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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 1
(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:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
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
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
---- ------------------------------------------------------------------- ----
PART II
<C> <S> <C>
6. Selected Financial Data............................................ 3
7. Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations............................................... 4
Overview........................................................... 4
Merger and Concurrent Subscription Offering........................ 4
Results of Operations.............................................. 4
Environmental Matters.............................................. 8
Liquidity and Capital Resources.................................... 8
REIT Management Agreement.......................................... 12
PART IV
14. Financial Statements and Schedule.................................. 14
</TABLE>
2
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PART II
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
Property Management Fees Paid to
Affiliates....................... 8,912 7,148 3,862 1,424 148
General and Administrative
Expenses......................... 952 784 660 436 697
REIT Management Fee Paid to
Affiliate........................ 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
</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
Outstanding........... 72,211 50,456 44,645 27,034 13,161
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Net earnings attribut-
able to Common Shares. $ 62,496 $ 30,619 $ 24,152 $ 8,986 $ 1,467
Add (Deduct):
Depreciation.......... 36,685 24,614 10,513 5,311 2,886
Provision for possible
loss on investments.. 420 1,600 2,270 400 400
Gain or loss on sale
of investments....... (2,623) -- (2,302) 51 611
Other (primarily pro-
vision for loss on
receivables)......... -- -- 83 74 40
---------- ---------- --------- --------- --------
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 In-
vesting 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>
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(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
3
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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 and may not be comparable to
other similarly titled measures of other companies. 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) operating
expense levels, (iii) the effectiveness of property level operations and (iv)
the pace and price at which PTR can develop and acquire additional multifamily
properties. Capital and credit market conditions 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. Operating 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
4
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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, property management fees 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, property management fees 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.
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 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.
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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 under an exchange agreement. Under the terms of the
sale, cash proceeds representing the value of the property sold was placed into
a trust. At the direction of PTR, a 290 unit multifamily property was acquired
utilizing the cash held in trust. For federal income tax purposes, the
transaction was structured as a non-taxable like-kind exchange. For financial
reporting purposes, the sale qualified for profit recognition and a gain of
$3.2 million was recognized in 1995.
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.
During 1993, PTR entered into a master lease agreement containing a purchase
option for the future sale of a non-multifamily property. Under the terms of
the agreement, PTR is responsible for certain maintenance items, if required,
during the five year period. During 1995, it was determined that PTR could
potentially be liable for expenditures estimated to aggregate $250,000, of
which $50,000 had previously been recorded. Accordingly, the 1995 financial
statements included a provision for such additional costs. This provision has
no impact on cash flow from operating activities.
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.
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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, property management fees 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, property management fees and real estate
taxes were 43.6% and 42.2% of rental income during the years ended December 31,
1994 and 1993, respectively.
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.
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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.
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.
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.
8
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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 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
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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 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.
10
<PAGE>
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.
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
and may not be comparable to other similarly titled measures of other
companies. 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
operating expenses for such properties for 1995 as compared to 1994.
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 resulting from a
6.42% rental rate increase) for such properties for 1994 as compared to 1993
was offset by increases in operating expenses, primarily due to real estate
taxes and turnover expenses. EBITDA may not be comparable to other similarly
titled measures of other companies.
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.
11
<PAGE>
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.
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 and may not be
comparable to other similarly titled measures of other companies. See Item 6.
Selected Financial Data for a reconciliation.
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.
12
<PAGE>
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.
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.
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 14 of this report.
2. Financial Statement Schedules:
Schedule III.
(b) Exhibits:
23.1 Consent of KPMG Peat Marwick LLP
All other schedules have been omitted since the required information is
presented in the financial statements and the related notes or is not
applicable.
13
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
SECURITY CAPITAL PACIFIC TRUST:
Independent Auditors' Report............................................. 15
Balance Sheets as of December 31, 1995 and 1994.......................... 16
Statements of Earnings for the years ended December 31, 1995, 1994 and
1993.................................................................... 17
Statements of Shareholders' Equity for the years ended December 31, 1995,
1994 and 1993........................................................... 18
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.................................................................... 19
Notes to Financial Statements............................................ 20
Schedule III--Real Estate and Accumulated Depreciation as of December 31,
1995.................................................................... 35
</TABLE>
14
<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
15
<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.
16
<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.................................... 73,808 55,772 20,880
Real estate taxes.................................. 21,326 16,093 5,742
Property management fees paid to affiliates........ 8,912 7,148 3,862
Depreciation....................................... 36,685 24,614 10,509
Interest........................................... 19,584 19,442 3,923
REIT management fee paid to affiliate.............. 20,354 13,182 7,073
General and administrative......................... 952 784 660
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.
17
<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.
18
<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........................ (311,619) (380,688) (536,622)
Mortgage notes receivable...................... (1,538) (162) --
Proceeds from mortgage note receivable repay-
ments......................................... 7,701 189 1,323
Proceeds from sale of investment properties.... 10,968 12,146 6,389
Other.......................................... -- -- (155)
-------- -------- --------
Net cash flow used in investing 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......................... 54,465 -- --
Repayment of the outstanding balance on
PACIFIC's line of credit...................... 51,900 -- --
-------- -------- --------
Net increase in net assets related to Merger... $245,036 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<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.
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.
20
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 and Gain 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.
Gains on sales of real estate are recorded when the criteria set forth in
Statement of Financial Accounting Standards No. 66 "Accounting for Sales of
Real Estate" have been met.
Rental Expenses
Rental expenses include utilities, repairs and maintenance, make-ready,
property insurance, marketing, landscaping, property management fees paid to
unaffiliated companies, on-site personnel and other administrative costs.
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
purchase price of the acquisition was $245,036,000. The Merger has been
accounted for as a purchase transaction. The acquired assets and liabilities
were recorded at estimated fair market value which approximated PACIFIC's net
book value at the time of the acquisition. 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
21
<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.
22
<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.
23
<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 under an exchange agreement. Under the terms of the
sale, cash proceeds representing the value of the property sold was placed into
a trust. At the direction of PTR, a 290 unit multifamily property was acquired
utilizing the cash held in trust. For federal income tax purposes, the
transaction was structured as a non-taxable like-kind exchange. For financial
reporting purposes, the sale qualified for profit recognition and a gain of
$3.2 million was recognized in 1995.
PTR also sold its investment in a mortgage note received upon prior year sale
of one of its non-multifamily 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.
During 1993, PTR entered into a master lease agreement containing a purchase
option for the future sale of a non-multifamily property. Under the terms of
the agreement, PTR is responsible for certain maintenance items, if required,
during the five year period. During 1995, it was determined that PTR could
potentially be liable for expenditures estimated to aggregate $250,000, of
which $50,000 had previously been recorded. Accordingly, the 1995 financial
statements included a provision for such additional costs. 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.
24
<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.
25
<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.
26
<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 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. Such distributions will annually aggregate at least 95% of PTR's
taxable income. Because depreciation is a non-cash expense, cash flow typically
will be greater than net earnings attributable to common shares. Therefore,
distributions paid will generally be higher than net earnings attributable to
common shares.
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.
27
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On July 21, 1994, in addition to the distributions paid, PTR redeemed the
shareholder purchase rights issued pursuant to the Rights Agreement dated as of
February 23, 1990, as amended. Pursuant to the redemption, each holder of
record at the close of business on July 21, 1994 was entitled to receive $0.01
per shareholder purchase right. The redemption price was paid on August 12,
1994 and is taxable as ordinary income for federal income tax purposes.
For federal income tax purposes, the following 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.
(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,
28
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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."
All dividends on Preferred Shares have been accrued and paid as of the end of
each fiscal year and, accordingly, are reflected in the accompanying financial
statements.
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
29
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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.
30
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 (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.
31
<PAGE>
SECURITY CAPITAL PACIFIC TRUST
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PTR is obligated to reimburse the REIT Manager for certain expenses incurred
by the REIT Manager on behalf of PTR 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.
32
<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
======= ======= ======= ======= ========
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
======= ======= ======= ======= ========
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.
33
<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.
34
<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)
35
<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)
36
<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)
37
<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
Remington ...... -- 2,324 -- 2,627 2,359 2,592 4,951 (b) (b) 1995
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)
38
<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)
39
<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.
40
<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.
41
<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.
42
<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/A No. 1 of Security Capital Pacific
Trust.
KPMG PEAT MARWICK LLP
El Paso, Texas
August 5, 1996
