve
PTR's target market. This network improves SCG Realty Services' and Homestead
Realty Services' ability to respond to changes in local market conditions and
resident needs. The REIT Manager believes that SCG Realty Services and
Homestead Realty Services have developed superior marketing programs, operating
procedures, financial controls, information systems and training programs,
which it expects to positively affect rental returns and occupancy rates. In
addition, incentive compensation programs have been implemented for on-site
property managers to further improve the performance of the properties. Rates
for services performed by SCG Realty Services and Homestead Realty Services are
subject to annual approval by PTR's independent Trustees (who receive an annual
review from an independent third party) and are at rates prevailing in the
markets in which PTR operates. During 1995, PTR paid aggregate fees of
$7,894,000 and $1,018,000 to SCG Realty Services and Homestead Realty Services,
respectively.
Capital Markets
REIT Management believes that a successful REIT must have the ability to
access the capital markets efficiently, expeditiously and cost effectively.
PTR's capital markets ability permits it to capitalize on the development and
acquisition opportunities that PTR believes exist in its target market. In
order to maximize this function and enhance relationships with major
institutional sources of capital, SCG has formed a registered broker-dealer
subsidiary, Security Capital Markets Group Incorporated ("Capital Markets
Group"). Capital Markets Group's services are included in the REIT Manager's
fee and do not result in a separate charge to PTR. Capital Markets Group and
the REIT Manager have arranged innovative public offering structures,
underwritten offerings and substantial credit facilities for PTR, including:
In June 1991, PTR raised $21.4 million of net proceeds from a rights
offering to holders of Common Shares;
In November 1991, PTR raised $45.6 million of net proceeds from a public
offering of Common Shares to shareholders and institutions;
In April 1992, PTR raised $69.8 million of net proceeds from a public
offering of Common Shares that was 71% underwritten by a syndicate of
investment banks;
In October 1992, PTR raised $73.4 million of net proceeds from a rights
offering to holders of Common Shares and a public offering of Common Shares
to institutional investors;
In February and March 1993, PTR raised $129.5 million of net proceeds
from a public offering of Common Shares that was 82% underwritten by a
syndicate of investment banks;
In September 1993, PTR raised $165.3 million of net proceeds from a
rights offering to holders of Common Shares and a public offering of Common
Shares to institutional investors;
In November 1993, PTR raised $219.7 million of net proceeds from an
underwritten public offering of Cumulative Convertible Series A Preferred
Shares of Beneficial Interest, par value $1.00 per share ("Series A
Preferred Shares");
In February 1994, PTR raised $196.4 million of net proceeds from an
underwritten public offering of fully amortizing, long-term unsecured
senior debt securities;
In August 1994, PTR raised $101.8 million of net proceeds from a rights
offering to holders of Common Shares;
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In March 1995, PTR raised $216.3 million of net proceeds from a
subscription offering for Common Shares that closed concurrently with the
merger (the "Merger") between PTR and Security Capital Pacific Incorporated
("PACIFIC") (see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Merger and Concurrent Subscription
Offering");
In May 1995, PTR raised $101.4 million of net proceeds from an
underwritten public offering of Series B Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $1.00 per share ("Series B
Preferred Shares"); and
In February 1996, PTR raised $148.2 million of net proceeds from an
underwritten public offering of fully amortizing, long-term unsecured
senior debt securities. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Financing Activities."
For the Common Share offerings, PTR's underwriting commissions (all of which
were paid to unaffiliated underwriters) have been $8.8 million, representing
1.05% of gross proceeds of $835.1 million, compared to an average commission
cost of 5.47% for all public equity REIT offerings of common shares, other than
initial public offerings, from January 1, 1991 through December 31, 1995.
When the REIT Manager was retained, PTR had $14.3 million of lines of credit
available to it for developments and acquisitions. The REIT Manager has
arranged increases in PTR's borrowing capacity as follows:
In October 1991, the REIT Manager negotiated a $20 million line of credit
for PTR from Texas Commerce Bank National Association ("TCB") at an
interest rate of prime plus 1/2 of 1%;
In August 1992, with the REIT Manager's assistance in the syndication
process, TCB arranged with a group of banks to increase this line of credit
to $72 million at an interest rate of prime plus 1/4 of 1%;
In February 1993, the REIT Manager negotiated and assisted in syndicating
an increase in the line of credit to $125 million;
In November 1993, the REIT Manager negotiated and assisted in syndicating
an extension of the maturity of this line of credit from August 1994 to
August 1995 and an increase to $200 million, with a reduction in interest
rate to prime or, at PTR's option, LIBOR plus 2.0%;
In August 1994, the REIT Manager negotiated and assisted in converting
the line of credit to an unsecured facility;
In October 1994, the REIT Manager negotiated and assisted in syndicating
an extension of the maturity of the line of credit from August 1995 to
August 1996 and an increase to $275 million, with a reduction in interest
rate to the greater of prime or the federal funds rate plus 0.5% or, at
PTR's option, LIBOR plus 1.75% (varying based upon the rating of PTR's
senior unsecured debt from LIBOR plus 1.75% to LIBOR plus 2.0%);
In March 1995, the REIT Manager negotiated and assisted in syndicating an
increase in the line of credit to $350 million and negotiated a reduction
in the interest rate to the greater of prime or the federal funds rate plus
0.5% or, at PTR's option, LIBOR plus 1.625% (varying based upon the rating
of PTR's senior unsecured debt from LIBOR plus 1.25% to LIBOR plus 2.0%);
and
In August 1995, the REIT Manager negotiated a reduction in the interest
rate to the greater of prime or the federal funds rate plus 0.5% or, at
PTR's option, LIBOR plus 1.375% (which can vary from LIBOR plus 1.0% to
LIBOR plus 1.75% based upon the rating of PTR's senior unsecured debt).
PTR's increased borrowing capacity enables it to develop and acquire
multifamily properties prior to securities offerings and to eliminate or
minimize the amount of cash it must invest in short term investments at low
yields. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
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PTR's strategy includes maintaining a conservative ratio of long-term debt to
total long-term undepreciated book capitalization (the sum of long-term debt
and shareholders' equity after adding back accumulated depreciation) (21% at
December 31, 1995 on an historical basis and 27% at January 31, 1996 on a pro
forma basis, giving effect to PTR's offering of $150 million of long-term
unsecured senior debt in February 1996 and the application of the net proceeds
therefrom). PTR believes its current conservative leverage provides
considerable flexibility to prudently increase its capital base by utilizing
long-term debt as a financing tool in the future.
THE REIT MANAGER
The REIT Manager provides both strategic and day-to-day management for PTR,
including research, investment analysis, acquisition and development services,
asset management, capital markets services, disposition of assets and legal and
accounting services, all of which are included in the REIT Management fee.
Hence, PTR depends upon the quality of the management provided by the REIT
Manager. As of March 20, 1996, 134 professionals were employed by the REIT
Manager and its specialized service affiliates. The REIT Manager also provides
office and other facilities for PTR's needs.
The REIT Manager believes that the quality of management should be assessed
in light of the following factors:
Management Depth/Succession. Management should have several senior
executives with the leadership, operational, investment and financial
skills and experience to oversee the entire operations of the REIT. The
REIT Manager believes that several of its senior officers could serve as
the principal executive officer and continue PTR's performance. See "--
Officers of PTR and Directors and Officers of the REIT Manager and Relevant
Affiliates."
Strategic Vision. Management should have the strategic vision to
determine an investment focus that provides both favorable initial yields
and strong long-term growth prospects. The REIT Manager has demonstrated
its strategic vision by focusing PTR on multifamily properties in target
markets where demographic and supply factors have permitted high
occupancies at increasing rents. This favorable environment was enhanced by
financing constraints for competitors, which permitted investments by PTR
on attractive terms. See "--Strategic Accomplishments--Developments and
Acquisitions" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Research Capability. Management should have the means for researching
both markets and products to determine appropriate investment
opportunities. PTR divides its target market into a total of 298 submarkets
for analysis purposes. The REIT Manager and its affiliate, Security Capital
Investment Research, have several professionals devoting substantial time
to research, on a submarket-by-submarket basis, who are closely supervised
by the Managing Directors of the REIT Manager; hence, the REIT Manager's
research has provided important guidance for PTR's investment decisions.
Investment Committee Process. Investment committees should provide
discipline and guidance for the investment activities of the REIT in order
to achieve its long-term strategic objectives. The five members of the REIT
Manager's Investment Committee have a combined 84 years of experience in
the real estate industry. See "--Officers of PTR and Directors and Officers
of the REIT Manager and Relevant Affiliates." The Investment Committee
receives detailed written analyses and research, in a standardized format,
from the REIT Manager's development and acquisition personnel and evaluates
all prospective investments pursuant to uniform underwriting criteria prior
to submission of investment recommendations to the Board. The quality of
the REIT Manager's Investment Committee process is evident from the ability
of PTR to achieve its investment goals, generally exceeding its projected
initial returns and growth from multifamily investments.
Development/Redevelopment and Acquisition Capability. Development returns
are generally higher than acquisition returns. Additionally, PTR can exert
better control over the quality of developed properties than acquired
properties. Hence, development is an important source of cash flow growth
even
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during attractive acquisition markets. By internally developing projects
and redeveloping well located operating properties, management can capture
for the REIT the value that normally escapes through sales premiums paid to
successful developers. The REIT Manager's personnel have substantial
development and redevelopment experience, as described in "--Officers of
PTR and Directors and Officers of the REIT Manager and Relevant
Affiliates." The REIT Manager has 52 full-time professionals committed to
development and acquisition activities. The REIT Manager has arranged for
over $1.3 billion of successful acquisitions. At January 31, 1996, the REIT
Manager had 6,252 multifamily units under construction with a total
expected cost of $316.8 million and had 7,266 multifamily units in planning
with a total expected cost of $391.8 million. The REIT Manager has engaged
in substantial development on behalf of PTR at attractive yields that have
generally exceeded projections. See "--Multifamily Properties" and "--
Strategic Accomplishments--Developments and Acquisitions."
Due Diligence Process. Management should have experienced personnel
dedicated to performing intelligent and thorough due diligence. The REIT
Manager has 10 full-time due diligence professionals and has developed
uniform systems and procedures for due diligence.
Capital Markets Capability. Management must be able to effectively raise
capital for the REIT in order for the REIT to execute its investment
strategy. The REIT Manager has arranged for over $1.5 billion of capital
for PTR, including approximately $253.3 million raised from SCG.
Operating Capability. Management can substantially improve cash flow by
actively and effectively managing assets. The REIT Manager and its
affiliates have devoted substantial personnel and financial resources to
developing value-added operating systems, which control and effectively
administer the operation of PTR's multifamily assets.
Communications/Shareholder Relations Capability. A REIT's success in
capital markets and asset acquisition and development activities can be
enhanced by management's ability to effectively communicate the REIT's
strategy and performance to investors, sellers of property and the
financial media. The REIT Manager believes that PTR has now generally
established an excellent reputation among these constituencies through its
performance and the REIT Manager's communications ability. The REIT Manager
provides at its expense full-time personnel who prepare informational
materials for and conduct periodic meetings with shareholders, the
investment community and analysts. Successfully combining the foregoing
attributes can establish for a REIT the ability to increase cash flow and
the market valuation of the REIT's portfolio. PTR's cash flow and market
valuation have both increased substantially under the REIT Manager's
administration.
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OFFICERS OF PTR AND DIRECTORS AND OFFICERS OF THE REIT MANAGER AND RELEVANT
AFFILIATES
Directors and Senior Officers of the REIT Manager.
Members of the REIT Manager's Investment Committee are designated by an
asterisk.
*C. RONALD BLANKENSHIP--46--Chairman of PTR; since March 1991, Chairman of
the REIT Manager and Managing Director of SCG; from June 1988 to March 1991,
Regional Partner, Trammell Crow Residential, Chicago, Illinois (multifamily
real estate development and property management); prior thereto, Executive Vice
President and Chief Financial Officer, The Mischer Corporation, Houston, Texas
(multibusiness holding company with investments primarily in real estate).
While with Trammell Crow Residential, Mr. Blankenship was on the Management
Board for Trammell Crow Residential Services, a property management company
that managed approximately 90,000 multifamily units nationwide, and was chief
executive officer of Trammell Crow Residential Services-North, which managed
10,000 multifamily units in the Midwest and Northeast. In his various positions
prior to his affiliation with the REIT Manager, Mr. Blankenship supervised the
development of approximately 9,300 multifamily units. Mr. Blankenship
supervises the overall operations of PTR and the REIT Manager.
*DAVID C. DRESSLER, JR.--42--Director and Chairman of Homestead Village
Incorporated ("Homestead Village") since April 1995, Managing Director of PTR
since May 1993 and Director and Managing Director of the REIT Manager since
April 1992, where he supervises the overall operations of Homestead Village
properties on behalf of PTR; from 1984 to May 1991, Regional Partner, Trammell
Crow Residential, Boston, Massachusetts (multifamily real estate development
and property management). While with Trammell Crow Residential, Mr. Dressler
was on the Management Board for Trammell Crow Residential Services (managing
90,000 multifamily units nationwide) and was co-founder and a board member of
Trammell Crow Residential Services-North, which managed 10,000 multifamily
units in the Midwest and Northeast. In his various positions prior to his
affiliation with the REIT Manager, Mr. Dressler supervised the development of
approximately 6,500 multifamily units. Mr. Dressler is also a Managing Director
of Security Capital Atlantic Incorporated ("ATLANTIC") and its REIT manager
where he supervises the overall operation of Homestead Village properties on
behalf of ATLANTIC.
*R. SCOT SELLERS--39--Managing Director of PTR and Director and Managing
Director of the REIT Manager since September 1994, where he has overall
responsibility for PTR's investment program, and from May 1994 to September
1994, Senior Vice President of PTR; from April 1993 to May 1994, Senior Vice
President of SCG, where he was responsible for national multifamily
acquisitions; from September 1981 to April 1993, Mr. Sellers was an operating
partner and Vice President of Lincoln Property Company (LPC) (development,
acquisition and management of multifamily properties) where he was responsible,
among other things, for the development of more than 6,500 apartment units in a
number of different markets.
*PATRICK R. WHELAN--39--Managing Director of PTR and the REIT Manager since
December 1995, Director of the REIT Manager since February 1995; since October
1994, President of SCG Realty Services, where he is responsible for overall
property management; from February 1994 to October 1994, Senior Vice President
and Co-Manager of Multifamily Acquisitions of SCG; from July 1986 to January
1994, Senior Vice President of Trammell Crow Company (development, acquisition
and management of commercial properties).
*JOHN H. GARDNER, JR.--42--Director of the REIT Manager since February 1995;
Senior Vice President of PTR and the REIT Manager since September 1994, where
he has overall responsibility for multifamily dispositions; from December 1984
to January 1993, Vice President of Asset Management and through September 1994,
Managing Director and Principal of Copley Real Estate Advisors in Boston, where
he had overall responsibility for the portfolio management function for eight
accounts valued at $7.5 billion; prior thereto, Real Estate Manager of Equity
Real Estate at John Hancock Companies. Mr. Gardner is also a Senior Vice
President of ATLANTIC and its REIT manager where he is responsible for overall
multifamily dispositions.
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JEFFREY B. ALLEN--47--Senior Vice President of PTR since September 1995 and
the REIT Manager since July 1995, where he has overall responsibility for
investments and operations in the Western Region; from October 1981 to July
1995, Managing Director of Paragon Group, where he was responsible for the
company's commercial and residential development and management operations in
the western region; prior thereto, Vice President of Cabot, Cabot and Forbes
Co., where he was responsible for commercial development in the Los Angeles
area.
JAY S. JACOBSON--43--Vice President of PTR since July 1993 and the REIT
Manager since March 1994, where he has overall responsibility for investments
and operations in the Central Region; from 1988 to June 1993, Vice President--
Residential Development for Michael Swerdlow Companies, Inc. and Hollywood
Inc., South Florida real estate development/management companies under common
control, where he was responsible for the planning and development of over
2,200 multifamily units as well as other development projects; from 1981 to
1988, General Partner and Chief Executive Officer of Meridian Land Company, a
Denver-based real estate development company.
JEFFREY A. KLOPF--47--Senior Vice President and Secretary of PTR, the REIT
Manager and SCG since January 1996, where he provides securities offerings and
corporate acquisition services and oversees the provision of legal services for
affiliates of the firm; from January 1988 to December 1995, partner of Mayer,
Brown & Platt where he practiced corporate and securities law.
MARK N. TENNISON--35--Vice President of PTR since July 1992 and the REIT
Manager since March 1994, where he has overall responsibility for investment
and operations in the Northwest Region; from May 1991 to July 1992, Executive
Vice President/Chief Operating Officer of Metro Concap, Inc., an operator of
over 7,100 multifamily units; from January 1991 to May 1991, attorney for the
Federal Deposit Insurance Corporation; and from August 1987 to December 1990,
Partner with Trammell Crow Residential (development, construction and
management of multifamily properties).
K. BRUCE WEBSTER--39--Senior Vice President of PTR and the REIT Manager since
March 1995, where he has overall responsibility for investments and operations
in the Southwest Region; from November 1994 to March 1995, Senior Vice
President of PACIFIC, where he had responsibility for PACIFIC's portfolio
performance and asset management; from June 1993 to November 1994, Vice
President of Asset Management at Irvine Apartment Communities, with
responsibility for property operations, portfolio performance and long-term
positioning; prior thereto, President and Chief Operating Officer of Trammell
Crow Residential Services North, where he had responsibility and accountability
for management company operations and property performance in the midwestern
and northeastern United States.
Other Officers.
FRANK R. ANDERSON--37--Vice President of PTR and the REIT Manager since June
1995, where he is a Project Manager in the Northwest Region; prior thereto Vice
President, Acquisitions and Land Development of Shea Homes, a single and
multifamily developer in San Diego.
ARIEL AMIR--36--Vice President of SCG since June 1994; from September 1985 to
April 1994, an attorney with the law firm of Weil, Gotshal & Manges, New York,
New York where he practiced securities and corporate law for eight years. Mr.
Amir provides securities offerings and corporate acquisition services to PTR.
ANTHONY R. ARNEST--45--Vice President of PTR and the REIT Manager since
November 1994, where he is the head of the due diligence group; from December
1990 to September 1994, Mr. Arnest maintained a private law practice
specializing in real estate, development and business and financial consulting;
from March 1990 to November 1990, Director of Infill Acquisitions with Lewis
Homes of California; from January 1986 to March 1990, Vice President Director
of Acquisitions and Forward Planning/Due Diligence with Wesco Development;
prior thereto, House Counsel for Torino Development.
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DARCY B. BORIS--33--Vice President of Security Capital Investment Research
since June 1995, where she conducts strategic market analysis for PTR and
affiliated companies; from August 1993 to June 1995, Ms. Boris worked for
Capital Markets Group; from January 1987 to September 1991, Project Manager
with Marcus & Millichap, Inc. in Palo Alto, California, where she coordinated
development of residential real estate projects.
JAMES C. BORMANN--43--Vice President of PTR since December 1995 and the REIT
Manager since June 1995, where he is responsible for production activities in
the Central Region; from August 1992 to May 1995, Vice President of
construction with Roseland Property Company (formerly Lincoln Property Company
Northeast); prior thereto, Construction Superintendent with Toll Brothers, Inc.
Mr. Bormann is a licensed real estate salesperson in Pennsylvania.
MARK J. CHAPMAN--38--Vice President of Security Capital Investment Research
since November 1995, where he is the director of the group and conducts
strategic market analysis for PTR and affiliated companies; from March 1995 to
November 1995, Vice President of PTR, with asset management responsibilities in
five major markets; from November 1994 to March 1995, Vice President of
PACIFIC; from July 1989 to November 1994, Vice President at Copley Real Estate
Advisors, Inc. where he directed asset management for Copley assets located
from Connecticut to Virginia, valued in excess of $1.5 billion; prior thereto,
Director of Asset Management for Liberty Real Estate, with responsibility for
assets east of the Mississippi River, including multifamily, office and retail
properties.
MARK G. CONROE--38--Vice President of PTR and the REIT Manager since January
1995 and Senior Vice President of Homestead Village since June 1995, where he
has overall responsibility for the development program of Homestead Village
properties; since February 1994, Vice President of ATLANTIC and its REIT
manager, where he was a member of the development group, and where he has
overall responsibility for the development program of Homestead Village
properties; from October 1991 to February 1994, President of Classic
Communities, Inc., a home building company; prior thereto, General Partner and
Executive Vice President of the Mozart Development Company, a real estate
development company.
RICHARD W. DICKASON--39--Vice President of PTR and the REIT Manager since
March 1995, where he has overall responsibility for PTR's investment activity
in the Northwest Region; from December 1993 to March 1995, Vice President of
PACIFIC; from July 1992 to September 1993, President at J.M. Peters
Company/Capital Pacific Homes, where he acquired property for the development
of single-family homes and apartments; from May 1980 to January 1992, Partner
and Vice President of Lincoln Property Company N.C. Inc., where he was
responsible for the acquisition, development, construction and management of a
sizable multifamily residential portfolio in the California marketplace; prior
thereto, Mr. Dickason represented private investors in the development of
condominiums, townhouses, shopping centers and single-family homes throughout
California.
JOSEPH G. DI CRISTINA--36--Vice President of PTR and the REIT Manager since
March 1995, where he has overall responsibility for PTR's investment activity
in the Central Region; from August 1994 to March 1995, Vice President of
PACIFIC; prior thereto, Vice President of Forward Planning at Robertson Homes.
G. STEPHEN DONOHUE--38--Vice President of PTR since December 1995 and SCG
Realty Services since July 1995, where he has overall asset management
responsibility for properties in San Antonio and Austin, Texas; from December
1994 to June 1995, Regional Vice President of Insignia Management, where he had
asset management responsibilities for 13,000 units (55 properties) in Texas;
prior thereto, Vice President/District Manager for Insignia Management in
Colorado Springs, Colorado, where he had asset management responsibilities for
3,300 units in the western United States.
KATHY B. FARR--41--Vice President of PTR and the REIT Manager since June
1995, where she is responsible for multifamily dispositions; from January 1994
to April 1995, Vice President of Corporate
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Finance with Irvine Apartment Communities, where she was responsible for all
aspects of financing, including the company's working capital line of credit
and construction financings for all new development activity; prior thereto,
Senior Director Project Finance with The Irvine Company, where she was
responsible for negotiating and closing construction and permanent financings
on residential and commercial properties. Ms. Farr is also a Vice President of
ATLANTIC and its REIT manager where she is responsible for multifamily
dispositions.
PETER M. GRIMM--53--Vice President of PTR since 1975 and the REIT Manager
since March 1991, where he is a Project Manager in the Central Region.
LAURA L. HAMILTON--32--Vice President of PTR and the REIT Manager since June
1995 and Homestead Village since January 1996, where she supervises Homestead
Village's due diligence group, and a member of the due diligence group since
April 1992; prior thereto Ms. Hamilton was a real estate paralegal with the law
firm of Poole, Kelly & Ramo in Albuquerque, New Mexico. Ms. Hamilton is also a
Vice President of ATLANTIC and its REIT manager where she is responsible for
Homestead Village due diligence.
CHRISTOPHER C. HARNESS--43--Vice President of PTR and the REIT Manager since
December 1995, and a member of the development group since June 1994, where he
has overall responsibility for PTR's investment activity in the Southwest
Region; from August 1993 to June 1994, Senior Analyst for Due Diligence at SCG
Realty Services; prior thereto, Mr. Harness was responsible for development of
commercial properties in eight Texas markets for Affiliated Builders.
NELSON L. HENRY--60--Vice President of PTR since December 1994 and the REIT
Manager since January 1995, where he is responsible for production activity in
the Western Region; from January 1983 to September 1993, Construction Vice
President for Lincoln Property Company N.C. Inc., where he was responsible for
the coordination of development in Colorado and California; prior thereto,
President of Royal Investment Corporation, a regional multifamily and single-
family developer.
W. GEOFFREY JEWETT--47--Vice President of PTR and the REIT Manager since
March 1995 and Homestead Village since January 1996, where he is responsible
for strategic operations for Homestead Village properties; from November 1994
to March 1995, Vice President of PACIFIC, where he was involved with and had
overall responsibility for acquisitions; from May 1994 to November 1994, Vice
President of ATLANTIC, where he had overall responsibility for the acquisitions
group; from September 1993 to April 1994, member of the acquisition group of
PACIFIC; prior thereto, Vice President of LaSalle Partners Limited in its
acquisitions and property finance group, where he provided investment property
sale, financing and acquisition services on behalf of corporate and
institutional clients throughout the western United States. Mr. Jewett is also
a Vice President of ATLANTIC and its REIT manager where he is responsible for
strategic operations for Homestead Village properties.
JOHN JORDANO III--39--Vice President of PTR and the REIT Manager since March
1995, where he has overall responsibility for PTR's investment activity in the
Western Region; from August 1994 to March 1995, Vice President of PACIFIC; from
January 1992 to July 1994, Senior Vice President of Prospect Partners, where he
was responsible for identifying and advising individual and corporate clients
on financial institution and Resolution Trust Corporation REO apartment
acquisition and investment opportunities in the western United States; prior
thereto, Partner with Trammell Crow Residential Company where he established
the Sacramento office and was responsible for the development of multifamily
projects.
JAMES W. KLUBER--45--Vice President and Controller for PTR and the REIT
Manager since January 1996, where he supervises accounting and financial
reporting for PTR; from June 1993 to December 1995, Vice President and
Controller for Security Capital Industrial Trust; from August 1989 to June
1993, Senior Vice President of Finance of Rouse & Associates in Philadelphia,
where he had financial and accounting responsibility for more than 200
operating properties, totalling approximately $2.5 billion and comprising 18
million square feet of commercial real estate space.
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LAWRENCE S. LEVITT--39--Vice President of PTR since September 1995 and the
REIT Manager since December 1995, where he is a member of the acquisitions
group in the Western Region; from May 1992 to August 1995, Vice President--
Director of Residential Acquisitions of Sares-Regis Group, where he managed the
residential acquisitions division; from August 1991 to May 1992, Principal of
Integrated Mortgage Resources, a commercial and residential mortgage banking
firm; prior thereto, Vice President of Con Am Management Corporation, where he
directed major transactions.
DANIEL W. OGDEN--35--Vice President of PTR since December 1995 and SCG Realty
Services since March 1995, where he has overall asset management responsibility
for properties in Dallas and Houston, Texas, and Oklahoma; from June 1994 to
February 1995, Executive Vice President of Mutual Real Estate Corporation in
Dallas, where he was responsible for a portfolio located in seven states; prior
thereto, Regional Vice President of Lincoln Property Company where he was
responsible for the supervision of multifamily units located in twelve mid-
Atlantic/Midwest states.
JOHN R. PATTERSON--44--Vice President of PTR and the REIT Manager since
January 1995 and Senior Vice President of Homestead Village since June 1995,
where he has overall responsibility for operations and asset management of
Homestead Village properties; from July 1993 to January 1995, a Senior Vice
President in business development at NationsBank in Atlanta; prior thereto,
Division President and Partner of Trammell Crow Residential Services. Mr.
Patterson is also a Vice President of ATLANTIC and its REIT manager where he
has overall responsibility for operations and asset management of Homestead
Village properties.
MARK P. PEPPERCORN--33--Vice President of PTR and the REIT Manager since
February 1995, where he is a member of the acquisitions group in the Western
Region; from September 1994 to February 1995, he was a member of the
acquisitions group for ATLANTIC and previously, for PTR; from March 1991 to
June 1993, Mr. Peppercorn was responsible for the multifamily brokerage
division of Transwestern Property Company in Houston; and prior thereto, an
Associate Vice President of Eastdil Realty Incorporated.
GREGG A. PLOUFF--38--Vice President of PTR and the REIT Manager since March
1995 and Homestead Village since June 1995; from July 1994 to March 1995, Vice
President of PACIFIC; from November 1993 to July 1994, a member of the
acquisitions group; prior to November 1993, Mr. Plouff served in an
acquisitions consulting capacity for PTR; prior thereto, Mr. Plouff was with
Trammell Crow Residential, most recently as a partner, where he was involved
with residential development in the Dallas, Chicago and Southern California
markets.
THOMAS L. POE--38--Vice President of PTR since June 1994 and the REIT Manager
since April 1992, where he is responsible for accounting and financial
reporting; from 1988 to 1992, Vice President of Finance for the Mischer
Corporation, Houston, Texas (real estate investments).
JERRY D. QUINN--52--Vice President of PTR and the REIT Manager since December
1995, where he is responsible for production activities in the Central Region,
and a member of the development group since July 1994; from April 1992 to July
1994, Vice President of Construction with C.F. Jordan Residential; prior
thereto, Vice President of Construction with Lincoln Property Company's
multifamily development.
HAROLD D. RILEY--59--Vice President of PTR since 1974 and the REIT Manager
since March 1991, where he provides accounting and financial reporting
services.
DAVID K. ROBBINS--44--Vice President of PTR and the REIT Manager since March
1995, where he is a Project Manager in the Western Region; from June 1994 to
January 1995, Vice President of ATLANTIC, where he was a member of the
development group; from December 1992 to May 1994, Vice President of
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PTR, where he had overall responsibility for the due diligence group; from
January 1988 to December 1992, partner in the law firm of Hill, Farrer &
Burrill in Los Angeles, where his practice focused on real estate acquisitions
and development. He also served as general counsel to Hollywood Park Racetrak,
where he was involved in forming Hollywood Park's public REIT.
SALLY J. ROWLING--42--Vice President of PTR since December 1995 and SCG
Realty Services since January 1996, where she has overall asset management
responsibility for properties in the Northwest Region; from August 1993 to
December 1995, a member of the development group of PTR; prior thereto, she was
Senior Analyst for Acquisitions at SCG Realty Services, and has more than 18
years experience in property management.
GARY L. TRUITT--45--Vice President of PTR and the REIT Manager since December
1995 and a member of the development group since January 1995, where he is
responsible for production activity in the Northwest Region; from July 1994 to
January 1995, Project Manager of C.F. Jordan Inc.; prior thereto,
Superintendent of Benchmark Contractors, where he had supervision and code and
specifications compliance responsibilities.
DAVID B. WOODWARD--29--Vice President of PTR since November 1993 and SCG
Realty Services since January 1995, where he has overall asset management
responsibility for properties in the Western Region; from June 1993 to October
1993, Mr. Woodward was with PTR where he was responsible for property
management; prior thereto, asset manager with USF&G's Real Estate Division.
K. DOUGLAS WRIGHT--49--Vice President of PTR and the REIT Manager since July
1995, where he is a Project Manager in the Western Region; from December 1991
to June 1995, Mr. Wright was a real estate consultant and managed a real estate
portfolio; prior thereto, he was president of Summit Development Company.
In addition, an affiliate of the REIT Manager employs a number of accounting
professionals who provide centralized accounting services for PTR.
Shareholder Relations and Capital Markets. The following persons provide
shareholder relations and capital markets services to PTR:
K. SCOTT CANON--34--President of Capital Markets Group since January 1996,
Vice President of Capital Markets Group since August 1993 and a member of
Capital Markets Group since March 1992, where he participates in capital
markets and institutional investor relations; from September 1991 to March
1992, a personal account director for Chase Manhattan Investment Services; from
August 1987 to September 1991, a member of private client services for Goldman,
Sachs & Co. Mr. Canon is registered with the National Association of Securities
Dealers, Inc.
JEFFREY A. COZAD--31--Senior Vice President of Capital Markets Group since
December 1994, Vice President from September 1992 to November 1994 (in its New
York office since June 1993) and a member of Capital Markets Group since March
1992; from August 1991 to August 1992, a member of SCG; in June 1991, Mr. Cozad
obtained a M.B.A. from The University of Chicago; prior thereto, an analyst
with LaSalle Partners Limited, where he provided corporate real estate services
to major institutions from 1986 to 1989. Mr. Cozad is registered with the
National Association of Securities Dealers, Inc.
JAMES J. EVANS JR.--42--Senior Vice President of Capital Markets Group since
December 1994, where he provides capital markets services for affiliates of the
firm; from December 1992 to November 1994, Managing Director of Copley Real
Estate Advisors, where he was responsible for acquisitions in the western
United States, and worked on new business initiatives (designing and marketing
business products), raising capital and asset management; from December 1988 to
December 1992, Vice President and Principal of Copley Real Estate Advisors,
where he was responsible for new investments in Southern California; prior
thereto, Associate at Copley Real Estate Advisors. Mr. Evans is registered with
the National Association of Securities Dealers, Inc.
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ROBERT H. FIPPINGER--52--Vice President of Capital Markets Group since June
1995 and with SCG since October 1994, where he directs corporate communications
services for affiliates of the firm; from November 1991 to October 1994, he was
with Grubb & Ellis where he represented corporate clients and provided tenant
advisory services; prior thereto, Executive Director of Techmart, where he was
responsible for management, marketing, operations, leasing and program
development of commercial properties.
GERARD DE GUNZBURG--48--Vice President of Capital Markets Group in its New
York office since January 1993; from June 1988 to December 1992, a consultant
to American and European companies; prior thereto, Director and Partner of
Lincoln Property Company, Europe, where he arranged real estate financing from
1976 to 1988. Mr. de Gunzburg is registered with the National Association of
Securities Dealers, Inc.
ALISON C. HEFELE--36--Vice President of Capital Markets Group since February
1994, where she provides capital markets services for affiliates of the firm;
from January 1990 to February 1994, Vice President with Prudential Real Estate
Investors (strategic planning and business development for institutional real
estate investment management services); from September 1985 to January 1990, a
management consultant with McKinsey & Company; prior thereto, a financial
analyst with Morgan Stanley Realty Inc. Ms. Hefele is registered with the
National Association of Securities Dealers, Inc.
BRADFORD W. HOWE--31--Vice President of Capital Markets Group since January
1996, where he provides capital markets services for affiliates of the firm and
where he has been an associate since December 1994; from March 1993 to December
1994, Assistant Vice President in the real estate investment banking group of
Kidder Peabody & Co., Incorporated; prior thereto, real estate consultant at
Coopers & Lybrand. Mr. Howe is registered with the National Association of
Securities Dealers, Inc.
JAMES H. POLK III--53--Trustee of PTR; Managing Director of Capital Markets
Group since August 1992. Mr. Polk has been affiliated with the REIT Manager
since March 1991; prior thereto, he was President and Chief Executive Officer
of PTR for sixteen years. He is registered with the National Association of
Securities Dealers, Inc. and is a past President and Trustee of the National
Association of Real Estate Investment Trusts, Inc.
INSURANCE
PTR carries comprehensive general liability coverage on its owned properties,
with limits of liability of $100 million per property and per occurrence
(subject to appropriate deductibles), to insure against liability claims and
related defense costs. Similarly, PTR is insured against the risk of direct
physical damage in amounts necessary to reimburse PTR on a replacement cost
basis for costs incurred to repair or rebuild each property, including loss of
rental income during the reconstruction period (up to a six month period).
COMPETITION
Within its geographic areas of operation, PTR is subject to competition from
a variety of investors, including insurance companies, pension funds, corporate
and individual real estate developers and investors and other REITs with
investment objectives similar to those of PTR. Some of these competitors have
substantial financial resources and staffs and long operating histories. As an
owner of real estate properties, PTR competes with other owners of similar
properties in connection with their financing, sale, lease or other disposition
and use.
ENVIRONMENTAL MATTERS
Many jurisdictions have adopted laws and regulations relating to
environmental controls and the development of real estate. Such laws and
regulations could affect existing PTR properties and/or operate to reduce the
number and attractiveness of investment opportunities available to PTR. The
effect upon PTR of the application of such laws and regulations cannot be
predicted. Such laws and regulations have not had a
18
<PAGE>
material effect on PTR's financial condition and results of operations to date.
PTR is not aware of any environmental condition on any of its properties which
is likely to have a material adverse effect on PTR's financial condition or
results of operations.
EMPLOYEES
All management activities of PTR are performed by the REIT Manager. PTR has
no employees.
EXECUTIVE OFFICERS
All executive functions of PTR are performed by the REIT Manager. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--REIT Management Agreement." The executive officers of the REIT
Manager are:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
C. Ronald Blankenship............ 46 Chairman
David C. Dressler, Jr............ 42 Managing Director
R. Scot Sellers.................. 39 Managing Director
Patrick R. Whelan................ 39 Managing Director
Jeffrey B. Allen................. 47 Senior Vice President
John H. Gardner, Jr.............. 42 Senior Vice President
Jeffrey A. Klopf................. 47 Senior Vice President and Secretary
K. Bruce Webster................. 39 Senior Vice President
Jay S. Jacobson.................. 43 Vice President
Mark N. Tennison................. 35 Vice President
</TABLE>
See "--Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates" for descriptions of the REIT Manager's executive officers.
ITEM 2. PROPERTIES
The information in the following table is as of December 31, 1995 for
properties owned at December 31, 1995, and as of January 31, 1996 for
properties acquired since December 31, 1995 or in planning and under control at
January 31, 1996 (dollars in thousands).
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PROPERTIES OWNED AT DE-
CEMBER 31, 1995:
PROPERTIES STABILIZED AT
DECEMBER 31, 1995: (2)
Albuquerque, New Mexi-
co:
Commanche Wells....... 1994 98.9% 179 $ 5,100 $ 5,100
Corrales Pointe....... 1993 100.0 208 6,688 6,688
Entrada Pointe........ 1994 99.0 208 7,563 7,563
Pavilions*............ (3) 95.8 240 15,408 15,408
Sandia Ridge.......... 1992 99.6 272 7,495 7,495
Vista del Sol......... 1993 95.8 168 5,951 5,951
Wellington Place...... 1993 97.5 280 10,002 10,002
Austin, Texas:
Anderson Mill Oaks.... 1993 96.9 350 12,226 12,226
Cannon Place.......... 1993 96.2 184 6,824 6,824
La Mirage*............ 1994 98.6 348 17,018 17,018
</TABLE>
(see notes following table)
19
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homestead Village--
Burnet*.............. 1995 (4) 133 $ 4,068 $ 4,148
Hunters Run*.......... 1995 98.3% 240 11,382 11,511
The Ridge............. 1993 98.8 326 10,420 10,420
Rock Creek............ 1993 99.4 314 10,161 10,161
Saddlebrook*.......... 1994 99.0 308 13,284 13,284
Shadowood............. 1993 99.1 235 6,545 6,545
Spyglass.............. 1992 99.3 298 10,473 10,473
Dallas, Texas:
Apple Ridge........... 1993 99.0 304 11,052 11,052
Custer Crossing....... 1993 96.7 244 10,378 10,378
Homestead Village--
Coit Road(5)*........ 1994 87.7 133 3,386 3,386
Homestead Village--
North Arlington*..... 1995 (4) 137 3,985 4,030
Homestead Village--
North Richland
Hills(5)*............ 1994 85.0 133 3,490 3,490
Homestead Village--
Skillman Road(5)*.... 1992 84.0 131 3,083 3,083
Homestead Village--
South Arlington*..... 1995 (4) 141 3,824 3,884
Homestead Village--
Stemmons Freeway(5)*. (6) 85.4 189 4,492 4,612
Homestead Village--
Tollway(5)*.......... 1993 96.8 119 2,718 2,718
Indian Creek.......... 1993 96.3 328 10,800 10,800
Post Oak Ridge........ 1993 96.7 486 15,121 15,121
Quail Run............. 1993 96.0 278 10,922 10,922
Somerset.............. 1993 98.7 372 15,065 15,065
Summerstone........... 1993 99.5 192 7,012 7,012
Timber Ridge.......... 1994 98.1 160 6,950 6,950
Woodland Park......... 1993 97.7 216 7,238 7,238
Denver, Colorado:
Cambrian.............. 1993 98.2 383 12,001 12,001
The Cedars............ 1993 99.8 408 17,044 17,044
Fox Creek Phase I..... 1993 99.4 175 6,149 6,149
Hickory Ridge......... 1992 99.4 688 23,403 23,403
Reflections Phase I... 1993 98.6 208 8,738 8,738
Silvercliff(7)........ 1994 95.5 312 16,285 16,285
Sunwood............... 1992 98.1 156 6,087 6,087
El Paso, Texas:
Acacia Park*.......... 1995 98.8 336 13,894 13,970
The Crest*............ 1992 95.3 232 7,977 7,977
Double Tree........... 1993 96.5 284 6,155 6,155
Las Flores*........... (8) 94.4 468 8,110 8,110
Mountain Village...... 1992 95.5 288 7,185 7,185
Park Place*........... (9) 97.3 292 8,705 8,705
The Phoenix*.......... 1993 97.3 336 10,095 10,095
Shadow Ridge*......... (10) 94.9 352 12,244 12,244
Spring Park(11)*...... 1990 98.9 180 5,239 5,239
Tigua Village*........ (12) 95.1 184 2,283 2,283
Houston, Texas:
Beverly Palms......... 1994 98.3 362 9,986 9,986
Braeswood Park(13).... 1993 96.3 240 12,560 12,560
</TABLE>
(see notes following table)
20
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Chasewood(14)......... 1994 97.3% 260 $ 13,540 $ 13,540
Cranbrook Forest...... 1993 95.8 261 6,886 6,886
Homestead Village--
Bammel-Westfield(5)*. 1994 73.3 135 3,475 3,475
Homestead Village--Fu-
qua(5)*.............. 1994 84.1 133 3,345 3,345
Homestead Village--
Park Ten(5)*......... 1994 82.8 134 3,893 3,893
Homestead Village--
Stafford(5)*......... 1995 83.3 133 3,667 3,667
Homestead Village--
West by North-
west(5)*............. 1994 83.3 133 3,432 3,432
Homestead Village--
Westheimer(5)*....... 1994 89.9 133 4,001 4,001
Pineloch.............. 1993 95.7 440 13,598 13,598
Plaza Del Oro......... 1994 98.3 348 11,907 11,907
Seahawk(15)........... 1994 99.1 224 8,607 8,607
Weslayan Oaks......... 1993 97.6 84 3,979 3,979
Woodside Village...... 1975 94.9 196 6,560 6,560
Las Vegas, Nevada:
The Hamptons.......... 1995 97.8 492 20,684 20,684
Horizons at Peccole
Ranch................ 1995 97.8 408 21,334 21,334
King's Crossing....... 1995 97.7 440 19,334 19,334
Sunterra(16).......... 1995 93.7 444 14,004 14,004
Oklahoma City, Oklaho-
ma:
Cimarron Trail........ 1994 96.9 228 6,753 6,753
Warrington............ 1993 96.1 204 5,986 5,986
Omaha, Nebraska:
Apple Creek(17)....... 1994 98.2 384 13,572 13,572
Phoenix, Arizona:
Bay Club.............. 1993 94.7 472 14,918 14,918
Foxfire............... 1994 97.3 188 7,277 7,277
Homestead Village--
Scottsdale*.......... 1995 (4) 120 4,259 4,275
Moorings at Mesa Cove. 1992 99.0 406 17,152 17,152
North Mountain Vil-
lage................. 1994 97.0 568 18,357 18,357
Papago Crossing....... 1992 97.8 180 3,808 3,808
Peaks at Papago Park
Phase I.............. 1994 98.6 624 28,128 28,128
Pheasant Run.......... 1993 96.4 248 8,632 8,632
Presidio at South
Mountain(18)......... 1993 98.7 600 31,356 31,356
The Ridge............. 1993 98.4 380 12,662 12,662
San Antigua*.......... 1994 99.7 320 23,799 23,799
San Marin*............ 1993 99.6 276 17,939 17,939
San Marina............ 1992 100.0 400 6,891 6,891
San Marquis North*.... 1995 100.0 208 9,888 10,748
San Marquis South*.... 1994 100.0 264 13,449 13,449
Scottsdale Greens..... 1994 98.1 644 27,685 27,685
Sunstone.............. 1993 99.2 242 10,595 10,595
Superstition Park..... 1992 97.3 376 12,498 12,498
Portland, Oregon:
Club at the Green..... 1995 99.6 254 11,076 11,076
Double Tree Phase I... 1995 94.7 245 10,386 10,386
Knight's Castle(19)... 1995 90.2 296 13,137 13,137
</TABLE>
(see notes following table)
21
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Meridian at
Murrayhill........... 1995 93.3% 312 $ 16,896 $ 16,896
Riverwood Heights..... 1995 100.0 240 10,015 10,015
Squire's Court........ 1995 96.6 235 10,907 10,907
Salt Lake City, Utah:
Cherry Creek(20)...... 1995 99.1 225 8,919 8,919
Greenpointe(21)....... 1995 90.6 192 6,056 6,056
Mountain Shadow(22)... 1995 98.3 174 5,636 5,636
San Antonio, Texas:
Applegate............. 1993 97.7 344 9,985 9,985
Austin Point.......... 1993 96.3 328 11,905 11,905
Camino Real........... 1993 93.2 176 6,196 6,196
Cobblestone Village... 1992 95.7 184 4,551 4,551
Contour Place......... 1992 99.2 126 2,602 2,602
The Crescent*......... 1994 99.7 306 15,599 15,599
Dymaxion Phase I...... 1994 97.9 190 4,555 4,555
The Gables............ 1993 92.7 192 7,060 7,060
Homestead Village--
Fredricksburg(5)*.... 1994 74.6 135 4,038 4,038
Lakeside Villas....... 1992 93.5 292 13,651 13,651
Marbach Park.......... 1993 96.4 304 7,987 7,987
Oakhampton Place...... 1992 93.9 280 12,174 12,174
Palisades Park........ 1993 91.2 328 8,144 8,144
Panther Springs....... 1993 90.9 88 3,982 3,982
Rancho Mirage......... 1993 96.5 254 4,854 4,854
Sterling Heights*..... 1995 96.0 224 11,992 12,075
Towne East Village.... 1993 95.0 100 2,483 2,483
Villas of Castle
Hills................ 1993 93.3 163 5,876 5,876
Villas of St. Tropez.. 1992 89.0 273 10,863 10,863
The Waters of Northern
Hills................ 1994 96.1 305 9,046 9,046
San Diego, California:
Scripps Landing....... 1994 97.5 160 9,122 9,122
Tierrasanta Ridge..... 1994 97.9 340 19,481 19,481
Santa Fe, New Mexico:
The Enclave........... 1992 96.6 204 9,748 9,748
The Meadows of Santa
Fe*.................. 1994 97.6 296 12,471 12,471
Rancho Vizcaya........ 1991 97.2 212 12,093 12,093
Seattle, Washington:
Logan's Ridge......... 1995 93.4 258 13,148 13,148
Matanza Creek......... 1995 86.8 152 6,928 6,928
Walden Pond........... 1995 90.5 316 13,736 13,736
Tucson, Arizona:
Ashton Meadows........ 1993 92.6 272 7,141 7,141
Cobble Creek.......... 1992 94.0 301 7,728 7,728
Craycroft Gardens..... 1992 99.0 101 1,941 1,941
Rio Cancion........... 1994 93.4 379 19,393 19,393
Sonoran Terraces...... 1992 91.7 374 17,818 17,818
Sundown Village*...... (23) 92.1 330 12,924 12,924
Tierra Antigua........ 1992 93.9 147 5,466 5,466
Villa Caprice......... 1993 97.0 268 8,801 8,801
</TABLE>
(see notes following table)
22
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Windsail(24).......... 1993 93.7% 300 $ 9,875 $ 9,875
Tulsa, Oklahoma:
Southern Slope........ 1993 95.1 142 5,333 5,333
---- ------ ---------- ----------
Subtotals/Average..... 96.2% 36,785 $1,375,832 $1,377,301
---- ------ ---------- ----------
PROPERTIES PRE-STABI-
LIZED AT DECEMBER 31,
1995(2):
El Paso, Texas:
Cielo Vista........... 1993 92.6% 378 $ 6,646 $ 8,668
Houston, Texas:
Brompton Court(25).... 1994 98.9 794 30,528 31,624
Homestead Village--As-
trodome*............. 1995 (4) 165 5,295 5,447
Homestead Village--
Willowbrook*......... 1995 (4) 137 3,925 4,017
Los Angeles, Califor-
nia:
Miramonte............. 1995 91.0 290 15,721 16,130
Las Vegas, Nevada:
La Tierra at the
Lakes(26)............ 1995 97.5 896 40,967 42,818
Omaha, Nebraska:
Oak Brook............. 1995 93.8 162 7,489 7,538
Portland, Oregon:
Double Tree Phase
II(27)............... 1995 92.7 124 6,615 6,615
Salt Lake City, Utah:
Plumtree.............. 1995 95.5 336 14,246 14,896
San Antonio, Texas:
Homestead Village--
Bitters*............. 1995 (4) 153 4,729 4,832
Homestead Village--
DeZavala*............ 1995 (4) 141 4,431 4,511
San Francisco (Bay Are-
a), California:
Treat Commons(28)..... 1995 94.9 510 38,590 38,955
Seattle, Washington:
Millwood Estates...... 1995 89.3 300 11,053 11,219
Remington Park........ 1995 95.5 332 18,927 18,977
---- ------ ---------- ----------
Subtotals/Average..... 95.3% 4,718 $ 209,162 $ 216,247
---- ------ ---------- ----------
DEVELOPMENTS UNDER CON-
STRUCTION AT
DECEMBER 31, 1995:
Albuquerque, New Mexi-
co:
Homestead Village--
Osuna................ 1995 N/A 141 $ 3,871 $ 5,203
La Paloma............. 1993 N/A 424 23,087 24,762
La Ventana............ 1994 N/A 232 13,844 15,067
Vistas at Seven
Bar(29).............. 1994 N/A 364 6,438 21,639
Austin, Texas:
Homestead Village--Mid
Town................. 1995 N/A 145 3,735 4,462
Homestead Village--
Pavillion(29)........ 1995 N/A 134 813 5,304
Hunters' Run Phase
II(29)............... 1993 N/A 160 1,572 8,867
Monterey Ranch Village
II................... 1993 N/A 456 14,283 24,341
</TABLE>
(see notes following table)
23
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dallas/Ft. Worth, Tex-
as:
Homestead Village--
Fort Worth........... 1994 N/A 97 $ 2,646 $ 2,974
Homestead Village--Las
Colinas.............. 1994 N/A 149 4,362 4,624
Denver, Colorado:
Homestead Village--
Belleview............ 1994 N/A 157 3,498 5,964
Homestead Village--
Iliff................ 1994 N/A 137 3,525 4,975
Reflections Phase II.. 1993 N/A 208 12,063 12,152
El Paso, Texas:
Patriot Apartments.... 1993 N/A 320 11,864 12,321
Houston, Texas:
Memorial Heights Phase
I.................... 1994 N/A 360 12,319 18,928
Oaks at Medical Cen-
ter.................. 1994 N/A 360 15,954 18,672
Phoenix, Arizona:
Homestead Village--
Baseline(29)......... 1995 N/A 149 2,500 5,346
Homestead Village--
Dunlap(29)........... 1995 N/A 143 2,068 5,154
Miralago Phase I(29).. 1995 N/A 496 3,260 23,809
Peaks at Papago Park
Phase II............. 1994 N/A 144 4,388 7,266
San Palmera(29)....... 1995 N/A 412 4,309 23,846
Portland, Oregon:
Preston's Cross-
ing(29).............. 1995 N/A 228 4,134 12,068
San Antonio, Texas:
Stanford Heights...... 1993 N/A 276 13,165 13,495
Salt Lake City, Utah:
Remington............. 1995 N/A 288 4,951 16,412
Seattle, Washington:
Pebble Cove........... 1995 N/A 288 4,237 16,949
Tucson, Arizona:
San Ventana(29)....... 1994 N/A 408 10,621 26,955
--- ----- ---------- ----------
Subtotals/Average..... N/A 6,676 $ 187,507 $ 341,555
--- ----- ---------- ----------
DEVELOPMENTS IN PLANNING
AND OWNED AT DECEMBER
31, 1995(2):
Austin, Texas:
Hobby Horse........... 1993 N/A 168 $ 1,091 $ 9,517
Denver, Colorado:
Fox Creek Phase II.... 1993 N/A 112 69 5,719
Houston, Texas:
Memorial Heights Phase
II................... 1994 N/A 476 6,229 26,049
Phoenix, Arizona:
22nd & Dunlap Phase
I(29)................ 1995 N/A 376 3,617 21,791
Arrowhead Phase I(29). 1995 N/A 248 2,030 16,086
Reno, Nevada:
Vista Ridge........... 1994 N/A 324 3,762 20,455
San Antonio, Texas:
St. Tropez Phase II... 1994 N/A 96 966 4,409
San Francisco (Bay Are-
a), California:
Homestead Village--San
Mateo................ 1995 N/A 136 1,652 6,709
Homestead Village--
Sunnyvale............ 1995 N/A 144 1,361 6,333
</TABLE>
(see notes following table)
24
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Santa Fe, New Mexico:
Foothills of Santa Fe
Phase I.............. 1995 N/A 248 2,156 14,321
----- ------- ---------- ----------
Subtotals/Average..... N/A 2,328 $ 22,933 $ 131,389
----- ------- ---------- ----------
Total Multifamily... 50,507 $1,795,434 $2,066,492
------- ---------- ----------
LAND HELD FOR FUTURE
MULTIFAMILY DEVELOPMENT
AT DECEMBER 31, 1995:
Austin, Texas:
Homestead Village--
Round Rock(30)....... 1995 N/A -- $ 892 $ --
Monterey Ranch Village
I(31)................ 1993 N/A -- 1,665 --
Monterey Ranch Village
III(32).............. 1993 N/A -- 5,825 --
El Paso, Texas:
West Ten(33).......... 1994 N/A -- 1,597 --
Houston, Texas:
Oaks at the Medical
Center Phase II(34).. 1994 N/A -- 5,229 --
Phoenix, Arizona:
22nd & Dunlap Phase
II(35)............... 1995 N/A -- 1,820 --
Arrowhead Phase
II(36)............... 1995 N/A -- 1,601 --
San Antonio, Texas:
Dymaxion Phase II(37). 1994 N/A -- 556 --
Indian Trails Phase
II(38)............... 1994 N/A -- 882 --
Walker Ranch Phase
I(39)................ 1994 N/A -- 3,386 --
Walker Ranch Phase
II(40)............... 1994 N/A -- 1,982 --
Walker Ranch Phase
III(41).............. 1994 N/A -- 783 --
Santa Fe, New Mexico:
Foothills of Santa Fe
Phase II(42)......... 1995 N/A -- 1,149 --
St. Francis (43)...... 1995 N/A -- 2,321 --
----- ------- ---------- ----------
Subtotals/Average..... N/A -- $ 29,688 $ --
----- ------- ---------- ----------
HOTEL (ROOMS) OWNED AT
DECEMBER 31, 1995:
San Francisco (Bay Are-
a), California:
Wharf Holiday Inn(44). 1971 87.7% 338 $ 22,870 $ 22,870
----- ------- ---------- ----------
Subtotals/Average..... 87.7% 338 $ 22,870 $ 22,870
----- ------- ---------- ----------
INDUSTRIAL (SQUARE FEET)
OWNED AT
DECEMBER 31, 1995:
Dallas, Texas:
Irving Building....... 1977 100.0% 37,200 $ 540 $ 540
El Paso, Texas:
Vista Industrial...... 1989 100.0 130,000 3,134 3,134
Ontario, California:
Ontario Building...... 1987 100.0 127,600 4,137 4,137
----- ------- ---------- ----------
Subtotals/Average..... 100.0% 294,800 $ 7,811 $ 7,811
----- ------- ---------- ----------
Other................. 100.0% 10,000 $ 63 $ 63
----- ------- ---------- ----------
Subtotals/Average..... 100.0% 10,000 $ 63 $ 63
----- ------- ---------- ----------
Total Properties
Owned at December
31, 1995........... $1,855,866 $2,097,236
---------- ----------
</TABLE>
(see notes following table)
25
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
UNITS OR TOTAL
YEAR ACQUIRED PERCENTAGE SQUARE PTR EXPECTED
OR COMPLETED LEASED FOOTAGE INVESTMENT COST(1)
------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PROPERTIES ACQUIRED
SINCE DECEMBER 31, 1995
AND THROUGH JANUARY 31,
1996 OR IN PLANNING AND
UNDER CONTROL AT
JANUARY 31, 1996:
DEVELOPMENTS IN PLANNING
AND OWNED AT
JANUARY 31, 1996(2):
San Francisco (Bay
Area), California:
Homestead Village--
Milipitas............ 1996 N/A 118 $ 1,195 $ 5,301
Seattle, Washington:
Canyon Creek.......... 1996 N/A 336 5,746 25,003
Portland, Oregon:
Arbor Heights......... 1996 N/A 348 2,760 22,247
Phoenix, Arizona:
Homestead Village--
Union Hills(29)...... 1996 N/A 141 922 4,961
----- ---------- ----------
Subtotal.............. 943 $ 10,623 $ 57,512
----- ---------- ----------
DEVELOPMENTS IN PLANNING
AND UNDER CONTROL AT
JANUARY 31, 1996(2):
Garden style proper-
ties................. N/A N/A 1,725 $ (45) $ 100,714
Homestead Village
properties........... N/A N/A 2,270 (45) 102,139
--- ----- ----------
Subtotal/Averages..... 3,995 $ 202,853
----- ----------
Total Properties
Owned or Under
Control at January
31, 1996........... $1,866,489 $2,357,601
========== ==========
</TABLE>
- --------
*Property developed by PTR.
(1) Represents cost, including planned renovations, for properties owned or in
planning and under control at January 31, 1996. Represents budgeted
development cost, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period, for
properties in development. Does not include land held for future
development, which approximates 2% of assets based on cost.
(2) For definitions of stabilized and pre-stabilized, see "Business--
Multifamily Properties." For the definition of developments in planning,
see "Business--Strategy for Cash Flow and Distribution Growth."
(3) Phase I (118 units) was acquired in 1991 and Phase II (122 units) was
developed in 1992.
(4) Property was in lease-up during 1995, therefore percentage leased is not
reflected because it would not be representative of a full year of
operations.
(5) Percentage leased represents an average economic occupancy (gross room
revenue earned divided by potential gross room revenue) for the year ended
December 31, 1995. Due to the holiday season, percentage leased at December
31, 1995 would not be representative of prevailing lease levels.
(6) Phase I (132 units) was developed in 1992 and Phase II (57 units) was
developed in 1995.
(7) The Silvercliff apartments are subject to a deed of trust securing long-
term mortgage debt of $7.5 million.
(8) 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 $5.9 million.
26
<PAGE>
(9) Phase I (160 units) was developed in 1989 and Phase II (132 units) was
developed in 1991. The entire project is subject to a deed of trust
securing long-term mortgage debt of $7.0 million.
(10) Phase I (208 units) was acquired in 1991 and Phase II (144 units) was
developed in 1994.
(11) The Spring Park apartments are subject to a deed of trust securing long-
term mortgage debt of $4.3 million.
(12) Phase I (84 units) was developed in 1970 and Phase II (100 units) was
developed in 1978. The entire project is subject to a deed of trust
securing long-term mortgage debt of $694,000.
(13) The Braeswood Park apartments are subject to a deed of trust securing
long-term mortgage debt of $6.9 million.
(14) The Chasewood apartments are subject to a deed of trust securing long-term
mortgage debt of $9.5 million.
(15) The Seahawk apartments are subject to a deed of trust securing long-term
mortgage debt of $5.5 million.
(16) The Sunterra apartments are subject to a deed of trust securing long-term
mortgage debt of $8.3 million.
(17) The Apple Creek apartments are subject to a deed of trust securing long-
term mortgage debt of $11.1 million.
(18) The Presidio at South Mountain apartments are subject to a deed of trust
securing long-term mortgage debt of $14.6 million.
(19) The Knight's Castle apartments are subject to a deed of trust securing
long-term mortgage debt of $7.6 million.
(20) The Cherry Creek apartments are subject to a deed of trust securing long-
term mortgage debt of $4.2 million.
(21) The Greenpointe apartments are subject to a deed of trust securing long-
term mortgage debt of $3.7 million.
(22) The Mountain Shadow apartments are subject to a deed of trust securing
long-term mortgage debt of $3.4 million.
(23) Phase I (250 units) was acquired in 1993 and Phase II (80 units) was
developed in 1995.
(24) The Windsail apartments are subject to a deed of trust securing long-term
mortgage debt of $4.8 million.
(25) The Brompton Court apartments are subject to a deed of trust securing
long-term mortgage debt of $14.5 million.
(26) The La Tierra at the Lakes apartments are subject to a deed of trust
securing long-term mortgage debt of $26.4 million.
(27) The Double Tree Phase II apartments are subject to a deed of trust
securing long-term mortgage debt of $4.8 million.
(28) The Treat Commons apartments are subject to a deed of trust securing long-
term mortgage debt of $7.3 million.
(29) Represents properties owned by third party owner-developers that are
subject to presale agreements with PTR to acquire such properties. PTR's
investment as of December 31, 1995, for properties owned by PTR as of
December 31, 1995, and January 31, 1996, for properties acquired
subsequent to December 31, 1995, represents development loans made by PTR
to such owner-developers.
(30) 3.7 acres of undeveloped land.
(31) 19.9 acres of undeveloped land.
(32) 53.1 acres of undeveloped land.
(33) 25.3 acres of undeveloped land.
(34) 13.2 acres of undeveloped land.
(35) 7.6 acres of undeveloped land.
(36) 11.6 acres of undeveloped land.
27
<PAGE>
(37) 18.0 acres of undeveloped land.
(38) 25.6 acres of undeveloped land.
(39) 38.7 acres of undeveloped land.
(40) 30.5 acres of undeveloped land.
(41) 10.3 acres of undeveloped land.
(42) 19.2 acres of undeveloped land.
(43) 10.4 acres of undeveloped land.
(44) PTR owns the building and land leased to Holiday Inns of America, Inc. at
Fisherman's Wharf in San Francisco. The lease with Holiday Inns expires in
2018. Percentage leased represents average occupancy for the one-year
period ended December 31, 1995.
(45) PTR's investment as of December 31, 1995 for garden style properties and
Homestead Village properties was $760,000 and $806,000, respectively, and
is reflected in the "other asset" caption of PTR's balance sheet for the
year ended December 31, 1995.
PORTFOLIO COMPOSITION
The following table indicates the composition of properties owned or under
control by PTR at January 31, 1996:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Multifamily...................................... 213 99%
Industrial....................................... 3 *
Hotel............................................ 1 1
--- ---
Total........................................ 217 100%
=== ===
</TABLE>
- --------
*Less than 1%.
(1) Represents cost, including planned renovations, for properties owned or in
planning and under control at January 31, 1996. Represents budgeted
development cost, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period, for
properties in development. Does not include land held for future
development, which approximates 2% of assets based on cost.
28
<PAGE>
GEOGRAPHIC DISTRIBUTION
PTR's multifamily and non-multifamily properties are located in 23
metropolitan areas in 12 states. The table below demonstrates the geographic
distribution of PTR's property investments based on cost at January 31, 1996
for properties owned or under control by PTR on such date:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ASSETS BASED
PROPERTIES ON COST(1)
---------- -------------
<S> <C> <C>
Albuquerque, New Mexico.......................... 12 6%
Austin, Texas.................................... 15 7
Dallas/Ft. Worth, Texas.......................... 20 6
Denver, Colorado................................. 13 5
El Paso, Texas/Las Cruces, New Mexico............ 14 4
Houston, Texas................................... 21 9
Kansas City, Kansas.............................. 1 *
Las Vegas, Nevada................................ 5 5
Los Angeles, California.......................... 3 1
Oklahoma City, Oklahoma.......................... 2 1
Omaha, Nebraska.................................. 2 1
Ontario, California.............................. 1 *
Phoenix, Arizona................................. 26 16
Portland, Oregon/Vancouver, Washington........... 10 6
Reno, Nevada..................................... 2 2
Salt Lake City, Utah............................. 8 4
San Antonio, Texas............................... 26 8
San Diego, California............................ 4 2
San Francisco (Bay Area), California............. 7 4
Santa Fe, New Mexico............................. 5 2
Seattle, Washington.............................. 9 6
Tucson, Arizona.................................. 10 5
Tulsa, Oklahoma.................................. 1 *
--- ---
Total........................................ 217 100%
=== ===
</TABLE>
- --------
*Less than 1%.
(1) Represents cost, including planned renovations, for properties owned or in
planning and under control at January 31, 1996. Represents budgeted
development cost, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during the construction period, for
properties in development. Does not include land held for future
development, which approximates 2% of assets based on cost.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
29
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Shares are listed on the New York Stock Exchange under the symbol
"PTR." The following table sets forth the high and low sale prices of the
Common Shares as reported in the New York Stock Exchange Composite Tape by
CompuServe, and distributions declared, for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------- ------- -------------
<S> <C> <C> <C>
1994
First Quarter............................. $21 5/8 $18 1/4 $0.250(1)
Second Quarter............................ 20 1/8 17 3/4 0.250
Third Quarter............................. 18 7/8 17 5/8 0.250
Fourth Quarter............................ 18 3/8 15 1/2 0.250
1995
First Quarter............................. $18 3/8 $16 3/8 $0.2875(2)
Second Quarter............................ 18 1/8 16 5/8 0.2875
Third Quarter............................. 19 1/4 17 0.2875
Fourth Quarter............................ 20 1/2 17 1/4 0.2875
1996
First Quarter (through March 20).......... $22 1/4 $19 1/4 $0.31(3)
</TABLE>
- --------
(1) Declared in the fourth quarter of 1993 and paid in the first quarter of
1994.
(2) Declared in the fourth quarter of 1994 and paid in the first quarter of
1995.
(3) Declared in the fourth quarter of 1995 and paid in the first quarter of
1996.
As of March 20, 1996, PTR had approximately 3,300 record holders of Common
Shares and in excess of 24,000 record and beneficial holders of Common Shares.
PTR, in order to qualify as a REIT, is required to make distributions (other
than capital gain distributions) to its shareholders in amounts at least equal
to (i) the sum of (A) 95% of its "REIT taxable income" (computed without regard
to the dividends paid deduction and its net capital gain) and (B) 95% of the
net income (after tax), if any, from foreclosure property, minus (ii) the sum
of certain items of non-cash income. PTR's distribution strategy is to
distribute what it believes is a conservative percentage of its cash flow,
permitting PTR to retain funds for capital improvements and other investments
while funding its distributions. PTR has paid 80 consecutive quarterly cash
distributions on Common Shares.
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 12, 1995 Board meeting, the Board announced a projected increase in
the annual distribution level from $1.15 to $1.24 per Common Share. The payment
of distributions is subject to the discretion of the Board and is dependent
upon the financial condition and operating results of PTR.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed PTR's current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in his or her Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholder's basis in his or her Common Shares, it will
generally be treated as gain from the sale or exchange of that shareholder's
Common Shares. PTR annually notifies shareholders of the taxability of
distributions paid during the preceding year. The following summarizes the
taxability of distributions paid in 1994 and 1993 in respect of the Common
Shares and the estimated taxability for 1995:
30
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income....................................... $0.92 $0.68 $0.65
Capital gains......................................... -- -- 0.11
Return of capital..................................... 0.23 0.32 0.06
----- ----- -----
Total............................................... $1.15 $1.00 $0.82
===== ===== =====
</TABLE>
On July 21, 1994, in addition to the distributions paid, PTR redeemed the
shareholder purchase rights issued pursuant to the Rights Agreement dated as of
February 23, 1990, as amended. Pursuant to the redemption, each holder of
record at the close of business on July 21, 1994 received $0.01 per shareholder
purchase right. The redemption price was paid on August 12, 1994 and is taxable
as ordinary income for federal income tax purposes.
Under federal income tax rules, PTR's earnings and profits are first
allocated to its Series A Preferred Shares and Series B Preferred Shares, which
increases the portion of the Common Shares distribution classified as return of
capital. The portion of distributions characterized as return of capital
results primarily from the excess of distributions over earnings, primarily
because non-cash charges such as depreciation are added to earnings in
determining distribution levels. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations."
For federal income tax purposes, the following summaries reflect the
taxability of dividends paid on Series A Preferred Shares and Series B
Preferred Shares, respectively, for periods prior to 1995 and the estimated
taxability for 1995:
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
1995 1994 12/31/93
----- ----- -----------
<S> <C> <C> <C>
Per Series A Preferred Share:
Ordinary income................................. $1.75 $1.75 $0.1231
Capital gains................................... -- -- 0.0227
----- ----- -------
Total......................................... $1.75 $1.75 $0.1458
===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
12/31/95
-----------
<S> <C>
Per Series B Preferred Share:
Ordinary income............................................. $1.3625
Capital gains............................................... --
-------
Total..................................................... $1.3625
=======
</TABLE>
PTR's tax return for the year ended December 31, 1995 has not been filed, and
the taxability information for 1995 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 distributions and dividends is subject to change.
31
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data relating to the
historical financial condition and results of operations of PTR for the years
ended December 31, 1995, 1994, 1993, 1992 and 1991. Such summary financial data
is qualified in its entirety by, and should be read in conjunction with, the
financial statements and related notes thereto incorporated by reference herein
(amounts in thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS SUMMARY:
Rental Income........... $ 262,473 $ 183,472 $ 76,129 $ 30,970 $ 14,721
Total Revenues.......... 264,873 186,105 78,418 32,779 15,817
General and
Administrative
Expenses............... 952 784 660 436 697
REIT Management Fee..... 20,354 13,182 7,073 2,711 793
Earnings from
Operations(1).......... 81,696 46,719 23,191 9,037 2,078
Gain (loss) on Sale of
Investments............ 2,623 -- 2,302 (51) (611)
Preferred Share
Dividends Paid......... 21,823 16,100 1,341 -- --
Net Earnings
Attributable to Common
Shares................. 62,496 30,619 24,152 8,986 1,467
Common Share
Distributions Paid..... $ 76,804 $ 46,121 $ 29,162 $ 13,059 $ 4,179
PER SHARE DATA:
Net Earnings
Attributable to Common
Shares................. $ 0.93 $ 0.66 $ 0.66 $ 0.46 $ 0.21
Common Share
Distributions Paid..... 1.15 1.00 0.82 0.70 0.64
Series A Preferred Share
Dividends Paid......... 1.75 1.75 0.1458 -- --
Series B Preferred Share
Dividends Paid......... $ 1.363 $ -- $ -- $ -- $ --
Weighted Average Common
Shares
Outstanding............ 67,052 46,734 36,549 19,435 7,123
OTHER DATA:
Funds from Operations
Attributable to Common
Shares(2).............. $ 96,978 $ 56,833 $ 34,716 $ 14,922 $ 5,404
Net Cash Provided by
Operating Activities... 121,795 94,625 49,247 20,252 6,092
Net Cash Used by
Investing Activities... (294,488) (368,515) (529,065) (229,489) (33,553)
Net Cash Provided by
Financing Activities... $ 191,520 $ 276,457 $ 478,345 $ 185,130 $ 57,259
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real Estate Owned, at cost... $1,855,866 $1,296,288 $872,610 $337,274 $117,572
Total Assets................. 1,840,999 1,295,778 890,301 342,235 141,020
Line of Credit............... 129,000 102,000 51,500 54,802 101
Long-Term Debt............... 200,000 200,000 -- -- --
Mortgages Payable............ 158,054 93,624 48,872 30,824 35,772
Total Liabilities............ 565,331 455,136 135,284 94,186 38,707
Shareholders' Equity......... $1,275,668 $ 840,642 $755,017 $248,049 $102,313
Number of Common Shares Out-
standing.................... 72,211 50,456 44,645 27,034 13,161
</TABLE>
- --------
(1) Earnings from operations for the year ended December 31, 1995, 1994 and
1993 reflect a $420,000, $1.6 million and a $2.3 million provision,
respectively, for possible losses relating to investments in non-
multifamily properties.
(2) Funds from operations attributable to Common Shares ("funds from
operations") means net earnings computed in accordance with generally
accepted accounting principles ("GAAP"), excluding gains (or
32
<PAGE>
losses) from debt restructuring and sales of property, plus certain non-cash
items, principally property depreciation, and after adjustments for
unconsolidated partnerships and joint ventures. PTR believes that funds from
operations is helpful in understanding a property portfolio's ability to
support interest payments and general operating expenses. Funds from
operations should not be considered as an alternative to net earnings or any
other GAAP measurement of performance as an indicator of PTR's operating
performance or as an alternative to cash flows from operating, investing or
financing activities as a measure of liquidity. In July 1994, PTR changed to
a more conservative policy of expensing the amortization of loan costs in
determining funds from operations. For comparability, funds from operations
has been restated to give effect to this policy as if it had been in effect
since January 1, 1991.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
PTR's operating results depend primarily upon income from multifamily
properties, which is substantially influenced by (i) the demand for and supply
of multifamily units in PTR's target market and submarkets, (ii) rental expense
levels, (iii) the effectiveness of property level operations and (iv) the pace
and price at which PTR can develop and acquire additional multifamily
properties. Capital and credit market conditions which affect PTR's cost of
capital also influence operating results.
PTR's target market and submarkets have benefitted substantially in recent
periods from demographic trends (including job and population growth) that
increase the demand for multifamily units. Consequently, rental rates for
multifamily units have increased more than the inflation rate for the last
three years and are expected to continue experiencing such increases for 1996.
Expense levels also influence operating results, and rental expenses (other
than real estate taxes) as a percentage of revenues for multifamily properties
have decreased slightly during 1995 and are expected to increase at
approximately the rate of inflation for 1996.
MERGER AND CONCURRENT SUBSCRIPTION OFFERING
On March 23, 1995, PTR completed the Merger. In the Merger, each outstanding
share of PACIFIC common stock was converted into the right to receive 0.611 of
a Common Share. As a result, 8,468,460 Common Shares were issued in the Merger
in exchange for all of the outstanding shares of PACIFIC common stock.
Additionally, PTR changed its name from Property Trust of America to Security
Capital Pacific Trust to more accurately reflect its newly expanded target
market. The Merger expanded PTR's target market to include a six-state region
of the western United States that the REIT Manager believes is expected to
provide some of the most attractive multifamily growth opportunities.
Concurrently with the consummation of the Merger, PTR completed a
subscription offering pursuant to which PTR received net proceeds of $216.3
million (13.2 million Common Shares). The subscription offering was designed to
allow shareholders of PTR to purchase Common Shares at the same price PACIFIC
shareholders were acquiring Common Shares in the Merger ($16.375 per Common
Share). SCG purchased $50 million (3.1 million Common Shares) in the
subscription offering pursuant to the oversubscription privilege.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
During 1995, PTR acquired 24 multifamily properties aggregating 7,633 units
for a total purchase price, including planned renovations, of approximately
$361.0 million. In addition, PTR completed development of 15 multifamily
properties aggregating 2,405 units in 1995 with a completion cost of $92.6
million. At December 31, 1995, PTR had 27 multifamily properties under
construction with a budgeted completion cost of $341.6 million and had in
planning (see "Item 1. Business--Strategy for Cash Flow and Distribution
33
<PAGE>
Growth") an estimated 6,150 multifamily units with an aggregate estimated
investment cost of $341.0 million. During 1994, PTR acquired 20 multifamily
properties aggregating 6,626 units for a total purchase price, including
planned renovations, of approximately $266.0 million. In addition, PTR
completed development of 15 multifamily properties aggregating 3,061 units in
1994 with a completion cost of $127.9 million.
The percentage of PTR's total rental income generated by multifamily
properties was 98.6% and 98.3% for the years ended December 31, 1995 and 1994,
respectively. This percentage will continue to increase throughout 1996 due to
past and ongoing multifamily property developments and acquisitions and the
periodic sale of non-multifamily properties.
Property Operations
Including the newly developed and acquired assets, net earnings increased
$37.6 million (80.5%) for 1995 over 1994. The increased net earnings related
primarily to property revenue increases of $79.0 million (43.1%), partially
offset by higher rental expenses and real estate taxes which increased $25.0
million (31.7%) for the period. Depreciation expense increased $12.1 million
(49.0%) for 1995 over 1994. These increases are due to multifamily acquisitions
and multifamily developments placed in service and to rental rate increases.
For operating multifamily properties, which comprise 98.1% of PTR's total
operating properties based on undepreciated cost at December 31, 1995, rental
expenses and real estate taxes were 40.0% and 43.6% of rental income during the
years ended December 31, 1995 and 1994, respectively.
During the period prior to a property being stabilized (see "Item 1.
Business--Multifamily Properties"), the REIT Manager and the property managers
begin implementing expense controls, reconfigure the resident mix, supervise
renovations and implement a strategy to increase rental income. The full
benefits of these changes are not reflected until after the properties are
stabilized. At December 31, 1995, 86.4% of PTR's operating multifamily
properties, based on expected cost, were classified as stabilized as compared
to 82.4% at December 31, 1994.
Multifamily Properties Fully Operating Throughout Both Periods
For the 79 multifamily properties that were fully operating throughout both
1995 and 1994, property level earnings before interest, income taxes,
depreciation and amortization ("EBITDA") as a percentage of PTR's aggregate
investment in these properties increased to 10.88% in 1995 from 10.22% in 1994.
EBITDA is not to be construed as a substitute for "net earnings" in evaluating
operating results, nor as a substitute for "cash flow" in evaluating liquidity.
This increase in return on investment, which is a function of rental rate
growth, occupancy levels, expense rate growth and capital expenditure levels,
is attributable primarily to growth in rental rates and the control of
operating expense growth. This increase in return on investment was achieved at
the same time that PTR increased its investment in these properties by $8.1
million (1.1% of total investment in these properties) as a result of
renovation and other capital expenditures. The 7.8% increase in net operating
income resulted from a 3.7% rental revenue increase and a 1.5% decrease in
rental expenses for such properties for 1995 as compared to 1994.
Interest Income
Interest income for 1995 decreased 8.9% primarily resulting from the payoff
of a $4.6 million mortgage note receivable during the first quarter of 1995 and
the sale during the fourth quarter of 1995 of PTR's investment in a $3.2
million purchase money note received from a prior year sale of a non-
multifamily property.
Interest Expense
Interest expense increased $142,000 (0.73%) for 1995 as compared to 1994. The
increase is primarily attributable to an increase of $1.5 million (11.9%)
resulting from the issuance of $200 million of long-term
34
<PAGE>
unsecured notes in February 1994, as more fully discussed under "--Liquidity
and Capital Resourses" and an increase in mortgage interest expense of $4.7
million (72.5%) for 1995 compared to 1994 offset by an increase in capitalized
interest of $5.7 million (94.7%) for 1995 compared to 1994. The increase in
mortgage expense is attributable to the addition of eight mortgage payable
notes aggregating $66.5 million acquired upon purchase of multifamily
properties or assumed in connection with the Merger. The increase in
capitalized interest is attributable to increased levels of multifamily
development activity and higher interest rates.
Line of credit interest expense for 1995 was $348,000 (5.7%) lower than 1994,
principally because of lower average outstanding balances offset by higher
interest rates. Average borrowings were approximately $51.9 million (with an
average interest rate of 8.0%) during 1995, as compared to average borrowings
of $59.9 million (with an average interest rate of 7.0%) during 1994.
General and Administrative Expense including REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow and therefore increased by $7.2 million (54.4%)
in 1995 as compared to 1994 because cash flow increased substantially (see "--
REIT Management Agreement" below). As PTR arranges amortizing long-term debt
and nonconvertible preferred share financing as more fully described in "--
Liquidity and Capital Resources" below, the REIT Management fee will
effectively decline in proportion to PTR's earnings from operations because
actual or assumed regularly scheduled principal payments, as defined in such
agreement, associated with the long-term debt and distributions actually paid
with respect to any nonconvertible preferred shares will be deducted from the
cash flow amount on which the REIT Management fee is based.
Gains and Provision for Loss on Real Estate and Investments
PTR develops and acquires properties with a view to effective long-term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio composition, PTR may from time to time seek to dispose
of assets that in management's view do not meet PTR's long-term investment
criteria and redeploy the proceeds therefrom, preferably through like-kind
exchanges, into assets that are more consistent with PTR's investment
objectives.
During the fourth quarter of 1995, PTR sold one multifamily property,
consisting of 166 units. PTR recorded a gain from such sale of $3.2 million for
the year ended December 31, 1995. The proceeds from the sale were redeployed
through a like-kind exchange into a 290 unit multifamily property.
PTR also sold its investment in a mortgage note received upon sale of one of
its non-multifamily properties. PTR recorded a loss of $600,000 on such sale
for the year ended December 31, 1995.
PTR owns a 40% interest in a partnership that in October 1995 sold its only
real estate asset, an office building located in the Dallas, Texas metropolitan
area. During the first quarter of 1994, the partnership adopted a strategy of
disposing of the property rather than continuing to hold the property as a
long-term investment. As a result, the managing partner evaluated the building
for net realizable value, which resulted in a provision for possible loss of $4
million. PTR's share of the loss provision is $1.6 million as reflected in the
December 31, 1994 statement of earnings. During the third quarter of 1995, the
partnership approved the sale of the property and as a result, PTR recorded an
additional provision of $220,000 as reflected in the December 31, 1995
statement of earnings. This provision has no impact on cash flow from operating
activities nor does PTR have any financial obligation to the partnership.
PTR also recorded a loss provision of $200,000 for the year ended December
31, 1995 relating to a contingent liability on a non-multifamily property. This
provision has no impact on cash flow from operating activity.
35
<PAGE>
PTR's strategy is to focus on the ownership of multifamily properties.
Periodic sales of multifamily and non-multifamily assets may occur as
opportunities arise or investment objectives change. Properties are
periodically evaluated for impairment and provisions for possible losses are
made if required. Statement of Financial Accounting Standard No. 121 entitled
"Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets
To Be Disposed Of" will be adopted by PTR, as required by the Statement,
effective January 1, 1996. In the opinion of management, the adoption of the
Statement is not expected to have a material impact on the financial statements
at the date of adoption.
Preferred Share Dividend
In November 1993, PTR issued $230 million of Series A Preferred Shares that
are entitled to receive an annual dividend of $1.75 per share (7.0% annual
dividend rate), which amounted to $16.1 million for both 1995 and 1994. In May
1995, PTR issued $105 million of Series B Preferred Shares that are entitled to
receive an annual dividend of $2.25 per share (9.0% annual dividend rate),
which amounted to $5.7 million for 1995. The Preferred Share dividends do not
reduce the amount PTR has budgeted for Common Share distributions but do
increase the percentage of the Common Share distribution that constitutes a
non-taxable return of capital.
1994 COMPARED TO 1993
During 1994, PTR acquired 20 multifamily properties aggregating 6,626 units
for a total purchase price, including planned renovations, of approximately
$266.0 million. In addition, PTR completed development of 15 multifamily
properties aggregating 3,061 units in 1994 with a completion cost of $127.9
million. At December 31, 1994, PTR had 21 multifamily properties under
construction with a budgeted completion cost of $205.4 million and had in
planning an estimated 8,492 multifamily units with an aggregate estimated
investment cost of $403.0 million. During 1993, PTR acquired 53 multifamily
properties aggregating 13,772 units for a total purchase price, including
planned renovations, of approximately $453.7 million, most of which was
invested in the fourth quarter of 1993. In addition, PTR completed development
of three multifamily properties aggregating 732 units in 1993.
The percentage of PTR's total rental income generated by multifamily
properties was 98.3% and 93.2% for the years ended December 31, 1994 and 1993,
respectively. At December 31, 1994, 82.4% of PTR's operating multifamily
properties based on expected cost were classified as stabilized as compared to
47% at December 31, 1993.
Property Operations
Including the newly developed and acquired assets, net earnings increased
$21.2 million (83.3%) for 1994 over 1993. The increased net earnings related
primarily to property revenue increases of $107.3 million (141.0%), partially
offset by higher rental expenses and real estate taxes, which increased by
$48.5 million (159.2%) for the period. Depreciation expense increased $14.1
million (134.2%) for 1994 over 1993. These increases are due to multifamily
acquisitions and multifamily developments placed in service and to rental rate
increases. For operating multifamily properties, which comprised 97.1% of PTR's
total operating properties based on cost at December 31, 1994, rental expenses
and real estate taxes were 43.6% and 42.2% of rental income during the years
ended December 31, 1994 and 1993, respectively.
Multifamily Properties Fully Operating Throughout Both Periods
For the 29 multifamily properties that were fully operating throughout both
1994 and 1993, property level EBITDA as a percentage of PTR's aggregate
investment in these properties increased to 11.14% in 1994 from 10.68% in 1993.
This increase in return on investment, was achieved at the same time that PTR
increased its investment in these properties by $2.8 million (1.1% of total
investment in these properties) as a result of renovation and other capital
expenditures. The 6.8% increase in rental income (the majority
36
<PAGE>
resulting from a 6.42% rental rate increase) for such properties for 1994 as
compared to 1993 was offset by increases in rental expenses, primarily due to
real estate taxes and turnover expenses.
Interest Income
Interest income for 1994 increased 15.0%, primarily resulting from the
addition of 4 purchase money notes aggregating $12.4 million received in 1993
in conjunction with property sales.
Interest Expense
Interest expense increased $15.5 million (395.6%) for 1994 as compared to
1993. The increase is primarily attributable to interest expense of $12.9
million resulting from the issuance of $200 million of long-term notes in
February 1994, as more fully discussed under "--Liquidity and Capital
Resources--Financing Activities."
Mortgage interest expense decreased $288,000 (41.6%) for 1994, compared to
1993. The decrease is attributable to interest savings resulting from
prepayments and payoffs aggregating $10.5 million on mortgages during 1994 and
an increase of $3.2 million (114.0%) in capitalized interest during 1994 over
1993 due to increased levels of multifamily development activity.
Line of credit interest expense for 1994 was $2.9 million higher than for
1993, principally because of higher average outstanding balances, higher
interest rates and amortization of additional loan costs (commitment fees,
title policies and legal expenses) relating to PTR's revolving credit facility
which was increased from $200 million to $275 million during 1994. Average
borrowings were approximately $59.9 million (with an average interest rate of
7.0%) during 1994, as compared to average borrowings of $40.6 million (with an
average interest rate of 6.3%) during 1993.
General and Administrative Expense including REIT Management Fee
The REIT Management fee paid by PTR fluctuates with the level of PTR's pre-
REIT Management fee cash flow and therefore increased by $6.1 million (86.4%)
in 1994 as compared to 1993 because cash flow increased substantially (see "--
REIT Management Agreement" below). As PTR arranges amortizing long-term debt
and nonconvertible preferred share financing as more fully described in "--
Liquidity and Capital Resources" below, the REIT Management fee will
effectively decline in proportion to PTR's earnings from operations because
actual or assumed regularly scheduled principal payments, as defined in such
agreement, associated with the long-term debt and distributions actually paid
with respect to any nonconvertible preferred shares will be deducted from the
cash flow amount on which the REIT Management fee is based.
Provision for Possible Loss
PTR develops and acquires properties with a view to effective long-term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio composition, PTR may from time to time seek to dispose
of assets that in management's view do not meet PTR's long-term investment
criteria and redeploy the proceeds therefrom, preferably through like-kind
exchanges, into assets that are more consistent with PTR's investment
objectives.
PTR owns a 40% interest in a partnership that in October 1995 sold its only
real estate asset, an office building located in the Dallas, Texas metropolitan
area. See "--1995 Compared to 1994--Gains and Provision for Loss on Real Estate
and Investments" above.
PTR focuses its investment and development activities on multifamily
properties. PTR will continue to aggressively manage its non-multifamily
properties in order to maximize cash flow, and dispositions of such non-
multifamily properties may occur as opportunities arise. Properties are
periodically evaluated for net realizable value and provisions for possible
losses are made if required.
37
<PAGE>
Preferred Share Dividend
In November 1993, PTR issued $230 million of Series A Preferred Shares that
are entitled to receive an annual dividend of $1.75 per share (7.0% annual
dividend rate), which amounted to $16.1 million for 1994 compared to $1.3
million for 1993. The preferred share dividends do not reduce the amount PTR
has budgeted for Common Share distributions but do increase the percentage of
the Common Share distribution that constitutes a non-taxable return of capital.
ENVIRONMENTAL MATTERS
PTR does not expect any environmental condition on its properties to have a
material adverse affect upon its results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
The REIT Manager considers PTR's liquidity and ability to generate cash from
operations and financings to be adequate and expects it to continue to be
adequate to meet PTR's development, acquisition, operating, debt service and
shareholder distribution requirements.
Operating Activities
Net cash flow provided by operating activities increased by $27.2 million
(28.7%) for the year ended December 31, 1995 as compared to 1994. Net cash flow
provided by operating activities increased by $45.4 million (92.1%) for 1994 as
compared to 1993. These increases are due primarily to multifamily property
acquisitions and developments as described under "--Results of Operations"
above offset partially by changes in the timing of the payment of accounts
payable and accrued expenses and other liabilities in 1995 as compared to 1994
and 1994 as compared to 1993.
Investing Activities
During the year ended December 31, 1995, PTR invested $501.7 million for the
development, acquisition (including properties acquired in the Merger) and
renovation of multifamily properties and land, net of $66.5 million in
mortgages assumed. During the year ended December 31, 1994, PTR invested $381.2
million for the acquisition, development and renovation of multifamily
properties and land, net of $56.6 million in mortgages assumed. Except for the
properties acquired in the Merger, which were financed with the issuance of
Common Shares, these developments, acquisitions and renovations were financed
with cash on hand and borrowings under PTR's revolving line of credit, which
were repaid with the proceeds from PTR's equity and debt offerings.
PTR's investing activities used $74.0 million (20.1%) less cash in 1995 as
compared to 1994 as a result of lower levels of multifamily property
acquisitions acquired for cash, and $160.6 million (30.3%) less cash in 1994 as
compared to 1993 as a result of lower levels of multifamily investments.
At January 31, 1996, PTR had unfunded development commitments for
developments under construction of $152.1 million. In addition, PTR had $391.8
million of developments in planning at such date. The foregoing developments
are subject to a number of conditions, and PTR cannot predict with certainty
that any of them will be consummated.
Financing Activities
PTR's net financing activities for the year ended December 31, 1995 provided
$191.5 million as compared to $276.5 million in 1994. In addition, PTR issued
8,468,460 Common Shares in March 1995
38
<PAGE>
valued at $138.7 million in exchange for all of PACIFIC's common stock. The
decrease in cash flow provided by financing activities is primarily due to the
repayment of revolving credit balances ($302.9 million during 1995 as compared
to $215.7 million in 1994) and an increase in distributions to shareholders
($98.6 million for 1995 compared to $62.2 million for 1994) offset slightly by
more offering proceeds received during 1995 as compared to 1994 ($317.6 million
during 1995 as compared to $301.1 million during 1994). Proceeds from the
offerings were used for acquisition, development and renovation of multifamily
properties, to repay revolving credit balances incurred for such purposes, and
for working capital purposes. Pending additional investment in multifamily
properties, PTR has invested the remaining net proceeds in short-term money
market instruments.
On February 23, 1996, PTR issued $50 million of 7.15% Notes due 2010 (the
"2010 Notes") and $100 million of 7.90% Notes due 2016 (the "2016 Notes") which
funds were used to reduce the outstanding revolving credit balance. The 2010
Notes bear interest at 7.15% per annum and require annual principal payments of
$6.25 million, commencing February 15, 2003. The 2016 Notes bear interest at
7.90% per annum and require aggregate annual principal payments of $10 million
in 2011, $12.5 million in 2012, $15 million in 2013, $17.5 million in 2014, $20
million in 2015 and $25 million in 2016. Collectively, the 2010 Notes and 2016
Notes are unsecured and have an average life to maturity of 15.5 years and an
average effective interest cost, including offering discounts and issuance
costs, of 7.84% per annum. The 2010 Notes and 2016 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 an adjustment, if any, based on
the yield to maturity relative to market yields available at redemption. The
2010 Notes and 2016 Notes are governed by the terms and provisions of an
indenture agreement dated February 1, 1994, as supplemented (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 the 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 1.5:1. PTR is in compliance with all debt covenants.
On March 23, 1995, PTR increased its unsecured revolving line of credit
facility to $350 million. The line of credit expires August 1997 and may
annually be extended for an additional year with the approval of TCB and the
other participating lenders. Borrowings bear interest at the greater of prime
(8.5% at December 31, 1995) or the federal funds rate plus 0.5% or, at PTR's
option, LIBOR (5.719% at December 31, 1995) plus 1.375% (7.094% at December 31,
1995) which can vary from LIBOR plus 1.0% to LIBOR plus 1.75% based upon the
rating of PTR's senior unsecured debt. Additionally, there is a commitment fee
on the average unfunded line of credit balance. Covenants require that PTR
maintain (i) an interest coverage ratio of not less than 2:1, (ii) a debt to
tangible net worth ratio no greater than 1:1, (iii) a fixed charge ratio of no
less than 1.4:1, (iv) an unencumbered pool of real estate properties of which
certain properties must meet certain occupancy requirements and which have an
aggregate historical cost of at least 175% of unsecured indebtedness and (v) a
tangible net worth of at least $1 billion at all times. PTR is in compliance
with all debt covenants.
PTR expects to finance developments, acquisitions and renovations with cash
on hand and borrowings under its line of credit prior to arranging long-term
capital in order to efficiently respond to market opportunities while
minimizing the amount of cash invested in short-term investments at lower
yields. PTR believes that its current conservative ratio of long-term debt to
total long-term undepreciated book capitalization, the sum of long-term debt
and shareholders' equity after adding back accumulated depreciation (21% at
December 31, 1995 on an historical basis, and 27% at January 31, 1996, on a pro
forma basis giving effect to the sale of the 2010 Notes and 2016 Notes and the
application of the net proceeds therefrom), provides considerable flexibility
to prudently increase its capital base by utilizing long-term debt
39
<PAGE>
as a financing tool in the future. PTR expects to fund additional growth for
the foreseeable future primarily through the issuance of unsecured long-term,
fixed rate amortizing debt securities similar to the 2010 Notes and 2016 Notes
and through its asset optimization strategy. To a lesser extent, under certain
circumstances, PTR may arrange for debt with different maturities in order to
optimize its overall debt maturity schedule.
PTR has the ability to finance a significant level of investment activity
with its debt issuance capacity, asset optimization strategy and internally
generated funds made available as the dividend payout ratio is reduced. Hence,
PTR has no current plans to raise additional capital through the common equity
markets. No assurance can be given that changes in market conditions or other
factors will not affect these plans.
On May 17, 1995, PTR raised net proceeds of $101.4 million from the sale of
the Series B Preferred Shares. The net proceeds were used for the development
and acquisition of additional multifamily properties, for the repayment of
indebtedness under PTR's revolving line of credit and for working capital
purposes.
On March 23, 1995, PTR raised $216.3 million of net proceeds from a
subscription offering of 13.2 million Common Shares at a price of $16.375 per
Common Share, which was the same price per Common Shares on which the exchange
ratio for the Merger was based. The subscription offering closed concurrently
with the consummation of the Merger. The subscription offering was designed to
allow shareholders the opportunity to purchase Common Shares at the same price
at which PACIFIC shareholders acquired Common Shares in the Merger and to
maintain PTR's balance sheet ratios. SCG acquired $50 million (3.1 million
Common Shares) of the subscription offering pursuant to the oversubscription
privilege.
On August 16, 1994, PTR raised $101.8 million of net proceeds from a rights
offering of 5,593,718 Common Shares at a price of $18.25 per Common Share. SCG
exercised in full its rights to acquire Common Shares in the offering at the
same price paid by the public ($18.25 per Common Share) and acquired additional
rights in the open market. Proceeds from the offering were used to fund
developments and to invest in additional multifamily properties in PTR's target
market and to repay borrowings under PTR's line of credit.
On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008
(the "2008 Notes") and $100 million of 7.5% Senior Notes due 2014 (the "2014
Notes") which funds were used for acquisition, development and renovation of
multifamily properties and to repay revolving credit balances incurred for such
purposes. 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 2008 Notes and 2014 Notes are unsecured and had an original
average life to maturity of 14.25 years and an average effective interest cost,
inclusive of offering discounts, issuance costs, and the interest rate
protection agreement, of 7.37% per annum. The 2008 Notes and 2014 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 2008 Notes and 2014 Notes
being redeemed plus accrued interest thereon to the redemption date plus an
adjustment, if any, based on the yield to maturity relative to market yields
available at redemption. The 2008 Notes and 2014 Notes are governed by the
terms and provisions of the Indenture.
Distributions
PTR's current distribution policy is to pay quarterly distributions to
holders of Common Shares based upon what it believes to be a prudent percentage
of cash flow. Because depreciation is a non-cash expense, cash flow typically
will be greater than net earnings attributable to Common Shares. Therefore,
quarterly distributions paid will generally be higher than quarterly net
earnings attributable to Common Shares.
Distributions paid on Common Shares exceeded net earnings attributable to
Common Shares by $14.3 million, $15.5 million and $5.0 million for 1995, 1994
and 1993, respectively, resulting in corresponding decreases in shareholders'
equity for each of the respective periods.
40
<PAGE>
PTR announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 12, 1995 board meeting, the Board announced a projected increase in
the annual distribution level from $1.15 to $1.24 per Common Share. The payment
of distributions is subject to the discretion of the Board and is dependent
upon the financial condition and operating results of PTR.
Pursuant to the terms of the preferred shares, PTR is restricted from
declaring or paying any distributions with respect to its Common Shares unless
all cumulative distributions with respect to the preferred shares have been
paid and sufficient funds have been set aside for distributions that have been
declared for the then current distribution period with respect to the preferred
shares.
Funds from operations represents PTR's net earnings computed in accordance
with GAAP, excluding gains (or losses) plus depreciation and provision for
possible loss on investments. PTR believes that funds from operations is
helpful in understanding a property portfolio's ability to support interest
payments and general operating expenses. In July 1994, PTR changed to a more
conservative policy of expensing the amortization of loan costs in determining
funds from operations. For comparability, funds from operations have been
restated to give effect to this policy as if it had been in effect since
January 1, 1991. Reflecting such restatement, funds from operations
attributable to Common Shares increased $40.1 million (70.6%) to $96.9 million
for 1995 from $56.8 million for 1994, and increased 63.7% from $34.7 million to
$56.8 million from 1993 to 1994. The increases resulted primarily from
increased properties in operation. Funds from operations should not be
construed as a substitute for "net earnings" in evaluating operating results
nor as a substitute for "cash flow" in evaluating liquidity.
REIT MANAGEMENT AGREEMENT
Effective March 1, 1991, PTR entered into a REIT management agreement (as
amended and restated, the "REIT Management Agreement") with the REIT Manager to
provide management services to PTR. All officers of PTR are employees of the
REIT Manager and PTR has no employees. See "Item 1. Business--The REIT Manager"
for a description of the services included in the REIT Management fee.
The REIT Management Agreement requires PTR to pay a base annual fee of
$855,000 plus 16% of cash flow as defined in the REIT Management Agreement
("Cash Flow") in excess of $4,837,000. In the REIT Management Agreement, Cash
Flow is calculated by reference to PTR's cash flow from operations before
deducting (i) fees paid to the REIT Manager, (ii) extraordinary expenses
incurred at the request of the independent Trustees of PTR, and (iii) 33% of
any interest paid by PTR on convertible subordinated debentures (of which there
have been none since inception of the REIT Management Agreement); and, after
deducting (iv) actual or assumed regularly scheduled principal and interest
payments for long-term debt and (v) distributions actually paid with respect to
any nonconvertible preferred shares of beneficial interest of PTR. The REIT
Management Agreement provides that the long-term debt described above under "--
Liquidity and Capital Resources" will be treated as having regularly scheduled
principal and interest payments similar to 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 interest and dividend income from PTR Development Services
Incorporated, realized gains from dispositions of investments or income from
cash equivalent investments. The REIT Manager also receives a fee of .25% per
year on the average daily balance of cash equivalent investments. REIT
management fees aggregated $20,354,000, $13,182,000 and $7,073,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR relating to PTR's operations, primarily
including third party legal, accounting and similar fees paid on behalf of PTR,
and travel expenses incurred in seeking financing, property acquisitions,
property sales, property development, attending Board and shareholder meetings
and similar activities on behalf of PTR.
41
<PAGE>
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. PTR may terminate the REIT Management Agreement on 60 days' notice.
Because of the year-to-year nature of the agreement, its maximum effect on
PTR's results of operations cannot be predicted, other than that REIT
Management fees will generally increase or decrease in proportion to cash flow
increases or decreases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PTR's Balance Sheets as of December 31, 1995 and 1994, its Statements of
Earnings, Shareholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1995 and Schedule III--Real Estate and
Accumulated Depreciation, together with the report of KPMG Peat Marwick LLP,
independent auditors, are included under Item 14 of this report and are
incorporated herein by reference. Selected quarterly financial data is
presented in Note 9 of Notes to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding executive officers of PTR's REIT Manager, see "Item
1. Business--Officers of PTR and Directors and Officers of the REIT Manager and
Relevant Affiliates." The other information required by this Item 10 is
incorporated herein by reference to the description under the captions
"Election of Trustees" and "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" in PTR's definitive proxy statement for its 1996 annual
meeting of shareholders (the "1996 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Trustee Compensation" and "PTR Officers--Employees of the REIT Manager" in the
1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the captions
"Principal Shareholders" and "Election of Trustees" in the 1996 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 1996 Proxy Statement.
42
<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 44 of this report.
2. Financial Statement Schedules:
Schedule III.
All other schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
3. Exhibits:
See Index to Exhibits, which is incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed during
the last quarter of the period covered by this report:
None.
(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.
43
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
SECURITY CAPITAL PACIFIC TRUST:
Independent Auditors' Report............................................. 45
Balance Sheets as of December 31, 1995 and 1994.......................... 46
Statements of Earnings for the years ended December 31, 1995, 1994 and
1993.................................................................... 47
Statements of Shareholders' Equity for the years ended December 31, 1995,
1994 and 1993........................................................... 48
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... 49
Notes to Financial Statements............................................ 50
Schedule III--Real Estate and Accumulated Depreciation as of December 31,
1995.................................................................... 65
</TABLE>
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
SECURITY CAPITAL PACIFIC TRUST:
We have audited the financial statements of SECURITY CAPITAL PACIFIC TRUST as
listed in the accompanying index. In connection with our audits of the
financial statements, we also have audited the financial statement schedule
listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SECURITY CAPITAL PACIFIC TRUST
as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995, 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
Chicago, Illinois
January 31, 1996, except as to
Note 12 which is as of
February 23, 1996
45
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ ----------------------
1995 1994
---------- ----------
<S> <C> <C>
Real estate............................................ $1,855,866 $1,296,288
Less accumulated depreciation.......................... 81,979 46,199
---------- ----------
1,773,887 1,250,089
Mortgage notes receivable.............................. 15,844 22,597
---------- ----------
Total investments.................................. 1,789,731 1,272,686
Cash and cash equivalents.............................. 26,919 8,092
Accounts receivable.................................... 3,318 1,657
Other assets........................................... 21,031 13,343
---------- ----------
Total assets....................................... $1,840,999 $1,295,778
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Line of credit....................................... $ 129,000 $ 102,000
Long term debt....................................... 200,000 200,000
Mortgages payable.................................... 158,054 93,624
Distributions payable................................ 22,437 14,506
Accounts payable..................................... 21,040 17,230
Accrued expenses and other liabilities............... 34,800 27,776
---------- ----------
Total liabilities.................................. 565,331 455,136
---------- ----------
Shareholders' equity:
Series A Preferred shares (9,200,000 convertible
shares issued; stated liquidation preference of $25
per share).......................................... 230,000 230,000
Series B Preferred shares (4,200,000 shares issued;
stated liquidation preference of $25 per share)..... 105,000 --
Common shares (shares issued--72,375,819 in 1995 and
50,620,516 in 1994)................................. 72,376 50,621
Additional paid-in capital........................... 952,679 622,161
Distributions in excess of net earnings.............. (82,450) (60,211)
Treasury shares (164,901 in 1995 and 164,478 in
1994)............................................... (1,937) (1,929)
---------- ----------
Total shareholders' equity......................... 1,275,668 840,642
---------- ----------
Total liabilities and shareholders' equity......... $1,840,999 $1,295,778
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Revenues:
Rental income...................................... $262,473 $183,472 $76,129
Interest........................................... 2,400 2,633 2,289
-------- -------- -------
264,873 186,105 78,418
-------- -------- -------
Expenses:
Rental expenses, excluding real estate taxes....... 82,720 62,920 24,742
Real estate taxes.................................. 21,326 16,093 5,742
Depreciation....................................... 36,685 24,614 10,509
Interest........................................... 19,584 19,442 3,923
General and administrative, including REIT manage-
ment fee.......................................... 21,306 13,966 7,733
Provision for possible loss on investments......... 420 1,600 2,270
Other.............................................. 1,136 751 308
-------- -------- -------
183,177 139,386 55,227
-------- -------- -------
Earnings from operations............................. 81,696 46,719 23,191
Gain on sale of investments, net..................... 2,623 -- 2,302
-------- -------- -------
Net earnings......................................... 84,319 46,719 25,493
Less Preferred share dividends....................... 21,823 16,100 1,341
-------- -------- -------
Net earnings attributable to common shares......... $ 62,496 $ 30,619 $24,152
======== ======== =======
Weighted average common shares outstanding........... 67,052 46,734 36,549
======== ======== =======
Per share net earnings attributable to common shares. $ 0.93 $ 0.66 $ 0.66
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES OF BENEFICIAL
INTEREST $1 PAR VALUE
-----------------------
SERIES A SERIES B
PREFERRED PREFERRED
SHARES AT SHARES AT COMMON
AGGREGATE AGGREGATE SHARES ADDITIONAL DISTRIBUTIONS
LIQUIDATION LIQUIDATION AT PAR PAID-IN IN EXCESS OF TREASURY
PREFERENCE PREFERENCE VALUE CAPITAL NET EARNINGS SHARES TOTAL
----------- ----------- ------- ---------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1992................... $ -- $ -- $27,191 $247,418 $(24,745) $(1,815) $ 248,049
Net earnings........... -- -- -- -- 25,493 -- 25,493
Common share distribu-
tions paid............ -- -- -- -- (29,162) -- (29,162)
Net increase in Common
share distributions
accrued............... -- -- -- -- (11,161) -- (11,161)
Preferred share divi-
dends paid............ -- -- -- -- (1,341) -- (1,341)
Sale of shares, net of
expenses.............. 230,000 -- 17,072 267,122 -- -- 514,194
Dividend Reinvestment
and Share Purchase
Plan, net............. -- -- 449 7,522 -- -- 7,971
Exercise of stock op-
tions, net............ -- -- 97 991 -- -- 1,088
Cost of treasury shares
purchased............. -- -- -- -- -- (114) (114)
-------- -------- ------- -------- -------- ------- ----------
Balances at December 31,
1993................... 230,000 -- 44,809 523,053 (40,916) (1,929) 755,017
Net earnings........... -- -- -- -- 46,719 -- 46,719
Common share distribu-
tions paid............ -- -- -- -- (46,121) -- (46,121)
Redemption of share-
holder purchase
rights................ -- -- -- -- (448) -- (448)
Net increase in Common
share distributions
accrued............... -- -- -- (3,345) (3,345)
Preferred share divi-
dends paid............ -- -- -- -- (16,100) (16,100)
Sale of shares, net of
expenses.............. -- -- 5,594 95,482 -- -- 101,076
Dividend Reinvestment
and Share Purchase
Plan, net............. -- -- 216 3,607 -- -- 3,823
Exercise of stock op-
tions, net............ -- -- 2 19 -- -- 21
-------- -------- ------- -------- -------- ------- ----------
Balances at December 31,
1994................... 230,000 -- 50,621 622,161 (60,211) (1,929) 840,642
Net earnings........... -- -- -- -- 84,319 -- 84,319
Common share distribu-
tions paid............ -- -- -- -- (76,804) -- (76,804)
Net increase in Common
share distributions
accrued............... -- -- -- -- (7,931) -- (7,931)
Preferred share divi-
dends paid............ -- -- -- -- (21,823) -- (21,823)
Issuance of shares, net
of expenses........... -- 105,000 21,694 329,591 -- -- 456,285
Dividend Reinvestment
and Share Purchase
Plan, net............. -- -- 61 927 -- -- 988
Cost of treasury shares
purchased............. -- -- -- -- -- (8) (8)
-------- -------- ------- -------- -------- ------- ----------
Balances at December 31,
1995................... $230,000 $105,000 $72,376 $952,679 $(82,450) $(1,937) $1,275,668
======== ======== ======= ======== ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net earnings................................... $ 84,319 $ 46,719 $ 25,493
Adjustments to reconcile net earnings to cash
flows provided
by operating activities
Depreciation and amortization................ 38,228 26,517 12,219
Provision for possible loss on investments... 420 1,600 2,270
Gain on investment properties................ (2,623) -- (2,302)
Other, net................................... -- -- 83
Increase in accounts payable................... 2,719 3,463 9,996
Increase in accrued real estate taxes.......... 2,167 7,874 2,156
Increase in accrued interest on long term
debt.......................................... -- 5,391 --
Increase in accrued expenses and other liabil-
ities......................................... 4,857 4,264 3,039
Net change in other operating assets........... (8,292) (1,203) (3,707)
-------- -------- --------
Net cash flow provided by operating activi-
ties........................................ 121,795 94,625 49,247
-------- -------- --------
Investing activities:
Real estate investments........................ (308,996) (380,688) (536,622)
Mortgage notes receivable, net................. 6,753 27 1,323
Sale of investment properties, net............. 7,755 12,146 6,389
Other.......................................... -- -- (155)
-------- -------- --------
Net cash flow used in investment activities.. (294,488) (368,515) (529,065)
-------- -------- --------
Financing activities:
Proceeds from sale of shares, net of expenses.. 317,614 101,076 514,194
Proceeds from line of credit................... 278,000 266,250 282,500
Proceeds from dividend reinvestment and share
purchase plan,
net........................................... 988 3,823 7,971
Proceeds from long term debt................... -- 200,000 --
Proceeds from exercise of stock options, net... -- 21 1,088
Cash distributions paid on common shares....... (76,804) (46,121) (29,162)
Redemption of shareholder purchase rights...... -- (448) --
Cash dividends paid on preferred shares........ (21,823) (16,100) (1,341)
Debt issuance costs incurred................... (1,496) (4,422) (3,109)
Principal payments on line of credit........... (251,000) (215,750) (285,802)
Payoff of PACIFIC's line of credit............. (51,900) -- --
Regularly scheduled principal payments on
mortgages payable............................. (1,748) (1,398) (682)
Prepayment of mortgages payable................ (303) (10,474) (7,198)
Other.......................................... (8) -- (114)
-------- -------- --------
Net cash flow provided by financing activi-
ties........................................ 191,520 276,457 478,345
-------- -------- --------
Net increase (decrease) in cash and cash equiva-
lents.......................................... 18,827 2,567 (1,473)
Cash and cash equivalents at beginning of year.. 8,092 5,525 6,998
-------- -------- --------
Cash and cash equivalents at end of year........ $ 26,919 $ 8,092 $ 5,525
======== ======== ========
Non-cash investing and financing activities:
Receipt of purchase money notes from sale of
non-multifamily properties.................... $ -- $ -- $ 12,413
Assumption of mortgages payable upon purchase
of multifamily properties..................... $ 12,078 $ 56,624 $ 26,952
Accrual of common share distributions.......... $ 22,437 $ 14,506 $ 11,161
Multifamily properties and other net assets ac-
quired in connection with the Merger which were
funded by:
PTR common shares exchanged for all of the
outstanding shares of
PACIFIC's common stock (Note 2)............... $138,671 $ -- $ --
Mortgage notes assumed......................... 54,403 -- --
Repayment of the outstanding balance on
PACIFIC's line of credit...................... 51,900 -- --
-------- -------- --------
Net increase in net assets related to Merger... $244,974 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
SECURITY CAPITAL PACIFIC TRUST ("PTR"), formerly Property Trust of America,
is an equity real estate investment trust, organized under the laws of the
state of Maryland, which primarily owns, develops, acquires and operates
income-producing multifamily properties in the western United States.
Principles of Financial Presentation
The accounts of PTR and its wholly owned subsidiaries are consolidated in the
accompanying financial statements. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
PTR considers all cash on hand, demand deposits with financial institutions
and short term, highly liquid investments with original maturities of three
months or less to be cash equivalents.
Real Estate and Depreciation
Real estate is carried at cost, which is not in excess of net realizable
value.
Costs directly related to the acquisition (including certain renovation costs
identified during PTR's pre-acquisition due diligence), development or
improvement of real estate, are capitalized. Costs incurred in connection with
the pursuit of unsuccessful acquisitions or developments are expensed at the
time the pursuit is abandoned.
Depreciation is computed over the expected useful lives of depreciable
property on a straight-line basis. Properties are depreciated principally over
the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements... 20-40 years
Furnishings and other........ 2-10 years
</TABLE>
Repairs and Maintenance
Repairs and maintenance, other than acquisition related renovation
expenditures, are expensed as incurred. PTR expenses carpet and appliance
repairs and replacements after any acquisition related renovation expenditures
for such items have been incurred.
Interest
During 1995, 1994 and 1993, the total interest paid in cash on all
outstanding debt, net of interest capitalized, was $17,674,000, $11,949,000 and
$2,231,000, respectively.
50
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PTR capitalizes interest as part of the cost of real estate properties in
development. Interest capitalized during 1995, 1994 and 1993 aggregated
$11,741,000, $6,029,000 and $2,818,000, respectively.
Cost of Raising Capital
Costs incurred in connection with the issuance of equity securities are
deducted from shareholders' equity. Costs incurred in connection with the
incurrence or renewal of debt are capitalized, included with other assets and
amortized over the term of the related loan in the case of incurrence costs or
twelve months in the case of renewal costs. Amortization of loan costs included
in interest expense for the years ended December 31, 1995, 1994 and 1993 was
$1,543,000, $1,903,000, and $1,845,000, respectively.
Revenue Recognition
Rental and interest income are recorded on the accrual method of accounting.
A provision for possible loss is made when collection of receivables is
considered doubtful.
Federal Income Taxes
PTR has made an election to be taxed as a real estate investment trust under
the Internal Revenue Code of 1986, as amended. PTR believes it qualifies as a
real estate investment trust. Accordingly, no provisions have been made for
federal income taxes in the accompanying financial statements.
Per Share Data
Per share data is computed based upon the weighted average number of Common
Shares of Beneficial Interest, par value $1.00 per share ("Common Shares"),
outstanding during the period. Exercise of the outstanding stock options would
not have a material dilutive effect on earnings per share. The assumed
conversion of Cumulative Convertible Series A Preferred Shares of Beneficial
Interest, par value $1.00 per share ("Series A Preferred Shares"), is anti-
dilutive in 1995, 1994 and 1993.
Reclassifications
Certain of the 1994 and 1993 financial statements and notes to financial
statements amounts have been reclassified to conform to the 1995 presentation.
(2) MERGER OF SECURITY CAPITAL PACIFIC INCORPORATED AND CONCURRENT SUBSCRIPTION
OFFERING
On March 23, 1995, PTR consummated a merger (the "Merger") of Security
Capital Pacific Incorporated ("PACIFIC"), a Maryland corporation, with and into
PTR. PACIFIC was a private multifamily REIT controlled by Security Capital
Group Incorporated ("SCG"), PTR's principal shareholder. In the Merger, each
outstanding share of PACIFIC common stock was converted into 0.611 of a Common
Share. As a result, 8,468,460 Common Shares were issued in the Merger in
exchange for all of the outstanding shares of PACIFIC common stock. The Merger
has been accounted for as a purchase and, accordingly, the results of
operations of PACIFIC have been included in PTR's financial statements from
March 23, 1995.
In connection with the Merger, PTR paid off the balance outstanding ($51.9
million) on PACIFIC's line of credit and assumed $54.4 million in mortgages.
The following summarized pro forma (unaudited) information assumes the Merger
occurred on January 1, 1995 and January 1, 1994, respectively, and represent
the combined historical operating results of PTR
51
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
and PACIFIC for the respective pro forma periods. No material pro forma
adjustments to revenue and expenses were required. The weighted average Common
Shares outstanding have been adjusted to reflect the Merger conversion rate
(.611 of a Common Share for each PACIFIC common share). The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had PACIFIC and PTR constituted a single entity during such
period (in thousands, except per share amounts).
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Rental Income.......................................... $271,091 $204,337
======== ========
Net earnings attributable to Common Shares............. $ 64,152 $ 36,512
======== ========
Weighted average Common Shares outstanding............. 68,955 52,846
======== ========
Per Common Share amounts:
Net earnings attributable to Common Shares........... $ 0.93 $ 0.69
======== ========
</TABLE>
Concurrently with the consummation of the Merger, PTR completed a
subscription offering pursuant to which PTR received net proceeds of $216.3
million (13.2 million Common Shares issued). The subscription offering was
designed to allow shareholders of PTR to purchase Common Shares at the same
price at which PACIFIC shareholders acquired Common Shares in the Merger
($16.375 per Common Share). SCG purchased $50 million (3.1 million Common
Shares issued) in the subscription offering at $16.375 per Common Share
pursuant to the oversubscription privilege.
(3) REAL ESTATE
Investments
Investments in real estate, at cost, were as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
INVESTMENT UNITS INVESTMENT UNITS
---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Multifamily:
Operating properties......... $1,584,994 41,503 $1,121,301 31,640
Developments under construc-
tion........................ 187,507 6,676(1) 100,401 4,526(1)
Developments in planning:
Developments owned.......... 22,933 2,328(1) 33,194 4,306(1)
Developments under con-
trol(2).................... -- 3,822(1) -- 4,186(1)
---------- ------ ---------- ------
Total developments in
planning.................. 22,933 6,150 33,194 8,492
---------- ------ ---------- ------
Land held for future develop-
ment........................ 29,688 -- 7,977 --
---------- ------ ---------- ------
Total multifamily.......... 1,825,122 54,329 1,262,873 44,658
====== ======
Non-multifamily................ 30,744 33,415
---------- ----------
Total real estate.......... $1,855,866 $1,296,288
========== ==========
</TABLE>
- --------
(1) Unit information is based on management's estimates and is unaudited.
(2) PTR's investment as of December 31, 1995 and 1994 for developments in
planning and under control was $2.2 million and $1.3 million, respectively,
and is reflected in the "other asset" caption of PTR's balance sheets.
52
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The change in investments in real estate, at cost, consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Balance at January 1................... $1,296,288 $ 872,610 $337,274
Acquisitions and renovation expendi-
tures................................. 370,543 270,024 449,500
Development expenditures, including
land
acquisitions.......................... 192,067 163,826 112,264
Capital improvements................... 5,493 3,912 1,639
Real estate sold....................... (8,402) (12,287) (24,953)
Provisions for possible losses......... (220) (1,600) (2,270)
Other.................................. 97 (197) (844)
---------- ---------- --------
Balance at December 31................. $1,855,866 $1,296,288 $872,610
========== ========== ========
</TABLE>
At January 31, 1996, PTR had contingent contracts or letters of intent,
subject to PTR's final due diligence, to acquire land for the near term
development of an estimated 3,995 multifamily units with an aggregate estimated
development cost of $202.9 million. At the same date, PTR also had contingent
contracts or letters of intent, subject to final due diligence, for the
acquisition of 515 additional multifamily units with an aggregate investment
cost of $14.3 million, including planned renovations.
At January 31, 1996, PTR had unfunded development commitments for
developments under construction of $152.1 million.
Third Party Owner-Developers
To enhance its flexibility in developing and acquiring multifamily properties,
PTR has and will enter into presale agreements with third party owner-
developers to acquire properties developed by such owner-developers where the
developments meet PTR's investment criteria. PTR has and will fund such
developments through development loans to such owner-developers. In addition,
to provide greater flexibility for the use of land acquired for development and
to dispose of excess parcels, PTR will make mortgage loans to PTR Development
Services Incorporated ("PTR Development Services") to purchase land for
development. PTR owns all of the preferred stock of PTR Development Services,
which entitles PTR to substantially all of the net operating cash flow (95%) of
PTR Development Services. SCG owned all of the common stock of PTR Development
Services during 1995. Effective as of January 1, 1996, SCG transferred such
stock to an unaffiliated trust. The common stock is entitled to receive the
remaining 5% of net operating cash flow. As of December 31, 1995, the
outstanding balance of development and mortgage loans made by PTR to third
party owner-developers and PTR Development Services aggregated $41.0 million
and none, respectively. The activities of PTR Development Services and
development loans are consolidated with PTR's activities and all intercompany
transactions have been eliminated in consolidation.
Gains and Provision for Loss from Real Estate and Investments
PTR develops and acquires properties with a view to effective long term
operation and ownership. Based upon PTR's market research and in an effort to
optimize its portfolio composition, PTR may from time to time seek to dispose
of assets that in management's view do not meet PTR's long term investment
criteria and redeploy the proceeds therefrom, preferably through like-kind
exchanges, into assets that are more consistent with PTR's investment
objectives.
53
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PTR's strategy is to focus on the ownership of multifamily properties.
Periodic sales of multifamily and non-multifamily assets may occur as
opportunities arise or investment objectives change. Properties are
periodically evaluated for impairment and provisions for possible losses are
made if required. Statement of Financial Accounting Standards No. 121 entitled
"Accounting For The Impairment Of Long-Lived Assets And For Long-Lived Assets
To Be Disposed Of " will be adopted by PTR, as required by the Statement,
effective January 1, 1996. In the opinion of management, the adoption of the
Statement is not expected to have a material impact on the financial statements
at the date of adoption.
During the fourth quarter of 1995, PTR sold one multifamily property
consisting of 166 units. PTR recorded a gain from the sale of $3.2 million for
the year ended December 31, 1995. The proceeds from the sale were redeployed
through a like-kind exchange into a 290 unit multifamily property.
PTR also sold its investment in a mortgage note received upon prior year sale
of one of its non-multifamuly properties. PTR recorded a loss from the sale of
$600,000 for the year ended December 31, 1995.
In October 1995, a partnership, in which PTR owns a 40% interest, sold its
only real estate asset, an office building located in the Dallas, Texas
metropolitan area. During the first quarter of 1994, the partnership adopted a
strategy of disposing of the property rather than continuing to hold the
property as a long term investment. As a result, the managing partner evaluated
the building for net realizable value which resulted in a provision for
possible loss of $4 million. PTR's share of the loss provision was $1.6 million
as reflected in the December 31, 1994 statement of earnings. During the third
quarter of 1995 the partnership approved the sale of property and as a result
PTR recorded an additional provision of $220,000. This provision has no impact
on cash flow from operating activities.
PTR also recorded a provision of $200,000 for the year ended December 31,
1995 relating to a contingent liability on non-multifamily property. This
provision has no impact on cash flow from operating activities.
(4) BORROWINGS
Line of Credit
Concurrent with the Merger (See Note 2), PTR increased its unsecured
revolving line of credit facility with Texas Commerce Bank, National
Association, as agent bank for a group of lenders ("TCB") to $350 million, and
in August 1995 received a reduction in the interest rate to the greater of
prime (8.5% at December 31, 1995) or the federal funds rate plus 0.50%, or at
PTR's option, LIBOR (5.719% at December 31, 1995) plus 1.375% which can vary
from LIBOR plus 1.0% to LIBOR plus 1.75% (7.094% at December 31, 1995) based
upon the rating of PTR's senior unsecured debt. Additionally, there is a
commitment fee on the average unfunded line of credit balance. The commitment
fee was $501,500, $224,300 and none for the years ended December 31, 1995, 1994
and 1993, respectively. In addition, Wells Fargo Realty Advisors Funding,
Incorporated was added as co-agent.
The TCB line matures August 1997 and may annually be extended for an
additional year with the approval of TCB and the other participating lenders.
All debt incurrences are subject to covenants, as more fully described in the
loan agreement. PTR was in compliance with all covenants at December 31, 1995.
54
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of PTR's line of credit borrowings is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Total line of credit....................... $350,000 $275,000 $200,000
Borrowings outstanding at December 31...... 129,000 102,000 51,500
Weighted average daily borrowings.......... 51,858 59,890 40,555
Maximum borrowings outstanding at any month
end....................................... $138,000 $124,000 $ 83,010
Weighted average daily interest rate....... 8.0% 7.0% 6.3%
Weighted average interest rate at December
31........................................ 7.3% 7.8% 6.0%
</TABLE>
Long Term Debt
On February 8, 1994, PTR issued $100 million of 6.875% Senior Notes due 2008
(the "2008 Notes") and $100 million of 7.50% Senior Notes due 2014 (the "2014
Notes" and together with the 2008 Notes, the "2008 and 2014 Notes").
The 2008 Notes bear interest at 6.875% per annum and require annual principal
payments of $12.5 million, commencing February 15, 2001. The 2014 Notes bear
interest at 7.5% per annum and require annual principal payments of $10 million
in 2009, $12.5 million in 2010, $15 million in 2011, $17.5 million in 2012, $20
million in 2013 and $25 million in 2014. Collectively, the 2008 and 2014 Notes
are unsecured and had an original average life to maturity of 14.25 years and
an average effective interest cost, including offering discounts, issuance
costs and proceeds from an interest rate protection agreement, of 7.37% per
annum. The 2008 and 2014 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 2008 and 2014 Notes being redeemed plus accrued interest thereon
to the redemption date plus an adjustment, if any, based on the yield to
maturity relative to market yields available at redemption. The 2008 and 2014
Notes are governed by the terms and provisions of a supplemental indenture
agreement dated February 2, 1994 ("the Indenture") between PTR and State Street
Bank and Trust Company, as trustee (See Note 12).
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 1.5:1. As of December 31, 1995, PTR was in compliance
with all debt covenants.
55
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Mortgages Payable
Mortgages payable consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
BALLOON PRINCIPAL PRINCIPAL
PERIODIC PAYMENT BALANCE AT BALANCE AT
INTEREST MATURITY PAYMENT DUE AT DECEMBER 31, DECEMBER 31,
PROPERTY RATE DATE TERMS MATURITY 1995 1994
-------- -------- -------- ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE
Tigua Village I....... 10.000% 08/01/95 (2) $ 303 $ -- $ 305
Knight's Castle(1).... 6.560 10/01/96 (2) 7,498 7,609 n/a
Tigua Village II...... 9.750 05/01/97 (2) 677 694 703
Chasewood............. 6.750 06/01/97 (2) 9,303 9,485 9,612
Presidio at South
Mountain............. 8.500 10/01/97 (2) 14,337 14,593 14,742
Silvercliff........... 7.650 11/10/97 (2) 7,304 7,469 7,550
Braeswood Park........ 7.500 01/01/98 (2) 6,635 6,889 7,008
Seahawk............... 8.040 01/10/98 (2) 5,350 5,505 5,577
La Tierra at the
Lakes(1)............. 7.875 12/01/98 (2) 25,105 26,444 n/a
Windsail.............. 8.875 02/01/99 (2) 4,675 4,843 4,888
Greenpointe(1)........ 8.500 03/01/00 (3) -- 3,696 n/a
Mountain Shadow(1).... 8.500 03/01/00 (3) -- 3,394 n/a
Sunterra(1)........... 8.250 03/01/00 (3) -- 8,274 n/a
Brompton Court........ 8.375 09/01/00 (2) 13,340 14,543 14,750
Spring Park........... 10.125 09/27/00 (2) 4,063 4,293 4,330
Park Place I.......... 10.250 11/01/00 (2) 3,320 3,515 3,545
Park Place II......... 10.250 11/01/00 (2) 3,325 3,517 3,546
Treat Commons......... 7.500 09/14/01 (2) 6,578 7,296 n/a
Double Tree Phase II.. 8.250 05/01/33 (3) -- 4,770 n/a
------ -------- ------------- -------- -------
136,829 76,556
-------- -------
TAX EXEMPT FIXED RATE
Cherry Creek(1)....... 7.995(4) 11/01/01 (2) 2,630 4,210 n/a
-------- -------
TAX EXEMPT FLOATING RATE
Apple Creek........... (5) 09/01/07 interest only 11,100 11,100 11,100
-------- -------
COMBINED(6)
Las Flores............ 7.750 06/01/24 (3) -- 5,915 5,968
------ -------- -------
7.907%(7) $158,054 $93,624
====== ======== =======
</TABLE>
- --------
(1) Mortgage assumed in the Merger (See Note 2).
(2) Amortizing monthly with a balloon payment due at maturity.
(3) Fully amortizing.
(4) Represents the average "all-in" rate over the remaining life of the bonds.
(5) Adjusted weekly by the remarketing agent. Weighted average daily interest
rate was 6.24% for 1995.
(6) In 1990, the Las Flores apartments were refinanced pursuant to multifamily
bonds aggregating $6.2 million. The bonds consist of $4.5 million Series A
tax exempt fixed rate bonds and $1.7 million Series B taxable fixed rate
bonds. The bonds are guaranteed by the GNMA mortgage-backed securities
program.
(7) Represents the weighted average interest rate for PTR's mortgages payable
for the year ended December 31, 1995.
Mortgages payable are secured by real estate with an aggregate undepreciated
cost of $295,570,000 at December 31, 1995.
56
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The mortgages which secure tax exempt housing bonds contain covenants which
require that a minimum percentage of units (generally 20% to 30%) be rented to
individuals whose income does not exceed levels specified by U.S. Government
programs. The tax exempt floating rate mortgage is secured by a letter of
credit of $11,445,000. The fee for this letter of credit is 1.25% per annum of
the outstanding mortgage payable balance. This letter of credit contains
certain covenants, all of which PTR was in compliance with at December 31,
1995.
The change in mortgages payable consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Balances at January 1......................... $ 93,624 $48,872 $30,824
Notes originated or assumed................... 66,481 56,624 26,952
Principal payments............................ (2,051) (11,872) (7,880)
Liquidated upon sale of properties............ -- -- (1,024)
-------- ------- -------
Balance at December 31........................ $158,054 $93,624 $48,872
======== ======= =======
</TABLE>
Scheduled Debt Maturities
Approximate principal payments due during each of the years in the five-year
period ending December 31, 2000 are as follows (in thousands):
<TABLE>
<CAPTION>
LONG
TERM
MORTGAGES DEBT TOTAL
--------- -------- --------
<S> <C> <C> <C>
1996.......................................... $ 9,639 $ -- $ 9,639
1997.......................................... 45,658 -- 45,658
1998.......................................... 26,798 -- 26,798
1999.......................................... 5,932 -- 5,932
2000.......................................... 39,125 -- 39,125
Thereafter.................................... 30,902 200,000 230,902
-------- -------- --------
$158,054 $200,000 $358,054
======== ======== ========
</TABLE>
(5) DISTRIBUTIONS
PTR's current policy is to pay distributions to shareholders based upon funds
from operations and aggregating annually at least 95% of its taxable income.
Funds from operations is not to be construed as a substitute for "net earnings"
in evaluating operating results nor as a substitute for "cash flow" in
evaluating liquidity. In July 1994, PTR changed to a more conservative policy
of expensing the amortization of loan costs in determining funds from
operations. For comparability, funds from operations for the year December 31,
1994 and 1993 have been restated to give effect to this policy as if it had
been in effect since January 1993. Funds from operations for the three years
ended December 31, 1995 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net earnings attributable to Common Shares..... $62,496 $30,619 $24,152
Add (Deduct):
Depreciation............................... 36,685 24,614 10,513
Provision for possible loss on investments. 420 1,600 2,270
Gain on sale of investments................ (2,623) -- (2,302)
Other...................................... -- -- 83
------- ------- -------
Funds from operations attributable to Common
Shares........................................ 96,978 56,833 34,716
Distributions paid to common shareholders...... 76,804 46,121 29,162
------- ------- -------
Excess of funds from operations after distribu-
tions......................................... $20,174 $10,712 $ 5,554
======= ======= =======
Weighted average Common Shares outstanding..... 67,052 46,734 36,549
======= ======= =======
</TABLE>
57
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For federal income tax purposes, the following summarizes the taxability of
distributions paid on Common Shares in 1994 and 1993 and the estimated
taxability for 1995:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income....................................... $0.92 $0.68 $0.65
Capital gains......................................... -- -- 0.11
Return of capital..................................... 0.23 0.32 0.06
----- ----- -----
Total............................................... $1.15 $1.00 $0.82
===== ===== =====
</TABLE>
On December 12, 1995 PTR declared a distribution of $0.31 per Common Share
payable on February 15, 1996 to shareholders of record as of February 2, 1996.
At the same time, PTR announced that it plans to pay a total distribution of
$1.24 per Common Share in 1996.
On July 21, 1994, in addition to the distributions paid, PTR redeemed the
shareholder purchase rights issued pursuant to the Rights Agreement dated as of
February 23, 1990, as amended. Pursuant to the redemption, each holder of
record at the close of business on July 21, 1994 was entitled to receive $0.01
per shareholder purchase right. The redemption price was paid on August 12,
1994 and is taxable as ordinary income for federal income tax purposes.
For federal income tax purposes, the following summaries reflect the
taxability of dividends paid on Series A Preferred Shares and Series B
Cumulative Redeemable Preferred Shares ("Series B Preferred Shares"),
respectively, for periods prior to 1995 and the estimated taxability for 1995.
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
1995 1994 12/31/93
----- ----- -----------
<S> <C> <C> <C>
Per Series A Preferred Share:
Ordinary income................................. $1.75 $1.75 $.1231
Capital gains................................... -- -- .0227
----- ----- ------
Total......................................... $1.75 $1.75 $.1458
===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
DATE OF
ISSUANCE TO
12/31/95
-----------
<S> <C>
Per Series B Preferred Share:
Ordinary income............................................. $1.3625
Capital gains............................................... --
-------
Total..................................................... $1.3625
=======
</TABLE>
PTR's tax return for the year ended December 31, 1995 has not been filed, and
the taxability information for 1995 is based upon the best available data.
PTR's tax returns have not been examined by the Internal Revenue Service and,
therefore, the taxability of the dividends is subject to change.
58
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) MORTGAGE NOTES RECEIVABLE
The change in investments in mortgage notes receivable (which primarily
originated in connection with PTR's sale of non-multifamily properties)
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Balances at January 1 ......................... $22,597 $22,624 $10,981
Notes originated............................... 1,538 162 12,966
Reduction of principal......................... (8,291) (189) (1,323)
------- ------- -------
Balance at December 31......................... $15,844 $22,597 $22,624
======= ======= =======
</TABLE>
Interest rates on mortgage notes receivable range from 7.5% to 10.5% with a
weighted average rate of 8.6%. Maturity dates on mortgage notes receivable
range from 1997 to 2008.
Aggregate cost for federal income tax purposes was the same as the balance at
December 31 for the three years shown above.
(7) SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
At December 31, 1995, 150,000,000 Shares of Beneficial Interest, $1.00 par
value per share, were authorized. PTR's Board of Trustees is authorized to
issue, from the authorized but unissued shares of PTR, preferred shares in
series and to establish from time to time the number of preferred shares to be
included in such series and to fix the designation and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
distributions, qualifications and terms and conditions of redemption of the
shares of each series.
Preferred Shares
On May 11, 1995, the Board of Trustees authorized PTR to classify and issue
the Series B Preferred Shares. The net proceeds to PTR from the sale of the
Series B Preferred Shares were $101.4 million. The net proceeds were used for
the development and acquisition of additional multifamily properties, for the
repayment of indebtedness under PTR's revolving line of credit and for working
capital purposes.
On and after May 24, 2000, the Series B Preferred Shares may be redeemed for
cash at the option of PTR, in whole or in part at a redemption price of $25.00
per share plus accrued and unpaid distributions, if any, to the redemption
date. The redemption price (other than the portion thereof consisting of
accrued and unpaid distributions) is payable solely out of the sale proceeds of
other capital shares of PTR, which may include shares of other series of
preferred shares. The holders of the Series B Preferred Shares have no
preemptive rights with respect to any shares of the capital securities of PTR
or any other securities of PTR convertible into or carrying rights or options
to purchase any such shares. The Series B Preferred Shares have no stated
maturity and are not subject to any sinking fund or other obligation of PTR to
redeem or retire the Series B Preferred Shares and are not convertible into any
other securities of PTR. In addition, holders of the Series B Preferred Shares
are entitled to receive, when and as declared by the Board of Trustees, out of
funds legally available for the payment of distributions, cumulative
preferential cash distributions at the rate of 9% of the liquidation preference
per annum (equivalent to $2.25 per share). Such distributions are cumulative
from the date of original issue and are payable quarterly in arrears on the
last day of each March, June, September and December.
59
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Series A Preferred Shares issued in November 1993 have a liquidation
preference of $25 per share for an aggregate liquidation preference of $230
million plus any accrued but unpaid distributions. The net proceeds (after
underwriting commission and other offering costs) of the Series A Preferred
Shares issued was $219.7 million. Holders of the Series A Preferred Shares are
entitled only to limited voting rights under certain conditions. Each Series A
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 Series A
Preferred Shares are cumulative in an amount per share equal to the greater of
$1.75 per annum or the annualized quarterly PTR distribution rate on the Common
Shares into which the Series A Preferred Shares are convertible, payable
quarterly in arrears on the last day of March, June, September and December of
each year. The Series A Preferred Shares are redeemable at the option of PTR
after November 30, 2003.
The Series A Preferred Shares and the Series B Preferred Shares will rank on
a parity as to distributions and liquidation proceeds. Series A Preferred
Shares and Series B Preferred Shares are collectively referred to as "Preferred
Shares."
Option Plan
In January 1987, PTR adopted its Share Option Plan for Outside Trustees (the
"1987 Plan"). Under the 1987 Plan, there are 126,000 Common Shares approved
which can be granted to independent 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, 1995 there were 20,000 options for Common Shares
outstanding and exercisable under the 1987 Plan at exercise prices ranging from
$10.625 to $18.875 per Common Share.
Ownership Restrictions and Significant Shareholder
PTR's Restated Declaration of Trust and the Articles Supplementary restrict
beneficial ownership (or ownership generally attributed to a person under the
REIT tax rules) of PTR's outstanding shares by a single person, or persons
acting as a group, to 9.8% of the Common Shares and 25% of the Preferred
Shares. The purpose of these provisions are to assist in protecting and
preserving PTR's REIT status and to protect the interests of shareholders in
takeover transactions by preventing the acquisition of a substantial block of
shares unless the acquiror makes a cash tender offer for all outstanding
shares. For PTR to qualify as a REIT under the Internal Revenue Code of 1986,
as amended, not more than 50% in value of its outstanding capital shares may be
owned by five or fewer individuals at any time during the last half of PTR's
taxable year. The provision permits five persons to acquire up to a maximum of
9.8% each of the Common Shares, or an aggregate of 49% of the outstanding
Common Shares, and thus assists the Trustees in protecting and preserving PTR's
REIT status for tax purposes.
Common Shares owned by a person or group of persons in excess of the 9.8%
limit are subject to redemption by PTR. The provision does not apply where a
majority of the Board of Trustees, in its sole and absolute discretion, waives
such limit after determining that the eligibility of PTR to qualify as a REIT
for federal income tax purposes will not be jeopardized or the disqualification
of PTR as a REIT is advantageous to the shareholders.
The Board of Trustees has permitted SCG, the owner of the REIT Manager (see
Note 8), to acquire up to 49% of PTR's fully converted Common Shares. SCG's
ownership of Common Shares is attributed for tax purposes to its shareholders.
SCG owned 37.93% of PTR's total outstanding Common Shares at December 31, 1995.
Pursuant to an agreement between SCG and PTR, SCG has agreed to acquire no more
than 49% of the fully converted Common Shares except pursuant to an all-cash
tender offer for all Common Shares
60
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
held open for 90 days. SCG would have no limitation on making a tender offer if
an unrelated third party commences such a tender offer.
Shareholder Purchase Rights
On February 23, 1990, PTR declared a dividend distribution of one shareholder
purchase right ("Right") for each outstanding Common Share to be distributed to
all holders of record of the Common Shares on February 23, 1990. Each Right
entitled the holder to purchase one Common Share for an exercise price of
$32.50 per share, subject to adjustment as provided in the Rights Agreement.
The Rights were exercisable only if a person or group acquired 20% or more of
PTR's Common Shares (32% in the case of SCG and certain defined affiliates) or
announced a tender offer for 25% or more of the Common Shares. Under certain
circumstances, including a shareholder acquisition of 20% or more of the Common
Shares, each Right would entitle the holder to purchase Common Shares or
securities of the acquiring company, which would have a dilutive effect on the
acquiring company and deter it from taking coercive actions against PTR
shareholders. The Rights held by certain 20% shareholders would be exercisable.
On July 11, 1994, the Board of Trustees announced the redemption, effective
at the close of business on July 21, 1994, of the shareholder purchase rights
issued pursuant to the Rights Agreement, dated as of February 23, 1990, as
amended. Pursuant to the redemption, each holder of record at the close of
business on July 21, 1994 was entitled to receive $0.01 per shareholder
purchase right. The redemption price was paid on August 12, 1994.
In addition, the Board of Trustees declared a distribution of one preferred
share purchase right (a "Purchase Right") for each Common Share outstanding,
payable to holders of Common Shares of record at the close of business on July
21, 1994. Each Purchase Right entitles the holder under certain circumstances
to purchase from PTR one one-hundredth of a share of Series B Junior
Participating Preferred Share, par value $1.00 per share (the "Participating
Preferred Shares"), at a price of $60.00 per one one-hundredth of a
Participating Preferred Share, subject to adjustment. Purchase Rights are
exercisable when a person or group of persons acquires 20% or more of the fully
converted Common Shares (49% in the case of SCG and certain defined affiliates)
or announces a tender offer for 25% or more of the outstanding Common Shares.
Under certain circumstances, each Purchase Right entitles the holder to
purchase, at the Purchase Right's then current exercise price, a number of
Common Shares having a market value of twice the Purchase Right's exercise
price. The acquisition of PTR pursuant to certain mergers or other business
transactions would entitle each holder to purchase, at the Purchase Right's
then current exercise price, a number of the acquiring company's common shares
having a market value at that time equal to twice the Purchase Right's exercise
price. The Purchase Rights will expire in July 2004 and are subject to
redemption in whole, but not in part, at a price of $0.01 per Purchase Right
payable in cash, shares of PTR or any other form of consideration determined by
the Board of Trustees.
Shelf Registration
On May 13, 1994 and December 1, 1994, PTR filed additional shelf registration
statements with the Securities and Exchange Commission. PTR registered an
aggregate of $650 million of securities ($325 million of securities in each
shelf registration statement) which can be issued in the form of debt
securities, preferred shares of beneficial interest, common shares of
beneficial interest, shareholder purchase rights or subscription rights for
common shares of beneficial interest. As of December 31, 1995, $243.2 million
in securities were available to be issued under PTR's shelf registrations (See
Note 12).
(8) REIT MANAGEMENT AND PROPERTY MANAGEMENT AGREEMENTS
Effective March 1, 1991, PTR entered into a REIT management agreement (the
"REIT Management Agreement") with Security Capital Pacific Incorporated (the
"REIT Manager"), formerly Security Capital
61
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(Southwest) Incorporated to provide management services to PTR. The REIT
Manager is a subsidiary of SCG (see Note 7). All officers of PTR are employees
of the REIT Manager and PTR has no employees. The REIT Manager provides both
strategic and day-to-day management of PTR, including research, investment
analysis, acquisition and development, asset management, capital markets, and
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 (iv) actual or assumed regularly scheduled principal and interest
payments on long term debt and (v) distributions actually paid with respect to
any nonconvertible preferred shares of beneficial interest of PTR. The REIT
Management Agreement has been amended so that the long term senior notes
described in Note 4 and Note 12 will be treated as if they had regularly
scheduled principal and interest payments similar to 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 interest and income from PTR Development
Services, realized gains from dispositions of investments or income from cash
equivalent investments. The REIT Manager also receives a fee of .25% per year
on the average daily balance of cash equivalent investments.
REIT management fees aggregated $20,354,000, $13,182,000 and $7,073,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR relating to PTR's operations, primarily
including third party legal, accounting and similar fees paid on behalf of PTR,
and travel expenses incurred in connection with financings, property
acquisitions, property dispositions, property development, attending Board of
Trustees and shareholder meetings and similar activities on behalf of PTR.
The REIT Management Agreement is renewable by PTR annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. PTR may terminate the REIT Management Agreement on 60 days' notice.
Because of the year-to-year nature of the agreement, its maximum effect on
PTR's results of operations cannot be predicted, other than that REIT
management fees will generally increase or decrease in proportion to cash flow
increases or decreases.
SCG Realty Services Incorporated ("SCG Realty Services") has managed and
currently manages a substantial majority of PTR's operating multifamily
properties. For the years ended December 31, 1995, 1994 and 1993, PTR paid SCG
Realty Services aggregate fees of $7,894,000, $7,148,000 and $3,862,000,
respectively. Homestead Realty Services Incorporated ("Homestead Realty
Services") manages all of PTR's operating Homestead Village properties. For the
year ended December 31, 1995, PTR paid Homestead Realty Services aggregate fees
of $1,018,000. In addition to property management, SCG Realty Services has
performed certain due diligence services for PTR's acquisitions. Effective
October 1, 1994, SCG Realty Services no longer performed due diligence services
for PTR. SCG owns each of SCG Realty Services and Homestead Realty Services.
Rates for services performed by SCG Realty Services and Homestead Realty
Services are subject to annual approval by PTR's independent Trustees (who
receive an annual review from an independent third party) and management
believes are at rates prevailing in the markets in which PTR operates.
62
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data (in thousands except for per share amounts)
for 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR
------------------------------- ENDED
3-31 6-30 9-30 12-31 12-31
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1995:
Rental Income....................... $53,518 $65,719 $70,176 $73,060 $262,473
======= ======= ======= ======= ========
Earnings from operations............ 14,540 20,806 23,203 23,147 81,696
Gain on sale of investments......... -- -- -- 2,623 2,623
Less preferred share dividends...... 4,025 5,023 6,387 6,388 21,823
------- ------- ------- ------- --------
Net earnings attributable to Common
Shares............................. $10,515 $15,783 $16,816 $19,382 $ 62,496
======= ======= ======= ======= ========
Net earnings per Common Share....... $ 0.20 $ 0.22 $ 0.23 $ 0.27 $ 0.93
======= ======= ======= ======= ========
Funds from operations attributable
to Common Shares................... $18,059 $24,909 $26,527 $27,483 $ 96,978
======= ======= ======= ======= ========
Weighted Average Common Shares out-
standing........................... 51,485 72,027 72,211 72,211 67,052
======= ======= ======= ======= ========
1994:
Rental Income....................... $37,414 $43,390 $50,299 $52,369 $183,472
======= ======= ======= ======= ========
Earnings from operations............ 9,512 10,765 12,727 13,715 46,719
Less preferred share dividends...... 4,025 4,025 4,025 4,025 16,100
------- ------- ------- ------- --------
Net earnings attributable to Common
Shares............................. $ 5,487 $ 6,740 $ 8,702 $ 9,690 $ 30,619
======= ======= ======= ======= ========
Net earnings per Common Share....... $ 0.12 $ 0.15 $ 0.18 $ 0.19 $ 0.66
======= ======= ======= ======= ========
Funds from operations attributable
to Common Shares................... $12,037 $12,581 $15,323 $16,892 $ 56,833
======= ======= ======= ======= ========
Weighted Average Common Shares out-
standing........................... 44,668 44,724 47,051 50,413 46,734
======= ======= ======= ======= ========
</TABLE>
(10) 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, 1995. PTR is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse effect on PTR's financial condition or results of operations.
See Note 3 for development and acquisition commitments.
63
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
(11) FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, other assets, accrued
expenses and other liabilities approximates fair value as of December 31, 1995
and 1994 because of the short maturity of these instruments. Similarly, the
carrying value of line of credit borrowings approximates fair value as of those
dates since the interest rate fluctuates based on published market rates. In
the opinion of management, the interest rates associated with the long term
debt, mortgages payable and mortgage notes receivable approximate the market
interest rates for these types of instruments, and as such, the carrying values
approximates fair value at December 31, 1995 and 1994, in all material
respects.
(12) SUBSEQUENT EVENTS
On February 23, 1996, PTR issued $50 million of 7.15% Notes due 2010 (the
"2010 Notes") and $100 million of 7.90% Notes due 2016 (the "2016 Notes" and
together with the 2010 Notes, the "2010 and 2016 Notes").
The 2010 Notes bear interest at 7.15% per annum and require annual principal
payments of $6.25 million, commencing February 15, 2003. The 2016 Notes bear
interest at 7.90% per annum and require aggregate annual principal payments of
$10 million in 2011, $12.5 million in 2012, $15 million in 2013, $17.5 million
in 2014, $20 million in 2015 and $25 million in 2016. Collectively, the 2010
and 2016 Notes are unsecured and have an average life to maturity of 15.5 years
and an average effective interest cost, including offering discounts and
issuance costs of 7.84% per annum. The 2010 and 2016 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 an adjustment, if any, based on
the yield to maturity relating to market yields available at redemption. The
2010 and 2016 Notes are governed by the terms and provisions of the Indenture
(See Note 4). As a result of the issuance of the 2010 and 2016 Notes, $93.2
million in securities remain available to be issued under PTR's shelf
registration.
64
<PAGE>
SCHEDULE III
SECURITY CAPITAL PACIFIC TRUST
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO PTR COSTS DECEMBER 31, 1995
--------------------- 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:
Commanche Wells. $ -- $ 719 $ 4,072 $ 309 $ 719 $ 4,381 $ 5,100 $ 202 1985 1994
Corrales Pointe. -- 944 5,351 393 944 5,744 6,688 336 1986 1993
Entrada Pointe.. -- 1,014 5,744 805 1,014 6,549 7,563 326 1986 1994
Homestead
Village--Osuna. -- 832 -- 3,039 840 3,031 3,871 (b) (b) 1995
La Paloma....... -- 4,135 -- 18,952 4,287 18,800 23,087 269 (b) 1993
La Ventana...... -- 2,210 -- 11,634 2,320 11,524 13,844 43 (b) 1994
Pavilions ...... -- 2,182 7,624 5,602 2,182 13,226 15,408 1,484 (a) (a)
Sandia Ridge.... -- 1,339 5,358 798 1,339 6,156 7,495 686 1986 1992
Vistas at Seven
Bar (i) ....... -- 2,597 -- 3,841 2,601 3,837 6,438 (b) (b) 1994
Vista del Sol... -- 1,105 4,419 427 1,105 4,846 5,951 326 1987 1993
Wellington
Place.......... -- 1,881 7,523 598 1,881 8,121 10,002 479 1981 1993
Austin, Texas:
Anderson Mill
Oaks........... -- 1,794 10,165 267 1,794 10,432 12,226 603 1984 1993
Cannon Place.... -- 1,220 4,879 725 1,220 5,604 6,824 304 1984 1993
Hobby Horse..... -- 788 -- 303 801 290 1,091 (b) (b) 1993
Homestead
Village--
Burnet......... -- 525 -- 3,543 723 3,345 4,068 66 1995 1994
Homestead
Village--
Mid Town....... -- 600 -- 3,135 645 3,090 3,735 (b) (b) 1995
Homestead
Village--
Pavilion (i) .. -- 693 -- 120 693 120 813 (b) (b) 1995
Hunters' Run.... -- 1,400 -- 9,982 1,816 9,566 11,382 183 1995 1993
Hunters' Run II
(i)............ -- 797 -- 775 861 711 1,572 (b) (b) 1995
La Mirage....... -- 2,350 -- 14,668 2,966 14,052 17,018 843 1994 1992
Monterey Ranch
Village II..... -- 1,151 -- 13,132 1,241 13,042 14,283 (b) (b) 1993
The Ridge....... -- 1,669 6,675 2,076 1,669 8,751 10,420 574 1978 1993
Rock Creek...... -- 1,311 7,431 1,419 1,311 8,850 10,161 477 1979 1993
Saddlebrook..... -- 800 -- 12,484 1,148 12,136 13,284 774 1994 1992
Shadowood....... -- 1,197 4,787 561 1,197 5,348 6,545 329 1985 1993
Spyglass........ -- 1,744 6,976 1,753 1,744 8,729 10,473 694 1981 1992
Dallas, Texas:
Apple Ridge..... -- 1,986 7,942 1,124 1,986 9,066 11,052 488 1984 1993
Custer Crossing. -- 1,532 8,683 163 1,532 8,846 10,378 506 1985 1993
Homestead
Village--
Coit Road...... -- 425 -- 2,961 496 2,890 3,386 301 1994 1993
Homestead
Village--
Fort Worth..... -- 350 -- 2,296 372 2,274 2,646 (b) (b) 1994
Homestead
Village--
Las Colinas.... -- 800 -- 3,562 805 3,557 4,362 (b) (b) 1994
Homestead
Village--North
Richland Hills. -- 470 -- 3,020 544 2,946 3,490 301 1994 1993
Homestead
Village--
Skillman Road.. -- 400 -- 2,683 400 2,683 3,083 278 1993 1992
</TABLE>
(see notes following table)
65
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED
INITIAL COST TO PTR COSTS AT DECEMBER 31, 1995
--------------------- 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
Village--South
Arlington...... $ $ 550 $ -- $ 3,274 $ 642 $ 3,182 $ 3,824 $ 120 1995 1994
Homestead
Village--
Stemmons
Freeway........ -- 356 -- 4,136 424 4,068 4,492 296 (c) (c)
Homestead
Village--
Tollway........ -- 275 -- 2,443 353 2,365 2,718 340 1993 1993
Homestead
Village--West
Arlington...... -- 585 -- 3,400 652 3,333 3,985 118 1995 1993
Indian Creek.... -- 1,582 8,962 256 1,582 9,218 10,800 520 1985 1993
Post Oak Ridge.. -- 2,137 12,111 873 2,137 12,984 15,121 724 1983 1993
Quail Run....... -- 1,613 9,140 169 1,613 9,309 10,922 533 1983 1993
Somerset........ -- 2,908 11,632 525 2,908 12,157 15,065 674 1986 1993
Summerstone..... -- 1,028 5,823 161 1,028 5,984 7,012 345 1983 1993
Timber Ridge.... -- 997 5,651 302 997 5,953 6,950 184 1984 1994
Woodland Park... -- 1,386 5,543 309 1,386 5,852 7,238 327 1986 1993
Denver, Colorado:
Cambrian........ -- 2,256 9,026 719 2,256 9,745 12,001 647 1983 1993
Cedars, The..... -- 3,128 12,512 1,404 3,128 13,916 17,044 925 1984 1993
Fox Creek Phase
I.............. -- 1,167 4,669 313 1,167 4,982 6,149 289 1984 1993
Fox Creek Phase
II............. -- -- -- 69 -- 69 69 (b) (b) 1995
Hickory Ridge... -- 4,402 17,607 1,394 4,402 19,001 23,403 1,601 1984 1992
Homestead
Village--
Belleview ..... -- 876 -- 2,622 921 2,577 3,498 (b) (b) 1994
Homestead
Village--Iliff. -- 615 -- 2,910 624 2,901 3,525 (b) (b) 1994
Reflections
Phase I........ -- 1,591 6,362 785 1,591 7,147 8,738 476 1980 1993
Reflections
Phase II....... -- 805 -- 11,258 845 11,218 12,063 34 (b) 1993
Silvercliff..... 7,469 2,410 13,656 219 2,410 13,875 16,285 640 1991 1994
Sunwood......... -- 1,030 4,596 461 1,030 5,057 6,087 414 1981 1992
El Paso, Texas:
Acacia Park..... -- 1,130 -- 12,764 1,475 12,419 13,894 298 1995 1993
Cielo Vista..... -- 1,111 4,445 1,090 1,111 5,535 6,646 324 1962 1993
The Crest....... -- 865 -- 7,112 1,026 6,951 7,977 866 1991 1992
Doubletree...... -- 1,106 4,423 626 1,106 5,049 6,155 349 1980 1993
Las Flores...... 5,915 625 6,624 861 625 7,485 8,110 3,168 (d) (d)
Mountain
Village........ -- 1,203 4,824 1,158 1,203 5,982 7,185 757 1982 1992
The Patriot .... -- 1,027 -- 10,837 1,103 10,761 11,864 121 (b) 1993
Park Place ..... 7,032 992 7,409 304 993 7,712 8,705 1,461 (e) (e)
The Phoenix..... -- 454 -- 9,641 658 9,437 10,095 817 1993 1993
Shadow Ridge ... -- 1,524 3,993 6,727 1,668 10,576 12,244 842 (f) (f)
Spring Park..... 4,293 734 4,428 77 734 4,505 5,239 917 1990 1989
Tigua Village... 694 161 146 1,976 161 2,122 2,283 1,151 (g) (g)
Houston, Texas:
Beverly Palms... -- 1,393 7,893 700 1,393 8,593 9,986 421 1970 1994
Braeswood Park.. 6,889 1,861 10,548 151 1,861 10,699 12,560 611 1984 1993
Brompton Court.. 14,543 4,058 22,993 3,477 4,058 26,470 30,528 967 1972 1994
Chasewood....... 9,485 2,016 11,422 102 2,016 11,524 13,540 530 1992 1994
Cranbrook
Forest......... -- 1,326 5,302 258 1,326 5,560 6,886 316 1984 1993
Homestead
Village--
Astrodome ..... -- 1,530 -- 3,765 1,669 3,626 5,295 18 1995 1994
Homestead
Village--
Bammel-
Westfield...... -- 516 -- 2,959 595 2,880 3,475 162 1994 1993
Homestead
Village--Fuqua. -- 416 -- 2,929 491 2,854 3,345 250 1994 1993
Homestead
Village--Park
Ten............ -- 791 -- 3,102 860 3,033 3,893 172 1994 1993
</TABLE>
(see notes following table)
66
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO PTR COSTS DECEMBER 31, 1995
--------------------- 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
Village--
Stafford....... $ -- $ 575 $ -- $ 3,092 $ 665 $ 3,002 $ 3,667 $ 168 1994 1993
Homestead
Village--West
by Northwest... -- 519 -- 2,913 568 2,864 3,432 283 1994 1993
Homestead
Village--
Westheimer..... -- 796 -- 3,205 897 3,104 4,001 208 1994 1993
Homestead
Village--
Willowbrook.... -- 575 -- 3,350 669 3,256 3,925 51 1995 1994
Memorial Heights
Phase I........ -- 3,169 -- 9,150 3,348 8,971 12,319 (b) (b) 1994
Memorial Heights
Phase II....... -- 4,190 -- 2,039 4,427 1,802 6,229 (b) (b) 1994
Oaks at Medical
Center Phase I. -- 4,210 -- 11,744 4,260 11,694 15,954 3 (b) 1994
Pineloch........ -- 1,980 11,221 397 1,980 11,618 13,598 659 1984 1993
Plaza Del Oro... -- 1,713 9,706 488 1,713 10,194 11,907 414 1984 1994
Seahawk......... 5,505 1,258 7,125 224 1,257 7,350 8,607 335 1984 1994
Weslayan Oaks... -- 581 3,293 105 581 3,398 3,979 198 1984 1993
Woodside
Village........ -- 710 2,811 3,039 710 5,850 6,560 2,347 1972 1975
Las Vegas, Nevada
Hamptons, The .. -- 2,959 16,790 935 2,959 17,725 20,684 337 1989 1995
Horizons at
Peccole Ranch.. -- 3,173 18,048 113 3,173 18,161 21,334 362 1990 1995
King's Crossing
............... -- 2,860 16,272 202 2,860 16,474 19,334 327 1991 1995
La Tierra at the
Lakes.......... 26,444 5,904 33,561 1,502 5,904 35,063 40,967 673 1986 1995
Sunterra ....... 8,274 2,086 11,867 51 2,086 11,918 14,004 236 1986 1995
Los Angeles, Cal-
ifornia:
Miramonte....... -- 2,357 13,364 -- 2,357 13,364 15,721 -- 1989 1995
Oklahoma City,
Oklahoma:
Cimarron Trails. -- 981 5,591 181 981 5,772 6,753 233 1984 1994
Warrington...... -- 882 4,883 221 882 5,104 5,986 303 1984 1993
Omaha, Nebraska:
Apple Creek..... 11,100 1,953 11,069 550 1,953 11,619 13,572 464 1987 1994
Oak Brook ...... -- 1,108 6,307 74 1,108 6,381 7,489 127 1994 1995
Phoenix, Arizona:
22nd & Dunlap
Phase I (i).... -- 3,062 -- 555 3,080 537 3,617 (b) (b) 1995
Arrowhead Phase
I (i).......... -- 2,019 -- 11 2,019 11 2,030 (b) (b) 1995
Bay Club........ -- 2,797 11,188 933 2,797 12,121 14,918 704 1985 1993
Foxfire......... -- 1,055 5,976 246 1,055 6,222 7,277 284 1985 1994
Homestead Vil-
lage--Baseline
(i)............ -- 808 -- 1,692 830 1,670 2,500 (b) (b) 1995
Homestead Vil-
lage--Dunlap
(i)............ -- 915 -- 1,153 933 1,135 2,068 (b) (b) 1995
Homestead Vil-
lage--Scotts-
dale........... -- 883 -- 3,376 975 3,284 4,259 37 1995 1994
Miralago Phase I
(i) ........... -- 2,743 -- 517 2,830 430 3,260 (b) (b) 1995
Moorings at Mesa
Cove........... -- 3,261 13,045 846 3,261 13,891 17,152 1,090 1985 1992
North Mountain
Village........ -- 2,704 15,323 330 2,704 15,653 18,357 754 1986 1994
Papago Crossing. -- 630 2,519 659 630 3,178 3,808 246 1980 1992
Peaks at Papago
Park Phase I... -- 4,131 23,408 589 4,131 23,997 28,128 1,114 1988 1994
Peaks at Papago
Park Phase II.. -- 1,000 -- 3,388 1,001 3,387 4,388 (b) (b) 1994
</TABLE>
(see notes following table)
67
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995
--------------------- 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>
Pheasant Run.... $ -- $ 1,607 $ 6,428 $ 597 $ 1,607 $ 7,025 $ 8,632 $ 408 1985 1993
Presidio at
South Mountain. 14,593 4,638 26,280 438 4,638 26,718 31,356 1,530 1989 1993
The Ridge....... -- 1,852 10,492 318 1,852 10,810 12,662 614 1987 1993
San Antigua..... -- 4,200 -- 19,599 4,705 19,094 23,799 1,053 1994 1991
San Marin....... -- 3,332 -- 14,607 3,798 14,141 17,939 1,365 1993 1993
San Marina...... -- 1,208 4,831 852 1,208 5,683 6,891 810 1986 1992
San Marquis
North.......... -- 1,215 -- 8,673 1,556 8,332 9,888 285 1994 1993
San Marquis
South.......... -- 2,312 -- 11,137 2,665 10,784 13,449 608 1994 1993
San Palmera (i)
............... -- 3,515 -- 794 3,682 627 4,309 (b) (b) 1995
Scottsdale
Greens......... -- 3,489 19,774 4,422 3,489 24,196 27,685 1,069 1980 1994
Sunstone........ -- 1,542 8,738 315 1,542 9,053 10,595 512 1986 1993
Superstition
Park........... -- 2,340 9,362 796 2,341 10,157 12,498 792 1985 1992
Portland, Oregon:
Club at the
Green.......... -- 1,640 9,327 109 1,640 9,436 11,076 193 1991 1995
Double Tree
Phase I........ -- 1,548 8,810 28 1,548 8,838 10,386 177 1990 1995
Double Tree
Phase II....... 4,770 991 5,611 13 991 5,624 6,615 100 1994 1995
Knight's Castle. 7,609 1,963 11,164 10 1,963 11,174 13,137 223 1989 1995
Meridian at
Murrayhill..... -- 2,517 14,320 59 2,517 14,379 16,896 287 1990 1995
Preston's Cross-
ing (i)........ -- 851 -- 3,283 852 3,282 4,134 (b) (b) 1995
Riverwood
Heights........ -- 1,479 8,410 126 1,479 8,536 10,015 169 1990 1995
Squire's Court . -- 1,630 9,249 28 1,630 9,277 10,907 186 1989 1995
Reno, Nevada:
Vista Ridge..... -- 2,002 -- 1,760 2,057 1,705 3,762 (b) (b) 1995
Salt Lake City,
Utah:
Cherry Creek.... 4,210 1,290 7,330 299 1,290 7,629 8,919 147 1986 1995
Greenpointe..... 3,696 891 5,050 115 891 5,165 6,056 102 1985 1995
Mountain Shadow
............... 3,394 832 4,730 74 832 4,804 5,636 95 1985 1995
Plum Tree ...... -- 2,091 11,892 263 2,091 12,155 14,246 239 1979 1995
1995
Remington ...... -- 2,324 -- 2,627 2,359 2,592 4,951 (b) (b)
San Antonio, Tex-
as:
Applegate....... -- 1,455 8,248 282 1,455 8,530 9,985 489 1983 1993
Austin Point.... -- 1,728 9,725 452 1,728 10,177 11,905 579 1982 1993
Camino Real..... -- 1,084 4,338 774 1,084 5,112 6,196 383 1979 1993
Cobblestone Vil-
lage........... -- 786 3,120 645 786 3,765 4,551 513 1984 1992
Contour Place... -- 456 1,829 317 456 2,146 2,602 331 1984 1992
The Crescent.... -- 1,145 -- 14,454 1,647 13,952 15,599 912 1994 1992
Dymaxion Phase
I.............. -- 683 3,740 132 683 3,872 4,555 115 1984 1994
The Gables...... -- 1,025 5,809 226 1,025 6,035 7,060 343 1983 1993
Homestead Vil-
lage--
Bitters........ -- 1,000 -- 3,729 1,198 3,531 4,729 66 1995 1994
Homestead Vil-
lage--DeZavala
............... -- 844 -- 3,587 983 3,448 4,431 55 1995 1994
Homestead Vil-
lage--
Fredricksburg.. -- 800 -- 3,238 892 3,146 4,038 171 1994 1993
Lakeside Villas. -- 2,597 10,388 666 2,597 11,054 13,651 926 1986 1992
Marbach Park.... -- 1,122 6,361 504 1,123 6,864 7,987 393 1985 1993
Oakhampton
Place.......... -- 2,292 9,170 712 2,292 9,882 12,174 834 1984 1992
Palisades Park.. -- 1,167 6,613 364 1,167 6,977 8,144 396 1983 1993
Panther Spring.. -- 585 3,317 80 585 3,397 3,982 196 1985 1993
Rancho Mirage... -- 724 2,871 1,259 724 4,130 4,854 243 1974 1993
Stanford
Heights........ -- 1,631 -- 11,534 1,693 11,472 13,165 56 (b) 1993
Sterling
Heights........ -- 1,644 -- 10,348 2,212 9,780 11,992 197 1995 1993
St. Tropez Phase
I.............. -- 2,013 8,054 796 2,013 8,850 10,863 741 1982 1992
St. Tropez Phase
II ............ -- 605 -- 361 632 334 966 (b) (b) 1994
Towne East Vil-
lage........... -- 350 1,985 148 350 2,133 2,483 119 1983 1993
</TABLE>
(see notes following table)
68
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995
--------------------- 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>
Villas of Castle
Hills.......... $ -- $ 1,037 $ 4,148 $ 691 $ 1,037 $ 4,839 $ 5,876 $ 289 1971 1993
The Waters of
Northern Hills. -- 1,251 7,105 690 1,251 7,795 9,046 377 1982 1994
San Diego, Cali-
fornia:
Scripps Landing. -- 1,332 7,550 240 1,332 7,790 9,122 421 1985 1994
Tierrasanta
Ridge.......... -- 2,859 16,130 492 2,859 16,622 19,481 717 1994 1994
San Francisco
(Bay Area), Cal-
ifornia:
Homestead Vil-
lage--
San Mateo...... -- 1,510 -- 142 1,510 142 1,652 (b) (b) 1995
Homestead Vil-
lage--
Sunnyvale ..... -- 1,274 -- 87 1,277 84 1,361 (b) (b) 1995
Treat Commons... 7,296 5,788 32,802 -- 5,788 32,802 38,590 -- 1988 1995
Santa Fe, New
Mexico:
Enclave, The.... -- 1,810 7,242 696 1,810 7,938 9,748 630 1986 1992
Foothills of
Santa Fe Phase
I.............. -- 1,396 -- 760 1,401 755 2,156 (b) (b) 1995
The Meadows of
Santa Fe....... -- 760 -- 11,711 992 11,479 12,471 675 1994 1993
Rancho Vizcaya.. -- 1,906 9,458 729 1,906 10,187 12,093 1,241 1990 1991
Seattle, Washing-
ton:
Logan's Ridge... -- 1,950 11,118 80 1,950 11,198 13,148 223 1987 1995
Mantanza Creek.. -- 1,016 5,814 98 1,016 5,912 6,928 117 1991 1995
Millwood Es-
tates.......... -- 1,593 9,200 260 1,593 9,460 11,053 184 1987 1995
Pebble Cove .... -- 1,895 -- 2,342 2,026 2,211 4,237 (b) (b) 1995
Remington Park.. -- 2,795 15,593 539 2,795 16,132 18,927 249 1990 1995
Walden Pond..... -- 2,033 11,535 168 2,033 11,703 13,736 232 1990 1995
Tucson, Arizona:
Ashton Meadows.. -- 966 5,474 701 966 6,175 7,141 348 1979 1993
Cobble Creek.... -- 1,422 5,690 616 1,422 6,306 7,728 802 1980 1992
Craycroft Gar-
dens........... -- 348 1,392 201 348 1,593 1,941 179 1963 1992
Rio Cancion..... -- 2,854 16,175 364 2,854 16,539 19,393 797 1984 1994
San Ventana (i). -- 3,177 -- 7,444 3,271 7,350 10,621 (b) (b) 1993
Sonoran Terrac-
es............. -- 3,020 14,150 648 3,020 14,798 17,818 2,001 1986 1992
Sundown Village
............... -- 2,009 6,424 4,491 2,110 10,814 12,924 611 (h) (h)
Tierra Antigua.. -- 992 3,967 507 992 4,474 5,466 518 1979 1992
Villa Caprice... -- 1,279 7,248 274 1,279 7,522 8,801 427 1972 1993
Windsail........ 4,843 1,852 7,407 616 1,852 8,023 9,875 549 1986 1993
Tulsa, Oklahoma:
Southern Slope.. -- 779 4,413 141 779 4,554 5,333 270 1982 1993
-------- -------- ---------- -------- -------- ---------- ---------- -------
Total
Multifamily.... $158,054 $299,981 $1,040,137 $455,316 $309,025 $1,486,409 $1,795,434 $77,433
-------- -------- ---------- -------- -------- ---------- ---------- -------
</TABLE>
(see notes following table)
69
<PAGE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COST TO PTR COSTS CARRIED AT DECEMBER 31, 1995
--------------------- CAPITALIZED --------------------------------
BUILDINGS SUBSE- BUILDINGS ACCUMU- CON-
ENCUM- AND QUENT TO AND LATED DE- STRUCTION
PROPERTIES BRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTALS PRECIATION YEAR
---------- -------- -------- ------------ ----------- -------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
Austin, Texas:
Homestead
Village--Round
Rock (j)....... $ -- $ 808 $ -- $ 84 $ 828 $ 64 $ 892 $ -- N/A
Monterey Ranch
Village I (k).. -- 424 -- 1,241 457 1,208 1,665 -- N/A
Monterey Ranch
Village III
(l)............ -- 1,131 -- 4,694 1,219 4,606 5,825 -- N/A
El Paso, Texas:
West Ten (m).... -- 1,523 -- 74 1,544 53 1,597 -- N/A
Houston, Texas:
Oaks at Medical
Center Phase II
(n)............ -- 3,368 -- 1,861 3,408 1,821 5,229 -- N/A
Phoenix, Arizona:
22nd & Dunlap
Phase II (o)... -- 1,647 -- 173 1,647 173 1,820 -- N/A
Arrowhead Phase
II (p)......... -- 1,601 -- -- 1,601 -- 1,601 -- N/A
San Antonio,
Texas:
Dymaxion Phase
II (q)......... -- 546 -- 10 545 11 556 -- N/A
Indian Trails
Phase II (r)... -- 864 -- 18 870 12 882 -- N/A
Walker Ranch
Phase I (s).... -- 2,230 -- 1,156 2,373 1,013 3,386 -- N/A
Walker Ranch
Phase II (t)... -- 1,481 -- 501 1,575 407 1,982 -- N/A
Walker Ranch Phase III (u). -- 555 -- 228 591 192 783 -- N/A
Santa Fe, New
Mexico:
Foothills of
Santa Fe Phase
II (v)......... -- 1,114 -- 35 1,114 35 1,149 -- N/A
St. Francis (w). -- 1,941 -- 380 1,986 335 2,321 -- N/A
-------- -------- ---------- -------- -------- ---------- ---------- -------
Total
Development
Land........... $ -- $ 19,233 $ -- $ 10,455 $ 19,758 $ 9,930 $ 29,688 $ --
-------- -------- ---------- -------- -------- ---------- ---------- -------
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn (x)........ $ -- $ 12,861 $ 1,935 $ 8,074 $ 12,861 $ 10,009 $ 22,870 $ 3,139 1972
-------- -------- ---------- -------- -------- ---------- ---------- -------
OFFICE/INDUSTRIAL:
Dallas, Texas:
Irving Blvd..... $ -- $ 109 $ 303 $ 128 $ 109 $ 431 $ 540 $ 234 1968
El Paso, Texas:
Vista
Industrial..... -- 567 2,504 63 567 2,567 3,134 437 1987
Ontario,
California:
Ontario
Industrial
Building....... -- 1,200 3,828 (891)(y) 1,200 2,937 4,137 696 1987
-------- -------- ---------- -------- -------- ---------- ---------- -------
Total Office/Industrial. $ -- $ 1,876 $ 6,635 $ (700) $ 1,876 $ 5,935 $ 7,811 $ 1,367
-------- -------- ---------- -------- -------- ---------- ---------- -------
OTHER: -- 16 46 1 16 47 63 38 1971
-------- -------- ---------- -------- -------- ---------- ---------- -------
TOTAL OTHER..... $ -- $ 16 $ 46 $ 1 $ 16 $ 47 $ 63 $ 38
-------- -------- ---------- -------- -------- ---------- ---------- -------
TOTAL........... $158,054 $333,967 $1,048,753 $473,146 $343,536 $1,512,330 $1,855,866 $81,977
======== ======== ========== ======== ======== ========== ========== =======
<CAPTION>
YEAR
PROPERTIES ACQUIRED
---------- --------
<S> <C>
LAND HELD FOR FU-
TURE MULTIFAMILY
DEVELOPMENT:
Austin, Texas:
Homestead
Village--Round
Rock (j)....... 1995
Monterey Ranch
Village I (k).. 1993
Monterey Ranch
Village III
(l)............ 1993
El Paso, Texas:
West Ten (m).... 1994
Houston, Texas:
Oaks at Medical
Center Phase II
(n)............ 1994
Phoenix, Arizona:
22nd & Dunlap
Phase II (o)... 1995
Arrowhead Phase
II (p)......... 1995
San Antonio,
Texas:
Dymaxion Phase
II (q)......... 1994
Indian Trails
Phase II (r)... 1994
Walker Ranch
Phase I (s).... 1994
Walker Ranch
Phase II (t)... 1994
Walker Ranch Phase III (u). 1994
Santa Fe, New
Mexico:
Foothills of
Santa Fe Phase
II (v)......... 1995
St. Francis (w). 1994
Total
Development
Land...........
HOTEL:
San Francisco,
California:
Wharf Holiday
Inn (x)........ 1975
OFFICE/INDUSTRIAL:
Dallas, Texas:
Irving Blvd..... 1977
El Paso, Texas:
Vista
Industrial..... 1989
Ontario,
California:
Ontario
Industrial
Building....... 1987
Total Office/Industrial.
OTHER: 1972
TOTAL OTHER.....
TOTAL...........
</TABLE>
- -------
(a) Phase I (118 units) was acquired in 1991 and Phase II (122 units) was
developed in 1992.
(b) As of 12/31/95, property was undergoing development.
(c) Phase I (132 units) was developed in 1992 and Phase II (57 units) was
developed in 1995.
(d) 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.
(e) Phase I (160 units) was developed in 1989 and Phase II (132 units) was
developed in 1991.
70
<PAGE>
(f) Phase I (208 units) was acquired in 1991 and Phase II (144 units) was
developed in 1994.
(g) Phase I (84 units) was developed in 1970 and Phase II (100 units) was
developed in 1978.
(h) Phase I (250 units) was acquired in 1993 and Phase II (80 units) was
developed in 1995.
(i) Represents properties owned by third party owner-developers that are
subject to presale agreements with PTR to acquire such properties. PTR's
investment as of December 31, 1995 represents development loans made by PTR
to such owner-developers.
(j) 3.7 acres of undeveloped land.
(k) 19.9 acres of undeveloped land.
(j) 53.1 acres of undeveloped land.
(m) 25.3 acres of undeveloped land.
(n) 13.2 acres of undeveloped land.
(o) 7.6 acres of undeveloped land.
(p) 11.6 acres of undeveloped land.
(q) 18.0 acres of undeveloped land.
(r) 25.6 acres of undeveloped land.
(s) 38.7 acres of undeveloped land.
(t) 30.5 acres of undeveloped land.
(u) 10.3 acres of undeveloped land.
(v) 19.2 acres of undeveloped land.
(w) 10.4 acres of undeveloped land.
(x) PTR owns the building and land leased to Holiday Inns of America, Inc. at
Fishermann's Wharf in San Francisco. The lease with Holiday Inns expires in
2018.
(y) The Ontario Industrial property was written down by $1,100,000 in June 1993
to more properly reflect the property's net realizable value.
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 1995 1994 1993
---------------- ---------- ---------- --------
<S> <C> <C> <C>
Balance at January 1......................... $1,296,288 $ 872,610 $337,274
Acquisitions, including renovation expendi-
tures....................................... 370,543 270,024 449,500
Development expenditures, including land ac-
quisition................................... 192,067 163,826 112,264
Capital improvements......................... 5,493 3,912 1,639
Real estate sold............................. (8,402) (12,287) (24,953)
Provision for possible losses................ (220) (1,600) (2,270)
Other........................................ 97 (197) (844)
---------- ---------- --------
Balance at December 31....................... $1,855,866 $1,296,288 $872,610
========== ========== ========
<CAPTION>
DECEMBER 31,
--------------------------------
ACCUMULATED DEPRECIATION 1995 1994 1993
------------------------ ---------- ---------- --------
<S> <C> <C> <C>
Balance at January 1......................... $ 46,199 $ 22,022 $ 19,360
Depreciation for the year.................... 36,685 24,614 10,241
Accumulated depreciation of real estate sold. (646) (151) (7,429)
Other........................................ (259) (286) (150)
---------- ---------- --------
Balance at December 31....................... $ 81,979 $ 46,199 $ 22,022
========== ========== ========
</TABLE>
As of December 31, 1995, the aggregate cost and net investment cost for
federal income tax purposes of PTR's investment in real estate amounted to
$1,796,983,000 and $1,714,221,000, respectively.
71
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Pacific Trust,
a Maryland real estate investment trust, and the undersigned Trustees and
officers of Security Capital Pacific Trust, hereby constitutes and appoints C.
Ronald Blankenship, James W. Kluber, Jeffrey A. Klopf, Ariel Amir, Edward J.
Schneidman and Michael T. Blair its or his true and lawful attorneys-in-fact
and agents, for it or him and in its or his name, place and stead, in any and
all capacities, with full power to act alone, to sign any and all amendments to
this report, and to file each such amendment to this report, with all exhibits
thereto, and any and all documents in connection therewith, with the Securities
and Exchange Commission, hereby granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform any and
all acts and things requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as it or he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them may lawfully do or cause to be done by virtue hereof.
72
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Security Capital Pacific Trust
/s/ C. Ronald Blankenship
By: _________________________________
C. Ronald Blankenship
Chairman (Principal Executive
Officer)
Date: March 20, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. Ronald Blankenship Chairman (Principal March 20, 1996
____________________________________ Executive Officer) and
C. Ronald Blankenship Trustee
/s/ James W. Kluber Vice President (Principal March 20, 1996
____________________________________ Financial and Accounting
James W. Kluber Officer)
/s/ James A. Cardwell Trustee March 20, 1996
____________________________________
James A. Cardwell
/s/ John T. Kelley III Trustee March 20, 1996
____________________________________
John T. Kelley III
/s/ Calvin K. Kessler Trustee March 20, 1996
____________________________________
Calvin K. Kessler
/s/ William G. Myers Trustee March 20, 1996
____________________________________
William G. Myers
/s/ James H. Polk III Trustee March 20, 1996
____________________________________
James H. Polk III
/s/ John C. Schweitzer Trustee March 20, 1996
____________________________________
John C. Schweitzer
</TABLE>
73
<PAGE>
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
4.1 Restated Declaration of Trust of PTR (Incorporated by
reference to Exhibit 4 to PTR's Form 10-Q for the
quarter ended June 30, 1991)
4.2 First Certificate of Amendment of Restated Declara-
tion of Trust of PTR (Incorporated by reference to
Exhibit 4 to PTR's Form 10-Q for the quarter ended
June 30, 1992)
4.3 Second Certificate of Amendment of Restated Declara-
tion of Trust of PTR (Incorporated by reference to
Exhibit 3.1 to PTR's Form 8-K dated May 3, 1994)
4.4 Third Articles of Amendment of Restated Declaration
of Trust of PTR (Incorporated by reference to Exhibit
4.4 to PTR's Registration Statement No. 33-86444)
4.5 Articles Supplementary relating to PTR's Cumulative
Convertible Series A Preferred Shares of Beneficial
Interest (Incorporated by reference to Exhibit 3.1 to
PTR's Form
8-K dated November 22, 1993)
4.6 Articles Supplementary relating to PTR's Series B Cu-
mulative Redeemable Series B Preferred Shares of Ben-
eficial Interest (Incorporated by reference to Ex-
hibit 99.3 to PTR's Form 8-K dated May 18, 1995)
4.7 First Articles of Amendment to Articles Supplementary
relating to PTR's Series B Cumulative Redeemable Pre-
ferred Shares of Beneficial Interest (Incorporated by
reference to Exhibit 3.1 to PTR's Form 10-Q for the
quarter ended September 30, 1995)
4.8 Articles of Merger of PACIFIC with and into PTR (In-
corporated by reference to Exhibit 4.6 to PTR's Form
10-K for the year ended December 31, 1994)
4.9 Bylaws of PTR (Incorporated by reference to Exhibit
4.1 to PTR's Form 8-K dated November 22, 1993)
4.10 Indenture, dated as of February 1, 1994, between PTR
and Morgan Guaranty Trust Company of New York, as
Trustee, relating to PTR's unsecured senior debt se-
curities (Incorporated by reference to Exhibit 4.2 to
PTR's Form 10-K for the year ended December 31, 1993)
4.11 First Supplemental Indenture, dated as of February 2,
1994, among PTR, Morgan Guaranty Trust Company of New
York and State Street Bank and Trust Company, as suc-
cessor Trustee (Incorporated by reference to Exhibit
4.3 to PTR's Form 10-K for the year ended December
31, 1993)
4.12 6.875% Note due February 15, 2008 (Incorporated by
reference to Exhibit 4.4 to PTR's Form 10-K for the
year ended December 31, 1994)
4.13 7.5% Note due February 15, 2014 (Incorporated by ref-
erence to Exhibit 4.5 to PTR's Form 10-K for the year
ended December 31, 1994)
4.14 7.15% Note due February 23, 2010.....................
4.15 7.90% Note due February 23, 2016.....................
4.16 Rights Agreement dated as of July 21, 1994 between
PTR and Chemical Bank, including form of Rights Cer-
tificate (Incorporated by reference to Exhibit 4.2 to
PTR's Form 8-K dated July 19, 1994)
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<C> <S> <C>
4.17 First Amendment dated as of February 8, 1995 to the
Rights Agreement (Incorporated by reference to Ex-
hibit 4.13 to PTR's Form 10-K for the year ended De-
cember 31, 1994)
10.1 1987 Share Option Plan for Outside Trustees, as
amended..............................................
10.2 Form of Indemnification Agreement entered into be-
tween PTR and all of its officers and Trustees (In-
corporated by reference to Exhibit 10.50 to Registra-
tion Statement No. 33-43201)
10.3 Second Amended and Restated Investor Agreement dated
as of July 11, 1994 between PTR and SCG (Incorporated
by reference to Exhibit 10.1 to PTR's Form 8-K dated
July 19, 1994)
10.4 Supplemental Investment Agreement dated as of October
1, 1991, by and between PTR and SCG (Incorporated by
reference to Exhibit 10.70 to Registration Statement
No. 33-43201)
10.5 Second Supplemental Investment Agreement dated as of
December 7, 1993 between PTR and SCG (Incorporated by
reference to Exhibit 10.2 to PTR's Form 8-K dated May
3, 1994)
10.6 Third Supplemental Investment Agreement dated as of
December 6, 1994 between PTR and SCG (Incorporated by
reference to Exhibit 10.6 to PTR's Form 10-K for the
year ended December 31, 1994)
10.7 Management Agreement dated as of September 1, 1995
between PTR and SCG Realty Services Incorporated.....
10.8 Amended and Restated Credit Agreement dated August
11, 1995 among PTR, Texas Commerce Bank National As-
sociation and Wells Fargo Realty Advisors Funding,
Incorporated, as co-agents, and the banks named
therein (Incorporated by reference to Exhibit 10.1 to
PTR's Form 10-Q for the quarter ended September 30,
1995)
10.9 Fourth Amended and Restated REIT Management Agreement
dated as of June 30, 1995 between PTR and the REIT
Manager (Incorporated by reference to Exhibit 10 to
PTR's Form 10-Q for the quarter ended June 30, 1995)
10.10 First Amendment to the Fourth Amended and Restated
REIT Management Agreement dated as of December 12,
1995 between PTR and the REIT Manager (Incorporated
by reference to Exhibit 10.1 to PTR's Form 8-K dated
February 15, 1996)
10.11 Agreement and Plan of Merger dated as of December 6,
1994 among PTR, PACIFIC and SCG (Incorporated by Ref-
erence to Exhibit 2.1 to Registration Statement No.
33-87184)
21.1 Subsidiaries of PTR..................................
23.1 Consent of KPMG Peat Marwick LLP.....................
24.1 Power of Attorney (included at page 72)
27.1 Financial Data Schedule
</TABLE>
75
<PAGE>
Exhibit 4.14
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $50,000,000
CUSIP No.: 814141 AA 5
SECURITY CAPITAL PACIFIC TRUST
7.15% NOTE DUE 2010
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of FIFTY
MILLION DOLLARS on February 15, 2010 (less all previously paid installments of
principal which are due and payable as set forth below, commencing on February
15, 2003) and to pay interest on the outstanding principal amount thereon from
February 23, 1996, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in arrears on
February 15 and August 15 in each year, commencing on August 15, 1996, at the
rate of 7.15% per annum, until the entire principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest which shall be the February 1 or August 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not more than 15
days and not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful
<PAGE>
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. Payment of the
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $50,000,000.
Installments of principal of $125 will be paid on each $1,000 original
principal amount of Securities of this series annually on each February 15,
commencing on February 15, 2003 to the Person in whose name this Security is
registered in the Security Register on the preceding February 1 (whether or not
a Business Day).
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than 30
days prior to the Redemption Date, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
-2-
<PAGE>
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar
if such redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have
been payable if such redemption or accelerated payment had not been made,
over (ii) the aggregate principal amount of the Securities being redeemed
or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment
date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole
Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded
United States government securities adjusted to constant maturities or, if
such statistical release is not published at the time of any determination
under the Indenture, then such other reasonably comparable index which
shall be designated by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case,
-3-
<PAGE>
upon compliance by the Company with certain conditions set forth in the
Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
-4-
<PAGE>
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being
-5-
<PAGE>
expressly waived and released by the acceptance of this Security by the Holder
thereof and as part of the consideration for the issue of the Securities of this
series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
___________________________
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
-------------------------
Jeffrey A. Klopf
Secretary
Dated: February 23, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:________________________
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
Exhibit 4.15
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $100,000,000
CUSIP No.: 814141 AB 3
SECURITY CAPITAL PACIFIC TRUST
7.90% NOTE DUE 2016
SECURITY CAPITAL PACIFIC TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of ONE HUNDRED
MILLION DOLLARS on February 15, 2016 (less all previously paid installments of
principal which are due and payable as set forth below, commencing on February
15, 2011) and to pay interest on the outstanding principal amount thereon from
February 23, 1996, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in arrears on
February 15 and August 15 in each year, commencing on August 15, 1996, at the
rate of 7.90% per annum, until the entire principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for on any Interest Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest which shall be the February 1 or August 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the Holder on such Regular Record Date, and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not more than 15
days and not less than 10 days prior to such Special Record Date, or may be paid
at any time in
-1-
<PAGE>
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. Payment
of the principal of, Make-Whole Amount, if any, on, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City of Boston, Commonwealth of Massachusetts, or elsewhere as
provided in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by (i) check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or (ii) transfer
to an account of the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of February 1, 1994,
between the Company and Morgan Guaranty Trust Company of New York, as trustee,
as supplemented by a First Supplemental Indenture, dated as of February 2, 1994,
(as so supplemented, herein called the "Indenture") between the Company and
State Street Bank and Trust Company, as successor trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the first page hereof, limited in
aggregate principal amount to $100,000,000.
Installments of principal on each $1,000 original principal amount of
Securities of this series will be paid annually on each February 15, commencing
on February 15, 2011, in the following amounts: $100 in 2011, $125 in 2012,
$150 in 2013, $175 in 2014, $200 in 2015 and $250 in 2016. In each case,
principal on this Security will be payable to the Person in whose name this
Security is registered in the Security Register on the preceding February 1
(whether or not a Business Day).
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, upon notice of not more than 60 nor less than
30 days prior to the Redemption Date, at a redemption price equal to the sum of
(i) the principal amount of the Securities being redeemed plus accrued interest
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thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Security, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of such dollar
if such redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have
been payable if such redemption or accelerated payment had not been made,
over (ii) the aggregate principal amount of the Securities being redeemed
or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment
date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole
Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded
United States government securities adjusted to constant maturities or, if
such statistical release is not published at the time of any determination
under the Indenture, then such other reasonably comparable index which
shall be designated by the Company.
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<PAGE>
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and the Trustee shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof or any interest on or
after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or
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<PAGE>
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and interest on this Security at the times, place and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or
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<PAGE>
any successor, under any rule of law, statute or constitutional provision or by
the enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
acceptance of this Security by the Holder thereof and as part of the
consideration for the issue of the Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
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<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ C. Ronald Blankenship
----------------------------
C. Ronald Blankenship
Chairman
Attest:
By: /s/ Jeffrey A. Klopf
-----------------------
Jeffrey A. Klopf
Secretary
Dated: February 23, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:________________________
Authorized Officer
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
======================================
======================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Pacific Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
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<PAGE>
Exhibit 10.1
PROPERTY TRUST OF AMERICA
SHARE OPTION PLAN FOR OUTSIDE TRUSTEES
Adopted January 6, 1987
Approved by Shareholders June 12, 1987
Amended October 4, 1988
Amended January 1, 1992
<PAGE>
PROPERTY TRUST OF AMERICA
SHARE OPTION PLAN FOR OUTSIDE TRUSTEES
1. Purpose of the Plan. This Share Option Plan is intended to advance the
interests of Property Trust of America (the "Trust") and its shareholders by
affording to the Trustees who are not officers or employees of the Trust or the
Advisor or its affiliates an additional opportunity to participate in the
ownership of the Trust and to benefit from any appreciation in the market value
of the Shares in order to motivate, retain and attract to the highly competent
individuals upon whose judgment, initiative, leadership and continued efforts
the success of the Trust depends.
2. Definitions. Unless the context otherwise requires, the following
words as used herein shall have the following meanings:
(a) "Administrator" - The Secretary of the Trust or other person (who
is not an outside Trustee) designated by the Board of Trustees of the Trust
to administer the Plan.
(b) "Advisor" - Southwest Realty Advisors Incorporated.
(c) "Annual Meeting" - The annual meeting of shareholders of the
Trust.
(d) "Disability" - Disability resulting from injury or illness which
renders the Optionee unable to serve as a Trustee of the Trust.
(e) "Inside Trustee" - A Trustee of the Trust who is also an officer
or employee of the Trust.
(f) "Option" - An option to purchase Shares granted pursuant to the
provisions hereof.
(g) "Optionee" - An Outside Trustee who has been granted an option
under this Plan and who has executed a written option agreement with the
Trust.
(h) "Outside Trustee" - A Trustee of the Trust who is not an officer
or employee of the Trust, the Advisor or any affiliate of the Advisor.
(i) "Plan" - The Share Option Plan for Outside Trustees set forth
herein.
(j) "Share Option Agreement" - The agreement described in Section 5
between the Trust and the Optionee under which the Optionee may purchase
stock hereunder.
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<PAGE>
(k) "Shares" - The Trust's present Shares of Beneficial Interest and
any Share or Shares of capital stock or other securities of the Trust
hereafter issued or issuable upon, in respect of or in substitution or in
exchange therefor.
3. Administration of the Plan. The Plan shall be administered by the
Administrator, who shall, in accordance with the provisions hereof, (i)
determine which Outside Trustees are not affiliated with the Advisor and who
thus participate in the Plan, (ii) calculate the exercise price of the Options,
(iii) direct the preparation of any appropriate documentation, including Share
Option Agreements, to effectuate the grant of Options, (iv) process and
supervise the exercise and termination of Options, (v) make necessary
adjustments to the Shares because of changes in capitalization of the Trust and
(vi) perform such other ministerial acts as are necessary to carry out the
purposes of the Plan.
4. Shares Subject to Plan. There shall be reserved for use upon exercise
of Options granted under the Plan 200,000 Shares of the Trust (unless such
maximum shall be increased or decreased by reason of changes in capitalization
as provided in Section 9 hereof). The Shares subject to the Plan may be
authorized but unissued Shares, or may be issued Shares which have been
reacquired by the Trust. Shares with respect to which an Option shall have been
exercised shall not again be available for option hereunder. If any option shall
expire or terminate for any reason without having been exercised in full, new
Options may be granted hereunder covering such unpurchased Shares. For purposes
of the Plan, Shares subject to Options which are surrendered pursuant to Section
5(d) shall be deemed to be unpurchased Shares.
5. Options.
(a) Option Grant and Agreement. After January 1, 1992, Options shall
only be granted under the Plan as follows: on each date of the Annual
Meeting for the years 1992 through and including 1996, each Outside Trustee
on such date (after the election of trustees in the Annual Meeting) shall
be granted an Option to purchase 2,000 Shares of the Trust for the exercise
price, term and other provisions described below. Each Option granted
hereunder shall be evidenced by a written Share Option Agreement dated as
of the date of grant and executed by the Trust and the Optionee, which
Agreement shall set forth an offer to sell at the Option price, the number
of Shares subject to the offer, the period of time during which the offer
shall remain open, and such other terms and provisions as may be determined
by the Administrator consistent with the Plan.
(b) Option Price. The Option price per Share subject to each Option
shall be equal to the closing price of Shares on
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<PAGE>
the New York Stock Exchange on the date of the Annual Meeting corresponding
to the Option grant, as such price is reported in the Wall Street Journal
on the business day immediately following such date.
(c) Option Period. The term of each Option shall be five (5) years.
Each Option shall be subject to earlier termination as hereinafter
provided.
(d) Vesting and Shares Appreciation Rights Under Certain
Circumstances.
(i) In the event of the acquisition of fifty percent (50%) or
more of the outstanding Shares of the Trust as a result of any cash
tender offer or exchange offer, other than one made by the Trust, the
Trust shall give written notice to each Optionee promptly after the
date on which the corporation, person or other entity making a cash
tender offer or exchange offer acquires fifty percent (50%) or more of
the outstanding Shares of the Trust. Each Optionee shall thereafter
have the right, for a period of thirty (30) days after the date of
receipt of such notice from the Trust, to either (i) exercise his
Option in full even though such Option would not otherwise be
exercisable under the option vesting schedule (if any), or (ii)
surrender his Option, or the unexercised portion thereof, to the Trust
in exchange for a cash payment to be made by the Trust to the Optionee
within ten (10) days after receipt by the Trust of the Option in an
amount representing the difference between the option price per Share
under the Option and the cash price paid per Share in the tender offer,
or in the event of an exchange offer, the value per Share of the
securities and/or other property offered in such exchange offer, less
the amount of all federal and state withholding or other employment
taxes applicable to the taxable income of such optionee resulting from
such surrender.
(ii) In the event of the dissolution or liquidation of the Trust,
each Option granted under this Plan shall terminate as of a date to be
fixed by the Administrator, provided that not less than thirty (30)
days prior written notice of the date so fixed shall be given to each
Optionee and each such Optionee shall have the right during such period
to exercise his Option in full even though such Option would not
otherwise be exercisable in full under the option vesting schedule (if
any). At the end of such period, any unexercised Option, or any
unexercised portion thereof, shall terminate and be of no further
effect.
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<PAGE>
6. Non-Transferability of Options. An Option (and related Share
appreciation rights) shall not be transferable otherwise than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986 as amended or Title I of
the Employee Retirement Income Security Act or rules thereunder, and an Option
may be exercised, during the lifetime of the Optionee, only by the Optionee or
by his guardian or legal representative. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, or the levy of any execution, attachment or similar process
upon the Option (and related Share appreciation rights) shall be null and void
and without effect.
7. Exercise of Options; Termination, Death or Disability. Each exercise
of an Option, or any part thereof, shall be evidenced by a notice in writing to
the Trust. The purchase price of the Shares as to which an Option shall be
exercised shall be paid in full in cash or by certified check at the time of
exercise, together with the full amount of all federal and state withholding or
other employment taxes applicable to the taxable income of such Optionee
resulting from such exercise. The holder of an Option shall not have any of the
rights of a shareholder of the Trust with respect to the Shares covered by the
Option except to the extent that one or more certificates for such Shares shall
have been delivered to him, or he has been determined by the Trust's Transfer
Agent to be a shareholder of record upon due exercise of the Option. If the
Optionee's position as a Trustee shall be terminated for any reason other than
death or Disability, the Optionee shall have the right, during the period ending
three months after such termination, to exercise such Option to the extent that
it was exercisable at the date of such termination and shall not have been
exercised (but in any event not more than ten years after the grant of such
Option). In the event of the death or Disability of an Optionee, the Optionee or
his guardian or legal representative in the event of Disability, or his personal
representatives, heirs, legatees or distributees in the event of his death,
shall have the right, up to twelve (12) months from the date of Disability or
date of death, as the case may be, to exercise the Option to the extent that the
Option was not exercised (but in any event not more than five years after the
grant of such Option).
8. Compliance with Securities and Other Laws. In no event shall the Trust
be required to sell or issue Shares under any Option if the issuance thereof
would constitute a violation by either the Optionee or the Trust of any
provision of any law or regulation of any governmental authority or any national
securities exchange. As a condition of any sale or issuance of Shares under
Option, the Trust may place legends on the Shares, issue stop transfer orders
and require such agreements or undertakings from
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<PAGE>
the Optionee as the Trust may deem necessary or advisable to assure compliance
with any such law or regulation, including, if the Trust or its counsel deems it
appropriate, representations from the Optionee that he is acquiring the Shares
solely for investment and not with a view to distribution and that no
distribution of the Shares acquired by him will be made unless registered
pursuant to applicable federal and state securities laws, or in the opinion of
counsel of the Trust, such registration is unnecessary.
9. Adjustments Upon Changes in Capitalization. The option price shall be
adjusted from time to time as follows:
(a) Subject to any required action by shareholders, the number of
Shares covered by each outstanding Option, and the option exercise price,
shall be proportionately adjusted for any increase or decrease in the
number of issued Shares of the Trust resulting from a subdivision or
consolidation of Shares or the payment of a stock dividend (but only in
Shares) or any other increase or decrease in the number of Shares effected
without receipt of consideration by the Trust.
(b) Subject to any required action by shareholders, if the Trust shall
be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to which a
holder of the number of Shares subject to the Option would have been
entitled. A merger or consolidation in which the Trust is not the surviving
corporation shall cause each outstanding Option to terminate, provided that
each Optionee shall, in such event, have the right immediately prior to
such merger or consolidation in which the Trust is not the surviving
corporation to exercise his Option in full even though such Option would
not otherwise be exercisable under the option vesting schedule (if any).
(c) In the event of a change in the Shares of the Trust as presently
constituted which is limited to a change of all of its authorized Shares
with par value into the same number of Shares with a different par value or
without par value, the Shares resulting from any such change shall be
deemed to be Shares within the meaning of this Plan.
To the extent that the foregoing adjustments relate to Shares of the Trust,
such adjustments shall be made by the Administrator, whose determination shall
be final, binding and conclusive.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Trust to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve,
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<PAGE>
liquidate or sell, or transfer all or any part of its business or assets.
10. Adoption and Approval of the Plan. The Plan shall be deemed to be
adopted as of January 8, 1987, which is the date of approval by the Board of
Trustees of the Trust. The Plan was approved by shareholders of the Trust on
June 12, 1987.
11. Amendment of the Plan. All provisions of the Plan (including the form
of option agreement) may at any time or from time to time be modified or amended
by the Administrator, subject to review and action by the Board of Trustees;
provided, however, that (i) modifications or amendments to Section 5 hereof may
not be made more than once every six (6) months except to comport with changes
to the Internal Revenue Code, the Employee Retirement Income Security Act or the
rules thereunder and (ii) no Option at any time outstanding under the Plan may
be modified, impaired or cancelled without the consent of the holder thereof,
and provided further, the Plan may not be amended (a) to increase the maximum
number of Shares subject to the Plan, (b) to reduce the option exercise price of
the Shares, contrary to the provisions of the Plan as hereinabove set forth, or
(c) to materially modify the requirements as to eligibility for participation in
the Plan.
12. Plan Termination. The Plan shall terminate on August 31, 1996 except
as to options outstanding on such date and no option shall be granted under this
Plan after that date.
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<PAGE>
Exhibit 10.7
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), made and entered into as of
the 1st day of September, 1995, by and between SECURITY CAPITAL PACIFIC TRUST, a
Maryland real estate investment trust (the "Owner"), and SCG REALTY SERVICES
INCORPORATED, a Texas corporation ("Manager").
W I T N E S S E T H:
This Agreement covers the apartment projects listed in Exhibit A (each is
individually referred to herein as a "Project"). This Agreement constitutes a
separate and independent contract between the Owner of a Project and the Manager
for such Project.
Owner desires to employ Manager in the management and operation of the
Project by turning over to Manager the operation, direction, management and
supervision of the Project, as outlined below, and Manager desires to assume
such duties upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, Owner and Manager agree as follows:
ARTICLE 1
Definitions
-----------
The following terms shall have the following meanings when used in this
Agreement:
1.1 Term. The term of this Agreement shall commence on the date hereof
and shall, subject to the provisions hereof, terminate on September 30, 1996;
provided, however, that unless either Owner or Manager delivers written notice
to the other party on or before thirty (30) days prior to the expiration of the
initial, or any renewal term, the term of this Agreement shall automatically be
extended for successive one year terms.
1.2 Fee. The management fee payable each month by Owner to Manager
hereunder shall be an amount equal to 3.5% of the Gross Receipts of the Project
for such month if the Project is located in California, Washington, Oregon or
Nevada, and 3.75% of the Gross Receipts of Project for such month if the Project
is located in any other state. Notwithstanding the foregoing, the management fee
payable for any Project identified on Exhibit A as a "construction project"
shall commence on the date 30 days prior to the opening of the leasing office
or, if earlier, the first delivery of units, and the management fee shall be
equal to 90% of the Gross Receipts shown on a rent schedule approved by Owner
until the first to occur of (the "Conversion Date") (a) the date 12 months after
the commencement of payment of management fees, and (b) the month in which the
management fee payable under this sentence first equals or exceeds the
management fee that would be due if calculated under the first
<PAGE>
sentence of this Section. On and after the Conversion Date, the management fee
shall be calculated in accordance with the first sentence of this Section.
1.3 Depository. An FDIC or FSLIC insured national or state bank
designated by Owner.
1.4 Working Capital Reserve. A reasonable working capital reserve per for
each Project, as determined by Owner in its sole discretion, shall be delivered
by Owner to Manager concurrently with Owner's execution and delivery hereof, to
be maintained by Manager during the term hereof, used in connection with the
operation of the Project in accordance with the terms hereof, and restored per
the terms of Sections 4.4 and 4.5 hereof.
1.5 Fiscal Year. The year beginning January 1 and ending December 31,
which is the fiscal year established by Owner for the Project.
1.6 Budget. A composite of (i) an Operations Budget, which shall be an
estimate of receipts and expenditures for the operation of the Project during a
Fiscal Year, including a schedule of expected apartment rentals (excluding
security deposits) for the period in question and a schedule of expected special
repairs and maintenance projects, and (ii) a Capital Budget, which shall be an
estimate of capital replacements, substitutions of and additions to the Project
for a Fiscal Year.
1.7 Gross Receipts. The entire amount of all receipts, determined on a
cash basis, from (a) tenant rentals collected pursuant to tenant leases for each
month during the term hereof; provided, however, that there shall be excluded
from tenant rentals any tenant security deposits (except as provided below) and
any electric utility payments on behalf of tenants on all "BILLS PAID"
properties; (b) cleaning, security and damage deposits forfeited by tenants in
such period; (c) laundry and vending machine income; (d) any and all receipts
from the operation of the Project received and relating to the period in
question; (e) proceeds from rental interruption insurance, unless the entire
property is destroyed; in which event this agreement will terminate as to such
property and Owner will have no further obligation to Manager with respect to
such Property; and (f) any other sums and charges collected in connection with
termination of the tenant leases. Gross Receipts do not include the proceeds of
(i) any sale, exchange, refinancing, condemnation, or other disposition of all
or any part of the Project, (ii) any loans to the Owner whether or not secured
by all or any part of the Project, (iii) any capital contributions by the Owner,
or (iv) any insurance (other than rental interruption insurance) maintained with
regard to the Project.
1.8 Project Employees. Those persons employed by Manager as a management
staff (i.e., manager, assistant manager, leasing agents, maintenance personnel,
and other personnel necessary to be employed in order to maintain and operate
the Project).
2
<PAGE>
ARTICLE 2
Duties and Rights of Manager
----------------------------
2.1 Appointment of Manager. During the Term of this Agreement, the
Manager agrees, for and in consideration of the compensation hereinafter
provided, and the Owner hereby grants to Manager the right, to supervise and
direct the leasing, management and operation of the Project. Everything
performed by Manager under this Agreement shall be done as an independent
contractor of Owner. All obligations or expenses incurred hereunder, including
the pro rata portion used in connection with or for the benefit of the Project
of all purchases of or contracts for sales or services in bulk or volume which
Manager may obtain for discount or convenience in connection with its operation
of other apartment projects, shall be for the account of, on behalf of, and at
the expense of Owner, expect as otherwise specifically provided; provided,
however, Owner shall not be obligated to reimburse Manager for expenses for
office equipment or office supplies of Manager (unless incurred for the
Project), for any overhead expenses of Manager incurred with respect to its
general offices, costs relating to accounting services performed hereunder, or
for any salaries of employees of Manager paid with respect to duties performed
on a supervisory level (except when Manager's supervisory employees are
performing tasks otherwise performed by a resident manager or (to the extent of
the savings achieved) where specialists are employed whose involvement creates
savings in performance of required duties). Owner shall also have no obligation
to reimburse Manager for that portion of the salary of a resident manager which
represents payment for services rendered in respect to apartment projects other
than the Project.
2.2 General Operation. Subject to the limitations imposed by the Budget
from time to time, Manager shall operate the Project in the same manner as is
customary and usual in operation of comparable facilities, and shall provide
such services as are customarily provided by operators of apartment projects of
comparable class and standing consistent with the Project's facilities. In
addition to the other obligations of Manager set forth herein, Manager shall
render the following services and perform the following duties for Owner in a
faithful, diligent and efficient manner: (a) maintain businesslike relations
with tenants whose service requests shall be received, considered and recorded
in systematic fashion in order to show the action taken with respect to each;
(b) collect all monthly rentals due from tenants and rent from users or lessees
of other non-dwelling facilities in the Project, if any; request, demand,
collect, receive and receipt for any and all charges or rents which become due
to Owner, and at Owner's expense take such legal action as may be necessary or
desirable to evict tenants delinquent in payment of monthly rental or other
charges (security deposits, late charges, etc.); (c) prepare or cause to be
prepared for execution by the Owner all forms, reports and returns, if any,
required to be filed by the Owner under applicable federal, state or local laws
and any other requirements relating to the employment of personnel (anything
contained herein to the contrary notwithstanding, however, Manager shall not be
obligated to prepare any of Owner's state or federal income tax returns); (d)
use all reasonable efforts at all times during the term of this Agreement to
operate and maintain the Project according to the highest standards achievable
consistent with the operation of comparable quality units; (e) maintain the
Project as a safe and secure environment and notify Owner of any security risks
or issues related to the Project that
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become known to Manager; (f) advertise when necessary, at Owner's expense, the
availability for rental of the Project units and display "for rent" or other
similar signs upon the Project, it being understood that Manager may install one
or more signs on or about the Project stating that same is under management of
Manager and may use, in a tasteful manner, Manager's name and logo in any
display advertising which may be done on behalf of the Project; and (g) sign,
renew and cancel tenant leases for the Project, in compliance with standards
established by Owner under the provisions of written apartment leases to bona
fide individuals, for monthly rentals and otherwise on terms established by
criteria approved from time to time by Owner, based upon Manager's
recommendations; provided, however, that Project Employees may occupy apartment
units on a month-to-month basis with or without an executed tenant lease.
2.3 Budget.
(a) Manager shall submit for Owner's approval no later than one hundred
twenty (120) days prior to the beginning of each successive Fiscal Year the
Budget for the ensuing Fiscal Year. The Budget shall be approved or rejected by
Owner thirty (30) days after receipt. If Owner fails to approve or disapprove
the Budget within such period, the Budget shall be deemed to be approved. In the
event Owner rejects the Budget, Owner and Manager shall jointly prepare the
Budget as soon as may be reasonably possible. Until a new Budget is approved,
Manager shall operate on the Budget approved for the prior Fiscal Year, with the
exception of expenses for personnel, which must be increased based upon existing
competitive conditions, and expenses relating to taxes, insurance and utilities.
The Budget shall reflect the schedule of monthly rents proposed for the new
fiscal year and shall also constitute a major control under which Manager shall
operate the Project, and there shall be no substantial deviations therefrom
except as permitted by Section 2.6(a). Consequently, without the prior consent
of Owner, no expenses may be incurred or commitments made by Manager in
connection with the maintenance and operation of the Project which exceed the
total expenses allocated for the period in question in the approved Budget by
more than ten percent (10%). The limitation in the preceding sentence, with
respect to incurring any expense not covered by the Budget, shall not apply to
expenses relating to taxes, insurance or utilities or expenditures required due
to emergencies which threaten life or property or could result in civil or
criminal liability for Owner and/or Manager. Manager makes no guaranty, warranty
or representation whatsoever in connection with the accuracy of any Budget, and
Owner agrees that they are intended as good faith estimates only.
(b) In the event there shall be a substantial discrepancy between the
results of operations for any month and the estimated results of operations for
such month as set forth in the budget, Manager shall upon request furnish to
Owner within twenty (20) days after the expiration of such month a written
explanation as to why the discrepancy occurred. If substantial variations have
occurred or are anticipated by Manager during the course of any Fiscal Year,
Manager, upon Owner's reasonable request, shall prepare and submit to Owner a
revised forecast of annual income and expenses for the remainder of the Fiscal
Year based on actual year-to-date income and expenses and Manager's forecast of
income and expenses for the remainder of the Fiscal Year.
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2.4 Manager and Other Personnel.
(a) Manager shall investigate, hire, train, instruct, pay, promote,
discharge and supervise the work of the Project Employees and shall supervise,
through the Project Employees, the hiring, promotion, discharge and work of all
other operating and service employees of Manager performing services in or about
the Project, all in the name of Manager. Since some of the Project Employees may
need to reside at the Project and be available full time in order to perform
properly the duties of his/her employment, it is further understood and agreed
that the Project Employees (including his/her spouse and dependent children), in
addition to their salary and fringe benefits, may receive the normal maintenance
customarily provided managers, assistant managers, leasing agents, and
maintenance personnel of an apartment project, including employee housing, use
of all Project facilities and reimbursement for any and all expenses which such
persons may reasonably incur in the performance of their duties. Any such
housing allowance that is provided will be considered as a payroll cost under
the Budget, and the amount of housing allowance will be credited as apartment
rental income.
(b) The Project Employees shall be employees of Manager. Owner shall
reimburse Manager monthly, in advance, for the total aggregate compensation,
including salary and fringe benefits, payable with respect to the Project
Employees, any temporary employees residing at the Project and, on an agreed
basis, the Project's proportionate share of such costs relating to roving
maintenance, off-site operating staff and similar personnel. The term "fringe
benefits" as used herein shall mean and include the employer's contribution of
F.I.C.A., unemployment compensation and other employment taxes, workmen's
compensation, group life and accident and health insurance premiums, performance
bonuses, and disability and other similar benefits paid or payable by the
employer with respect to employees in other apartment projects operated by
Manager.
2.5 Contracts and Supplies. Manager shall, except as provided herein, in
the name of and on behalf of Owner and at Owner's expense, and without
compensation directly or indirectly to Manager, except as expressly set forth
herein or agreed to by Owner or Manager, consummate arrangements with
concessionaires, licensees, tenants or other intended users of the facilities of
the Project, shall, except as provided herein, on Owner's behalf, enter into
contracts for the furnishing to the Project of electricity, gas, water, steam,
telephone, cleaning, vermin extermination, furnace and air conditioning
maintenance, security protection, pest control and any other utilities, services
and concessions which are provided in connection with the maintenance and
operation of an apartment project in accordance with standards comparable to
those prevailing in other similar apartment projects, and shall place purchaser
orders for such equipment, tools, appliances, materials and supplies as are
necessary to properly maintain the Project.
2.6 Alterations, Repairs and Maintenance.
(a) Manager shall make or install, or cause to be made and installed, or
do or cause to be done at Owner's expense and in the name of Owner, all
necessary or desirable repairs,
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interior and exterior cleaning, painting and decorating, plumbing, alterations,
replacements, improvements and other normal maintenance and repair work on and
to the Project as are customarily made by Manager in the operation of apartment
projects; provided, however, that no unbudgeted expenditure in excess of
$5,000.00 per item or a total of $20,000.00 annually may be made for such
purposes without the prior approval of Owner, unless emergency repairs involving
manifest danger to life or property are immediately necessary for the
preservation of the safety of the Project, or to avoid criminal or civil
liability or for the safety of the tenants, or are required to avoid the
suspension of any necessary service to the Project, in which event such
expenditures may be made by the Manager without prior approval and irrespective
of the cost limitations imposed by this Section 2.6, provided that Owner is
immediately thereafter given notice of such situation and all costs so incurred.
(b) In accordance with the terms of the Budget or after consultation with,
and written approval by, Owner (except in the case of emergency, in which case
such consultation shall be by telephone), Manager shall, at Owner's expense,
from time to time during the term hereof, make all required capital replacements
or repairs to the Project. Subject to obtaining Owner's prior written approval
in regard to sums necessary to cover costs of such capital replacements or
repairs, Manager shall first use any excess funds held pursuant to Section 4.5
and then funds furnished by Owner.
2.7 Licenses and Permits. Manager shall apply for, obtain, and maintain,
in the name and at the expense of Owner, all licenses and permits (including
deposits and bonds) required of Owner or Manager in connection with the
management and operation of the Project. Owner agrees to execute and deliver any
and all applications and other documents and to otherwise cooperate to the
fullest extent with Manager in applying for, obtaining and maintaining such
licenses and permits.
2.8 Compliance with Laws. Manager, at Owner's expense, shall use all
reasonable efforts to cause all such acts and things to be done in and about the
Project as Owner and/or Manager shall deem necessary, and Owner covenants
throughout the term of this Agreement at its expense to comply with all laws,
regulations and requirements of any federal, state or municipal government
having jurisdiction respecting the use or manner of use of the Project or the
maintenance or operation thereof.
2.9 Legal Proceedings. Manager shall institute, in its own name or in the
name of Owner, but in any event at the expense of Owner, any and all legal
actions or proceedings which Manager deems reasonable to collect charges, rent
or other income from the Project or to dispossess tenants or other persons in
possession, or to cancel, terminate, or enforce any lease, license or concession
agreement for the breach thereof or default thereunder by the tenant, licensee
or concessionaire.
2.10 Debts of Owner. In the performance of its duties as Manager, Manager
shall act solely on behalf of Owner in Manager's capacity as independent
contractor. Except as provided in Section 2.1, all debts and liabilities to
third persons incurred by Manager (which are
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consistent with the terms and conditions of this Agreement), in the course of
its operation and management of the Project shall be the debts and liabilities
of the Owner only, and Manager shall not be liable for (and is hereby
indemnified in respect of) any such debts or liabilities, except to the extent
Manager has exceeded its authority hereunder.
ARTICLE 3
Management Fees
---------------
3.1 Management Fee and Other Reimbursable Expenses. Owner shall pay to
Manager, during the term hereof, the Fee for the month on or before the 10th day
of each month. At such time as the Fee is paid, Owner shall also reimburse
Manager for the expenses identified on Exhibit B actually incurred by Manager
during the prior month.
3.2 Place of Payment. All sums payable by Owner to Manager hereunder
shall be payable to Manager at the address set forth below Manager's signature,
unless the Manager shall from time to time specify a different address in
writing.
ARTICLE 4
Procedure for Handling Receipts and Operating Capital
-----------------------------------------------------
4.1 Bank Deposits. All monies received by Manager for or on behalf of
Owner shall be deposited by Manager with the Depository. Manager shall maintain
separate accounts for such funds consistent with the system of accounting of the
Project. All funds on deposit shall be and remain under the sole and exclusive
control of Manager, subject to the provisions hereof. Concurrently, with its
execution and delivery hereof, Owner has deposited with Manager the Working
Capital Reserve. All monies of Owner held by Manager pursuant to the terms
hereof shall be held by Manager in trust for the benefit of Owner to be held and
disbursed as herein provided, and shall not, unless Owner otherwise has agreed
or directed, be commingled with the funds of any other person, including Manager
or any affiliate of Manager. However, Owner has specifically approved the use of
Manager's Central Disbursement account and the movement of Owner's funds into
that account when payments are made. Except as otherwise provided herein, the
Manager shall be strictly liable for the proper application of all funds of
Owner held by Manager in accordance with the terms of this Agreement.
4.2 Security Deposits. Subject to Owner's direction, a portion of
security deposits collected in connection with the leasing of apartment units
shall be delivered to Owner who shall make same available to Manager for return
to tenants in accordance with their respective tenant leases to the extent Gross
Receipts are insufficient to repay same. Manager shall comply with all
applicable laws with respect to such security deposits. All funds held by
Manager representing security deposits shall at all times be the property of
Owner, subject to all applicable laws with respect thereto.
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4.3 Disbursement of Deposits. Manager shall disburse and pay all funds on
behalf of and in the name of Owner in such amounts and at such times as the same
are required in connection with the ownership, maintenance and operation of the
Project on account of all taxes, assessments and charges of every kind imposed
by any governmental authority having jurisdiction over the Project, and all
costs and expenses of maintaining, operating and supervising the operation of
the Project, including, but not limited to, salaries, fringe benefits and
expenses of the Project Employees, insurance premiums, legal and external
accounting fees and the cost and expense of utilities, services and concessions.
If Owner requests Manager to place or create any services for the Project which
are not generally provided at other comparable apartment complexes managed by
Manager, Owner shall reimburse Manager for any costs of Manager's staff
allocable to the placement and/or creation of such services.
4.4 Working Capital. In addition to the funds derived from the operation
of the Project and the Working Capital Reserve, Owner shall furnish and maintain
in the operating accounts in the Depository such other funds as may be necessary
to discharge financial commitments required to efficiently operate the Project,
meet all payrolls and satisfy, before delinquency, all accounts payable. Manager
shall have no responsibility or obligation with respect to the furnishing of
such funds.
4.5 Excess Funds. Any operating funds in excess of the Working Capital
Reserve shall be utilized at Owner's option, to pay debt service or shall be
transferred to a bank account opened and maintained solely by Owner; provided,
however, that Manager shall not be required to make any such transfer if the
transfer would reduce the balance of operating funds below an amount equal to
the Working Capital Reserve. Owner shall designate the bank in which the
operating funds are maintained, and Manager shall have no liability for loss of
operating funds due to insolvency of such institution, even though the amount of
funds maintained exceeds the available federal or other deposit insurance.
4.6 Authorized Signatories. In addition to any signatory designated by
Owner, any persons from time to time designated by Manager shall be authorized
signatories on all bank accounts established by Manager hereunder and shall have
authority to make disbursements from such accounts. Funds may be withdrawn from
all bank accounts established by Manager, in accordance with this Article IV,
only upon the signature of an individual who has been granted that authority by
Manager or Owner. All persons who are authorized signatories or who in any way
handle funds for the Project shall be bonded in the minimum amount of
$500,000.00. Any expense relating to such bonds for on-site employees shall be
borne by Owner and for off-site employees by Manager.
ARTICLE 5
Accounting
----------
5.1 Books and Records. On behalf of Owner, Manager shall keep, or shall
supervise and direct the keeping, on an accrual basis, of a comprehensive system
of office records, books
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and accounts pertaining to the Project. Manager shall use the computer
accounting program designated by Owner or otherwise approved by Owner. Such
records shall be subject to examination by Owner or its authorized agents,
attorneys and accountants at all reasonable hours at the office where such
records are maintained.
5.2 Periodic Statements; Audits.
(a) On or before ten (10) days following the end of each calendar month,
Manager shall deliver or cause to be delivered to Owner (i) an unaudited income
and expense statement showing the results of operation of the Project for the
preceding calendar month and the Fiscal Year to-date; (ii) a comparison of
actual income and expenses with the income and expenses projected in the Budget;
and (iii) cash balances for reserves and operating accounts as of the last day
of such month. Manager shall at its option (i) preserve all invoices for a
period for four (4) years, or (ii) at the expiration of each Fiscal Year deliver
all invoices to Owner. Such statements and computations shall be prepared from
the books of account of the Project.
(b) Within twenty (20) days after the end of such Fiscal Year, Manager
will deliver or cause to be delivered to the Owner an income and expense
statement as at the end of such Fiscal Year, and the results of operation of the
Project during the preceding Fiscal Year.
(c) In the event that Owner or Owner's Mortgagee(s) requires an audit, the
Manager shall cooperate with the auditors. Owner shall pay all costs and fees of
the external auditors.
(d) Owner may request and Manager shall provide without further cost to
Owner, when available, such monthly, quarterly and/or annual leasing and
management reports that relate to the operations of the property as Manager
customarily provides the owners of properties it manages. If additional reports
are required, Manager shall quote Owner an additional fee for providing such
additional reports and, if Owner thereafter requests such reports, Owner shall
pay Manager such additional fee.
5.3 Expenses. All costs and expenses incurred in connection with the
preparation of any statements, budgets, schedules, computations and other
reports expressly required under this Article 5 or under any other provisions of
this Agreement shall be borne by Manager. Any costs and expenses incurred in
connections with the preparation of any statement or reports not expressly
provided for under this Article V or any other provisions of this Agreement
shall be borne by Owner.
ARTICLE 6
General Covenants of Owner and Manager
--------------------------------------
6.1 Operating Expenses. Except as otherwise provided herein, Owner shall
be solely liable for the costs and expenses of maintaining and operating the
Project incurred by Owner or by Manager in accordance with the provisions of
this Agreement, and shall pay, or Manager
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shall pay on Owner's behalf, all such costs and expenses, including, without
limitation, the salaries of all Project Employees.
6.2 Owner's Right of Inspection and Review. Owner and its accountants,
attorneys and agents shall have the right to enter upon any part of the Project
at all reasonable times during the term of this Agreement for any reason,
including, without limitation, examining or inspecting the Project or examining
or making extracts of books and records of the Project, but any inspection shall
be done with as little disruption to the business of the Project as possible.
Books and records of the Project shall be kept, beginning the date hereof, at
the Project or at the location where any central accounting and bookkeeping
services are performed by Manager, but at all times shall be the property of
Owner.
6.3 Indemnity. Owner, at its sole cost and expense, shall defend,
indemnify and hold harmless Manager, its partners, employees, agents,
contractors and affiliates against and from any and all claims, losses, damages,
liabilities and expenses, including, but not limited to, attorneys' fees,
arising out of injuries or damages to persons or property, by reason of any
cause whatsoever, occurring on or around the Project. If the Owner's general
liability policy does not automatically include the manager as an additional
insured, Owner agrees to list the Manager as an additional insured on any and
all liability insurance policies maintained by Owner with insurance to that
effect. The indemnity set forth herein shall not apply if the claim results from
either (i) Manager's gross negligence; (ii) Manager's willful misconduct; or
(iii) Manager's failure to comply with the provisions of this Agreement;
provided that these exceptions shall not apply with respect to any action taken
or policy implemented upon the Owner's written request after consultation with
the Manager.
6.4 Covenants Concerning Payment of Operating Expenses. Except as
otherwise provided herein, Owner covenants to pay all sums for operating
expenses in excess of Gross Receipts required to operate the Project upon
written notice and demand from Manager within ten (10) days after receipt of
written notice. Owner further recognizes that the Project may be operated in
conjunction with other phases and that costs may be allocated or shared between
such phases on a more efficient and less expensive method of operation. In such
regard, Owner consents to the allocation of costs and/or the sharing of any
expenses in an effort to save costs and operate the Project in a more efficient
manner.
ARTICLE 7
Defaults: Termination Rights
-----------------------------
7.1 Default by Manager. Manager shall be deemed to be in default
hereunder in the event Manger shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall (i) result from
Manager's grossly negligent acts or omissions or willful misconduct; (ii)
involve Manager's misappropriation or intentional misapplication of funds
received or held by Manager hereunder; or (iii) continue for a period of ten
(10) days after written notice thereof
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by Owner to Manager as to any default in payment of money or thirty (30) days
after notice thereof by Owner to Manager as to any non-monetary default, or, if
such non-monetary default cannot be cured within thirty (30) days, then such
additional period as shall be reasonable provided that Manager is capable of
curing same and has continuously attempted to cure such default.
7.2 Remedies of Owner. Upon the occurrences of an event of default by
Manager as specified in Section 7.1 hereof, Owner shall be entitled to terminate
this Agreement and Owner shall have the right to pursue any other remedy it may
have at law or in equity, it being expressly understood that following such a
termination, Owner shall have no further obligation to pay any Fee due
hereunder, however, notwithstanding such termination, Manager shall not be
relieved of any liability arising as a result of Manager's default and the
resulting termination of this Agreement. Upon such termination, Manager shall
deliver to Owner such funds, books and records of Owner then in the possession
or control of Manger.
7.3 Defaults by Owner. Owner shall be deemed to be in default hereunder
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner, and such default shall continue for a period of ten (10) days after
written notice thereof by Manager to Owner as to any default in payment of money
or thirty (30) days after notice thereof by Manager to Owner as to any non-
monetary default, or, if such non-monetary default cannot be cured within thirty
(30) days, then such additional period as shall be reasonable provided that
Owner is capable of curing same and has continuously attempted to cure such
default.
7.4 Remedies of Manager. Upon the occurrence of an event of default by
Owner as specified in Section 7.3 hereof, Manager shall be entitled to terminate
this Agreement and upon any such termination by Manager pursuant to this Section
7.4, Manager shall have the right to pursue any other remedy it may have at law
or in equity, except that Owner shall continue to be obligated to pay and
perform all of its obligations which have accrued as of the date of termination
and provided further that Owner shall pay Manger a termination fee for the month
in which this Agreement is terminated equal to the Fee paid for the last full
calendar month preceding the month in which the Agreement was terminated.
7.5 Expiration of Term. Upon the expiration of the Term hereof pursuant
to Section 1.10 hereof, or the earlier termination hereof pursuant to any of
Sections 7.2, 7.3 and 9.10, Manager shall deliver to Owner all funds, including
tenant security deposits, books and records of Owner then in the possession or
control of Manager, save and except such sums as are then due and owing to
Manger hereunder. Within sixty (60) days following expiration or termination,
Manager shall deliver to Owner a final accounting, in writing, with respect to
the operations of the Property.
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ARTICLE 8
Insurance
---------
8.1 Owner's Insurance Coverage. Owner, at its expense, will obtain and
keep in force commercially reasonable commercial general liability insurance and
insurance against physical damage (e.g., fire and extended coverage endorsement,
boiler, and machinery, etc.) and insurance against liability for loss, damage,
or injury to property or persons which might arise out of the occupancy,
management, operation or maintenance of the Property, all as set forth on
Exhibit C attached hereto. Manager will be covered as an additional insured in
all liability insurance maintained with respect to the Property.
The Manager shall furnish whatever information is requested by Owner for
the purpose of establishing the placement of insurance coverages and shall aid
and cooperate in every reasonable way with respect to such insurance and any
loss thereunder. Owner shall include in its hazard policy covering the Property,
the personal property, fixtures, and equipment located thereon (owned by either
Manager or Owner), appropriate clauses pursuant to which the insurance carriers
shall waive the rights of subrogation with respect to losses payable under such
policies.
8.2 Manager's Insurance Coverage. Pursuant to the provisions of Section
4.3, Manager shall provide and maintain, so long as this Agreement is in force,
workmen's compensation insurance in full compliance with all applicable state
and federal laws and regulations covering all employees of Manager performing
work in respect of the Project operations and liability insurance complying with
the terms of Exhibit D.
8.3 Subrogation and Indemnity or Deductible Provisions.
(a) Any insurance which is procured and maintained which in any way is
related to the Project or the authorized activities connected therewith is for
the sole benefit of the party securing such insurance and others named as
insureds, and Manager and Owner hereby release each other from all rights of
recovery under or through subrogation or otherwise for any loss or damage
insured under policies required by this Agreement, and agree that no insurer
shall have a right to recover any amounts paid in respect of a claim form Owner
or Manager, as the case may be, by way of subrogation to Manager's or Owner's
claim, assignment or otherwise, as the case may be. Any insurance which is
procured and maintained by Manager insuring the interest and property of Owner
may contain indemnity or deductible provisions and the cost of such provisions
shall be borne by the Owner.
(b) Each of Owner and Manager hereby waives any and all claims and demands
of whatsoever nature against the other for damages, loss or injury to the
other's property in, upon or about the Project, except for claims and demands
arising out of the gross negligence or willful misconduct of Owner, Manager, or
either of their respective agents, employees, officers or contractors.
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8.4 Environmental Indemnification. Owner agrees to indemnify, defend and
hold Manager and its partners, officers, employees and agents harmless from any
claims, judgments, damages (including consequential damages), penalties, fines,
costs, liabilities (including sums paid in settlement of claims) or losses,
direct or indirect, known or unknown, including without limit, attorney's fees,
consultant fees and expert fees, which Manager may incur as a result of its
being named as a "responsible party" or a "potential responsible party" under
any federal, state or local law governing or regulating the environment for acts
arising solely from its duties as manager under this Agreement.
ARTICLE 9
Miscellaneous Provisions
------------------------
9.1 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State wherein jurisdiction of the
specific property is applicable.
9.2 Notices. Owner shall designate one person as Owner's representative
in all dealings with Manager, who shall, until further notice, be the person
whose name is indicated beneath Owner's address set forth on the signature page
hereof. Any notice or communication hereunder must be in writing, and may be
given by registered or certified mail, and if given by registered or certified
mail, same shall be deemed to have been given and received when a registered or
certified letter containing such notice, properly addressed, with postage
prepaid, is deposited in the United States mail; and if given otherwise than by
registered mail, it shall be deemed to have been given when delivered to and
received by the party to whom it is addressed. Such notices or communications
shall be given to the parties hereto at the addresses set forth opposite the
names of the respective parties on the signature page hereof. Any party hereto
may at any time by giving ten (10) days' written notice to the other party
hereto designate any other address in substitution of the foregoing address to
which such notice or communication shall be given.
9.3 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or such other
documents, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, covenant or condition of this
Agreement or such other documents shall be valid and shall be enforced to the
fullest extent permitted by law.
9.4 No Joint Venture or Partnership. Owner and Manager hereby agree that
nothing contained herein or in any document executed in connection herewith
shall be construed as making Manager and Owner joint venturers or partners. In
no event shall Manager have any obligation or liability whatsoever with respect
to any debts, obligations or liabilities of Owner.
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9.5 Modification; Termination. This Agreement terminates any and all
prior management agreements between Owner and Manager, relating to the Project,
and any amendment, modification, termination or release hereof may be effected
only by a written instrument executed by Manager and Owner.
9.6 Attorneys' Fees. Should either party employ an attorney or attorneys
to enforce any of the provisions hereof or to protect its interest in any manner
arising under this Agreement, or to recover damages for the breach of this
Agreement, the non-prevailing party in any action (the finality of which is not
legally contested) agrees to pay to the prevailing party all reasonable costs,
damages and expenses, including attorneys' fees, expended or incurred in
connection therewith.
9.7 Total Agreement. This Agreement (including any understanding referred
to in Section 9.14 hereof) is a total and complete integration of any and all
undertakings existing between Manager and Owner and supersedes any prior oral or
written agreements, promises or representations between them.
9.8 Competitive Projects. Manager agrees that in its management of
ventures or projects which are competitive with the Project, Manager will
exercise good faith towards and deal fairly with Owner and the Project. Manager
agrees to notify Owner of any competitive projects.
9.9 Successors and Assigns. Owner has entered into this Agreement with
Manager based on Manager's abilities and, accordingly, Manager may not assign
this Agreement without the prior written consent of Owner. Notwithstanding the
foregoing limitation on assignment, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns.
9.10 Sale of the Project. In the event the Project is sold, conveyed or
transferred during the term hereof, Owner may assign this Agreement to the
purchaser of the Project, subject to obtaining Manager's prior written consent,
or Owner may terminate this Agreement, and Owner shall pay to Manager a
termination fee equal to the Fee payable hereunder for the month prior to the
month of termination. Manager, unless otherwise agreed, shall have no duties in
connection with any such sale except reasonable cooperation with brokers and
purchasers.
9.11 Termination. The term of this Agreement shall be for a period of one
year, and shall be automatically renewed for successive periods of one year each
unless either party provides thirty (30) days' notification of its intent not to
renew. Subject to the provisions of the sentences next following, either party
may terminate this Agreement at any time with or without cause by giving the
other party at least thirty (30) days prior notice in writing. Owner recognizes
that Manager will sustain significant start-up and mobilization costs,
therefore, in the event that Owner terminates this Agreement without cause
within one (1) year from the date hereof, Manager shall be entitled to receive a
termination fee as a condition precedent to the
14
<PAGE>
effectiveness of such termination, in an amount equal to three (3) times the
management fee which accrued during the thirty (30) days immediately prior to
the effective date of termination.
9.12 Prior Agreement. This Agreement supersedes and replaces that certain
Management Agreement, dated September 1, 1991, originally executed by Property
Trust of America (the predecessor in interest to Owner) and WilsonSchanzer, Inc.
(the predecessor in interest to Manager).
9.13 Limitation of Liability. Owner is a Maryland real estate investment
trust, and, in accordance with the declaration of trust of Owner, notice is
hereby given that neither the trustees, officers, employees nor shareholders of
Owner assume any personal liability for obligations entered into by or on behalf
of Owner.
ARTICLE 10
Subordination to Mortgages
--------------------------
10.1 Subordination. This Agreement and Manager's interest and rights
hereunder, are and shall be subject and subordinate at all times to the lien of
any first or second mortgage, whether now existing or hereafter created on or
against the Project, and all amendments, restatements, renewals, modifications,
consolidations, refinancings, assignments and extensions thereof ("Security
Documents") without the necessity of any further instrument or act on the part
of the Manager. Manager agrees, at the election of the holder of any such
Security Documents (the "Secured Party"), to attorn to the Secured Party. The
term "mortgage" as used herein shall be deemed to include deeds of trust,
security assignments and any other encumbrances, and any reference to the
"holder" of a Security Document shall be deemed to include the beneficiary under
a deed of trust. Notwithstanding the foregoing, nothing herein shall obligate
the Manager to continue its performance under this Agreement unless it continues
to be paid in accordance with the terms of this Agreement.
10.2 Rights after Events of Default. Upon an Event of Default (as such
term is defined in any Security Document), the Manager shall continue to perform
its obligation under this Agreement until the earlier to occur of (a) the
termination of this Agreement with respect to the Project or the termination of
this Agreement in its entirety by the Secured Party, either of which may occur
in the Secured Party's sole discretion, or (b) the Secured Party's (or its
assignee's or nominee's) acquisition of title to the Project through the
foreclosure, a deed-in-lieu thereof, or otherwise. On and after an Event of
Default, there shall be no material changes in the terms and conditions of this
Agreement without the prior written consent of the Secured Party having been
obtained, which consent may be arbitrarily withheld.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the day and year first above written.
OWNER:
ADDRESS: SECURITY CAPITAL PACIFIC TRUST
125 Lincoln Avenue, 3rd Floor
Santa Fe, NM 87501
/s/ Constance B. Moore
---------------------------------
Constance B. Moore
Managing Director
MANAGER:
ADDRESS: SCG REALTY SERVICES
INCORPORATED
125 Lincoln Avenue, 3rd Floor
Santa Fe, NM 87501
/s/ Patrick R. Whelan
---------------------------------
Patrick R. Whelan
President
16
<PAGE>
Exhibit 21.1
- ------------
PTR has 14 consolidated wholly owned subsidiaries carrying on the same line of
business as PTR operating in the United States.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Security Capital Pacific Trust:
We consent to incorporation by reference in the registration statements No.
33-86444 (Form S-3), No. 33-78402 (Form S-3), No. 33-71040 (Form S-3), No.
33-44631 (Form S-3) and No. 33-25317 (Form S-8) of Security Capital Pacific
Trust of our report dated January 31, 1996, except as to note 12, which is as
of February 23, 1996, relating to the balance sheets of Security Capital Pacific
Trust as of December 31, 1995 and 1994, 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, 1995, which report appears in the
December 31, 1995 annual report on Form 10-K of Security Capital Pacific Trust.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Form 10-K for the twelve months ended December 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 26,919
<SECURITIES> 0
<RECEIVABLES> 19,162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,855,866
<DEPRECIATION> 81,979
<TOTAL-ASSETS> 1,840,999
<CURRENT-LIABILITIES> 0
<BONDS> 158,054
<COMMON> 72,376
0
335,000
<OTHER-SE> 868,292
<TOTAL-LIABILITY-AND-EQUITY> 1,840,999
<SALES> 262,473
<TOTAL-REVENUES> 264,873
<CGS> 0
<TOTAL-COSTS> 82,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 420
<INTEREST-EXPENSE> 19,584
<INCOME-PRETAX> 81,696
<INCOME-TAX> 0
<INCOME-CONTINUING> 81,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,696
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.93
</TABLE>
