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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
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
ARCHSTONE COMMUNITIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 74-6056896
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
7670 South Chester Street, Suite 100
Englewood, Colorado 80112
(Address of principal executive offices and zip code)
(303) 708-5959
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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Name of each exchange
Title of each class on which registered
------------------- ------------------------------
Common Shares of Beneficial Interest, par value $1.00 per share New York Stock Exchange
Cumulative Convertible Series A Preferred Shares of
Beneficial Interest, par value $1.00 per share New York Stock Exchange
Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share New York Stock Exchange
Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share New York Stock Exchange
Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
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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 Common Shares on February
23, 2000, the aggregate market value of the voting common equity held by non-
affiliates of the registrant was approximately $1,654,547,000.
At February 23, 2000, there were approximately 138,970,000 of the
registrant's Common Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 2000 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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Table of Contents
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Item Description Page
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PART I
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Glossary............................................................................... 1
1. Business............................................................................... 3
Archstone Communities Trust........................................................ 3
Trustees and Officers of Archstone................................................. 6
Employees.......................................................................... 10
Insurance.......................................................................... 10
Risk Factors....................................................................... 11
2. Properties............................................................................. 14
Geographic Distribution............................................................ 14
Real Estate Portfolio.............................................................. 15
3. Legal Proceedings...................................................................... 17
4. Submission of Matters to a Vote of Security Holders.................................... 17
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.............. 17
6. Selected Financial Data................................................................ 20
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 21
Results of Operations.............................................................. 22
Liquidity and Capital Resources.................................................... 24
7A. Quantitative and Qualitative Disclosures About Market Risk............................. 28
8. Financial Statements and Supplementary Data............................................ 29
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 30
PART III
10. Trustees and Executive Officers of the Registrant...................................... 30
11. Executive Compensation................................................................. 30
12. Security Ownership of Certain Beneficial Owners and Management......................... 30
13. Certain Relationships and Related Transactions......................................... 30
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 30
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GLOSSARY
The following abbreviations, acronyms or defined terms used in this document
are defined below:
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Abbreviation, Acronym or Defined Term Definition/Description
- ------------------------------------------- --------------------------------------------------------------
2000 Proxy Statement....................... Archstone's definitive proxy statement for its 2000 annual
meeting of shareholders.
APB........................................ Accounting Principles Board.
Archstone.................................. Archstone Communities Trust, formerly Security Capital Pacific
Trust. Financial information and references throughout this
document are labeled "Archstone" for periods before and after
the Atlantic Merger (when the name of the company was
changed), unless indicated otherwise.
Atlantic Merger............................ In July 1998, Security Capital Atlantic Incorporated was
merged with and into Security Capital Pacific Trust. The
combined company has continued its existence under the name
Archstone Communities Trust and is traded on the NYSE under
the symbol "ASN".
Board...................................... Archstone's Board of Trustees.
Common Share(s)............................ Archstone common shares of beneficial interest, par value
$1.00 per share.
DEU(s)..................................... Dividend equivalent unit(s).
Fannie Mae................................. Federal National Mortgage Association.
Funds From Operations...................... Net earnings computed in accordance with GAAP, excluding real
estate depreciation, gains (or losses) on dispositions of
depreciated real estate, provisions for possible losses on
investments, non-cash interest income, extraordinary items and
significant non-recurring items. Funds From Operations has
been an industry-wide standard used to measure operating
performance of a REIT since its adoption by NAREIT in 1991.
Funds From Operations should not be considered as an
alternative to net earnings or any other GAAP measurement of
performance or as an alternative to cash flow from operating,
investing or financing activities as a measure of liquidity.
The Funds From Operations measure presented by Archstone,
while consistent with NAREIT's definition, will not be
comparable to similarly titled measures of other REIT's that
do not compute Funds From Operations in a manner consistent
with Archstone.
GAAP....................................... Generally accepted accounting principles.
In Planning................................ Parcels of land owned or Under Control upon which construction
of apartments is expected to commence within 36 months.
Lease-Up................................... The phase during which newly constructed apartments are being
leased for the first time, but prior to the community becoming
Stabilized.
LIBOR...................................... London Interbank Offered Rate.
Long-Term Unsecured Debt................... Collectively, Archstone's long-term unsecured senior notes
payable and tax-exempt unsecured bonds.
NAREIT..................................... National Association of Real Estate Investment Trusts.
Outside Trustees........................... Independent members of Archstone's Board of Trustees.
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1
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Abbreviation, Acronym or Defined Term Definition/Description
- --------------------------------------------------- -----------------------------------------------------------------
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Preferred Shares................................... Collectively, the Archstone Series A Convertible Preferred
Shares, Archstone Series B Preferred Shares, Archstone Series
C Preferred Shares, and Archstone Series D Preferred Shares.
REIT............................................... Real estate investment trust.
Security Capital................................... Security Capital Group Incorporated, Archstone's largest
shareholder (39% ownership at December 31, 1999).
Series A Convertible Preferred Shares.............. Archstone Series A Cumulative Convertible Preferred Shares of
Beneficial Interest, par value $1.00 per share.
Series B Preferred Shares.......................... Archstone Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share. These shares
are not convertible.
Series C Preferred Shares.......................... Archstone Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share. These shares
are not convertible.
Series D Preferred Shares.......................... Archstone Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $1.00 per share. These shares
are not convertible.
SFAS............................................... Statement of Financial Accounting Standards.
Stabilized......................................... The classification assigned to an apartment community that has
achieved 93% occupancy at market rents, and for which the
redevelopment, new management and new marketing programs (or
development and marketing in the case of a newly developed
community) have been completed. The stabilization process
takes up to 12 months except for major redevelopments which
could take longer.
Total Expected Investment.......................... For development communities, represents the total expected
investment at completion; for operating communities,
represents the total expected investment plus planned capital
expenditures.
Under Control...................................... Land parcels which Archstone does not own, yet has an
exclusive right (through contingent contract or letter of
intent) during a contractually agreed upon time period to
acquire for the future development of apartment communities,
subject to approval of contingencies during the due diligence
process. There can be no assurance that any such land will be
acquired.
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PART I
Item 1. Business
Archstone Communities Trust
Archstone Communities Trust (NYSE: ASN) is a leading real estate operating
company focused on the development, acquisition, redevelopment, operation and
ownership of apartment communities in markets and sub-markets with high barriers
to entry across the United States. As of December 31, 1999, we had 267 apartment
communities, representing 80,556 units, including 12,301 units in our
development pipeline under construction and In Planning, in markets that include
33 of the nation's 50 largest metropolitan markets.
Our principal focus is to maximize shareholder value by:
. Owning apartment communities in markets with high barriers to entry,
limited new supply and strong economic growth;
. Generating long-term sustainable growth in cash flow from operations;
. Creating value through the development of new apartment communities;
. Thoughtfully managing our invested capital, through the disposition of
assets that no longer meet the company's investment objectives, in an
effort to maximize long-term value creation; and
. Leveraging technology to strengthen Archstone's brand position and
reputation for quality.
1999 Accomplishments
. Net operating income for our communities which have been in operation since
January 1, 1998 increased 6.2% in 1999 as compared to 1998, with a 14.1%
increase in California and an 8.1% increase in Washington, D.C.
. As of December 31, 1999, our development pipeline totaled $1.3 billion,
including $823.4 million of communities under construction and $510.9
million of communities In Planning.
. Twenty-two development communities achieved Stabilization, adding a total
of 5,527 units, representing a Total Expected Investment of $460.9 million,
to our operating portfolio.
. We completed the disposition of $589.3 million of communities in secondary,
non-core markets, which was redeployed primarily into long-term investments
in core, high-growth markets.
. We completed a $100 million share repurchase program and announced a $50
million share repurchase program that is currently in progress. Through
both programs, we have repurchased a total of $121.6 million of Common
Shares (6.1 million shares at an average price of $19.76 per share) as of
December 31, 1999.
. We significantly streamlined the move-in and move-out process for residents
through SafeRent/SM/, an Internet-based credit scoring model which allows
us to approve a customer's application in less than 30 seconds, and our
Instant Refunds program, which allows us to return customers' security
deposits when they need it most--on the day they move out.
. We created several strategic alliances to broaden our suite of value-added
services for residents. Through BroadbandNOW!, Archstone will provide high-
speed Internet access across our national portfolio--making us the first
apartment company in the industry to roll out this kind of service. In
addition, we were the first apartment company to sign an agreement with
AT&T to market their long distance service nationally.
. Archstone paid dividends of $1.48 per Common Share, a 6.5% increase over
Common Share dividends paid in 1998, which represents the company's 24th
consecutive year of Common Share dividend payments. We announced
Archstone's anticipated 2000 dividend level of $1.54 per share, a 4.1%
increase over the 1999 level. Including the announced increase, the
company's annual dividend per share has grown 120% since 1992.
Investment Strategy
We use extensive research to identify investment opportunities we believe
will produce total returns in excess of the company's long-term cost of capital.
We believe the company's long-term cost of equity capital is 13 - 14%, which
when combined with long-term debt rates as of December 31, 1999, gives Archstone
a weighted average long-term cost of capital of approximately 11%. We only make
an investment when the total return, which includes the initial yield plus
expected long-term value creation through continued growth in net operating
income, will exceed the company's long-term cost of capital.
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We focus Archstone's investment activities on markets characterized by: (i)
attractive long-term economic fundamentals; (ii) high barriers to entry against
new supply; and (iii) expensive single-family housing. Barriers to entry exist
when there is a very limited amount of land zoned for apartment development, and
where local municipalities are reluctant to zone additional land for apartment
communities. Examples of high-barrier markets include the Washington, D.C.
metropolitan area, Boston, Chicago, Minneapolis, the San Francisco Bay area, and
San Diego--all markets where Archstone continues to establish a long-term
strategic presence. We believe that the consistent growth in demand and limited
competition typical of Archstone's target markets maximizes our ability to
produce sustainable long-term cash flow growth.
We use a sophisticated capital allocation strategy to maximize the return
on Archstone's invested capital. Our disciplined investment strategy is executed
through the following four internal capabilities:
1. Development. We place considerable emphasis on the value created through
the development of apartment communities. Currently, the company's
development pipeline totals $1.3 billion, including $823.4 million of
communities under construction and $510.9 million of communities In
Planning. In 1999, the company completed $534.1 million of new development
communities, representing 6,678 units in markets that include greater
Washington D.C. and Orange County, California.
We believe that Archstone's locally based development infrastructure
creates a significant competitive advantage in identifying and completing
very attractive investment opportunities in Archstone's core markets, and
expect our development capability to continue to be a key contributor to
growth as communities are completed and Stabilized at attractive yields
during the next several years.
2. Dispositions. We continue to pursue favorable opportunities to dispose of
assets that no longer meet our long-term investment criteria, and redeploy
the proceeds into new investments with more attractive long-term growth
prospects. We have disposed of more than $1.6 billion of assets since the
beginning of 1996, generating aggregate gains of $213.3 million and
producing an average annual unleveraged rate of return during the holding
period of 13.1%.
In 1999, we made significant progress in aggressively concentrating our
portfolio in high-growth metropolitan markets. The company has exited ten
secondary markets with limited barriers to entry: Sacramento, California;
Sarasota, Florida; Asheville, North Carolina; Oklahoma City and Tulsa,
Oklahoma; Columbus, Ohio; El Paso, Texas; Memphis, Tennessee; Santa Fe, New
Mexico; and Omaha, Nebraska. In addition, we significantly reduced our
presence in low-barrier markets including Dallas and Houston, Texas;
Birmingham, Alabama; Tucson, Arizona; and Jacksonville, Florida. Proceeds
from dispositions were redeployed primarily into investments in the San
Francisco Bay area, Southern California, Washington, D.C., Boston, Chicago
and Minneapolis--all high-growth, supply-constrained markets.
3. Acquisitions. We have completed more than $2.8 billion in acquisitions
since 1992. In mid-1997, we determined that pricing for acquisitions had
become relatively unattractive. From July 1, 1997 through December 31,
1999, the company's aggregate dispositions have exceeded acquisitions by
$275.9 million. All of the company's $409.2 million of acquisitions in 1999
were funded with disposition proceeds through 1031 tax-deferred exchanges.
Our locally based acquisition infrastructure allows the company to continue
to take advantage of selected opportunities in markets with excellent
growth prospects as they become available.
4. Redevelopment. Our redevelopment strategy is to reposition well-located
assets through value-added renovations including upgrades to interiors,
exteriors, leasing offices, landscaping and amenities. In addition, the
company has invested in revenue-enhancing capital expenditures such as
building garages/carports and adding storage facilities, and also expense-
reducing expenditures such as water sub-metering systems and xeriscaping.
Archstone had completed the redevelopment of 37 communities whose Total
Expected Investment including the redevelopment costs aggregated $767.4
million, over the past six years, and had 16 communities in
redevelopment, whose Total Expected Investment including the expected
redevelopment costs aggregated $420.1 million as of December 31, 1999.
By executing our sophisticated capital allocation strategy, we expect to
solidify our position as a company with long-term investments concentrated in
core positions in markets and sub-markets with strong economic fundamentals and
significant supply constraints.
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We believe Archstone's Common Shares represent an attractive investment
opportunity. Therefore, in February 1999, we announced a $100 million share
repurchase program, which was completed in July 1999. In September 1999, we
announced an additional $50 million share repurchase program. As of December
31, 1999, we had repurchased a total of $121.6 million of Common Shares (6.1
million shares at an average price of $19.76 per share) under both programs.
Customer-focused Operations
We are dedicated to maximizing Archstone's operating performance by
providing a high-quality lifestyle to our customers in a consistent manner
across our diverse portfolio. We actively pursue the ongoing development of
innovative ideas, programs and services designed to enhance the customer
experience and relationship with the Archstone brand, while also improving cash
flow growth.
In 1999, we led the industry by launching several new programs that
significantly improve relationships with our customers:
. SafeRent/SM/ Resident Screening is an Internet-based credit scoring model
that allows us to approve customer applications in less than 30 seconds--a
dramatic improvement compared to the industry standard of one to two days.
Archstone was the first company in the apartment industry to launch this
technology. Utilizing a proprietary credit scoring model similar to those
used extensively by the nation's consumer credit card and mortgage
companies to assess risk, SafeRent provides a more accurate prediction of
an applicant's likelihood of fulfilling a lease obligation, while
substantially improving our point-of-sale relationship with the customer.
And, since the model is completely objective and correlates highly with
expected lease performance, the company's exposure to financial and fair-
housing risk is also substantially diminished.
. Archstone's Instant Refunds Program allows us to return security deposits
when customers need them most--on the day they move out, rather than the
industry standard of 30 to 45 days. The Instant Refunds Program reduces
processing costs and we believe it leaves customers with a lasting,
positive impression of the company, which is expected to increase the
likelihood for customer referrals.
. BroadbandNOW!/TM/ is a high-speed Internet service, which is up to 100
times faster than typical dial-up modem service. Our alliance with
BroadbandNOW! enables us to offer our customers the most sophisticated
Internet technology available today. We recognized early on that high-speed
data and Internet services would become a required amenity for apartment
customers, and we had the foresight to perceive the intrinsic value of
connecting all of our apartment communities on a nationwide Internet
Protocol (IP) network. To our knowledge, Archstone is the first company in
the apartment industry to make this service available to our residents, and
anticipate a wide-scale national rollout of this service in 2000.
Launched in 1997, Archstone's Seal of Service/SM/ emulates successful
customer service programs from other highly competitive industries to create
customer loyalty and trust while establishing the service benchmark for the
apartment industry. The program features the following five unconditional
service guarantees, which have contributed positively to our customer-focused
operations: (i) a 100% Move-in Satisfaction Guarantee, (ii) a One-day Service
Guarantee, (iii) an Archstone Rewards Program, (iv) a Customer Service
Connection, and (v) an Archstone Relocation Guarantee. As an example, through
the Archstone Relocation Guarantee, we have transferred approximately 2,300
residents to other Archstone communities in 1999, a 48% increase over the
previous year, which has allowed us to retain an estimated $18 million in rental
revenue.
Archstone continues to be an industry leader in generating income from our
operating communities through utility reimbursements, telecommunications and
other customer services. Utility reimbursements, which we record as a reduction
to utility expenses, were $133 per unit in 1999--an increase of 43% over 1998,
and telecommunications and cable revenues were $36 per unit in 1999--a 64%
increase over 1998.
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Conservative Balance Sheet Management
We are committed to preserving Archstone's strong balance sheet to enhance
financial flexibility. The company has strong investment-grade debt ratings from
Standard & Poors (BBB+), Moody's Investor Services (Baa1), and Duff & Phelps
(A-), which are indicative of Archstone's solid financial position. It should be
noted that a rating on debt securities is not a recommendation to buy, sell or
hold securities and may be revised or withdrawn at any time.
One of our primary objectives is to structure Archstone's balance sheet in
order to have access to capital when few others do. We believe that careful
balance sheet management will allow us to take advantage of compelling
investment opportunities that are more likely to emerge in a capital-constrained
environment.
During 1999, we financed our investment activity primarily through
internally generated cash flow from operations, asset dispositions, and the
issuance of perpetual preferred stock. To minimize refinancing risk, we are
focused on ensuring that the company does not face liquidity issues in a given
quarter or year. As a result, Archstone's long-term debt is structured to create
a relatively level principal maturity schedule, without significant repayment
obligations in any future year. Archstone has only $82.4 million of long-term
debt maturing during 2000, and $80.5 million maturing in 2001. We had a total of
$356.5 million of undrawn capacity on our existing short-term credit facilities
and $4.1 billion of unencumbered assets as of December 31, 1999. In addition,
the company had a significant equity base, with a total equity market
capitalization of $3.2 billion as of December 31, 1999.
Management Depth and Succession Planning
We believe that Archstone should have several senior executives with the
leadership, operational, investment and financial skills and experience to
oversee the entire operations of the company. We believe that several of
Archstone's senior officers could serve as the principal executive officer and
continue the company's strong performance. See "--Trustees and Officers of
Archstone." Our management team emphasizes active training and organizational
development initiatives for associates at all levels of the company to build
long-term management depth and succession planning.
Trustees and Officers of Archstone
In July 1998, the name of the company was changed to Archstone Communities
Trust. References throughout this section are labeled "Archstone" for the post-
merger period as a result of this name change. Pre-merger periods will be
referenced as follows: (i) as "Archstone" for individuals who were associated
with Security Capital Pacific Trust and/or its management companies and (ii) as
"Atlantic" for individuals who were associated with Security Capital Atlantic
Incorporated and/or its management companies. See Note 8 of Archstone's audited
financial statements contained in this Annual Report for a more complete
discussion of the Atlantic Merger.
Trustees of Archstone
C. Ronald Blankenship-50-Trustee of Archstone since March 2000, Director,
Vice Chairman and Chief Operating Officer of Security Capital since May 1998;
prior thereto, Managing Director of Security Capital since 1991. Advisory
Trustee of Archstone from July 1998 to March 2000. Non-Executive Chairman of
Archstone from June 1997 to July 1998; Chairman of Archstone from June 1991 to
June 1997; Interim Chairman, Chief Executive Officer and a Director of Homestead
Village Incorporated (ownership, operation and development of extended-stay
lodging facilities throughout the United States) since May 1999; Director of
BelmontCorp (ownership, operation and development of assisted living facilities
in the United States) since May 1998; Director of Storage USA, Inc. (ownership,
operation and development of self-storage facilities throughout the United
States) since December 1997; Director of CarrAmerica Realty Corporation
(ownership, operation and development of office properties throughout the
United States) since August 1998; Trustee of City Center Retail Trust
(ownership, operation and development of premier urban-infill retail facilities
throughout the United States) since December 1997; and a Director of Strategic
Hotel Capital Incorporated from April 1997 to September 1999.
James A. Cardwell-68-Trustee of Archstone since May 1980; Chief Executive
Officer of Petro Stopping Centers, L.P. (operation of a national chain of full-
service truck stopping centers) and its predecessor since 1975; Director of El
Paso Electric Company since 1990.
Ned S. Holmes-55-Trustee of Archstone since July 1998; Director of Atlantic
from May 1994 to July 1998; President and Chief Executive Officer of Laing
Properties, Inc. since May 1990; Chairman and President of Parkway Investments/
Texas Inc., a Houston-based real estate investment and development company which
specializes in residential (apartment and townhouse), commercial (office and
warehouse) and subdivision projects since April 1984; Director of Heritage Bank
and Commercial Bancshares, Inc.; Chairman of the Port Commission of the Port of
Houston Authority; Director of the Institute of International Education and the
Houston International Protocol Alliance; a Director of Greater Houston
Partnership.
John T. Kelley, III-59-Trustee of Archstone since January 1988; founding
officer and Advisory Trustee of ProLogis Trust (ownership, operation and
development of industrial parks in the United States, Mexico and Europe) since
January 1993; Director of Security Capital since 1990; Director of Regency
Realty Corporation (ownership, operation and development of infill retail
properties throughout the United States) since March 1999, prior to which he
served as Chairman of the Board of Pacific Retail Trust.
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Calvin K. Kessler-68-Trustee of Archstone since January 1972; President and
principal shareholder, Kessler Industries, Inc., (manufacturer of furniture and
aluminum castings) since 1960.
Constance B. Moore-44-Trustee of Archstone since July 1998; Managing
Director of the Capital Division of Security Capital since January 1999; Co-
Chairman and Chief Operating Officer of Archstone from July 1998 to December
1998, at which time she left Archstone to become an employee of Security
Capital; Director, Co-Chairman and Chief Operating Officer of Atlantic from
January 1996 to July 1998; Managing Director of Archstone from May 1994 to
December 1995.
James H. Polk, III-57-Trustee of Archstone since January 1976; Managing
Director, SING LTD. Co. (ownership, operation and development of self-storage
facilities), since January 1998; Managing Director of Security Capital Markets
Group Incorporated from August 1992 to June 1997 and President from March 1997
to June 1997; affiliated with Archstone from January 1976 to June 1997 in
various capacities, including Trustee, President, and Chief Executive Officer;
past President and Trustee of the National Association of Real Estate Investment
Trusts, Inc.; Director, M.D. Anderson Hospital, Houston, Texas, and Mortgage
West, Santa Fe, New Mexico.
John M. Richman-72-Trustee of Archstone since July 1998; Director of
Atlantic from September 1996 to July 1998; Counsel to the law firm of Wachtell,
Lipton, Rosen & Katz from January 1990 to October 1996 and from April 1997 to
present; former Chairman and CEO of Kraft Foods; Director, Evanston Northwestern
Healthcare, Chicago Council on Foreign Relations and Lyric Opera of Chicago;
Life Trustee of the Chicago Symphony Orchestra and Northwestern University;
retired Director of R.R. Donnelley & Sons Company and served as Acting Chairman
and Chief Executive Officer of that company from October 1996 to April 1997;
retired Director of BankAmerica Corporation, Bank of America National Trust and
Savings Association, and USX Corporation. Member, The Business Council and The
Commercial Club of Chicago.
John C. Schweitzer-55-Trustee of Archstone since April 1976; Director of
Homestead Village Incorporated (ownership and operation of extended-stay
lodging facilities) since April 1997; Director of Regency Realty Corporation
(ownership, operation and development of infill retail properties throughout the
United States) since March 1999; Trustee of Pacific Retail Trust from June 1997
to February 1999; President, Westgate Corporation (real estate and investments)
since 1976; Managing Partner, Campbell Capital Ltd. (real estate and
investments) since 1976; Trustee of Texas Christian University; Director of
Chase Bank of Texas-Austin and KLRU Public Television, Austin, Texas.
R. Scot Sellers-43-Trustee of Archstone since July 1998; Chairman and Chief
Executive Officer of Archstone since December 1998, where he has overall
responsibility for Archstone's strategic direction, investments and operations;
Co-Chairman and Chief Investment Officer of Archstone from July 1998 to December
1998; President and Chief Executive Officer of Archstone from June 1997 to July
1998; from September 1994 to June 1997, Managing Director of Archstone, where he
had overall responsibility for Archstone's investment strategy and
implementation; Senior Vice President of Archstone from May 1994 to September
1994; from April 1993 to May 1994, Senior Vice President of Security Capital,
where he was responsible for portfolio acquisitions from institutional sources.
Executive Officers of Archstone
The executive officers of Archstone are:
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Name Title
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<S> <C>
R. Scot Sellers............... Chairman and Chief Executive Officer
Patrick R. Whelan............. Chief Operating Officer
Charles E. Mueller, Jr........ Chief Financial Officer
Richard A. Banks.............. Managing Director
J. Lindsay Freeman............ Managing Director
</TABLE>
Biographies of Executive and Senior Officers
R. Scot Sellers-43-See "Trustees of Archstone" above.
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Patrick R. Whelan-42-Chief Operating Officer of Archstone since December
1998, where he has overall responsibility for operations of the company;
Managing Director of Archstone since December 1996; previously, President of SCG
Realty Services Incorporated, where he had overall responsibility for property
management nationwide; Senior Vice President and Co-Manager of apartment
acquisitions for Security Capital in 1994; Senior Vice President of Trammell
Crow Company (development, acquisition and management of commercial properties)
from July 1986 to January 1994.
Charles E. Mueller, Jr.-36-Chief Financial Officer of Archstone since
December 1998, where he is responsible for corporate finance,
accounting/reporting and investor relations; Vice President of Archstone from
September 1996 to December 1998; prior thereto, he was with Security Capital
Markets Group, where he provided financial services to Security Capital and its
affiliates.
Richard A. Banks-52-Managing Director of Archstone since December 1997,
where he is responsible for investments and operations in the West Region;
Senior Vice President of Archstone from August 1997 to December 1997; from
January 1995 to August 1997, President and Chief Executive Officer of Lincoln
Residential Services, where he was responsible for all aspects of leading a full
service property management company of approximately 40,000 apartment units in
the western United States; from July 1993 to January 1995, Vice President of
Lincoln Property Company, Irvine, California, with responsibility for overall
management and revenue growth for the region.
J. Lindsay Freeman-54-Managing Director of Archstone since July 1998, where
he has responsibility for investments and operations in the East Region;
Managing Director of Atlantic from December 1997 to July 1998; Senior Vice
President of Atlantic from May 1994 to November 1997; previously, Senior Vice
President and Operating Partner of Lincoln Property Company in Atlanta, Georgia,
where he was responsible for acquisitions, financing, construction and
management of apartment communities within the Atlantic region and oversaw
operations of 16,000 apartment units.
Daniel E. Amedro-43-Senior Vice President of Archstone since January 1999,
where he has served as Chief Information Officer since March 1998; from
September 1996 to March 1998, Vice President of Information Services for
American Medical Response, the largest private ambulance operation in the United
States; from March 1981 to September 1996, he was with Hyatt Hotels and Resorts,
where his most recent position was Vice President of Information Services and
was responsible for all strategic information systems including Spirit, Hyatt's
worldwide reservation system, which supported over 50,000 users and was
recognized as the leading reservations system in the hospitality industry.
Caroline Brower-51-Senior Vice President, General Counsel and Secretary of
Archstone since September 1999, where she provides legal and corporate
governance services. Ms. Brower was Executive Director and Senior Vice
President of AMERITON Properties Incorporated from September 1998 to September
1999. Prior thereto, Ms. Brower was a partner of Mayer, Brown & Platt, where
she practiced transaction and real estate law.
Neil T. Brown-43-Senior Vice President of Archstone since September 1998,
where he is responsible for all investments, including the acquisition and
development of new apartment communities in the East Region; Vice President from
July 1998 to September 1998; Vice President of Atlantic from April 1996 to July
1998, where he had comparable responsibilities; from July 1992 to December 1995,
Regional Vice President/Regional Partner of JPI Development Partners, Inc.,
where he was responsible for all development activity in Florida.
Richard O. Campbell-37-Senior Vice President of Archstone since July 1998,
where he is responsible for investment activity in target markets in the
Midwest; Senior Vice President and Regional Managing Partner for the Dallas/Fort
Worth area for JPI Partners from March 1997 to May 1998; Vice President in the
Development Group for Atlantic from May 1994 to March 1997.
Richard W. Dickason-43-Senior Vice President of Archstone since October
1997, where he has overall responsibility for investment activities in the
northeastern United States; Vice President of Archstone from December 1993 to
October 1997. Prior thereto, Partner and Vice President of Lincoln Property
Company, Inc., where he was responsible for the acquisition, development,
construction and management of a 4,000 unit multifamily residential portfolio in
California.
8
<PAGE>
Joseph J. Dominguez-40-Senior Vice President of Archstone since December
1998, where he is responsible for construction and planning of development
communities in the East Region; Vice President from July 1998 to December 1998;
Vice President of Atlantic from April 1996 to July 1998; prior thereto, he was a
member of the development group of Atlantic; from November 1984 to August 1995,
Vice President of Operations for the Casden Company, where he had overall
responsibility for the start-up and operations of a general contracting
subsidiary.
Dana K. Hamilton-31-Senior Vice President of Archstone since December 1998
where she is responsible for the company's investments in new e-business and
technology-related initiatives, development of the Archstone brand and corporate
marketing and communications; Vice President from December 1996 to December
1998, responsible for new product development and revenue enhancement through
portfolio-wide initiatives, and prior thereto, she focused on national
operations for Archstone and its affiliates.
Nelson L. Henry-64-Senior Vice President of Archstone since September 1998,
where he has overall responsibility for construction, planning and
rehabilitation activity in the West Region; Vice President of Archstone from
August 1994 to September 1998. Prior thereto, Construction Vice President for
Lincoln Property Company N.C. Inc., where he was responsible for the
construction of over 8,000 units in Colorado and California.
John Jordano, III-43-Senior Vice President of Archstone since October 1997,
where he has overall responsibility for investment activity in the West Region;
Vice President of Archstone from August 1994 to October 1997. Prior thereto,
Senior Vice President of Prospect Partners, where he was responsible for
identifying and advising individual and corporate clients on financial
institution and Resolution Trust Corporation apartment acquisition and
investment opportunities in the western United States.
William Kell-43-Senior Vice President and Controller of Archstone since
July 1998, where he is responsible for financial reporting, accounting,
budgeting and forecasting; Senior Vice President of Atlantic from December 1997
to July 1998; Vice President of Atlantic from January 1996 to December 1997,
during which time he held comparable responsibilities; from June 1991 to
December 1995, Vice President and Controller of Archstone, where he had overall
responsibility for accounting and financial reporting.
Mary Caperton Lester-45-Senior Vice President of Archstone since September
1998 and Vice President from July 1998 to September 1998, where she has overall
responsibility for community operations in Mid-Atlantic markets; Vice President
of Atlantic from July 1995 to July 1998 and with Atlantic since June 1994,
during which time she held comparable responsibilities. Prior thereto, Ms.
Lester was with Summit Management Company, where she specialized in new business
development.
Toni L. Lopez-42-Senior Vice President of Archstone since September 1998
and Vice President from August 1996 to September 1998, where she has overall
responsibility for community operations in Denver, Colorado; Salt Lake City,
Utah; and Dallas, Austin, Houston and San Antonio, Texas, and with Archstone
since July 1993, where she held similar responsibilities.
Scott V. Monroe-40-Senior Vice President of Archstone since December 1998,
where he has overall responsibility for community operations in California; Vice
President from August 1996 to December 1998, during which time he held
comparable responsibilities; from March 1987 to July 1996, Vice President of
Maxim Property Management, where he had direct management responsibility for a
residential portfolio consisting of over 11,000 units located throughout
California and Arizona.
Christopher T. Nolan-36-Senior Vice President of Archstone since September
1998 and Vice President from July 1998 to September 1998, where he has overall
responsibility for acquisitions and dispositions in the East Region; Vice
President of Atlantic from February 1998 to July 1998; from January 1997 to
February 1998, Managing Director of R&B Realty Group, where he managed their
apartment community expansion effort; from December 1995 to January 1997, Vice
President of Atlantic, where he had responsibility for acquisitions; from May
1994 to December 1995, he was a member of Atlantic's asset management group.
Daniel W. Ogden-39-Senior Vice President of Archstone since September 1998,
where he is responsible for community operations in New Mexico, Arizona, Nevada
and portions of Southern California; Vice President from March 1995 to September
1998, during which time he held comparable responsibilities; from June 1994 to
February 1995, Executive Vice President of Mutual Real Estate Corporation in
Dallas, Texas, where he was responsible for the management of a multifamily
portfolio containing 2,500 units in seven states.
9
<PAGE>
Jerry D. Quinn-56-Senior Vice President of Archstone since April 1999,
where he is responsible for construction in the Central Region, Senior Vice
President of Homestead Village Incorporated (ownership and operation of
extended-stay lodging facilities) from December 1998 to March 1999, and was Vice
President from December 1996 to December 1998, where he was a member of the
Development group; a Vice President of Security Capital from July 1994 to
December 1996.
Glenn T. Rand-39-Senior Vice President of Archstone since September 1998
and Vice President from July 1998 to September 1998, where he is responsible for
community operations in Florida and Georgia; Vice President of Atlantic from
June 1996 to July 1998 and with Atlantic since May 1995, where he had comparable
responsibilities; from August 1987 to April 1995, Vice President of Trammell
Crow Residential and Avalon Properties, where he was responsible for operations
and third party management solicitation in southern Florida and the northeastern
United States.
Gary L. Truitt-49-Senior Vice President of Archstone since December 1998,
where he is responsible for Archstone's national redevelopment and purchasing
activities and construction in the northeastern United States; Vice President
from December 1995 to December 1998 and with Archstone since January 1995.
Employees
Archstone currently employs approximately 2,000 individuals, of which
approximately 1,600 are focused on the site-level operation of our apartment
communities. The balance are professionals who manage corporate and regional
operations, including our investment program, property operations, and support
functions. We consider our relationship with employees to be good. Archstone's
employees are not represented by a collective bargaining agreement.
Insurance
Archstone carries comprehensive general liability coverage on our owned
communities, with limits of liability customary within the industry, to insure
against liability claims and related defense costs. Similarly, we are insured
against the risk of direct physical damage in amounts necessary to reimburse the
company on a replacement cost basis for costs incurred to repair or rebuild each
property, including loss of rental income during the reconstruction period, plus
a 12 month extended indemnification period. Archstone's blanket property policy
for all operating and development communities includes coverage for the perils
of flood and earthquake. Our earthquake coverage is subject to a deductible
equal to 5% of the aggregate insurance value of communities affected by any such
occurrence, subject to a maximum deductible of $5 million. The maximum aggregate
flood or earthquake recovery per occurrence is $450 million.
Risk Factors
The following factors could affect Archstone's future financial
performance:
Dependence on Key Personnel
Archstone's success depends on our ability to attract and retain the
services of executive officers, senior officers and company managers. There is
substantial competition for qualified personnel in the real estate industry and
the loss of several of our key personnel could have an adverse effect on the
company.
Debt Financing Risks
Archstone is subject to risks associated with debt financing. These risks
include the risks that we will not have sufficient cash flow from operations to
meet required payments of principal and interest, that we will be unable to
refinance current or future indebtedness, that the terms of any refinancing will
not be as favorable as the terms of existing indebtedness, and that we will be
unable to make necessary investments in new business initiatives due to lack of
available funds. Increases in interest rates could increase interest expense,
which would adversely affect net earnings and cash available for payment of
obligations. If we are unable to make required payments on indebtedness that is
secured by a mortgage on Archstone's property, the asset may be transferred to
the mortgagee with a consequent loss of income and value to Archstone. As of
December 31, 1999, Archstone had $2.5 billion in total debt outstanding of which
$694.9 million was secured by real estate assets.
10
<PAGE>
Availability of Capital
Since mid-1998 and continuing into 2000, the real estate industry has
experienced a reduced supply of favorably priced public equity and debt capital,
which has generally decreased the level of new investment activity by publicly
traded real estate companies. A prolonged period in which real estate operating
companies cannot effectively access the public equity markets may result in
heavier reliance on alternative financing sources to undertake new investment
activities.
Interest of Certain Trustees in Archstone's Affiliates
Three members of our Board are directors of Security Capital or one or more
of its affiliates. In the event there is a transaction between Archstone and
Security Capital or one of these affiliates, the interests of these persons may
differ from the interests of our shareholders as a result of their positions in
the other entity. For this reason, any transactions with an affiliate must be
approved by a majority of the Outside Trustees, and Board members with a
potential conflict are not allowed to vote on such transactions.
Significant Influence of Principal Shareholder
As of December 31, 1999, Security Capital beneficially owned approximately
39% of the issued and outstanding Common Shares and therefore controls
approximately 39% of the vote on matters submitted to our shareholders. In
addition, as long as Security Capital beneficially owns at least 10% of the
outstanding Common Shares, Security Capital is entitled to representation on the
Board of Trustees in proportion to its ownership interest and has rights of
prior approval and consultation regarding certain matters.
General Real Estate Investment Risks
Real estate cash flows and values are affected by a number of factors,
including changes in the general economic climate, local, regional or national
conditions (such as an oversupply of properties or a reduction in rental demand
in a specific area), the quality and philosophy of management, competition from
other available properties and the ability to provide adequate maintenance and
insurance and to control operating costs. Although we seek to minimize these
risks through our market research and property management capabilities, they
cannot be totally eliminated. Real estate cash flows and values are also
affected by such factors as government regulations, including zoning, usage and
tax laws, interest rate levels, the availability of financing, property tax
rates, potential liability under environmental and other laws, and changes in
environmental and other laws.
Risks of Real Estate Development
We have developed or commenced development on a substantial number of
apartment communities and expect to develop additional apartment communities in
the future. Real estate development involves risks in addition to those involved
in the ownership and operation of established communities, including the risks
that financing, if needed, may not be available on favorable terms, construction
may not be completed on schedule, contractors may default, estimates of the
costs of apartment communities may prove to be inaccurate and communities may
not be leased or rented on profitable terms. These risks may cause the
development to fail to perform as expected. Timely construction may be affected
by local weather conditions, local or national strikes and by local or national
shortages in materials, building supplies or energy and fuel for equipment.
Illiquidity of Real Estate Investments
Equity real estate investments are relatively illiquid and therefore may
tend to limit our ability to react promptly to changes in economic or other
conditions. Our ability to dispose of assets in the future will depend on
prevailing market conditions.
11
<PAGE>
Regulation
Our communities must comply with Title III of the Americans with
Disabilities Act to the extent that such communities are "public accommodations"
and/or "commercial facilities" as defined by the Act. The Act does not consider
apartment communities to be public accommodations or commercial facilities,
except portions of such facilities open to the public, such as the leasing
office. Noncompliance could result in imposition of fines or an award of damages
to private litigants. We believe our communities comply with all present
requirements under the Act and applicable state laws.
Changes in Laws
We may not be able to pass increased costs resulting from increases in real
estate, income taxes or other governmental requirements directly to tenants.
Substantial increases in rents, as a result of those increased costs, may affect
the ability of a tenant to pay rent, causing increased vacancy. Changes in laws
increasing potential liability for environmental conditions or increasing the
restrictions on discharges or other conditions may result in significant
unanticipated expenditures. We cannot give any assurance that new legislation,
regulations, administrative interpretations or court decisions will not
significantly change the laws relating to our qualification as a REIT, or the
federal income tax consequences of that qualification to Archstone.
Uninsured Losses
There are certain types of losses (such as from wars) which may be
uninsurable or not economically insurable. If an uninsured loss or a loss in
excess of insured limits occurs, we could lose both our invested capital, and
anticipated profits from, one or more communities.
Competition
There are numerous commercial developers, real estate companies and other
owners of real estate that we compete with in seeking land for development,
apartment communities for acquisition and disposition, and residents for
apartment communities. All of our apartment communities are located in developed
areas that include other apartment communities. The number of competitive
apartment communities in a particular area could have a material adverse effect
on our ability to lease units and on the rents charged. In addition, single-
family homes and other residential properties provide housing alternatives to
residents and potential residents of our apartment communities.
As reported in "Item 2. Properties - Geographic Distribution",
approximately 16% of the apartment communities which are operating, under
construction or In Planning were in Southern California as of December 31, 1999.
Southern California is the geographic area comprised of Los Angeles, the Inland
Empire, Orange County, San Diego and Ventura County. None of these markets,
however, represent over 10% of our portfolio. We are, nonetheless, subject to
increased exposure (positive or negative) to the economic and other competitive
factors specific to our target markets within this geographic area.
Impact of Environmental Regulations
We must comply with certain environmental and health and safety laws and
regulations related to the ownership, operation, development and acquisition of
apartments. Under those laws and regulations, we may be liable for, among other
things, the costs of removal or remediation of certain hazardous substances,
including asbestos-related liability. Those laws and regulations often impose
liability without regard to fault.
As part of our due diligence procedures, we have conducted Phase I
environmental assessments on each of our properties prior to acquisition;
however, we cannot give any assurance that those assessments have revealed all
potential liabilities. We are not aware of any environmental condition on any of
our real estate investments which is likely to have a material adverse effect on
Archstone's financial position or results of operations; however, we cannot give
any assurance that any such condition does not exist or may not arise in the
future.
12
<PAGE>
Item 2. Properties
Geographic Distribution
Archstone's apartment communities are located in markets that include 33 of
the nation's 50 largest metropolitan markets. The following table summarizes
the geographic distribution of our apartment communities which are operating,
under construction or In Planning, based on Total Expected Investment.
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Central Region
Austin, Texas...................................... 2.55% 2.19% 3.43%
Chicago, Illinois.................................. 1.50 -- --
Dallas, Texas...................................... 1.70 1.94 2.11
Denver, Colorado................................... 3.67 2.96 5.23
Houston, Texas..................................... 2.50 2.71 4.53
Minneapolis, Minnesota............................. 0.96 -- --
Salt Lake City, Utah............................... 3.03 3.84 5.33
San Antonio, Texas................................. 2.25 2.25 3.74
Other.............................................. 0.16 2.45 3.14
------ ------ ------
Central Region Total............................ 18.32 18.34 27.51
------ ------ ------
East Region
Atlanta, Georgia................................... 7.27 8.35 --
Boston, Massachusetts.............................. 1.88 -- --
Charlotte, North Carolina.......................... 2.89 3.86 --
Nashville, Tennessee............................... 1.54 1.75 --
Orlando, Florida................................... 1.12 1.31 --
Raleigh, North Carolina............................ 4.20 5.21 --
Richmond, Virginia................................. 2.28 2.69 --
Southeast Florida.................................. 5.12 5.23 --
Washington, D.C.................................... 7.02 5.41 --
West Coast Florida................................. 1.72 1.85 --
Other.............................................. 3.12 3.12 --
------ ------ ------
East Region Total............................... 38.16 38.78 --
------ ------ ------
West Region
Albuquerque, New Mexico............................ 2.05 2.31 4.04
Las Vegas, Nevada.................................. 1.47 1.43 2.81
Phoenix, Arizona................................... 5.60 5.84 10.42
Portland, Oregon................................... 1.72 2.10 5.01
San Francisco Bay Area, California................. 9.49 9.76 15.27
Seattle, Washington................................ 5.80 6.44 11.63
Southern California................................ 16.20 13.83 20.15
Other.............................................. 1.19 1.17 3.16
------ ------ ------
West Region Total............................... 43.52 42.88 72.49
------ ------ ------
Total All Markets............................. 100.00% 100.00% 100.00%
====== ====== ======
</TABLE>
13
<PAGE>
Real Estate Portfolio
The information in the following table is as of December 31, 1999 (dollar
amounts in thousands). Additional information on the company's real estate
portfolio is contained in "Schedule III, Real Estate and Accumulated
Depreciation," and in Archstone's audited financial statements contained in this
Annual Report.
<TABLE>
<CAPTION>
Total
Number of Number Archstone Expected Percentage
Communities of Units Investment Investment Leased (1)
----------- -------- ---------- ------------ -----------
OPERATING APARTMENT COMMUNITIES:
Central Region:
<S> <C> <C> <C> <C> <C>
Austin, Texas............................ 6 1,900 $ 85,121 $ 86,928 99.11%
Chicago, Illinois........................ 3 879 81,758 88,474 97.27
Dallas, Texas............................ 6 1,616 95,487 100,201 95.79
Denver, Colorado......................... 11 3,286 193,279 199,701 97.75
Houston, Texas........................... 8 2,712 141,865 147,363 94.36
Minneapolis, Minnesota................... 3 718 50,641 56,592 98.89
Salt Lake City, Utah..................... 10 2,522 136,998 140,711 96.91
San Antonio, Texas....................... 13 3,269 127,253 132,502 96.08
Other.................................... 1 468 8,696 8,696 93.59
------------ --------- ---------- ---------- ---------
Central Region Subtotal/Average....... 61 17,370 $ 921,098 $ 961,168 96.66%
------------ --------- ---------- ---------- ---------
East Region:
Atlanta, Georgia......................... 19 6,182 $ 422,034 $ 428,018 96.75%
Boston, Massachusetts.................... 2 389 53,440 54,582 99.23
Charlotte, North Carolina................ 7 2,136 137,280 138,941 95.22
Nashville, Tennessee..................... 5 1,637 88,399 90,383 95.30
Orlando, Florida......................... 5 984 64,325 65,981 98.17
Raleigh, North Carolina.................. 12 3,162 213,130 216,181 96.52
Richmond, Virginia....................... 5 1,308 101,387 101,916 96.71
Southeast Florida........................ 13 3,436 233,272 236,684 98.84
Washington, D.C. ........................ 8 2,484 222,162 225,688 99.32
West Coast Florida....................... 7 1,538 77,944 81,219 97.59
Other.................................... 3 1,135 70,037 70,180 94.62
------------ --------- ---------- ---------- ---------
East Region Subtotal/Average.......... 86 24,391 $1,683,410 $1,709,773 97.09%
------------ --------- ---------- ---------- ---------
West Region:
Albuquerque, New Mexico.................. 8 2,295 $ 118,460 $ 120,895 96.73%
Las Vegas, Nevada........................ 3 1,748 84,119 86,226 97.83
Phoenix, Arizona......................... 15 5,718 298,723 307,535 94.22
Portland, Oregon......................... 6 1,597 100,455 101,233 94.43
San Francisco Bay Area, California....... 7 3,120 321,799 336,266 96.79
Seattle, Washington...................... 13 3,484 261,564 265,350 95.09
Southern California...................... 24 7,565 601,882 609,162 97.25
Other.................................... 4 967 52,779 53,575 95.76
------------ --------- ---------- ---------- ---------
West Region Subtotal/Average.......... 80 26,494 $1,839,781 $1,880,242 96.03%
------------ --------- ---------- ---------- ---------
Operating Apartment
Communities Subtotal/Average..... 227 68,255 $4,444,289 $4,551,183 96.57%
------------ --------- ---------- ---------- ---------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Number of Number Archstone Total Expected Percentage
Communities of Units Investment Investment Leased (1)
-------------- ----------- ------------ -------------- -------------
APARTMENT COMMUNITIES UNDER
CONSTRUCTION:
Central Region:
<S> <C> <C> <C> <C> <C>
Austin, Texas........................... 1 448 $ 13,089 $ 31,669 N/A%
Denver, Colorado........................ 1 172 5,549 16,376 N/A
Salt Lake City, Utah.................... 1 448 34,435 37,483 79.2
-------------- ----------- ------------ -------------- ------------
Central Region Subtotal/Average...... 3 1,068 $ 53,073 $ 85,528 33.2%
-------------- ----------- ------------ -------------- ------------
East Region:
Boston, Massachusetts................... 1 168 $ 20,066 $ 21,402 44.6%
Charlotte, North Carolina............... 1 404 7,629 31,398 N/A
Raleigh, North Carolina................. 1 388 27,706 31,289 56.7
Richmond, Virginia...................... 1 288 22,148 22,873 27.4
Southeast Florida....................... 1 408 9,857 30,722 N/A
Washington, D.C......................... 3 862 54,564 92,683 24.5
West Coast Florida...................... 1 264 18,675 19,750 73.1
Other................................... 2 470 33,794 35,022 63.8
-------------- ----------- ------------ -------------- -------------
East Region Subtotal/Average......... 11 3,252 $ 194,439 $ 285,139 33.1%
-------------- ----------- ------------ -------------- -------------
West Region:
San Francisco Bay Area, California...... 4 1,500 $ 168,438 $ 222,057 32.8%
Seattle, Washington..................... 2 754 60,648 64,964 67.5
Southern California..................... 2 1,076 71,896 149,467 9.8
Other................................... 1 180 14,526 16,204 52.2
-------------- ----------- ------------ -------------- ------------
West Region Subtotal/Average......... 9 3,510 $ 315,508 $ 452,692 34.2%
-------------- ----------- ------------ -------------- ------------
Apartment Communities Under
Construction Subtotal/Average.. 23 7,830 $ 563,020 $ 823,359 33.6%
-------------- ----------- ------------ -------------- ------------
APARTMENT COMMUNITIES IN
PLANNING AND OWNED:
Central Region.......................... 1 444 $ 4,813 $ 31,648
East Region............................. 2 401 6,604 32,974
West Region............................. 5 1,251 34,064 149,913
-------------- ----------- ------------ -------------
Apartment Communities In
Planning and Owned
Subtotal/Average............... 8 2,096 $ 45,481 $ 214,535
-------------- ----------- ------------ -------------
Total Apartment Communities
Owned at December 31, 1999... 258 78,181 $ 5,052,790 $ 5,589,077
-------------- ----------- ------------ -------------
OTHER REAL ESTATE ASSETS (3).............. -- $ 141,671 --
----------- ------------ -------------
HOTEL ASSET............................... -- $ 22,870 $ 22,870
----------- ------------ -------------
Total Real Estate
Owned at
December 31, 1999....... 78,181 $ 5,217,331 $ 5,611,947
=========== ============ =============
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
APARTMENT COMMUNITIES IN PLANNING AND UNDER CONTROL(2): Expected Total
Number Expected
of Units Investment
----------- --------------
<S> <C> <C>
East Region................................................. 1,773 $218,236
West Region................................................. 602 78,141
----------- --------------
Total Apartment Communities In Planning and Under
Control............................................... 2,375 $296,377
=========== ==============
</TABLE>
(1) Represents percentage leased as of December 31, 1999. For communities in
Lease-Up, the percentage leased is based on leased units divided by total
number of units in the community (completed and under construction) as of
December 31, 1999. An "N/A" indicates markets with communities under
construction where Lease-Up has not yet commenced.
(2) As of December 31, 1999, Archstone's actual investment in communities In
Planning and Under Control was $5.3 million, which is reflected in the
"Other assets" caption of Archstone's Balance Sheet.
(3) Includes land that is not In Planning and our investment in an
unconsolidated taxable subsidiary.
Item 3. Legal Proceedings
Archstone is a party to various claims and routine litigation arising in
the ordinary course of business. We do not believe that the results of any such
claims and litigation, individually or in the aggregate, will have a material
adverse effect on Archstone's business, financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Common Shares are listed on the NYSE under the symbol "ASN". The
following table sets forth the high and low sales prices of the Common Shares,
as reported on the NYSE Composite Tape, and cash distributions per Common Share
for the periods indicated.
<TABLE>
<CAPTION>
Cash
High Low Distributions
---------------- --------------- ---------------------
1998:
<S> <C> <C> <C>
First Quarter....................................... $ 24 1/2 $ 22 1/8 $0.340
Second Quarter...................................... 24 1/16 21 1/4 0.340
Third Quarter....................................... 23 11/16 18 0.355
Fourth Quarter...................................... 21 1/2 17 7/8 0.355
1999:
First Quarter....................................... $20 15/16 $ 19 3/16 $0.370
Second Quarter...................................... 23 1/2 19 5/8 0.370
Third Quarter....................................... 22 5/16 19 5/16 0.370
Fourth Quarter...................................... 21 11/16 18 15/16 0.370
2000:
First Quarter (through February 23, 2000).......... $ 21 3/4 $19 11/16 $0.385
</TABLE>
As of February 23, 2000, Archstone had approximately 138,970,000 Common
Shares outstanding, approximately 3,300 record holders of Common Shares and
approximately 35,000 beneficial holders of Common Shares.
16
<PAGE>
In order to qualify as a REIT, Archstone is required to make distributions
(other than capital gain distributions) to shareholders in amounts at least
equal to (i) the sum of (A) 95% of its REIT taxable income (computed without
regard to the dividends-paid deduction and its net capital gain) and (B) 95% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of non-cash income. Including the February 2000
distribution of $0.385 per Common Share, Archstone has paid quarterly cash
distributions on the Common Shares for 24 consecutive years. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the strategy, financial condition and operating results of Archstone. Our long-
term objective is to reduce the company's dividend payout ratio to 65-70% of
Funds From Operations while increasing annual dividends per Common Share each
year. Reducing the dividend payout ratio allows Archstone to retain more of our
internally generated cash flow from operations to fund future investment
opportunities while maintaining compliance with the REIT rules requiring payout
of at least 95% of taxable income.
We announce 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 1999 Board meeting, the Board announced an anticipated increase in the
annual distribution level from $1.48 to $1.54 per Common Share and declared the
first quarter 2000 distribution of $0.385 per Common Share. The first quarter
distribution was paid on February 28, 2000 to shareholders of record on February
14, 2000.
Archstone is restricted from declaring or paying any distribution with
respect to our Common Shares unless all cumulative distributions with respect to
the Preferred Shares have been paid and sufficient funds have been set aside for
Preferred Share distributions that have been declared. All of Archstone's
declared distributions have been paid on schedule.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed Archstone's current and accumulated earnings and
profits (calculated for tax purposes) constitute a return of capital rather than
a dividend and reduce the shareholder's basis in the Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholder's basis in the Common Shares, it will generally be
treated as a gain from the sale or exchange of that shareholder's Common Shares.
We annually notify shareholders of the taxability of distributions paid during
the preceding year. For federal income tax purposes, the following summarizes
the taxability of cash distributions paid on the Common Shares in 1997 and 1998
and the estimated taxability for 1999:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income................................... $1.26 $1.29 $1.08
Capital gains..................................... 0.10 0.10 --
Return of capital................................. 0.12 -- 0.22
----- ----- -----
Total.......................................... $1.48 $1.39 $1.30
===== ===== =====
</TABLE>
Under federal income tax rules, Archstone's earnings and profits are first
allocated to our Series A, Series B, Series C, and Series D Preferred Shares,
which increases the portion of the Common Shares distribution classified as
return of capital.
17
<PAGE>
For federal income tax purposes, the following summaries reflect the
estimated taxability of dividends paid on the Series A, Series B, Series C, and
Series D Preferred Shares, respectively.
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
Per Series A Convertible Preferred Share:
<S> <C> <C> <C>
Ordinary income............................. $1.83 $1.72 $1.75
Capital gains............................... 0.16 0.15 --
----- ----- -----
Total.................................... $1.99 $1.87 $1.75
===== ===== =====
Per Series B Preferred Share:
Ordinary income............................. $2.07 $2.07 $2.25
Capital gains............................... 0.18 0.18 --
----- ----- -----
Total.................................... $2.25 $2.25 $2.25
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1999 1998/(1)/
----- -----
<S> <C> <C>
Per Series C Preferred Share:
Ordinary income............................. $1.99 $0.99
Capital gains............................... 0.17 0.09
----- -----
Total.......................... $2.16 $1.08
===== =====
</TABLE>
(1) Represents dividends paid by Archstone in 1998 subsequent to the Atlantic
Merger.
<TABLE>
<CAPTION>
Date of
Issuance to
12/31/99
-----------
<S> <C>
Per Series D Preferred Share:
Ordinary income............................. $0.81
Capital gains............................... 0.07
-----
Total.................................... $0.88
=====
</TABLE>
Archstone's tax return for the year ended December 31, 1999 has not been
filed, and the taxability information for 1999 is based upon the best available
data. Archstone's tax returns for prior years have not been examined by the
Internal Revenue Service and, therefore, the taxability of the dividends may be
subject to change.
18
<PAGE>
Item 6. Selected Financial Data
The following table provides selected financial data relating to the
historical financial condition and results of operations of Archstone for 1999,
1998, 1997, 1996 and 1995. This data is qualified in its entirety by, and
should be read in conjunction with, "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation" and the financial
statements and notes thereto incorporated by reference herein (amounts in
thousands, except per share data).
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operations Summary:
Total revenues................................... $ 666,872 $ 513,645 $ 355,662 $ 326,246 $ 264,873
Property operating expenses...................... 217,527 173,760 123,051 128,122 104,046
Net operating income............................. 420,281 310,779 212,009 193,924 158,427
Interest expense................................. 121,494 83,350 61,153 35,288 19,584
General and administrative expense............... 22,156 16,092 18,350 23,268 21,306
Nonrecurring expenses (1)........................ - 2,193 71,707 - -
Earnings from operations (1)..................... 167,279 133,926 24,686 94,089 81,696
Gains on dispositions of depreciated real
estate, net..................................... 62,093 65,531 48,232 37,492 2,623
Preferred Share cash dividends paid.............. 23,731 20,938 19,384 24,167 21,823
Net earnings attributable to Common Shares:
- Basic....................................... 204,528 177,022 53,534 106,544 62,496
- Diluted..................................... 204,528 186,999 53,534 121,261 62,496
Common Share cash distributions paid............. $ 208,018 $ 165,190 $ 105,547 $ 90,728 $ 76,804
Per Share Data:
Net earnings attributable to Common Shares:
Basic (1)................................... $ 1.46 $ 1.49 $ 0.65 $ 1.46 $ 0.93
Diluted (1)................................. 1.46 1.49 0.65 1.44 0.93
Common Share cash distributions paid............. 1.48 1.39 1.30 1.24 1.15
Series A Convertible Preferred Share cash
dividends paid.................................. 1.99 1.87 1.75 1.75 1.75
Series B Preferred Share cash dividends paid..... 2.25 2.25 2.25 2.25 1.36
Series C Preferred Share cash dividends paid..... 2.16 1.08 - - -
Series D Preferred Share cash dividends paid..... $ 0.88 $ - $ - $ - $ -
Weighted average Common Shares outstanding
- Basic....................................... 139,801 118,592 81,870 73,057 67,052
Weighted average Common Shares outstanding
- Diluted..................................... 139,829 125,825 81,908 84,340 67,126
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Financial Position:
Real estate owned, at cost....................... $ 5,217,331 $ 4,869,801 $ 2,604,919 $ 2,153,363 $ 1,855,866
Mortgage notes receivable........................ 210,357 211,967 285,238 189,829 15,844
Total assets..................................... 5,302,437 5,059,898 2,805,686 2,282,432 1,840,999
Unsecured credit facilities...................... 493,536 264,651 231,500 110,200 129,000
Long-Term Unsecured Debt......................... 1,276,572 1,231,167 630,000 580,000 200,000
Mortgages payable................................ 694,948 676,613 265,652 217,188 158,054
Total liabilities................................ 2,679,628 2,410,114 1,265,250 1,014,924 565,331
Redeemable preferred stock....................... 297,635 272,515 240,210 267,374 335,000
Shareholders' equity............................. $ 2,567,506 $ 2,628,325 $ 1,540,436 $ 1,267,508 $ 1,275,668
Number of Common Shares outstanding.............. 139,008 143,313 92,634 75,511 72,211
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Other Data:
Cash Flows:
Net cash provided by operating activities................ $ 282,537 $ 221,534 $ 159,724 $ 143,939 $ 121,795
Net cash used in investing activities.................... $(210,441) $(309,145) $(403,112) $(360,935) $(294,488)
Net cash provided by (used in) financing activities...... $ (72,143) $ 92,803 $ 242,672 $ 195,720 $ 191,520
Computation of Funds From Operations:
Net earnings attributable to Common Shares - Basic....... $ 204,528 $ 177,022 $ 53,534 $ 106,544 $ 62,496
Add (Deduct):
Depreciation on real estate investments.................. 132,437 96,337 52,893 44,887 36,685
Provision for possible loss on investments............... 2,000 4,700 3,000 - 420
Gains on dispositions of depreciated real estate, net.... (62,093) (65,531) (48,232) (37,492) (2,623)
Nonrecurring expenses and extraordinary items, net....... 1,113 3,690 71,707 739 -
Other.................................................... 170 (662) (1,281) (141) -
--------- --------- --------- --------- ---------
Funds From Operations attributable to Common
Shares/(2)/ - Basic..................................... 278,155 215,556 131,621 114,537 96,978
Series A Convertible Preferred Share dividends........... 8,206 9,332 9,934 14,717 16,100
Minority interest........................................ 780 - - - -
--------- --------- --------- --------- ---------
Funds From Operations attributable to Common
Shares/(2)/ - Diluted................................... $ 287,141 $ 224,888 $ 141,555 $ 129,254 $ 113,078
========= ========= ========= ========= =========
Weighted average Common Shares outstanding - Diluted..... 146,087 125,825 90,230 84,340 78,315
========= ========= ========= ========= =========
</TABLE>
(1) Nonrecurring expenses in 1998 include $1.1 million in transaction
integration costs associated with the Atlantic Merger and $1.1 million
associated with the introduction of Archstone's national branding strategy.
In 1997, the non-recurring expense represents the impact of a one-time,
non-cash charge of $71.7 million associated with the costs incurred in
acquiring Archstone's REIT and property management companies from Security
Capital. These one-time charges were not deducted for purposes of
calculating Funds From Operations in 1998 and 1997, due to the non-
recurring and/or non-cash nature of the expenses.
(2) Funds From Operations has been an industry-wide standard used to measure
operating performance of a REIT since its adoption by the NAREIT in 1991.
Funds From Operations should not be considered as an alternative to net
earnings or any other GAAP measurement of performance or as an alternative
to cash flow from operating, investing or financing activities as a measure
of liquidity. The Funds From Operations measure presented by Archstone,
while consistent with the NAREIT's definition, will not be comparable to
similarly titled measures of other REIT's that do not compute Funds From
Operations in a manner consistent with Archstone.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with Archstone's
audited financial statements and notes contained in this Annual Report.
Forward-Looking Statements
Certain statements in this Annual Report are "forward-looking
statements" as that term is defined under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on management's
current expectations, estimates and projections about the industry and markets
in which Archstone operates. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" and variations of such words and
similar expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions, which are difficult to predict and many of
which are beyond the control of Archstone. Therefore, actual outcomes and
results may differ materially from what is expressed, forecasted or implied in
such forward-looking statements. Information concerning expected investment
balances, expected funding sources, planned investments and revenue and expense
growth assumptions are examples of forward-looking statements. We undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by
applicable law.
20
<PAGE>
Archstone's operating results depend primarily on income from
apartment communities, which is substantially influenced by demand and supply of
apartment units in Archstone's primary target markets and submarkets, operating
expense levels, property level operations and the pace and price at which we can
develop, acquire or dispose of apartment communities. Capital and credit market
conditions which affect Archstone's cost of capital also influence operating
results. See "Item 1. Business" for a more complete discussion of risk factors
that could impact Archstone's future financial performance.
Results of Operations
Archstone's rental revenues and net operating income increased in 1999 for
the fourteenth consecutive year. The year over year increases from 1997 to 1998
and 1998 to 1999 were primarily due to: (i) the Atlantic Merger in July 1998;
(ii) development of new communities; and (iii) execution of our capital
redeployment program, which involves the disposition of operating communities in
secondary markets with less attractive growth prospects to fund investments in
targeted markets with higher barriers to entry.
Archstone's net earnings from 1997 to 1998 and 1998 to 1999 also increased
as a result of the increases in revenues and net operating income discussed
above. The substantial increase in net earnings from 1997 to 1998 was also
affected by greater gains on dispositions in 1998 and a $71.7 million non-cash
charge recorded in 1997 related to the acquisition of Archstone's REIT and
property management companies from Security Capital. The acquisition of these
companies resulted in Archstone becoming an internally managed REIT. The non-
cash charge was equal to the difference between the fair value of the stock
consideration given by Archstone and the tangible net assets acquired.
In July 1998 Security Capital Atlantic Incorporated, an affiliated
apartment REIT which operated primarily in the southeast and mid-Atlantic
markets of the United States, was merged with and into Archstone (which was
called Security Capital Pacific Trust at the time). The Atlantic Merger added 91
operating apartment communities (24,414 units) and 34 development communities
(9,358 units) to the portfolio. The transaction was accounted for as a purchase.
Apartment Community Operations
At December 31, 1999, investments in apartment communities comprised over
99% of Archstone's total real estate portfolio, based on Total Expected
Investment. The following table summarizes the net operating income generated
from Archstone's apartment communities during 1999, 1998 and 1997 (in thousands,
except for units and percentages):
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Rental revenues........................... $ 634,028 $ 478,144 $ 331,346
Property operating expenses:
Rental expenses......................... 165,103 132,359 95,956
Real estate taxes....................... 52,410 40,476 26,967
----------- ----------- -----------
Total property operating expenses..... 217,513 172,835 122,923
----------- ----------- -----------
Net operating income...................... $ 416,515 $ 305,309 $ 208,423
----------- ----------- -----------
Average number of operating units......... 68,991 55,276 41,849
----------- ----------- -----------
Operating margin (net operating
income/rental revenues).................. 65.7% 63.9% 62.9%
=========== =========== ===========
</TABLE>
Archstone's growth in net operating income from 1997 to 1998 and 1998 to
1999 resulted primarily from increases in the number of operating communities
added by the Atlantic Merger in July 1998 and the on-going development of new
communities and increasing cash flow from existing apartment communities. The
acquisition of operating communities has also played an important role in
Archstone's growth, although community dispositions have exceeded acquisitions
during the last four years as a result of our capital redeployment program.
Execution of this strategy has led to an improvement in operating margins in
each year during the period from 1997 to 1999 as a result of higher rental rates
and more stable revenue growth as more capital is redeployed into markets with
higher barriers to entry. Average occupancy has remained strong at 94.9%, 95.0%
and 94.7%, respectively over the last three years. Rental expense growth has
been controlled by operating efficiencies and increasing levels of utility
expense reimbursements from customers, which has also contributed to improvement
in operating margins.
21
<PAGE>
We expect overall net operating income to increase in 2000 as units under
development become operational and as the full impact of incremental development
completions and acquisitions become fully reflected in Archstone's operating
results. During 2000, we will continue to focus our energies on enhancing
relationships and improving interfaces with customers. These efforts are
intended to help build the Archstone brand, which is expected to result in
higher levels of customer satisfaction, lower customer turnover and improved
profitability. To achieve these objectives, our plans include:
. Continuation of Archstone's Seal of Service/SM/ program which features
five unconditional customer service guarantees;
. Use of an Internet-based credit scoring model to facilitate on-the-
spot approval of rental applications; and
. Issuance of security deposit refunds the day a customer moves out of
an Archstone community.
In addition, we expect substantial progress towards each of the following
initiatives during 2000:
. Development and launch of an on-line leasing process;
. Creation of community Web pages to facilitate electronic payment of
rent, lease renewals and transfers, and the submission and tracking of
requests for service; and
. Offering various value-added services to customers, including high-
speed Internet access, through alliances with world-class service
providers.
Other Income
Other income is primarily influenced by interest income on convertible
mortgage notes receivable. During 1999, 1998 and 1997, Archstone recorded $23.6
million, $22.9 million, and $16.7 million in interest income, respectively, from
these notes.
Depreciation Expense
The increases in depreciation expense from 1997 to 1998 and 1998 to 1999
resulted primarily from the increase in the number of operating communities due
to the Atlantic Merger in July 1998, and an increase in the cost basis of
operating communities resulting from our active development and capital
redeployment programs. These increases were partially offset by dispositions. A
slight increase in depreciation is expected in 2000 as the full impact of
incremental development completions and acquisitions become fully reflected.
Interest Expense
The increases in interest expense from 1997 to 1998 and 1998 to 1999 are
primarily attributable to higher outstanding debt balances associated with the
financing of our investment activities. These higher borrowing costs were
partially offset by the capitalization of interest on apartment development
activities, which increased in each successive year. We expect interest expense
to increase in 2000 as a result of higher outstanding debt balances, slightly
higher interest rates and a decrease in interest capitalization due to lower
levels of investments undergoing active development.
General and Administrative Expenses
The increase in general and administrative expenses in 1999 compared to
1998 related primarily to the incremental costs associated with operating the
company after the Atlantic Merger, which occurred in July 1998. General and
administrative expenses decreased in 1998 as compared to 1997 due primarily to
the acquisition of the REIT management company from Security Capital in
September 1997. Prior to the acquisition, the company paid an external
management fee equal to approximately 16% of cash flow, none of which was
eligible for capitalization. As a result of the management company acquisition,
Archstone became internally managed and now directly incurs expenses related to
personnel and other operating costs. General and administrative expenses also
include a portion of the fees paid to Security Capital for certain services
provided under an administrative service agreement, which began in September
1997. These fees have steadily declined since inception of the agreement as
functions related to information technology, human resources, investor
relations, legal and tax have been internalized. We expect these fees to
continue to decrease as we explore further opportunities to internalize
services. Costs related to internalized functions are incurred and paid directly
by Archstone. Overall general and administrative expenses are expected to
increase in 2000 primarily as a result of research and development associated
with information technology initiatives and higher costs associated with
Archstone's long-term incentive plan.
22
<PAGE>
Provision for Possible Loss on Investments
During 1999, we concluded that the full recovery of certain investments was
doubtful. As a result, a provision for possible loss of $2.0 million was
recorded to reduce these assets to their estimated fair value. Similar
provisions of $4.7 million and $3.0 million were recorded during 1998 and 1997,
respectively.
Non-recurring and Other Expenses
During 1998, Archstone incurred approximately $2.2 million in costs related
to merger integration and the implementation of the Archstone national branding
strategy. In 1997, Archstone recorded a non-recurring charge of $71.7 million in
connection with the acquisition of the REIT and property management companies,
as further discussed above.
Other expenses have increased primarily as a result of an increase in
minority interest associated with the issuance of perpetual preferred units
during the latter half of 1999. Minority interest expense is expected to
increase in 2000 as the effect of new issuances is realized.
Gains on Dispositions
Archstone has recognized substantial gains on the disposition of
depreciated real estate in each of the last three years. These gains have
resulted from our capital redeployment program, which we believe has been highly
successful. Archstone's disposition activity will continue into 2000, although
the level of dispositions is expected to be less than 1999.
Extraordinary Items
Extraordinary items were recorded in 1999 and 1998 in connection with the
extinguishment of certain debt instruments.
Preferred Share Dividends
The higher level of Preferred Share dividends in each year during the
period from 1997 to 1999 is primarily attributable to the issuance of the Series
C Preferred Shares in connection with the Atlantic Merger, and yearly increases
in the Series A Convertible Preferred Share dividend rate. The increase in 1999
relative to 1998 was also due to the issuance of Series D Preferred Shares in
August 1999. The increases were partially offset by periodic conversions by
shareholders of Series A Convertible Preferred Shares into Common Shares in each
year.
Liquidity and Capital Resources
Financial Flexibility
Since mid-1998 and continuing into 2000, the real estate industry has
experienced a reduced supply of favorably priced equity and debt capital, which
has generally decreased the level of new investment activity by real estate
companies. As a result of this challenging capital environment and consistent
with the capital redeployment program described earlier, Archstone funded
attractive new investment opportunities during 1999 primarily through use of
proceeds from dispositions in non-core secondary markets. Other sources of
capital during 1999 included issuance of $50 million in Series D Preferred
Shares, issuance of $43 million in perpetual preferred limited partnership units
and borrowings under unsecured credit facilities. Although we cannot predict how
long the current market conditions will prevail, we continue to believe
Archstone's liquidity and financial condition are strong and are committed to
preserving a strong balance sheet and maintaining the financial flexibility
needed to capitalize on market opportunities as they arise. For example, in
early 1999, we commenced a program to repurchase our shares and through December
31, 1999, have repurchased $121.6 million of Common Shares through this program
(6.1 million shares at an average price of $19.76 per share). The Board has
authorized the repurchase of up to $150 million in Common Shares. See "-Planned
Investments" and "-Funding Sources" in this section for further information on
planned investment and financing activities.
We consider our liquidity and ability to generate cash from operations,
dispositions and financings to be adequate to meet all of our cash flow
requirements during 2000.
23
<PAGE>
Operating Activities
Archstone's net cash flow provided by operating activities increased by
$61.0 million (27.5%) in 1999 as compared to 1998 and $61.8 million (38.7%) for
1998 compared to 1997. These increases are due primarily to the Atlantic Merger
in July 1998, the development of new apartment communities and cash flow growth
from existing apartment communities.
Investing and Financing Activities
During 1999, 1998 and 1997, we invested cash of $801.8 million, $688.2
million and $616.1 million, respectively, in real estate investments. Real
estate investments and the repurchase of $121.6 million of Common Shares during
1999 were financed primarily from proceeds from property dispositions, cash held
in escrow pending tax-deferred exchanges and borrowings under unsecured credit
facilities. These unsecured credit facilities were partially repaid with net
proceeds of $90.2 million from the issuance of Series D Preferred Shares and
perpetual preferred limited partnership units, and cash flow from operations.
Real estate investments during 1998 were financed primarily from proceeds from
property dispositions, cash held in escrow pending tax-deferred exchanges, cash
acquired in the Atlantic Merger and borrowings under unsecured credit
facilities. These unsecured credit facilities were partially repaid with
proceeds from the issuance of $447.2 million of Long-Term Unsecured Debt, $268.5
million in proceeds from the issuance of Fannie Mae secured debt and $44.0
million in net proceeds from the sale of Common Shares in 1998. Real estate
investments during 1997 were financed primarily from proceeds from property
dispositions and borrowings under unsecured credit facilities. These unsecured
credit facilities were partially repaid during 1997 with proceeds from the
issuance of $50 million of Long-Term Unsecured Debt and $248.4 million in net
proceeds from the sale of 11.4 million Common Shares.
Other significant financing activity included the payment of $231.7
million, $186.1 million and $124.9 million in Common and Preferred Share
distributions in 1999, 1998 and 1997, respectively. The increases are
principally attributable to (i) an increase in the overall number of Common
Shares and Series C Preferred Shares outstanding resulting primarily from the
Atlantic Merger in 1998; and (ii) annual increases in the cash distributions
paid per Common Share. The increase from 1998 to 1999 was also due in part to
the issuance of Series D Preferred Shares during 1999. We prepaid mortgages due
to community dispositions of $52.1 million, $76.3 million and $49.8 million in
1999, 1998 and 1997, respectively, and funded convertible mortgage notes of
$11.9 million and $85.8 million in 1998 and 1997, respectively.
Archstone's most significant non-cash investing and financing activities
during the three-year period ended December 31, 1999 included the Atlantic
Merger in July 1998, and the acquisition of the REIT and property management
companies from Security Capital in September 1997.
Scheduled Debt Maturities and Interest Payment Requirements
In order to reduce refinancing risk, Archstone's long-term debt obligations
are carefully structured to create a relatively level principal maturity
schedule with the objective of minimizing the requirement for unusually large
payments in any single year. Archstone has only $82.4 million of long-term debt
maturing during 2000, and $80.5 million maturing in 2001. See Note 4 of
Archstone's audited financial statements contained in this Annual Report for
additional information on scheduled debt maturities.
We currently have $850 million in total borrowing capacity under
Archstone's unsecured credit facilities, with $570.4 million outstanding and an
available balance of $279.6 million at February 23, 2000. Archstone's unsecured
credit facilities, Long-Term Unsecured Debt and mortgages payable had effective
interest rates of 6.3%, 7.3% and 6.1%, respectively, as of December 31, 1999.
These rates give effect to interest rate swaps and caps, as applicable.
Archstone was in compliance with all financial covenants pertaining to our
debt instruments at December 31, 1999.
24
<PAGE>
Shareholder Dividend/Distribution Requirements
Based on anticipated distribution levels for 2000 and the number of
Archstone shares outstanding as of December 31, 1999, we anticipate that
Archstone will pay the following annual dividends/distributions in 2000 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Common Share distributions.......................... $1.54 $214,073
Series A Convertible Preferred Share dividends...... 2.07 7,685
Series B Preferred Share dividends.................. 2.25 9,450
Series C Preferred Share dividends.................. 2.16 4,312
Series D Preferred Share dividends.................. 2.19 4,375
Series E perpetual preferred limited partnership 2.09 1,926
unit distributions (1)............................
Series F perpetual preferred limited partnership 2.03 1,625
unit distributions (1)............................
Other distributions on minority interests /1/....... 1.54 921
--------
Total dividend/distribution requirements............ $244,367
========
</TABLE>
(1) See Note 6 of Archstone's audited financial statements contained in this
Annual Report for information on the perpetual preferred limited
partnership units and other minority interests.
Planned Investments
Following is a summary of unfunded planned investments as of December 31,
1999 (dollar amounts in thousands). The amounts labeled "Discretionary"
represent future investments that we plan to make, although there is not a
contractual commitment to do so. The amounts labeled "Committed" represent the
approximate amount that Archstone has contractually committed to fund. Only the
amount of non-refundable earnest money deposits is reflected as "Committed" for
community acquisitions under contract or letter of intent.
<TABLE>
<CAPTION>
Planned Investments
------- ---------------------------
Units Discretionary Committed
------- ------------- ---------
<S> <C> <C> <C>
Planned operating community improvements............. - $ 93,117 $ 13,777
Communities under construction....................... 7,830 - 260,339
Communities In Planning and owned.................... 2,096 169,054 -
Communities In Planning and Under Control............ 2,375 291,121 -
Operating community acquisitions under contract or 1,241 179,200 6,600
letter of intent...................................
------ ------------- ---------
Total.......................................... 13,542 $732,492 $280,716
====== ============= =========
</TABLE>
We anticipate completion of most of the communities that are currently
under construction and the planned operating community improvements during the
remainder of 2000 and 2001 and expect to start construction on approximately
$250-300 million, based on Total Expected Investment, of communities that are
currently In Planning, during 2000. We expect to complete the acquisition of
operating communities under contract or letter of intent by June 30, 2000. No
assurances can be given that communities Archstone does not currently own will
be acquired or that planned developments will actually occur. In addition,
actual costs incurred could be greater or less than Archstone's current
estimates.
25
<PAGE>
Funding Sources
We anticipate financing the company's planned investment and operating
needs primarily with cash flow from operating activities, disposition proceeds
derived from our capital redeployment program and borrowings under unsecured
credit facilities, prior to arranging long-term financing. Consistent with
Archstone's performance in 1999, we anticipate that net cash flow from operating
activities during 2000 will be sufficient to fund anticipated
dividend/distribution requirements and scheduled debt principal payments. To
fund planned investment activities, we had $356.5 million in available capacity
on Archstone's unsecured credit facilities, $68.7 million in tax-deferred
exchange escrow and $57.5 million of operating communities and certain other
real estate assets under contract for sale as of December 31, 1999. Subject to
normal closing risks, we anticipate that we will complete these dispositions
during the first or second quarter of 2000. Furthermore, we expect that $300-400
million in total proceeds will be generated from dispositions during 2000 in
connection with the ongoing execution of our capital redeployment program.
In addition, Archstone currently has $777.2 million in shelf registered
securities which can be issued in the form of Long-Term Unsecured Debt,
preferred shares or Common Shares on an as-needed basis, subject to our ability
to complete offerings on satisfactory terms.
Other Contingencies, Hedging Activities and Year 2000 Issue
Archstone is a party to various claims and routine litigation arising in
the ordinary course of business. When considering the company's insurance
coverage and other aspects of our risk management program, we do not believe
that the results of any such claims and litigation, individually or in
aggregate, will have a material adverse effect on Archstone's business,
financial position or results of operations.
Our involvement with derivative financial instruments is limited and we do
not use them for trading or other speculative purposes. We occasionally utilize
derivative financial instruments to lower our overall borrowing costs. See Note
11 of Archstone's audited financial statements contained in this Annual Report
for more information on derivative financial instruments currently in use.
We have not experienced any significant adverse consequences related to the
widely publicized Year 2000 issue. All mission-critical computer systems are
operable and performing as intended.
26
<PAGE>
Funds From Operations
Funds From Operations has been an industry-wide standard used to measure
operating performance of a REIT since its adoption by NAREIT in 1991. Funds From
Operations should not be considered as an alternative to net earnings or any
other GAAP measurement of performance or as an alternative to cash flow from
operating, investing or financing activities as a measure of liquidity. The
Funds From Operations measure presented by Archstone, while consistent with
NAREIT's definition, will not be comparable to similarly titled measures of
other REITs that do not compute Funds From Operations in a manner consistent
with Archstone.
Archstone's Funds From Operations is calculated as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net earnings attributable to Common Shares--Basic ............. $204,528 $177,022 $ 53,534
Add (Deduct):
Depreciation on real estate investments ................... 132,437 96,337 52,893
Provision for possible loss on investments ................ 2,000 4,700 3,000
Gain on disposition of investments, net ................... (62,093) (65,531) (48,232)
Nonrecurring expenses and extraordinary items ............. 1,113 3,690 71,707
Other, net ................................................ 170 (662) (1,281)
-------- -------- --------
Funds From Operations attributable to Common Shares--Basic .... $278,155 $215,556 $131,621
-------- -------- --------
Series A Convertible Preferred Share dividends ............ 8,206 9,332 9,934
Minority interest ......................................... 780 -- --
-------- -------- --------
Funds From Operations attributable to Common Shares--Diluted .. $287,141 $224,888 $141,555
======== ======== ========
Weighted average Common Shares outstanding--Diluted ........... 146,087 125,825 90,230
======== ======== ========
</TABLE>
In October 1999, NAREIT revised the definition of Funds From Operations.
The primary change involves including non-recurring items in Funds From
Operations, except for those that are defined as "extraordinary items" under
GAAP. To more closely conform to the revised definition, Archstone will count
all interest income associated with our convertible mortgage notes as Funds From
Operations whereas in the past it has excluded the benefit of non-cash
amortization. Archstone will officially begin reporting the revised measure in
the first quarter of 2000.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Archstone is exposed to interest rate changes associated with our unsecured
credit facilities and other variable rate debt. Our involvement with derivative
financial instruments is limited and we do not use them for trading or other
speculative purposes. We occasionally utilize derivative financial instruments
to lower our overall borrowing costs.
27
<PAGE>
The table below provides information about Archstone's financial
instruments that are sensitive to changes in interest rates, including the
estimated fair values for each interest rate sensitive asset or liability, as of
December 31, 1999. As the table incorporates only those exposures that exist as
of December 31, 1999, it does not consider those exposures or positions which
could arise after that date. Moreover, because there were no firm commitments to
actually sell these instruments at fair value as of December 31, 1999, the
information presented therein is merely an estimate and has limited predictive
value. As a result, Archstone's ultimate realized gain or loss with respect to
interest rate fluctuations will depend on the exposures that arise during future
periods, hedging strategies and prevailing interest rates at the time. The
interest rates shown below give effect to interest rate caps and swaps, where
applicable. See Note 11 of Archstone's audited financial statements contained in
this Annual Report for information on Archstone's derivative financial
instruments.
<TABLE>
<CAPTION>
Expected Maturity/Principal Repayment Schedule at
December 31,
-------------------------------------------------------------
Estimated
Total Fair
2000 2001 2002 2003 2004 Thereafter Balance Value(1)
------- ------- -------- -------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest rate sensitive assets:
Convertible mortgage notes receivable(2)..$ -- $ -- $ -- $ -- $ -- $205,601 $ 205,601 $ 205,600
Average nominal interest rate (3)....... 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% -- --
Interest rate sensitive liabilities:
Unsecured credit facilities...............$ 8,536 $ -- $ -- $485,000(4) $ -- $ -- $ 493,536 $ 494,000
Average nominal interest rate (3)....... 6.0% 6.0% 6.0% 6.0% -- -- -- --
Long-Term Unsecured Debt:
Fixed rate..............................$75,310 $70,010 $97,810 $171,560 $51,560 $734,607 $1,200,857 $1,139,000
Average nominal interest rate (3)..... 7.3% 7.4% 7.4% 7.5% 7.5% 7.5% -- --
Variable rate (5).......................$ -- $ -- $ -- $ -- $ -- $ 75,715 $ 75,715 $ 71,000
Average nominal interest rate (3)..... 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% -- --
Mortgages payable:
Fixed rate debt (6).....................$ 5,910 $ 9,184 $ 4,531 $ 25,014 $ 4,842 $452,619 $ 502,100 $ 497,000
Average nominal interest rate (3)..... 6.3% 6.3% 6.2% 6.2% 6.2% 6.2% -- --
Variable rate debt........................$ 1,165 $ 1,257 $ 1,358 $ 1,467 $37,932 $149,669 $ 192,848 $ 193,000
Average nominal interest rate (3)...... 3.5% 3.5% 3.5% 3.5% 3.5% 3.4% -- --
</TABLE>
(1) The estimated fair value for the convertible mortgage notes receivable and
each of the liabilities listed was calculated by discounting the actual
principal payment stream at prevailing interest rates (obtained from third
party financial institutions) currently available on debt instruments with
similar terms and features.
(2) The face amount of the convertible mortgage notes is $221.3 million. See
Note 3, of Archstone's audited financial statements contained in this
Annual Report for more information on convertible mortgages notes.
(3) Reflects the weighted average nominal interest rate on the assets or
liabilities outstanding during each period, giving effect to principal
payments and final maturities during each period, if any. The nominal
interest rates for variable rate mortgages payable have been held constant
during each period presented based on the actual variable rates at December
31, 1999. The weighted average effective interest rate at December 31,
1999 for the convertible mortgage notes receivable was 13.4%. The weighted
average effective interest rate on the unsecured credit facilities, Long-
Term Unsecured Debt and mortgages payable was 6.3%, 7.3%, and 6.1%,
respectively.
(4) Archstone's $750 million unsecured credit facility matures in July 2001, at
which time it may be converted into a two-year term loan, at Archstone's
option.
(5) Consists of tax-exempt unsecured bonds.
(6) The fixed rate mortgages payable balance includes $304.4 million of Fannie
Mae secured debt.
Archstone also has investments in marketable equity securities aggregating
$7.7 million which have been classified as "available for sale" and whose value
is subject to equity price risk. As of December 31, 1999 an unrealized holding
gain of $394,000 had been recorded in "other comprehensive income", a component
of shareholders' equity, on these securities.
Item 8. Financial Statements and Supplementary Data
Archstone's Balance Sheets as of December 31, 1999 and 1998, and its
Statements of Earnings, Shareholders' Equity and Cash Flows for each of the
years in the three-year period ended December 31, 1999 and Schedule III - Real
Estate and Accumulated Depreciation, together with the reports of KPMG LLP,
independent auditors, are included under Item 14 of this report and are
incorporated herein by reference. Selected quarterly financial data is presented
in Note 11 of Archstone's audited financial statements contained in this Annual
Report.
28
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Trustees and Executive Officers of the Registrant
For information regarding Archstone's Trustees and executive officers, see
"Item 1. Business - Trustees and Officers of Archstone." The other information
required by this Item 10 is incorporated herein by reference to the description
under the captions "Election of Trustees" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in Archstone's 2000 Proxy Statement.
Item 11. Executive Compensation
Incorporated herein by reference to the description under the captions
"Election of Trustees" and "Executive Compensation" in the 2000 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to the description under the captions
"Principal Shareholders" and "Election of Trustees" in the 2000 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 2000 Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedule:
1. Financial Statements
See Index to Financial Statements and Schedule on page 31 of
this report, which is incorporated herein by reference.
2. Financial Statement Schedule:
See Schedule III on page 59 of this report, which is
incorporated herein by reference.
All other schedules have been omitted since the required
information is presented in the financial statements and the
related notes or is not applicable.
3. Exhibits.
See Index to Exhibits on page 70 of this report, which is
incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed
during the last quarter of the period covered by this report.
None filed in last quarter of period covered by this report.
(c) Exhibits:
The Exhibits required by Item 601 of Regulation S-K are listed in
the Index to Exhibits on page 70 of this report, which is incorporated
herein by reference.
29
<PAGE>
Index to Financial Statements and Schedule
<TABLE>
<CAPTION>
Page
------
Archstone Communities Trust
<S> <C>
Independent Auditors' Report................................................................. 32
Balance Sheets as of December 31, 1999 and 1998.............................................. 33
Statements of Earnings for the years ended December 31, 1999, 1998 and 1997.................. 34
Statements of Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997...... 35
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................ 36
Notes to Financial Statements................................................................ 37
Independent Auditors' Report on Financial Statement Schedule................................. 58
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1999.............. 59
Index to Exhibits............................................................................ 70
</TABLE>
30
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Archstone Communities Trust:
We have audited the accompanying balance sheets of Archstone Communities
Trust as of December 31, 1999 and 1998, and the related statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements 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 Archstone Communities Trust
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
January 27, 2000, except as to Note 16,
which is as of February 4, 2000
31
<PAGE>
Archstone Communities Trust
Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
--------------------------
Assets 1999 1998
------ ---------- ----------
<S> <C> <C>
Real estate................................................................................ $5,217,331 $4,869,801
Less accumulated depreciation.............................................................. 300,658 205,795
---------- ----------
4,916,673 4,664,006
Mortgage notes receivable, net............................................................. 210,357 211,967
---------- ----------
Net investments..................................................................... 5,127,030 4,875,973
Cash and cash equivalents.................................................................. 10,072 10,119
Restricted cash in tax-deferred exchange escrow............................................ 68,729 90,874
Other assets............................................................................... 96,606 82,932
---------- ----------
Total assets........................................................................ $5,302,437 $5,059,898
========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Liabilities:
Unsecured credit facilities............................................................. $ 493,536 $ 264,651
Long-Term Unsecured Debt................................................................ 1,276,572 1,231,167
Mortgages payable....................................................................... 694,948 676,613
Distributions payable................................................................... 53,518 53,364
Accounts payable........................................................................ 26,677 55,649
Accrued expenses........................................................................ 74,462 83,114
Other liabilities....................................................................... 59,915 45,556
---------- ----------
Total liabilities................................................................... 2,679,628 2,410,114
---------- ----------
Minority interest.......................................................................... 55,303 21,459
---------- ----------
Shareholders' equity:
Series A Convertible Preferred Shares (3,705,390 shares in 1999 and 4,700,615 in 1998;
stated liquidation preference of $25 per share)...................................... 92,635 117,515
Series B Preferred Shares (4,200,000 shares; liquidation preference of $25 per share)
per share)............................................................................. 105,000 105,000
Series C Preferred Shares (2,000,000 shares; liquidation preference of $25 per share)... 50,000 50,000
Series D Preferred Shares (2,000,000 shares; liquidation preference of $25 per share)... 50,000 --
Common Shares (139,008,353 in 1999 and 143,313,015 in 1998)............................. 139,008 143,313
Additional paid-in capital.............................................................. 2,271,856 2,350,239
Unrealized holding gain................................................................. 394 --
Distributions in excess of net earnings................................................. (141,387) (137,742)
---------- ----------
Total shareholders' equity.......................................................... 2,567,506 2,628,325
---------- ----------
Total liabilities and shareholders' equity.......................................... $5,302,437 $5,059,898
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
Archstone Communities Trust
Statements of Earnings
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
Revenues: 1999 1998 1997
--------- --------- ----------
<S> <C> <C> <C>
Rental revenues................................................... $ 637,808 $ 484,539 $ 335,060
Other income...................................................... 29,064 29,106 20,602
--------- --------- ---------
666,872 513,645 355,662
--------- --------- ---------
Expenses:
Rental expenses................................................... 163,110 130,558 88,023
Rental expenses paid to affiliate................................. 1,996 2,521 7,642
Real estate taxes................................................. 52,421 40,681 27,386
Depreciation on real estate investments........................... 132,437 96,337 52,893
Interest expense.................................................. 121,494 83,350 61,153
General and administrative expenses............................... 20,521 13,978 4,036
General and administrative expenses paid to affiliate............. 1,635 2,114 14,314
Nonrecurring expenses:
Branding strategy and Atlantic Merger integration............. - 2,193 -
Costs incurred in acquiring management companies from an
affiliate.................................................. - - 71,707
Provision for possible loss on investments........................ 2,000 4,700 3,000
Other expenses.................................................... 3,979 3,287 822
--------- --------- ---------
499,593 379,719 330,976
--------- --------- ---------
Earnings from operations............................................. 167,279 133,926 24,686
Gains on dispositions of depreciated real estate, net............. 62,093 65,531 48,232
--------- --------- ---------
Earnings before extraordinary items.................................. 229,372 199,457 72,918
Less extraordinary items.......................................... 1,113 1,497 -
--------- --------- ---------
Net earnings......................................................... 228,259 197,960 72,918
--------- --------- ---------
Less Preferred Share dividends.................................... 23,731 20,938 19,384
--------- --------- ---------
Net earnings attributable to Common Shares - Basic................... $ 204,528 $ 177,022 $ 53,534
========= ========= =========
Weighted average Common Shares outstanding - Basic................... 139,801 118,592 81,870
--------- --------- ---------
Weighted average Common Shares outstanding - Diluted................. 139,829 125,825 81,908
--------- --------- ---------
Earnings before extraordinary item per Common Share:
Basic............................................................. $ 1.47 $ 1.51 $ 0.65
========= ========= =========
Diluted........................................................... $ 1.47 $ 1.50 $ 0.65
========= ========= =========
Net earnings per Common Share:
Basic and Diluted................................................. $ 1.46 $ 1.49 $ 0.65
========= ========= =========
Distributions paid per Common Share.................................. $ 1.48 $ 1.39 $ 1.30
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
Archstone Communities Trust
Statements of Shareholders' Equity
Years ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Series A
Convertible Series B Series C Series D
Preferred Preferred Preferred Preferred
Shares at Shares at Shares at Shares at
aggregate aggregate aggregate aggregate
liquidation liquidation liquidation liquidation
preference preference preference preference
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances at December 31, 1996 .............. $162,374 $105,000 $ -- $ --
Comprehensive income:
Net earnings ....................... -- -- -- --
Preferred Share dividends paid ..... -- -- -- --
Other comprehensive income ......... -- -- -- --
Comprehensive income attributable to
Common Shares ........................ -- -- -- --
Common Share distributions ............. -- -- -- --
Issuance of shares to affiliate ........ -- -- -- --
Issuance of shares, net of expenses .... -- -- -- --
Other, net ............................. (27,164) -- -- --
-------- -------- ------- -------
Balances at December 31, 1997 .............. 135,210 105,000 -- --
Comprehensive income:
Net earnings ....................... -- -- -- --
Preferred Share dividends paid ..... -- -- -- --
Other comprehensive income ......... -- -- -- --
Comprehensive income attributable to
Common Shares ........................ -- -- -- --
Common Share distributions ............. -- -- -- --
Atlantic Merger ........................ -- -- 50,000 --
Issuance of shares, net of expenses .... -- -- -- --
Other, net ............................. (17,695) -- -- --
-------- -------- ------- -------
Balances at December 31, 1998 .............. 117,515 105,000 50,000 --
Comprehensive income:
Net earnings ....................... -- -- -- --
Preferred Share dividends paid ..... -- -- -- --
Other comprehensive income ......... -- -- -- --
Comprehensive income attributable to
Common Shares ........................ -- -- -- --
Common Share distributions ............. -- -- -- --
Repurchase of shares, net of expenses .. (750) -- -- --
Issuance of shares, net of expenses .... -- -- -- 50,000
Other, net ............................. (24,130) -- -- --
-------- -------- ------- -------
Balances at December 31, 1999 .............. $ 92,635 $105,000 $50,000 $50,000
======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Common Additional Unrealized Distributions
Shares at paid-in holding in excess of
par value capital gain (loss) net earnings Total
--------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996 .............. $ 75,511 $ 918,434 $ 74,923 $ (68,734) $1,267,508
Comprehensive income:
Net earnings ....................... -- -- -- 72,918 72,918
Preferred Share dividends paid ..... -- -- -- (19,384) (19,384)
Other comprehensive income ......... -- -- 8,871 -- 8,871
----------
Comprehensive income attributable to
Common Shares ........................ -- -- -- -- 62,405
----------
Common Share distributions ............. -- -- -- (112,505) (112,505)
Issuance of shares to affiliate ........ 3,296 68,780 -- -- 72,076
Issuance of shares, net of expenses .... 11,420 236,956 -- -- 248,376
Other, net ............................. 2,407 27,333 -- -- 2,576
-------- ---------- -------- --------- ----------
Balances at December 31, 1997 .............. 92,634 1,251,503 83,794 (127,705) 1,540,436
Comprehensive income:
Net earnings ....................... -- -- -- 197,960 197,960
Preferred Share dividends paid ..... -- -- -- (20,938) (20,938)
Other comprehensive income ......... -- -- (83,794) -- (83,794)
----------
Comprehensive income attributable to
Common Shares ........................ -- -- -- -- 93,228
----------
Common Share distributions ............. -- -- -- (187,059) (187,059)
Atlantic Merger ........................ 47,752 1,038,390 -- -- 1,136,142
Issuance of shares, net of expenses .... 2,050 41,959 -- -- 44,009
Other, net ............................. 877 18,387 -- -- 1,569
-------- ---------- -------- --------- ----------
Balances at December 31, 1998 .............. 143,313 2,350,239 -- (137,742) 2,628,325
Comprehensive income:
Net earnings ....................... -- -- -- 228,259 228,259
Preferred Share dividends paid ..... -- -- -- (23,731) (23,731)
Other comprehensive income ......... -- -- 394 -- 394
----------
Comprehensive income attributable to -- -- -- -- 204,922
Common Shares ........................ ----------
Common Share distributions ............. -- -- -- (208,173) (208,173)
Repurchase of shares, net of expenses .. (6,098) (114,733) -- -- (121,581)
Issuance of shares, net of expenses .... -- (1,740) -- -- 48,260
Other, net ............................. 1,793 38,090 -- -- 15,753
-------- ---------- -------- --------- ----------
Balances at December 31, 1999 .............. $139,008 $2,271,856 $ 394 $(141,387) $2,567,506
======== ========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
Archstone Communities Trust
Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net earnings............................................................. $ 228,259 $ 197,960 $ 72,918
Adjustments to reconcile net earnings to net cash flow provided by
operating activities:
Depreciation and amortization........................................ 133,817 96,908 54,541
Gains on dispositions of depreciated real estate, net................ (62,093) (65,531) (48,232)
Provision for possible loss on investments........................... 2,000 4,700 3,000
Costs incurred in acquiring management companies from an affiliate... -- -- 71,707
Extraordinary item................................................... 1,113 1,497 --
Change in accounts payable............................................... (19,119) (9,714) 4,000
Change in accrued expenses and other liabilities......................... 4,598 16,886 11,034
Change in other assets................................................... (6,038) (21,172) (9,244)
--------- --------- ---------
Net cash flow provided by operating activities....................... 282,537 221,534 159,724
--------- --------- ---------
Investing activities:
Real estate investments.................................................. (801,805) (688,151) (616,100)
Proceeds from dispositions, net of closing costs......................... 572,741 401,031 297,895
Cash acquired in Atlantic Merger......................................... -- 79,359 --
Change in tax-deferred exchange escrow................................... 22,145 (90,874) --
Funding of convertible mortgage notes receivable......................... -- (11,895) (85,750)
Other, net............................................................... (3,522) 1,385 843
--------- --------- ---------
Net cash flow used in investing activities........................... (210,441) (309,145) (403,112)
--------- --------- ---------
Financing activities:
Proceeds from (payments on) Long-Term Unsecured Debt..................... (30,000) 447,200 50,000
Proceeds from Fannie Mae secured debt.................................... 36,206 268,450 --
Debt issuance costs incurred............................................. (6,304) (14,281) (1,518)
Principal payments on mortgages payable.................................. (62,965) (111,325) (53,131)
Proceeds from bond refinancing........................................... 16,000 -- --
Proceeds from (payments on) unsecured credit facilities, net............. 228,885 (356,621) 121,300
Repurchase of Common Shares.............................................. (121,581) -- --
Proceeds from issuance of Common Shares, net............................. -- 44,009 249,199
Proceeds from issuance of Series D Preferred Shares, net................. 48,260 -- --
Proceeds from issuance of perpetual preferred units...................... 41,969 -- --
Cash distributions paid on Common Shares................................. (208,018) (165,190) (105,547)
Cash dividends paid on Preferred Shares.................................. (23,731) (20,938) (19,384)
Other, net............................................................... 9,136 1,499 1,753
--------- --------- ---------
Net cash flow provided by (used in) financing activities............. (72,143) 92,803 242,672
--------- --------- ---------
Net change in cash and cash equivalents..................................... (47) 5,192 (716)
Cash and cash equivalents at beginning of year.............................. 10,119 4,927 5,643
--------- --------- ---------
Cash and cash equivalents at end of year.................................... $ 10,072 $ 10,119 $ 4,927
========= ========= =========
</TABLE>
See Note 15 for supplemental information on non-cash investing and
financing activities.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Archstone Communities Trust
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(1) Description of Business and Summary of Significant Accounting Policies
In July 1998, Security Capital Atlantic Incorporated was merged with and
into Security Capital Pacific Trust. This transaction is hereafter referred to
as the "Atlantic Merger". Upon consummation of the Atlantic Merger, the name of
the company was changed to Archstone Communities Trust. Financial information
and references throughout this document are labeled "Archstone" for both pre-
and post-transaction periods. Archstone's financial statements and related
footnotes as of and for the period from the merger date (July 1998) to December
31, 1998 give effect to the Atlantic Merger, which was accounted for under the
purchase method. See Note 8 for a more complete discussion.
Business
Archstone is an equity REIT organized in 1963 under the laws of the state
of Maryland. Archstone primarily owns, operates, develops, acquires and
redevelops income-producing apartment communities in our strategic target
markets throughout the United States.
Principles of Financial Presentation
The accounts of Archstone and its controlled subsidiaries are consolidated
in the accompanying financial statements. All significant intercompany accounts
and transactions have been eliminated in consolidation. We use the equity method
to account for investments when we do not control but have the ability to
exercise significant influence over the operating and financial policies of the
investee. For an investee accounted for under the equity method, Archstone's
share of net earnings or losses of the investee is reflected in income as earned
and dividends are credited against the investment as received.
The preparation of these financial statements in conformity with GAAP
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual amounts realized or paid could differ from
those estimates.
Cash and Cash Equivalents
We consider 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, other than land and properties held for sale, is carried at
depreciated cost. Long-lived assets to be disposed of are reported at the lower
of their carrying amount or fair value less cost to sell. Such assets are no
longer depreciated when designated as held for sale. We periodically review
long-lived assets to be held and used for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be
recoverable. This review involves comparing an investment's book value to its
estimated future cash flows, on an undiscounted basis.
We capitalize direct and certain related indirect costs associated with the
successful acquisition, development or improvement of real estate. Capitalized
costs associated with unsuccessful acquisition or development pursuits are
expensed at the time the pursuit is abandoned.
36
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Depreciation is computed over the expected useful lives of depreciable
property on a straight-line basis as follows:
Buildings and related land improvements..... 20-40 years
Furniture, fixtures, equipment and other.... 5-10 years
Interest
During 1999, 1998 and 1997, the total interest paid in cash on all
outstanding debt, was $148.0 million, $96.4 million, and $73.1 million,
respectively.
We capitalize interest incurred during the construction period as part of
the cost of apartment communities under development. Interest capitalized during
1999, 1998 and 1997 aggregated $31.9 million, $29.9 million, and $17.6 million,
respectively.
Cost of Raising Capital
Costs incurred in connection with the issuance of equity securities are
deducted from shareholders' equity. Costs incurred in connection with the
issuance or renewal of debt are capitalized as other assets and are amortized
into interest expense over the term of the related loan or the renewal period.
The balance of any unamortized loan costs associated with refinanced debt is
expensed upon replacement with new debt. Amortization of loan costs included in
interest expense for 1999, 1998 and 1997 was $4.8 million, $3.3 million, and
$3.2 million, respectively.
We occasionally utilize derivative financial instruments to lower our
overall borrowing costs. The costs associated with entering into these
agreements, as well as the related gains or losses on such agreements, are
deferred and are amortized into interest expense over the term of the underlying
debt.
Revenue and Gain Recognition
We generally lease our apartment units under operating leases with terms of
one year or less. Rental income is recognized according to the terms of the
underlying leases which approximates the revenue which would be recognized if
spread evenly over the lease term.
Gains on sales of real estate are recorded when the recognition criteria
set forth by GAAP have been met.
Rental Expenses
Rental expenses shown on the accompanying Statements of Earnings include
costs associated with on-site and property management personnel, utilities (net
of utility reimbursements from residents), repairs and maintenance, make-ready,
property insurance, marketing, landscaping, and other on-site and related
administrative costs.
Federal Income Taxes
We have made an election to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, and believe Archstone qualifies as a REIT.
Accordingly, no provision has been made for federal income taxes in the
accompanying financial statements.
Comprehensive Income
Comprehensive income, which is defined as all changes in equity during each
period except those resulting from transactions with or distributions to
shareholders, is displayed in the accompanying Statements of Shareholders'
Equity. The amounts reflected as "other comprehensive income" in 1998 and 1997
reflect unrealized holding gains and losses on convertible mortgages notes
receivable (see Note 3).
37
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Per Share Data
Following is a reconciliation of basic earnings per share to diluted
earnings per share for the periods indicated (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- -------------
Reconciliation of numerator between basic and diluted net earnings per Common Share (1):
<S> <C> <C> <C>
Net earnings attributable to Common Shares - Basic.......................... $204,528 $177,022 $53,534
Dividends on Series A Convertible Preferred Shares...................... - 9,332 -
Minority interest........................................................ - 645 -
-------- -------- -------
Net earnings attributable to Common Shares - Diluted........................ $204,528 $186,999 $53,534
======== ======== =======
Reconciliation of denominator between basic and diluted net earnings per Common Share (1):
Weighted average number of Common Shares outstanding - Basic................ 139,801 118,592 81,870
Assumed conversion of Series A Convertible Preferred Shares into
Common Shares......................................................... - 6,765 -
Minority interest........................................................ - 458 -
Incremental options outstanding.......................................... 28 10 38
-------- -------- -------
Weighted average number of Common Shares outstanding - Diluted.............. 139,829 125,825 81,908
======== ======== =======
</TABLE>
(1) Excludes the impact of potentially dilutive equity securities during the
periods in which they are anti-dilutive.
Expected Impact of New Accounting Rules
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, was issued which established standards for the accounting
and reporting of derivative instruments. The new rules, which become effective
January 1, 2001, are not expected to have a material impact on Archstone's
financial position or results of operations. See Note 11 for further information
on derivative financial instruments.
Reclassifications
Certain of the 1998 and 1997 amounts have been reclassified to conform to
the 1999 presentation.
38
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
(2) Real Estate
Investments in Real Estate
Equity investments in real estate, at cost, were as follows (dollar amounts
in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------
1999 1998 (1)
------------------------------ --------------------------------
Investment Units Investment Units
-------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Apartment communities:
Operating communities................................ $4,444,289 68,255 $4,027,044 69,341
Communities under construction (2)................... 563,020 7,830 701,897 12,120
Development communities In Planning (2)
Owned............................................. 45,481 2,096 69,710 3,398
Under Control (3)................................ - 2,375 - 3,772
---------- ------ ---------- ------
Total development communities In Planning........ 45,481 4,471 69,710 7,170
---------- ------ ---------- ------
Total apartment communities....................... 5,052,790 80,556 4,798,651 88,631
---------- ====== ---------- ======
Hotel asset (4)....................................... 22,870 22,870
Other real estate assets (5)........................... 141,671 48,280
---------- ----------
Total real estate.............................. $5,217,331 $4,869,801
========== ==========
</TABLE>
(1) Includes the real estate assets acquired in the Atlantic Merger (see Note
8).
(2) Unit information is based on management's estimates and has not been
audited or reviewed by Archstone's independent auditors.
(3) Archstone's investment as of December 31, 1999 and 1998 for developments
Under Control was $5.3 million and $4.8 million, respectively, and is
reflected in the "Other assets" caption of Archstone's Balance Sheets.
(4) Represents Archstone's investment in a five-story Holiday Inn hotel located
in the Fisherman's Wharf area of San Francisco, California.
(5) Includes land that is not In Planning and, in 1999, our investment in an
unconsolidated taxable subsidiary.
Capital Expenditures
In conjunction with the underwriting of each acquisition of an operating
community, we prepare acquisition budgets that encompass the incremental capital
needed to achieve our investment objectives. These expenditures, combined with
the initial purchase price and related closing costs, are capitalized and
classified as "acquisition-related" capital expenditures, as incurred.
As part of our operating strategy, we periodically evaluate each
community's physical condition relative to established business objectives and
the community's competitive position in its market. In conducting these
evaluations, we consider Archstone's return on investment in relation to its
long-term cost of capital as well as our research and analysis of competitive
market factors. Capital expenditures for operating communities are classified as
either "redevelopment" or "recurring".
The redevelopment category includes: (i) redevelopment initiatives, which
are intended to reposition the community in the marketplace and include items
such as significant upgrades to the interiors, exteriors, landscaping and
amenities; (ii) revenue-enhancing expenditures, which include investments that
are expected to produce incremental community revenues, such as building
garages, carports and storage facilities or gating a community; and (iii)
expense-reducing expenditures, which include items such as water submetering
systems and xeriscaping that reduce future operating costs.
Recurring capital expenditures consist of significant expenditures for
items having a useful life in excess of one year which are incurred to maintain
a community's long-term physical condition at a level commensurate with our
stringent operating standards. Examples of recurring capital expenditures
include roof replacements, parking lot resurfacing and exterior painting.
39
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Repairs, maintenance and make-ready expenditures, including the replacement
of carpets and appliances, are expensed as incurred, to the extent they are not
acquisition-related costs identified during our pre-acquisition due diligence.
Make-ready expenditures are costs incurred in preparing a vacant apartment unit
for the next resident.
The change in investments in real estate, at cost, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Balance at January 1........................................ $4,869,801 $2,604,919 $2,153,363
---------- ---------- ----------
Apartment communities:
Real estate assets acquired in the Atlantic Merger..... - 1,823,727 -
Acquisition-related expenditures....................... 401,392 285,806 391,234
Redevelopment expenditures............................. 72,517 57,171 43,187
Recurring capital expenditures......................... 13,022 9,464 8,762
Development expenditures, excluding land acquisitions.. 334,049 378,161 205,619
Acquisition and improvement of land for development.... 43,417 67,248 75,196
Dispositions(1)........................................ (542,554) (344,336) (268,210)
Provision for possible loss on investments............. (450) - (2,800)
---------- ---------- ----------
Net apartment community activity............................ 321,393 2,277,241 452,988
---------- ---------- ----------
Other:
Change in other real estate assets..................... 32,359 - -
Dispositions........................................... (4,672) (9,959) (1,232)
Provision for possible loss on investments............. (1,550) (2,400) (200)
---------- ---------- ----------
Net other activity.......................................... 26,137 (12,359) (1,432)
---------- ---------- ----------
Balance at December 31...................................... $5,217,331 $4,869,801 $2,604,919
========== ========== ==========
</TABLE>
(1) At December 31, 1999, Archstone held a portion of the 1999 disposition
proceeds aggregating $68.7 million in an interest bearing escrow account,
pending the acquisition of other apartment communities to complete tax-
deferred exchanges.
At December 31, 1999, Archstone had unfunded contractual commitments
related to real estate investment activities aggregating approximately $280.7
million.
We were committed to the sale of seven apartment communities and certain
other real estate assets having an aggregate carrying value of $57.5 million as
of December 31, 1999. Each property's carrying value is less than or equal to
its estimated fair market value, net of estimated costs to sell. The property-
level earnings, after mortgage interest and depreciation, from communities held
for disposition at December 31, 1999, which are included in Archstone's earnings
from operations for 1999, 1998 and 1997, were $3.8 million, $3.3 million and
$2.6 million, respectively.
40
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
(3) Mortgage Notes Receivable
Convertible Mortgage Note Terms
In October 1996, we contributed 54 extended-stay lodging assets to
Homestead Village Incorporated (NYSE: HSD) in exchange for common stock and
convertible mortgage notes. The common stock was distributed to Archstone's
shareholders in November 1996. In total, we received $221.3 million (face
amount) of convertible mortgage notes in exchange for development financing
provided to Homestead from 1996 through 1998, including the notes received in
exchange for the initial contribution of properties.
In May 1999, Homestead consummated a common share rights offering and, in
accordance with the terms of the agreement governing Archstone's convertible
mortgage notes, the conversion ratio of the notes was adjusted. The notes are
convertible into Homestead common stock on the basis of one share of Homestead
common stock for every $10.44 of principal face amount outstanding. Previously
the conversion ratio was $11.50. As a result of this lower conversion ratio,
Archstone has the right to convert the Homestead notes into 1,944,860 additional
Homestead common shares, for a total of 21,191,262 Homestead common shares. The
conversion feature had no intrinsic value as of December 31, 1999. The
convertible mortgage notes bear interest at 9.0% of face per annum which is
received in interest-only payments on a semi-annual basis, are callable by
Homestead after October 31, 2001 and mature on October 31, 2006. The extended-
stay lodging assets we contributed serve as collateral securing the convertible
mortgage notes.
<TABLE>
<S> <C>
Face amount of convertible mortgage notes........................................ $221,334
Original issue discount.......................................................... (22,501)
--------
Amount funded.................................................................... 198,833
Other adjustments(1)............................................................. 6,768
--------
Carrying value at December 31, 1999.............................................. $205,601
========
</TABLE>
(1) Includes the amortization of the original issue discount and the net
unamortized discount on the conversion feature.
(4) Borrowings
Unsecured Credit Facilities
Upon consummation of the Atlantic Merger in July 1998, we replaced our $350
million unsecured revolving credit facility with a $750 million unsecured
revolving credit facility provided by a group of financial institutions led by
Chase Bank of Texas, National Association. The $750 million unsecured credit
facility matures in July 2001, at which time it may be converted into a two-year
term loan at our option. The unsecured credit facility bears interest at the
greater of prime or the federal funds rate plus 0.50%, or at our option, LIBOR
(6.5% at December 31, 1999 and an average of 5.3% for the year ended December
31, 1999) plus 0.65%. The spread over LIBOR can vary from LIBOR plus 0.50% to
LIBOR plus 1.25% based upon the rating of our Long-Term Unsecured Debt. Under a
competitive bid option contained in the credit agreement, we may be able to
borrow up to $375 million at a lower interest rate spread over LIBOR, depending
on market conditions. Under the agreement, Archstone pays a facility fee, which
is equal to 0.15% of the commitment. Archstone paid commitment fees of $1.1
million, $0.8 million, and $0.4 million in 1999, 1998 and 1997, respectively.
Upon replacing the $350 million credit facility with the $750 million
credit facility, we expensed the remaining $1.5 million of unamortized loan
costs associated with the $350 million credit facility, which was recorded as an
extraordinary item during 1998.
41
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
The following table summarizes our unsecured credit facility borrowings (in
thousands, except for percentages):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Total unsecured credit facility.............................. $750,000 $750,000 $350,000
Borrowings outstanding at December 31........................ $485,000 $234,000 $223,500
Weighted average daily borrowings............................ $387,082 $340,658 $121,038
Maximum borrowings outstanding during the period............. $485,000 $624,000 $251,250
Weighted average daily nominal interest rate................. 6.0% 6.3% 6.7%
Weighted average daily effective interest rate............... 6.4% 6.8% 8.4%
</TABLE>
In September 1996, we entered into a short-term, unsecured borrowing
agreement with Chase Bank of Texas in order to enhance cash management
flexibility. This borrowing agreement was renegotiated by Archstone upon
consummation of the Atlantic Merger under terms similar to the previous
agreement. In October 1998, the maximum borrowing capacity under the agreement
was increased to $100 million. The agreement bears interest at an overnight rate
that ranged from 5.4% to 6.3% during 1999. At December 31, 1999 and 1998, there
were $8.5 million and $30.7 million of borrowings outstanding under this
agreement respectively.
Long-Term Unsecured Debt
A summary of our Long-Term Unsecured Debt outstanding at December 31, 1999
follows (amounts in thousands):
<TABLE>
<CAPTION>
Effective Average
Coupon Interest Balance at Balance at Remaining
Type of Debt Rate/(1)/ Rate/(2)/ December 31, 1999 December 31, 1998 Life (years)
- ----------------------------------- --------- --------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Long-term unsecured senior notes... 7.3% 7.5% $1,200,857 $1,231,167 7.9
Unsecured tax-exempt bonds......... 3.9% 4.3% 75,715 -- 8.4
--- --- ---------- ---------- ---
Total/average.................... 7.1% 7.3% $1,276,572 $1,231,167 7.9
=== === ========== ========== ===
</TABLE>
(1) Represents a fixed rate for the long-term unsecured notes and a variable
rate for the unsecured tax-exempt bonds. See Note 11 for information on
derivative financial instruments.
(2) Represents the effective interest rate, including interest rate hedges,
loan cost amortization and other ongoing fees and expenses, where
applicable.
The $1.2 billion of long-term unsecured senior notes generally have semi-
annual interest payments and either amortizing annual principal payments or
balloon payments due at maturity. (see -Scheduled Debt Maturities). The notes
are redeemable any time at our option, in whole or in part. The redemption price
is equal to the sum of the principal amount of the notes being redeemed plus
accrued interest through the redemption date plus an adjustment, if any, based
on the yield to maturity relating to market yields available at redemption. The
long-term unsecured senior notes are governed by the terms and provisions of an
indenture agreement. The unsecured tax-exempt bonds require semi-annual interest
payments and are due upon maturity in 2008.
42
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Mortgages Payable
Archstone's mortgages payable generally feature either monthly interest and
principal payments or monthly interest only payments with balloon payments due
at maturity. A summary of mortgages payable outstanding at December 31, 1999
follows (amounts in thousands):
<TABLE>
<CAPTION>
Effective Interest Principal Balance at December 31,
Type of Mortgage Rate (1) 1999 1998
- ----------------------------------------------- ----------------------- ------------------------ ----------------------
<S> <C> <C> <C>
Fannie Mae secured debt (2).................... 6.5% $304,365 $268,450
Conventional fixed rate........................ 7.9% 110,776 108,588
Tax-exempt fixed rate.......................... 6.3% 56,576 61,604
Tax-exempt floating rate....................... 4.5% 192,847 209,316
Other.......................................... 6.3% 30,384 28,655
----------------------- ----------------------- ----------------------
Total/average mortgage debt.................. 6.1% $694,948 $676,613
======================= ======================== ======================
</TABLE>
(1) Includes the effect of interest rate hedges, credit enhancement fees, other
bond-related costs and loan cost amortization, where applicable, as of
December 31, 1999. See Note 11 for information on derivative financial
instruments.
(2) Represents a long-term secured debt agreement with Fannie Mae. The Fannie
Mae secured debt matures January 2006, although Archstone has the option to
extend the term of any portion of the debt for up to an additional 30-year
period at any time, subject to Fannie Mae's approval.
The changes in mortgages payable during the past three years consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ----------------- -----------------
<S> <C> <C> <C>
Balances at January 1.............................. $676,613 $ 265,652 $217,188
Notes assumed in Atlantic Merger................. - 160,329 -
Notes assumed or originated...................... 141,613 362,158 101,595
Bond refinancing................................. (59,715) - -
Regularly scheduled principal amortization....... (5,391) (4,316) (3,284)
Prepayments, final maturities and other.......... (58,172) (107,210) (49,847)
------------------ ----------------- -----------------
Balances at December 31............................ $694,948 $ 676,613 $265,652
================== ================= =================
</TABLE>
Scheduled Debt Maturities
Approximate principal payments due during each of the next five calendar
years and thereafter, are as follows (in thousands):
<TABLE>
<CAPTION>
Mortgages Payable
---------------------------------------------
Regularly
Scheduled
Long-Term Principal Final Maturities
Unsecured Debt Amortization and Other Total
------------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
2000............................. $ 75,310 $ 4,876 $ 2,199 $ 82,385
2001............................. 70,010 5,240 5,201 80,451
2002............................. 97,810 5,596 293 103,699
2003............................. 171,560 5,891 20,590 198,041
2004............................. 51,560 6,135 36,639 94,334
Thereafter....................... 810,322 158,737 443,551 1,412,610
------------------- -------------------- -------------------- ------------------
Total....................... $1,276,572 $186,475 $508,473 $1,971,520
=================== ==================== ==================== ==================
</TABLE>
The average annual principal payments due from 2005 to 2019 are $90.7
million per year.
The $750 million unsecured credit facility matures in July 2001, at which
time it may be converted into a two-year term loan at our option.
43
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Other
Archstone's debt instruments generally contain certain covenants common to
the type of facility or borrowing, including financial covenants establishing
minimum debt service coverage ratios and maximum leverage ratios. We were in
compliance with all financial covenants pertaining to our debt instruments at
December 31, 1999.
See Note 11 for a summary of derivative financial instruments used in
connection with our debt instruments.
(5) Distributions to Shareholders
To maintain Archstone's status as a REIT, we are generally required to
distribute at least 95% of our taxable income. The payment of distributions is
subject to the discretion of the Board and is dependent upon our strategy,
financial condition and operating results. At its December 1999 Board meeting,
the Board announced an anticipated increase in the annual distribution level
from $1.48 to $1.54 per Common Share.
The following table summarizes the cash dividends paid per share on the
Common Shares and Preferred Shares in 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Common Shares.......................... $1.48 $1.39 $1.30
Series A Convertible Preferred Shares.. $1.99 $1.87 $1.75
Series B Preferred Shares.............. $2.25 $2.25 $2.25
Series C Preferred Shares (1).......... $2.16 $1.08 -
Series D Preferred Shares (2).......... $0.88 - -
</TABLE>
(1) In 1998, represents dividends paid subsequent to the Atlantic Merger.
(2) Shares were issued in August 1999. The annualized dividend level is
$2.1875 per share.
(6) Minority Interest
In August 1999, a consolidated subsidiary issued 520,000 Series E perpetual
preferred units ($25 liquidation preference per unit) to a limited partnership
in exchange for $13.0 million. In November 1999, an additional 400,000 units
were issued in exchange for $10.0 million. The units pay cumulative quarterly
distributions of $0.5234 per share ($2.09375 or 8.375% per annum), are
redeemable at our option after August 13, 2004 and are convertible into
Archstone Series E Cumulative Redeemable Perpetual Preferred shares on or after
August 13, 2009.
In September 1999, a consolidated subsidiary issued 800,000 Series F
perpetual preferred units ($25 liquidation preference per unit) to a limited
partnership in exchange for $20.0 million. The units pay cumulative quarterly
distributions of $0.5078 per share ($2.03125 or 8.125% per annum), are
redeemable at our option after September 27, 2004 and are convertible into
Archstone Series F Cumulative Redeemable Perpetual Preferred shares on or after
September 27, 2009.
The total net proceeds of $42.0 million from the issuance of perpetual
preferred units in 1999 were used to repay borrowings under our unsecured credit
facilities.
44
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
During 1998, certain operating communities were acquired by a consolidated
subsidiary of Security Capital Atlantic Incorporated in exchange for cash and
limited partnership units. The Atlantic subsidiary became a subsidiary of
Archstone as a result of the Atlantic Merger. As of December 31, 1999 and 1998
there were approximately 598,000 and 913,000 of these limited partnership units
outstanding, respectively. The units are convertible on a one for one basis into
Common Shares and are generally entitled to distributions in amounts equal to
those distributed on Common Shares.
All of the units are reflected as minority interest in the accompanying
Balance Sheets. Distributions on the units are recorded as minority interest
expense and are reflected as "Other expenses" in Archstone's 1999 and 1998
Statements of Earnings. See Note 16 for information regarding an additional
issuance of perpetual preferred units.
(7) Shareholders' Equity
Shares of Beneficial Interest
Archstone's Declaration of Trust authorizes us to issue up to 250,000,000
Shares of Beneficial Interest, $1.00 par value per share, consisting of Common
Shares, preferred shares and such other shares of beneficial interest as the
Board may create and authorize from time to time. The Board may classify or
reclassify any unissued shares from time to time by setting or changing the
preferences, conversion rights, voting powers, restrictions, limitations as to
distributions, qualifications of terms or conditions of redemption.
Preferred Shares
The Series A Convertible Preferred Shares issued in November 1993 have a
liquidation preference of $25.00 per share for an aggregate liquidation
preference at December 31, 1999 of $92.6 million. Holders of the Series A
Convertible Preferred Shares are entitled only to limited voting rights under
certain conditions. Each Series A Convertible Preferred Share is convertible, in
whole or in part at the option of the holder at anytime, into 1.3469 of
Archstone's Common Shares. During 1999, 1998 and 1997, approximately 965,000,
708,000, and 1,087,000 of Series A Convertible Preferred Shares were converted,
at the option of the holders, into approximately 1,300,000, 953,000, and
1,463,000 Common Shares, respectively. This activity is included in "Other, net"
in the accompanying Statements of Shareholders' Equity.
Distributions on the Series A Convertible Preferred Shares are payable in
an amount per share equal to the greater of $1.75 per annum or the annualized
quarterly distribution rate on the Common Shares into which the Series A
Convertible Preferred Shares are convertible. Based on our anticipated 2000
Common Share dividend level, the dividend on the Series A Convertible Preferred
Shares will be $2.074. The Series A Convertible Preferred Shares are redeemable
at our option after November 30, 2003.
A summary of Archstone's Series B, Series C and Series D Preferred Shares
outstanding at December 31, 1999 follows:
<TABLE>
<CAPTION>
Liquidation Total
Preferred Shares Preference Liquidation Dividend Redeemable on or
Shares Outstanding (per share) Preference (per share) After/(1)/
- --------- ----------- ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Series B..... 4.2 million $25.00 $105 million $2.2500 May 24, 2000
Series C..... 2.0 million $25.00 $ 50 million $2.1560 August 20, 2002
Series D..... 2.0 million $25.00 $ 50 million $2.1875 August 6, 2004
</TABLE>
(1) We may redeem the shares for cash, in whole or in part, at a redemption
price of $25.00 per share plus any accrued but 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 shares of Archstone, which may include
other series of preferred shares.
45
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
The holders of the Preferred Shares do not have preemptive rights over the
holders of Common Shares. The Preferred Shares have no stated maturity and are
not subject to any sinking fund or other obligation of Archstone to redeem or
retire the Preferred Shares. Holders of the Preferred Shares are entitled to
receive, when and as declared by the Board, out of funds legally available for
the payment of distributions, cumulative preferential cash distributions. The
Series B, Series C, and Series D Preferred Shares are not convertible into any
other securities of Archstone.
All Preferred Share 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. All dividends due and payable on Preferred Shares have
been accrued and paid as of the end of each fiscal year. All series of Preferred
Shares rank on a parity as to distributions and liquidation proceeds.
If six quarterly dividends payable (whether or not consecutive) on any
series or class of preferred shares that are of equal rank with respect to
dividends and any distribution of assets, shall not be paid in full, the number
of Outside Trustees shall be increased by two and the holders of all such
preferred shares voting as a class regardless of series or class, shall be
entitled to elect the two additional Outside Trustees. Whenever all arrears in
dividends have been paid, the right to elect the two additional Outside Trustees
shall cease and the terms of such Outside Trustees shall terminate.
Share Repurchase
In February 1999, the Board authorized a $100 million share repurchase
program, which was completed in July 1999. In September 1999, the Board
authorized an additional repurchase of up to $50 million Common Shares. Through
both programs, we have repurchased a total of $121.6 million of Common Shares
(6.1 million shares at an average price of $19.76 per share) as of December 31,
1999. Proceeds from apartment community dispositions were used to reduce our
unsecured credit facilities, providing the capacity to fund the share purchases.
Dividend Reinvestment and Share Purchase Plan
We established the Dividend Reinvestment and Share Purchase Plan in
December 1997 in order to increase ownership in the company by private
investors. Under the plan, holders of Common Shares have the ability to
automatically reinvest their cash dividends to purchase additional Common Shares
at a two percent discount from market rates, based on the average of the high
and low sales price of a Common Share on the day of the purchase. Additionally,
existing and prospective investors have the ability to tender cash payments that
will be applied towards the purchase of Common Shares. The amount purchased by
an individual is limited to a maximum of $5,000 per month, with any investments
above the limitation requiring company approval. We did not grant approval for
any purchases above the $5,000 threshold during 1999. In January 1998, we filed
a registration statement with the SEC registering the offering of 2,000,000
Common Shares, which may be issued pursuant to the terms of the plan.
Ownership Restrictions and Significant Shareholder
Our governing documents restrict beneficial ownership of our outstanding
shares by a single person, or persons acting as a group, to 9.8% of the Common
Shares and 25% of each series of Preferred Shares. The purpose of these
provisions is to assist in protecting and preserving Archstone's REIT status and
to protect the interests of shareholders in takeover transactions by preventing
the acquisition of a substantial block of shares without first negotiating with
the Board. For Archstone 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
Archstone'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.
46
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Common Shares owned by a person or group of persons in excess of the 9.8%
limit are subject to redemption by Archstone. The provision does not apply where
a majority of the Board, in its sole and absolute discretion, waives such limit
after determining that the eligibility of Archstone to qualify as a REIT for
federal income tax purposes will not be jeopardized or the disqualification of
Archstone as a REIT is advantageous to shareholders.
The Board has permitted Security Capital to acquire up to 49% of
Archstone's fully converted Common Shares. Security Capital's ownership of
Common Shares is attributed for tax purposes to its shareholders. Security
Capital owned approximately 39% of Archstone's total outstanding Common Shares
at December 31, 1999. Pursuant to an agreement between Security Capital and
Archstone, Security Capital has agreed to acquire no more than 49% of the fully
converted Common Shares, subject to certain limited exceptions.
Purchase Rights
In 1994, the Board authorized the distribution to shareholders of one
purchase right for each Common Share held. Holders of additional Common Shares
issued after this date and prior to the expiration of the purchase rights in
July 2004 will be entitled to one purchase right for each additional Common
Share.
Each purchase right entitles the holder under certain circumstances to
purchase from Archstone one one-hundredth of a share of a Participating
Preferred Share at a price of $60.00 per one one-hundredth of Participating
Preferred Share, subject to adjustment. Purchase rights are exercisable when a
person or group of persons acquires beneficial ownership of 20% or more of the
fully converted Common Shares (49% in the case of Security Capital and certain
defined affiliates), or takes formal actions, the intent of which would result
in the beneficial ownership by a person of 25% or more of the outstanding Common
Shares (49% in the case of Security Capital and certain defined affiliates).
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 Archstone pursuant to certain transactions 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 Archstone or any other form of consideration
determined by the Board.
Shelf Registration
In December 1998, we filed a $750 million shelf registration with the SEC
to supplement an existing shelf registration with a balance of $77.2 million.
These securities can be issued in the form of Long-Term Unsecured Debt, Common
Shares or preferred shares on an as-needed basis, subject to our ability to
complete offerings on satisfactory terms. As of December 31, 1999 Archstone had
approximately $777.2 million in shelf-registered securities available for
issuance.
(8) Atlantic Merger
In July 1998, Security Capital Atlantic Incorporated ("Atlantic"), an
affiliated apartment REIT which operated primarily in the southeast and mid-
Atlantic markets of the United States, was merged with and into Security Capital
Pacific Trust ("Pacific"). The combined company continued its existence under
the name Archstone and is traded on the NYSE under the symbol "ASN". In
accordance with the terms of the Atlantic Merger, each outstanding Atlantic
common share was converted into the right to receive one Common Share and each
outstanding Atlantic Series A preferred share was converted into the right to
receive one comparable share of a new class of Series C Preferred Shares. As a
result, 47,752,052 Common Shares and 2,000,000 Series C Preferred Shares were
issued to Atlantic's shareholders in exchange for all of the outstanding
Atlantic common shares and Atlantic Series A preferred shares. In addition,
Archstone assumed Atlantic's debt and other liabilities. The total purchase
price paid for Atlantic aggregated approximately $1.9 billion. The transaction
was structured as a tax-free transaction and was accounted for under the
purchase method. See Note 5 for additional information on Archstone's dividend
and distribution levels, which were adjusted subsequent to the Atlantic Merger.
47
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
The following summarized pro forma unaudited information represents the
combined historical operating results of Pacific and Atlantic with the
appropriate purchase accounting adjustments, assuming the Atlantic Merger had
occurred on January 1, 1997. The pro forma financial information presented is
not necessarily indicative of what Archstone's actual operating results would
have been had the two companies constituted a single entity during such periods
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
Total revenues......................................................... $ 610,866 $ 550,805
========= =========
Net earnings attributable to Common Shares before extraordinary items.. $ 201,562 $ 110,680
========= =========
Net earnings attributable to Common Shares............................. $ 199,842 $ 110,680
========= =========
Weighted average Common Shares outstanding:
Basic........................................................... 141,939 128,575
========= =========
Diluted......................................................... 148,714 128,614
========= =========
Earnings attributable to Common Shares before extraordinary items
per Common Share:
Basic and Diluted............................................... $ 1.42 $ 0.86
========= =========
Net earnings attributable to Common Shares per Common Share:
Basic and Diluted............................................... $ 1.41 $ 0.86
========= =========
</TABLE>
(9) Acquisition of REIT Manager and Property Manager
In September 1997, we acquired the operations and businesses of our REIT
manager and property manager from Security Capital in exchange for 3,295,533
Common Shares. As a result of the transaction, we became an internally managed
REIT.
The market value of the 3,295,533 Common Shares issued was approximately
$73.3 million, based on the $22.25 per share closing price of the Common Shares
on such date. Of this amount, approximately $1.6 million was allocated to the
estimated fair value of the tangible net assets acquired. The $71.7 million
difference between the market value of the Common Shares and the estimated fair
value of the net tangible assets acquired was recorded as "Costs incurred in
acquiring management companies from an affiliate" (a non-recurring and non-cash
expense) in Archstone's 1997 Statement of Earnings. Since the management
companies did not have significant operations other than the management of
Archstone and its assets, the transaction did not qualify as the acquisition of
a "business" for purposes of applying APB Opinion No. 16, Business Combinations.
Consequently, the market value of the Common Shares issued in excess of the fair
value of the net tangible assets acquired was recorded as an operating expense
rather than capitalized as goodwill.
As a result of this transaction, we no longer pay REIT and property
management fees to Security Capital. The REIT management agreement required us
to pay a fee of approximately 16% of cash flow from operations, whereas the
property management agreement required payment of a fee equal to approximately
3.5-3.75% of revenues, as defined in the respective agreements. None of these
fees were capitalized. In lieu of these fees, we now directly incur the
personnel and other costs related to these functions.
Concurrent with the closing of the transaction, we also entered into an
agreement with Security Capital for the provision of certain administrative
services. Archstone purchases these services in exchange for a fee which,
through December 31, 1998, was equal to Security Capital's direct cost of such
services plus 20%. Effective January 1, 1999, the fee arrangement was revised to
provide for the payment of our specific usage at fixed rates per unit for each
service provided. The agreement has a one-year term and expires on December 31,
2000. We may modify or terminate the agreement, in whole or in part, at any
time, subject to certain terms and conditions.
48
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
(10) Benefit Plans
In September 1997, our Common Shareholders approved the long-term incentive
plan. To date, there have been three types of awards issued under the plan: (i)
an employee share purchase plan with matching options, (ii) share options with a
DEU feature, and (iii) restricted Common Share unit awards with a dividend
feature. No more than 8,650,000 Common Shares in the aggregate may be awarded
under the plan and no individual may be awarded more than 500,000 Common Shares
in any one-year period. The plan has a 10-year term.
Dividend Equivalent Units
The long-term incentive plan generally provides that participants who are
awarded share options or restricted Common Share units will also be credited
with DEUs with respect to such awards. Options awarded under the employee share
purchase plan are not eligible for DEUs. The DEUs credited to share options or
restricted Common Share units are awarded annually at the end of each year and
vest under the same terms as the underlying share options or restricted Common
Share units.
DEUs credited to share options represent the number of share options held
plus DEUs previously awarded, multiplied by the excess between the average
annual dividend yield on Common Shares and the average dividend yield for the
Standard & Poor's 500 Stock Index. The average annual dividend yield for the
Standard & Poor's 500 Stock Index is not deducted when calculating DEUs credited
to restricted Common Share units. As of December 31, 1999, there were a total of
151,840 DEUs outstanding, awarded to 172 holders of share options and restricted
Common Share units. These DEUs were valued at $3.1 million on December 31, 1999
based upon the market price of the Common Shares on that date. We recognize the
value of the DEUs awarded as compensation expense over the vesting period, net
of any previously recorded DEU expense related to forfeitures.
Employee Share Purchase Plan with Matching Options
As of December 31, 1999, certain officers and other employees had purchased
931,304 Common Shares at prices ranging from $21.19 to $24.31 per Common Share
under the employee share purchase plan. Archstone financed 95% of the total
purchase price through 10-year notes from the participants aggregating $19.2
million at December 31, 1999. The share purchase notes are recorded as a
reduction in shareholders' equity and are included in "Other, net" on the
accompanying Statements of Shareholders' Equity. The notes bear interest at
approximately 6.0% per annum. All dividends on the shares are applied to
interest and principal on the notes, with no cash distributions to employees.
The notes are fully recourse to the participant and are also secured by the
Common Shares purchased. For each Common Share purchased, participants were
granted two options, each to purchase one Common Share at the market price of
the underlying share on the date of grant. The matching share options gradually
vest over a five-year period. The matching share options do not have a DEU
feature. A reconciliation of the notes due from employees during 1999 and 1998
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Beginning balance.................. $ 26,275 $ 17,238
Notes assumed in Atlantic Merger... - 11,338
Notes issued....................... - 1,164
Retirements........................ (6,854) (3,254)
Principal payments received........ (251) (211)
---------------- ----------------
Ending balance................ $ 19,170 $ 26,275
================ ================
</TABLE>
Of the notes outstanding at December 31, 1999, approximately $16.3 million
were due from officers.
49
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Share Options with DEU's and Trustee Options
We have awarded share options with a DEU feature to certain officers and
other employees. The exercise price of each share option granted is equal to the
Common Share market price on the date of grant (See "Proforma Compensation
Expense" below). The share options awarded generally vest at a rate of 25% per
year.
Additionally, Archstone has authorized 300,000 Common Shares for issuance
to Outside Trustees. The exercise price of Outside Trustee options may not be
less than the fair market value on the date of grant. All the options, except
the 35,000 issued in 1999, have a five-year term and are exercisable in whole or
in part at any time. The options issued in 1999 have a DEU feature, a 10-year
term and vest over a four-year period.
A summary of all share options outstanding at December 31, 1999 follows:
<TABLE>
<CAPTION>
Weighted-Average
Number of Range of Exercise Remaining
Options Prices (1) Expiration Date Contractual Life
--------------- ---------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Matching options under the employee
share purchase plan.................. 1,862,608 $21.19 - $24.31 2007 - 2008 7.7 years
Share options with DEU's.............. 2,260,806 $19.00 - $24.31 2007 - 2009 9.0 years
Outside Trustees...................... 73,000 $15.59 - $22.59 2000 - 2009 5.8 years
---------------
Total................................. 4,196,414
===============
</TABLE>
(1) The exercise price was equal to market price on the date of grant. The
weighted average exercise prices for the matching options under the
employee share purchase plan, share options with DEU's and Outside Trustee
options were $22.17, $20.68, and $21.46 per Common Share, respectively, as
of December 31, 1999. The weighted average exercise price for all options
outstanding at December 31, 1999 was $21.36 per Common Share.
A summary of the status of our share option plans as of December 31, 1999,
1998 and 1997, and changes during the years ended on those dates is presented
below.
<TABLE>
<CAPTION>
Weighted Number of
Number of Average Exercise Options
Options Price Exercisable
------------------ ---------------------- ------------------
<S> <C> <C> <C>
Balance/Average at December 31, 1996............. 32,000 $16.48 32,000
------------------
Granted....................................... 1,857,417 22.06
Exercised..................................... (2,000) 16.34
Forfeited..................................... (2,000) 8.46
------------------ ----------------------
Balance/Average at December 31, 1997............. 1,885,417 21.99 38,000
------------------ ---------------------- ------------------
Assumed in the Atlantic Merger................ 1,260,138 22.44
Granted....................................... 1,582,754 20.67
Exercised..................................... (8,000) 16.14
Forfeited..................................... (563,660) 22.30
------------------ ----------------------
Balance/Average at December 31, 1998............. 4,156,649 21.62 48,000
------------------ ---------------------- ------------------
Granted....................................... 923,528 20.74
Exercised..................................... (10,000) 18.83
Forfeited..................................... (873,763) 21.87
------------------ ----------------------
Balance/Average at December 31, 1999 4,196,414 $21.36 873,325
================== ====================== ==================
</TABLE>
Restricted Common Share Unit Awards
During 1999 and 1998, we awarded 360,594 and 220,572 restricted Common
Share units with a DEU feature to certain employees under the long-term
incentive plan, respectively, of which 22,663 have been forfeited. Each
restricted Common Share unit provides the holder with one Common Share, subject
to certain vesting provisions. The Common Share units and related DEU feature
generally vest at 20% per year, over a five-year period. We recognize the value
of the awards as compensation expense over the vesting period.
50
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
Proforma Compensation Expense
We have adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which allows us to continue to account for our various share option plans using
APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and
related interpretations. Under APB 25, if the exercise price of the share
options equals the market price of the underlying share on the date of grant, no
compensation expense is recognized. Accordingly, we did not recognize
compensation expense related to share options as the exercise price of all
options granted was equal to the market price on the date of grant. Had
compensation cost for these plans been determined using the option valuation
models prescribed by SFAS No. 123, net earnings attributable to Common Shares
and earnings per Common Share for 1999, 1998, and 1997 would change as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
Net earnings attributable to Common Shares
(in thousands):
<S> <C> <C> <C>
As reported................................. $204,528 $177,022 $53,534
-------- -------- -------
Pro forma................................... $203,348 $175,991 $53,318
======== ======== =======
Basic earnings per Common Share:
As reported................................. $ 1.46 $ 1.49 $ 0.65
-------- -------- -------
Pro forma................................... $ 1.45 $ 1.48 $ 0.65
======== ======== =======
Diluted earnings per Common Share:
As reported................................. $ 1.46 $ 1.49 $ 0.65
-------- -------- -------
Pro forma................................... $ 1.45 $ 1.48 $ 0.65
======== ======== =======
</TABLE>
The pro forma amounts above were calculated using the Black-Scholes model,
using the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Weighted average risk-free interest rate......... 6.52% 4.74% 6.08%
Weighted average dividend yield.................. 6.97% 6.43% 5.60%
Weighted average volatility...................... 16.31% 25.44% 18.35%
Weighted average expected option life............ 6.27 years 6.74 years 6.74 years
</TABLE>
The weighted average fair value of all options granted (excluding Trustee
options) was approximately $2.00, $3.00 and $3.00 per option during 1999, 1998,
and 1997, respectively.
401(k) Plan and Nonqualified Savings Plan
In December 1997, the Board established a 401(k) plan and a nonqualified
savings plan, which both became effective on January 1, 1998. The plans work
together to provide for matching employer contributions of fifty cents for every
dollar contributed by an employee, up to 6% of the employees' annual
compensation. The matching employer contributions are made in Common Shares,
which vest based on years of service at a rate of 20% per year.
51
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
(11) Fair Values of Financial Instruments
The following disclosures of estimated fair value of financial instruments
were determined based on available market information and valuation
methodologies believed to be appropriate for these purposes. Considerable
judgment and a high degree of subjectivity are involved in developing these
estimates and, therefore, are not necessarily indicative of the actual amounts
that Archstone could realize upon disposition.
At December 31, 1999, the carrying amount of cash and cash equivalents,
restricted cash in tax-deferred exchange escrow, and trade receivables and
payables were representative of their fair values because of the short-term
maturity of these instruments. Similarly, the carrying value of the unsecured
credit facilities approximates fair value as of those dates since the interest
rates on these instruments fluctuate based on published market rates. At
December 31, 1999, the estimated fair value of our mortgage notes receivable
approximated their amortized cost. At December 31, 1999, our marketable
securities, which are all classified as "available for sale", had an estimated
fair value and actual carrying value of $7.7 million. At December 31, 1999 our
Long-Term Unsecured Debt had an estimated fair value of approximately $1.2
billion and an actual carrying value of $1.3 billion. The mortgages payable had
an estimated fair value and actual carrying value of approximately $0.7 billion
at December 31, 1999.
Derivative Financial Instruments
Our involvement with derivative financial instruments is limited and we do
not use them for trading or other speculative purposes. We occasionally utilize
derivative financial instruments to lower our overall borrowing costs.
On December 22, 1999, we entered into an interest rate swap agreement with
a notional amount of $7.25 million, relating to a tax-exempt bond carrying a
fixed interest rate of 5.25% per annum. The $7.25 million swap effectively
provides for a floating interest rate through the bond mandatory tender date of
December 1, 2006, at which time the agreement terminates. The actual floating
effective interest rate at December 31, 1999 was 4.1% per annum.
On July 28, 1999, we entered into an interest rate swap agreement with a
notional amount of $15.1 million, relating to unsecured tax-exempt bonds
carrying a fixed interest rate of 5.3% per annum. The $15.1 million swap
effectively provides for a floating interest rate through the bond mandatory
tender date of June 1, 2008, at which time the agreement terminates. The actual
floating effective interest rate at December 31, 1999, was 4.1% per annum.
On June 29, 1999, we entered into an interest rate swap agreement with a
notional amount of $60.6 million, relating to unsecured tax-exempt bonds
carrying a fixed interest rate of 5.3% per annum. The $60.6 million swap
effectively provides for a floating interest rate through the bond mandatory
tender date of June 1, 2008, at which time the agreement terminates. The actual
floating effective interest rate at December 31, 1999, was 4.3% per annum.
On May 12, 1999, we entered into an interest rate swap agreement with a
notional amount of $36.3 million, relating to secured tax-exempt bonds carrying
a fixed interest rate of 9.0% per annum. The $36.3 million swap effectively
provides for a floating interest rate through the bond maturity date of May 1,
2004, at which time the agreement terminates. The actual floating effective
interest rate at December 31, 1999, was 4.6% per annum.
On April 13, 1999, we entered into an interest rate swap agreement with a
notional amount of $100 million, relating to a portion of the outstanding
balance on our $750 million unsecured line of credit. The $100 million swap
effectively provides for a fixed interest rate of 5.9% through April 13, 2000,
at which time the agreement terminates. The effective interest rate on
Archstone's unsecured line of credit, including the effect of the hedge, was
6.4% per annum as of December 31, 1999.
52
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
On January 21, 1999, we entered into two interest rate swap agreements with
notional amounts aggregating $55.0 million, relating to Long-Term Unsecured
Debt. The $55.0 million of notes, which were originally issued at a floating
weighted average effective interest rate of 7.3%, were effectively converted to
a fixed weighted average interest rate of 7.1% through maturity.
In connection with the closing of the $268.5 million of long-term secured
debt agreement in December 1998 with Fannie Mae, we entered into an interest
rate cap agreement on December 30, 1998, with a notional amount aggregating
$118.5 million, which capped this portion of the debt at an effective interest
rate of 6.9% through December 2002. The actual floating effective interest rate
at December 31, 1999, was 6.7% per annum. Additionally in January 1999, we
entered into an interest rate swap on the remaining $150 million, which was
originally issued at a floating weighted average interest rate of 5.9% per
annum. The swap effectively provides for a fixed interest rate of 6.3% until
maturity in 2006.
As of December 31, 1999, marking our various interest rate agreements to
market would result in a net gain of $15.8 million, prior to consideration of
the associated issuance costs, if each had been terminated on such date.
In anticipation of a Long-Term Unsecured Debt offering that closed in March
1998, we entered into four separate interest rate contracts in 1997 with
notional amount aggregating $120 million. Upon completion of the offering, we
terminated the interest rate contracts, realizing a loss of approximately $5.5
million. The resulting loss was deferred and is being amortized into interest
expense over the term of the debt agreement.
(12) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data (in thousands except per share amounts)
for 1999 and 1998 is summarized below. The sum of the quarterly earnings per
Common Share amounts may not equal the annual earnings per Common Share amounts
due primarily to the impact of equity issuances.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
----------------------------------------------- -----------
3-31 6-30 9-30 12-31 12-31
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1999:
Total revenues......................... $161,387 $163,317 $168,872 $173,296 $666,872
-------- -------- -------- -------- --------
Earnings from operations............... 39,330 42,415 43,361 42,173 167,279
Gains on dispositions of
depreciated real estate, net......... 5,319 13,659 27,909 15,206 62,093
Less extraordinary item................ 1,113 - - - 1,113
Less Preferred Share dividends......... 5,691 5,617 6,036 6,387 23,731
-------- -------- -------- -------- --------
Net earnings attributable to
Common Shares - Basic.................. 37,845 50,457 65,234 50,992 204,528
======== ======== ======== ======== ========
Net earnings per Common Share:
Basic.................................. $ 0.27 $ 0.36 $ 0.47 $ 0.37 $ 1.46
======== ======== ======== ======== ========
Diluted................................ $ 0.27 $ 0.36 $ 0.46 $ 0.37 $ 1.46
======== ======== ======== ======== ========
1998:
Total revenues......................... $ 95,611 $ 98,176 $159,045 $160,813 $513,645
-------- -------- -------- -------- --------
Earnings from operations............... 29,299 28,048 37,961 38,618 133,926
Gains on dispositions of
depreciated real estate, net......... 15,484 - 21,204 28,843 65,531
Less extraordinary item................ - - 1,497 - 1,497
Less Preferred Share dividends......... 4,712 4,757 5,723 5,746 20,938
-------- -------- -------- -------- --------
Net earnings attributable to
Common Shares Basic.................. $ 40,071 $ 23,291 $ 51,945 $ 61,715 $177,022
======== ======== ======== ======== ========
Net earnings per Common Share:
Basic................................. $ 0.43 $ 0.25 $ 0.36 $ 0.43 $ 1.49
======== ======== ======== ======== ========
Diluted............................... $ 0.42 $ 0.25 $ 0.36 $ 0.43 $ 1.49
======== ======== ======== ======== ========
</TABLE>
53
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
(13) Segment Data
We define each of our apartment communities as individual operating
segments. We have determined that all of our apartment communities have similar
economic characteristics and also meet the other criteria which permit the
apartment communities to be aggregated into one reportable segment. We rely
primarily on net operating income for purposes of making decisions about
allocating resources and assessing segment performance.
Following are reconciliations of the reportable segment's: (i) revenues to
consolidated revenues, (ii) net operating income to consolidated earnings from
operations, and (iii) assets to consolidated assets, for the periods indicated
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Reportable segment revenues................................................ $ 634,028 $ 478,144 $ 331,346
Other non-reportable operating segment income(1)........................... 32,844 35,501 24,316
------------- ------------- -------------
Total segment and consolidated revenues.................................... $ 666,872 $ 513,645 $ 355,662
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Reportable segment net operating income (2)................................ $ 416,515 $ 305,309 $ 208,423
Other non-reportable operating segment net operating income................ 3,766 5,470 3,586
------------- ------------- -------------
Total segment net operating income.................................... 420,281 310,779 212,009
------------- ------------- -------------
Reconciling items:
Other income.......................................................... 29,064 29,106 20,602
Depreciation on real estate investments............................... (132,437) (96,337) (52,893)
Interest expense...................................................... (121,494) (83,350) (61,153)
General and administrative expenses................................... (22,156) (16,092) (18,350)
Provision for possible loss on investments............................ (2,000) (4,700) (3,000)
Nonrecurring expenses................................................. -- (2,193) (71,707)
Other expenses........................................................ (3,979) (3,287) (822)
------------- ------------- -------------
Consolidated earnings from operations...................................... $ 167,279 $ 133,926 $ 24,686
============= ============= =============
</TABLE>
54
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Continued)
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
Reportable segment assets...................................................... $ 4,819,307 $ 4,536,529
Other non-reportable operating segment assets (3).............................. 371,727 385,587
------------------ -------------------
Total segment assets...................................................... 5,191,034 4,922,116
------------------ -------------------
Reconciling items:
Cash and cash equivalents................................................. 515 5,429
Restricted cash in tax-deferred exchange escrow........................... 68,729 90,874
Other assets.............................................................. 42,159 41,479
------------------ -------------------
Consolidated total assets...................................................... $ 5,302,437 $ 5,059,898
================== ===================
</TABLE>
(1) Includes $23.6 million, $22.9 million and $16.7 million of interest income
on the convertible mortgage notes receivable in 1999, 1998 and 1997,
respectively (see Note 3). Also includes income from our unconsolidated
taxable subsidiary and interest income on cash equivalents and other notes
receivable.
(2) Net operating income is defined as rental revenues less rental expenses and
real estate taxes.
(3) Includes $205.6 million and $203.0 million of convertible mortgage notes
receivable during 1999 and 1998, respectively, and various other real
estate investments.
We do not derive any of our consolidated revenues from foreign countries
and do not have any major customers that individually account for 10% or more of
our consolidated revenues.
(14) Commitments and Contingencies
Archstone is a party to various claims and routine litigation arising in
the ordinary course of business. We do not believe that the results of any of
such claims and litigation, individually or in the aggregate, will have a
material adverse effect on our business, financial position or results of
operations.
Archstone is subject to environmental regulations related to the ownership,
operation, development and acquisition of real estate. As part of our due
diligence investigation procedures, we conduct Phase I environmental assessments
on each property prior to acquisition. The cost of complying with environmental
regulations was not material to Archstone's results of operations for any of the
years in the three-year period ended December 31, 1999. We are not aware of any
environmental condition on any of our communities which is likely to have a
material effect on Archstone's financial condition or results of operations.
See Note 2 for apartment construction and redevelopment commitments.
55
<PAGE>
Archstone Communities Trust
Notes to Financial Statements - (Concluded)
(15) Supplemental Cash Flow Information
Significant non-cash investing and financing activities for the years ended
December 31, 1999, 1998 and 1997 are as follows:
(i) Holders of Series A Convertible Preferred Shares converted
$24.1 million, $17.7 million and $27.2 million of their shares
into Common Shares during the years ended December 31, 1999,
1998 and 1997, respectively.
(ii) In connection with the acquisition of apartment communities, we
assumed mortgage debt of $105.4 million, $93.7 million
(excluding mortgage debt assumed in the Atlantic Merger) and
$101.6 million during the years ended December 31, 1999, 1998
and 1997, respectively.
(iii) We refinanced $59.7 million in bonds during the year ended
December 31, 1999.
(iv) We issued 47,752,052 Common Shares valued at approximately $1.1
billion, 2,000,000 Series C Preferred Shares valued at
approximately $50.6 million and assumed debt and other
liabilities valued at approximately $778.9 million in exchange
for approximately $1.9 billion of assets in the Atlantic
Merger.
(v) We recorded an $83.8 million decrease and an $8.9 million
increase in the unrealized gain on the convertible mortgage
notes receivable during the years ended December 31, 1998 and
1997 respectively, primarily as a result of changes in the
market value of the common stock into which these securities
are convertible.
(vi) We had notes receivable outstanding from employees aggregating
$19.2 million, $26.3 million (including $11.3 million assumed
in the Atlantic Merger) and $17.2 million for the purchase of
Common Shares under the Archstone's long-term incentive plan in
1999, 1998 and 1997, respectively.
(vii) We issued 3,295,533 Common Shares valued at $73.3 million to
Security Capital in exchange for the operations and business of
the REIT and property management companies in September 1997.
(16) Subsequent Event
In February 2000, a consolidated subsidiary issued 680,000 additional
Series E perpetual preferred units ($25 liquidation preference per unit) to a
limited partnership in exchange for $17.0 million. The units pay cumulative
quarterly dividends of $0.5234 per share ($2.09375 or 8.375% per annum), are
redeemable at our option after August 13, 2004 and are convertible into
Archstone Series E Cumulative Redeemable Perpetual Preferred shares on or after
August 13, 2009.
56
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Archstone Communities Trust:
Under date of January 27, 2000, except as to Note 16 which is as of
February 4, 2000, we reported on the balance sheets of Archstone Communities
Trust as of December 31, 1999 and 1998, and the related statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. In connection with our audits of the
aforementioned financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility of
the company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule as listed in the
accompanying index, 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 LLP
Chicago, Illinois
January 27, 2000
57
<PAGE>
SCHEDULE III
Archstone Communities Trust
Real Estate and Accumulated Depreciation
December 31, 1999
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ---- ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Albuquerque, New Mexico:
Comanche Wells....................... 179 $ - $ 719 $ 4,072 $ 835
La Paloma............................ 424 - 4,135 - 19,966
La Ventana........................... 232 - 2,210 - 13,590
Pavilions............................ 240 - 2,182 7,624 6,339
Telegraph Hill....................... 200 - 1,216 6,889 1,013
Vista Del Sol........................ 168 - 1,105 4,419 1,238
Vistas at Seven Bar Ranch............ 572 - 3,541 5,351 20,709
Wellington Place..................... 280 - 1,881 7,523 1,904
Atlanta, Georgia:
Archstone Roswell.................... 664 30,355 6,791 38,484 457
Archstone Vinings.................... 200 - 1,787 10,126 740
Azalea Park.......................... 447 15,033 4,330 24,536 484
Cameron Ashford...................... 365 - 4,245 24,053 251
Cameron at Barrett Creek............. 332 - 1,963 11,126 13,733
Cameron Briarcliff................... 220 - 2,515 14,250 238
Cameron at Northpoint................ 264 - 2,248 12,740 8,073
Cameron Bridge....................... 224 - 2,119 12,010 4,948
Cameron Brook........................ 440 18,774 4,050 22,950 306
Cameron Dunwoody..................... 238 - 2,747 15,566 148
Cameron Greens....................... 304 10,013 2,389 13,537 239
Cameron Landing...................... 368 15,340 3,535 20,030 516
Cameron Pointe....................... 214 12,545 2,725 15,440 462
Cameron Station...................... 348 15,058 2,880 16,321 1,010
Cameron Woodlands.................... 644 - 4,901 27,775 319
Lake Ridge at Dunwoody............... 268 - 3,126 17,712 179
Old Salem............................ 172 - 1,490 8,446 521
Trolley Square....................... 270 - 2,918 16,534 524
Winterscreek......................... 200 4,834 1,561 8,846 86
Austin, Texas:
Archstone Hunters' Run I & II........ 400 14,820 2,197 - 17,856
Archstone Monterey Ranch I........... 168 16,861 424 - 9,204
Archstone Monterey Ranch II.......... 456 - 1,151 - 23,686
Archstone Monterey Ranch III......... 448 - 1,131 - 11,958
Archstone Northwest Hills............ 314 - 1,311 7,431 3,054
Ridge, The........................... 326 - 1,669 6,675 3,326
Shadowood............................ 236 - 1,197 4,787 1,154
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
------------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Albuquerque, New Mexico:
Comanche Wells....................... $ 719 $ 4,907 $ 5,626 $ 753 1985 1994
La Paloma............................ 4,135 19,966 24,101 3,165 1996 1993
La Ventana........................... 2,210 13,590 15,800 1,673 1996 1994
Pavilions............................ 2,182 13,963 16,145 3,082 (a) (a)
Telegraph Hill....................... 1,216 7,902 9,118 701 1986 1996
Vista Del Sol........................ 1,105 5,657 6,762 946 1987 1993
Vistas at Seven Bar Ranch............ 3,541 26,060 29,601 3,451 (b) (b)
Wellington Place..................... 1,881 9,427 11,308 1,446 1981 1993
Atlanta, Georgia:
Archstone Roswell.................... 6,791 38,941 45,732 2,806 1988 1998
Archstone Vinings.................... 1,787 10,866 12,653 658 1978 1998
Azalea Park.......................... 4,330 25,020 29,350 1,658 1987 1998
Cameron Ashford...................... 4,245 24,304 28,549 1,542 1990 1998
Cameron at Barrett Creek............. 1,963 24,859 26,822 400 1999 1998
Cameron Briarcliff................... 2,515 14,488 17,003 915 1989 1998
Cameron at Northpoint................ 2,248 20,813 23,061 612 1999 1998
Cameron Bridge....................... 2,119 16,958 19,077 516 1999 1998
Cameron Brook........................ 4,050 23,256 27,306 1,447 1988 1998
Cameron Dunwoody..................... 2,747 15,714 18,461 999 1989 1998
Cameron Greens....................... 2,389 13,776 16,165 865 1986 1998
Cameron Landing...................... 3,535 20,546 24,081 1,359 1998 1998
Cameron Pointe....................... 2,725 15,902 18,627 989 1987 1998
Cameron Station...................... 2,880 17,331 20,211 1,062 (d) 1998
Cameron Woodlands.................... 4,901 28,094 32,995 1,758 (e) 1998
Lake Ridge at Dunwoody............... 3,126 17,891 21,017 1,347 1979 1998
Old Salem............................ 1,490 8,967 10,457 557 1968 1998
Trolley Square....................... 2,918 17,058 19,976 1,082 1989 1998
Winterscreek......................... 1,561 8,932 10,493 570 1984 1998
Austin, Texas:
Archstone Hunters' Run I & II........ 2,197 17,856 20,053 2,428 (f) (f)
Archstone Monterey Ranch I........... 424 9,204 9,628 164 1999 1993
Archstone Monterey Ranch II.......... 1,151 23,686 24,837 2,365 1996 1993
Archstone Monterey Ranch III......... 1,131 11,958 13,089 (c) (c) 1993
Archstone Northwest Hills............ 1,311 10,485 11,796 1,588 1979 1993
Ridge, The........................... 1,669 10,001 11,670 1,672 1978 1993
Shadowood............................ 1,197 5,941 7,138 954 1985 1993
</TABLE>
58
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ---- ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Birmingham, Alabama:
Cameron at the Summit I.............. 372 $ - $3,458 $19,595 $ 414
Cameron at the Summit II............. 268 - 698 3,955 13,387
Boston. Massachusetts
Arboretum, The....................... 312 36,346 6,721 38,087 513
Archstone Tewksbury.................. 77 3,076 1,189 6,739 190
Archstone Tewksbury II............... 168 - 3,235 660 16,171
Charlotte, North Carolina:
Archstone Tyvola Centre.............. 404 - 3,470 2,461 1,698
Cameron at Hickory Grove............. 202 6,063 1,434 8,127 219
Cameron Matthews..................... 212 9,035 2,034 11,526 165
Archstone Eastover................... 128 - 1,431 8,107 705
Pinnacle at North Cross, The......... 312 - 3,573 20,264 206
Archstone Reafield................... 324 - 3,009 17,052 1,012
Springs at Steele Creek.............. 264 - 2,475 14,028 170
Waterford Square I & II.............. 694 - 6,220 35,243 280
Chicago, Illinois
Foxfire (k).......................... 294 8,119 3,137 17,770 192
Garden Glen (k)...................... 460 33,410 6,844 38,722 1,203
Prairie Court (k).................... 125 7,250 2,071 11,708 111
Dallas, Texas:
Archstone Knoxbridge................. 334 15,462 4,668 26,453 697
Archstone Legacy..................... 244 - 1,532 8,683 2,581
Archstone Spring Creek............... 278 - 1,613 9,140 2,925
Oaks at Park Boulevard, The.......... 216 - 1,386 5,543 3,050
Summerstone.......................... 192 - 1,028 5,824 2,192
Timber Ridge I & II.................. 352 - 1,672 5,671 10,829
Denver, Colorado:
Archstone Dakota Ridge............... 480 - 2,108 24 32,494
Cambrian, The........................ 383 - 2,256 9,026 3,967
Cedars II, The....................... 172 - 828 529 4,192
Cedars, The.......................... 408 - 3,128 12,512 5,828
Fox Creek I.......................... 175 - 1,167 4,669 1,612
Fox Creek II......................... 112 - - - 8,819
Legacy Heights....................... 384 16,417 2,049 4 20,496
Reflections I & II................... 416 - 2,396 6,362 14,550
Regency Park......................... 204 8,500 2,416 13,674 16
Silver Cliff......................... 312 - 2,410 13,656 1,156
Sunwood.............................. 156 - 1,030 4,596 3,013
Wendemere at the Ranch............... 256 - 2,606 14,769 469
El Paso, Texas:
Las Flores........................... 468 5,648 625 6,624 1,447
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
------------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Birmingham, Alabama:
Cameron at the Summit I.............. $3,458 $20,009 $23,467 $1,685 1998 1998
Cameron at the Summit II............. 698 17,342 18,040 101 (c) 1998
Boston. Massachusetts
Arboretum, The....................... 6,721 38,600 45,321 926 1989 1999
Archstone Tewksbury.................. 1,189 6,929 8,118 181 1995 1999
Archstone Tewksbury II............... 3,235 16,831 20,066 50 (c) 1999
Charlotte, North Carolina:
Archstone Tyvola Centre.............. 3,470 4,159 7,629 (c) (c) 1998
Cameron at Hickory Grove............. 1,434 8,346 9,780 522 1988 1998
Cameron Matthews..................... 2,034 11,691 13,725 748 1998 1998
Archstone Eastover................... 1,431 8,812 10,243 527 1987 1998
Pinnacle at North Cross, The......... 3,573 20,470 24,043 819 1997 1998
Archstone Reafield................... 3,009 18,064 21,073 1,101 1987 1998
Springs at Steele Creek.............. 2,475 14,198 16,673 879 1997 1998
Waterford Square I & II.............. 6,220 35,523 41,743 2,416 (g) 1998
Chicago, Illinois
Foxfire (k).......................... 3,137 17,962 21,099 171 1998 1999
Garden Glen (k)...................... 6,844 39,925 46,769 374 1987 1999
Prairie Court (k).................... 2,071 11,819 13,890 112 1987 1999
Dallas, Texas:
Archstone Knoxbridge................. 4,668 27,150 31,818 812 1994 1998
Archstone Legacy..................... 1,532 11,264 12,796 1,687 1985 1993
Archstone Spring Creek............... 1,613 12,065 13,678 1,792 1983 1993
Oaks at Park Boulevard, The.......... 1,386 8,593 9,979 1,078 1986 1993
Summerstone.......................... 1,028 8,016 9,044 1,164 1983 1993
Timber Ridge I & II.................. 1,672 16,500 18,172 1,730 (h) (h)
Denver, Colorado:
Archstone Dakota Ridge............... 2,108 32,518 34,626 433 1999 1997
Cambrian, The........................ 2,256 12,993 15,249 1,872 1983 1993
Cedars II, The....................... 828 4,721 5,549 (c) (c) 1999
Cedars, The.......................... 3,128 18,340 21,468 2,849 1984 1993
Fox Creek I.......................... 1,167 6,281 7,448 896 1984 1993
Fox Creek II......................... - 8,819 8,819 159 1999 1995
Legacy Heights....................... 2,049 20,500 22,549 1,199 1998 1997
Reflections I & II................... 2,396 20,912 23,308 2,828 (i) (i)
Regency Park......................... 2,416 13,690 16,106 20 1986 1999
Silver Cliff......................... 2,410 14,812 17,222 2,248 1991 1994
Sunwood.............................. 1,030 7,609 8,639 1,143 1981 1992
Wendemere at the Ranch............... 2,606 15,238 17,844 548 1984 1999
El Paso, Texas:
Las Flores........................... 625 8,071 8,696 3,981 (j) (j)
</TABLE>
59
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ---- ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Ft. Lauderdale/West Palm Beach:
Archstone at Woodbine............ 408 $ - $3,803 $ 1,832 $ 4,222
Archstone Pembrooke Pines........ 308 - 2,675 15,159 1,051
Archstone Waterview.............. 192 - 1,847 10,464 874
Cameron at Meadow Lakes.......... 189 - 1,712 9,702 121
Cameron at the Villages.......... 384 - 3,298 18,686 722
Cameron Cove..................... 221 8,173 1,648 9,338 644
Cameron Gardens.................. 300 - 2,803 15,882 6,017
Cameron Hidden Harbor............ 200 5,233 1,868 10,587 839
Cameron Palms.................... 340 - 2,252 12,763 13,813
Cameron Park I................... 196 - 2,129 12,063 2,580
Cameron View..................... 176 - 1,487 8,425 376
Cameron Waterways................ 300 - 3,678 20,840 452
Archstone Island Reach........... 280 - 2,764 15,662 605
Park Place at Turtle Run......... 350 - 2,598 14,721 128
Ft. Myers, Florida:
Forestwood....................... 397 11,058 2,534 14,361 520
Houston, Texas:
7100 Almeda...................... 348 - 1,713 9,706 2,484
Archstone Braeswood.............. 240 - 1,861 10,548 1,775
Archstone Braeswood II........... 36 - 1,125 5 3,050
Archstone Brompton Court......... 794 - 4,058 22,993 8,940
Archstone Medical Center I....... 360 13,295 4,210 - 14,660
Archstone Medical Center II...... 318 - 3,368 - 15,908
Memorial Heights I............... 360 14,801 3,169 - 16,087
Memorial Heights II.............. 256 12,174 9,164 - 7,042
Indianapolis, Indiana:
Arbor Green...................... 208 - 1,597 9,049 446
Archstone River Ridge............ 202 - 461 2,612 12,681
Inland Empire, California:
Crossing, The.................... 296 - 2,227 12,622 2,058
Miramonte........................ 290 - 2,357 13,364 1,231
Sierra Hills..................... 300 612 2,810 15,921 1,827
Terracina........................ 736 - 5,780 32,757 3,252
Westcourt........................ 515 - 1,909 10,817 4,795
Woodsong......................... 262 - 1,846 10,469 920
Jacksonville, Florida:
Cameron Lakes I & II............. 555 - 5,268 29,855 355
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
-------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------ ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Ft. Lauderdale/West Palm Beach:
Archstone at Woodbine............ $3,803 $ 6,054 $ 9,857 $ (c) (c) 1999
Archstone Pembrooke Pines........ 2,675 16,210 18,885 996 1988 1998
Archstone Waterview.............. 1,847 11,338 13,185 705 1988 1998
Cameron at Meadow Lakes.......... 1,712 9,823 11,535 620 1983 1998
Cameron at the Villages.......... 3,298 19,408 22,706 1,219 1987 1998
Cameron Cove..................... 1,648 9,982 11,630 617 1986 1998
Cameron Gardens.................. 2,803 21,899 24,702 550 1999 1998
Cameron Hidden Harbor............ 1,868 11,426 13,294 704 1986 1998
Cameron Palms.................... 2,252 26,576 28,828 421 1999 1998
Cameron Park I................... 2,129 14,643 16,772 562 1999 1998
Cameron View..................... 1,487 8,801 10,288 554 1987 1998
Cameron Waterways................ 3,678 21,292 24,970 1,209 1998 1998
Archstone Island Reach........... 2,764 16,267 19,031 387 1990 1999
Park Place at Turtle Run......... 2,598 14,849 17,447 938 1989 1998
Ft. Myers, Florida:
Forestwood....................... 2,534 14,881 17,415 933 1986 1998
Houston, Texas:
7100 Almeda...................... 1,713 12,190 13,903 1,680 1984 1994
Archstone Braeswood.............. 1,861 12,323 14,184 1,863 1984 1993
Archstone Braeswood II........... 1,125 3,055 4,180 35 1999 1997
Archstone Brompton Court......... 4,058 31,933 35,991 4,628 1972 1994
Archstone Medical Center I....... 4,210 14,660 18,870 1,991 1996 1994
Archstone Medical Center II...... 3,368 15,908 19,276 541 1999 1994
Memorial Heights I............... 3,169 16,087 19,256 3,226 1996 1996
Memorial Heights II.............. 9,164 7,042 16,206 4 1998 1996
Indianapolis, Indiana:
Arbor Green...................... 1,597 9,495 11,092 591 1989 1998
Archstone River Ridge............ 461 15,293 15,754 100 (c) 1998
Inland Empire, California:
Crossing, The.................... 2,227 14,680 16,907 1,453 1989 1996
Miramonte........................ 2,357 14,595 16,952 1,618 1989 1995
Sierra Hills..................... 2,810 17,748 20,558 1,270 1990 1997
Terracina........................ 5,780 36,009 41,789 3,504 1988 1996
Westcourt........................ 1,909 15,612 17,521 1,712 1986 1996
Woodsong......................... 1,846 11,389 13,235 1,033 1985 1996
Jacksonville, Florida:
Cameron Lakes I & II............. 5,268 30,210 35,478 2,457 (l) 1998
</TABLE>
60
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ---- ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Las Vegas, Nevada:
Crossings at Lake Mead, The.......... 444 $ - $2,086 $11,867 $ 2,035
Horizons at Piccole Ranch............ 408 - 3,173 18,048 1,307
La Tierra at the Lakes............... 896 - 5,904 33,561 6,137
Los Angeles, California:
Oakridge............................. 178 - 3,212 18,200 1,355
Regency Court........................ 174 - 1,962 11,118 1,066
Minneapolis, Minnesota:
Eden Commons (k)..................... 196 5,979 1,973 11,181 258
Regency Woods (k).................... 282 - 3,591 20,368 29
Willow Creek (k)..................... 240 - 1,976 11,192 73
Nashville, Tennessee:
Amberwood at Bellevue................ 225 5,002 2,235 12,660 966
Archstone Briley Parkway............. 360 - 2,471 14,003 367
Cameron Overlook..................... 452 - 4,031 22,843 186
Enclave at Brentwood, The............ 380 - 2,672 15,143 1,197
Shadowbluff.......................... 220 5,720 1,422 8,059 145
Orange County, California:
Las Flores........................... 504 7,368 8,900 264 41,392
Newpointe............................ 160 - 1,403 7,981 651
Rivermeadows......................... 152 - 2,082 11,797 1,503
Sorrento............................. 241 4,744 4,872 - 22,888
Villa Marseilles..................... 192 3,630 1,970 11,162 4,850
Windemere............................ 182 - 2,611 14,815 14
Orlando, Florida:
Cameron Promenade.................... 212 - 2,236 12,671 1,117
Cameron Springs...................... 340 - 2,893 16,391 378
Cameron Wellington I................. 192 - 1,505 8,526 98
Cameron Wellington II................ 120 - 1,605 9,094 274
Kingston Village..................... 120 - 1,039 5,887 610
Phoenix, Arizona:
Bay Club at Mesa Cove................ 472 - 2,797 11,188 2,336
Cochise at Arrowhead I (k)........... 272 - 2,019 - 16,080
Cochise at Arrowhead II (k).......... 200 - 1,601 - 11,074
Foxfire.............................. 188 - 1,055 5,976 1,011
Miralago I........................... 496 18,720 2,743 - 22,519
Moorings at Mesa Cove, The........... 406 - 3,261 13,045 2,136
Peaks at Papago Park, The............ 768 - 5,131 23,408 10,221
Ridge, The........................... 380 - 1,852 10,492 1,067
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
------------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Las Vegas, Nevada:
Crossings at Lake Mead, The.......... $2,086 $13,902 $15,988 $1,720 1986 1995
Horizons at Piccole Ranch............ 3,173 19,355 22,528 2,434 1990 1995
La Tierra at the Lakes............... 5,904 39,698 45,602 5,167 1986 1995
Los Angeles, California:
Oakridge............................. 3,212 19,555 22,767 686 1985 1998
Regency Court........................ 1,962 12,184 14,146 341 1988 1999
Minneapolis, Minnesota:
Eden Commons (k)..................... 1,973 11,439 13,412 328 1987 1998
Regency Woods (k).................... 3,591 20,397 23,988 140 1988 1999
Willow Creek (k)..................... 1,976 11,265 13,241 107 1979 1999
Nashville, Tennessee:
Amberwood at Bellevue................ 2,235 13,626 15,861 440 1986 1998
Archstone Briley Parkway............. 2,471 14,370 16,841 1,057 1986 1998
Cameron Overlook..................... 4,031 23,029 27,060 1,897 1998 1998
Enclave at Brentwood, The............ 2,672 16,340 19,012 1,004 1988 1998
Shadowbluff.......................... 1,422 8,204 9,626 520 1986 1998
Orange County, California:
Las Flores........................... 8,900 41,656 50,556 1,297 1999 1996
Newpointe............................ 1,403 8,632 10,035 809 1987 1996
Rivermeadows......................... 2,082 13,300 15,382 992 1986 1997
Sorrento............................. 4,872 22,888 27,760 800 1998 1996
Villa Marseilles..................... 1,970 16,012 17,982 1,138 1991 1996
Windemere............................ 2,611 14,829 17,440 101 1987 1999
Orlando, Florida:
Cameron Promenade.................... 2,236 13,788 16,024 670 1999 1998
Cameron Springs...................... 2,893 16,769 19,662 1,060 1986 1998
Cameron Wellington I................. 1,505 8,624 10,129 548 1988 1998
Cameron Wellington II................ 1,605 9,368 10,973 422 1999 1998
Kingston Village..................... 1,039 6,497 7,536 397 1982 1998
Phoenix, Arizona:
Bay Club at Mesa Cove................ 2,797 13,524 16,321 2,136 1985 1993
Cochise at Arrowhead I (k)........... 2,019 16,080 18,099 920 1999 1995
Cochise at Arrowhead II (k).......... 1,601 11,074 12,675 180 1999 1995
Foxfire.............................. 1,055 6,987 8,042 1,041 1985 1994
Miralago I........................... 2,743 22,519 25,262 2,417 1997 1995
Moorings at Mesa Cove, The........... 3,261 15,181 18,442 2,682 1985 1992
Peaks at Papago Park, The............ 5,131 33,629 38,760 4,975 (m) (m)
Ridge, The........................... 1,852 11,559 13,411 1,891 1987 1993
</TABLE>
61
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Phoenix, Arizona (continued):
San Marbeya (k)...................... 404 $ $3,675 $ 93 $23,369
San Marquis North.................... 208 - 1,215 - 9,866
San Marquis South.................... 264 - 2,312 - 11,568
San Palmera (k)...................... 412 - 3,515 - 23,216
San Valiente I (k)................... 376 - 3,062 - 19,796
San Valiente II (k).................. 228 - 1,647 - 12,360
Scottsdale Greens.................... 644 23,465 3,489 19,774 8,753
Portland, Oregon:
Arbor Heights........................ 348 - 2,669 - 20,771
Brighton............................. 233 - 1,675 9,532 1,743
Cambridge Crossing................... 250 - 2,260 - 13,411
Hedges Creek......................... 408 - 3,758 162 23,647
Preston's Crossing................... 228 - 851 - 12,280
Timberline........................... 130 - 1,058 5,995 643
Raleigh, North Carolina:
52 Magnolia.......................... 228 11,765 2,732 15,482 283
Archstone at Preston................. 388 - 882 4,996 21,828
Cameron at Six Forks................. 172 - 1,417 8,027 225
Cameron at Southpoint................ 288 - 1,719 9,741 9,397
Cameron Brooke....................... 228 - 2,031 11,508 258
Cameron Lake I & II.................. 368 - 3,145 17,820 1,342
Cameron Ridge........................ 228 - 1,694 9,599 675
Cameron Square....................... 268 - 2,575 14,590 190
Cameron Woods........................ 328 - 2,107 11,940 8,182
Conifer Glen......................... 186 - 2,204 12,511 148
Cornerstone.......................... 302 - 3,748 21,239 334
Poplar Place......................... 230 - 2,189 12,407 772
Waterford Point...................... 336 14,560 3,136 17,763 -
Reno, Nevada:
Enclave, The......................... 228 - 1,947 - 13,810
Enclave II, The...................... 180 - 1,538 - 12,988
Vista Ridge.......................... 324 - 2,002 - 19,416
Richmond, Virginia:
Archstone Swift Creek I.............. 288 - 812 4,604 16,732
Cameron at Gayton.................... 220 - 1,905 10,796 168
Cameron at Virginia Center........... 264 - 2,907 16,472 1,227
Cameron at Virginia Center II........ 88 - 242 1,372 5,367
Cameron at Wyndham................... 312 - 3,782 21,433 992
Cameron Crossing I & II.............. 424 - 4,968 28,155 1,600
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
--------------------------------
Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Phoenix, Arizona (continued):
San Marbeya (k)...................... $3,675 $23,462 $27,137 $ 478 1999 1997
San Marquis North.................... 1,215 9,866 11,081 1,429 1994 1993
San Marquis South.................... 2,312 11,568 13,880 1,967 1994 1993
San Palmera (k)...................... 3,515 23,216 26,731 2,282 1997 1995
San Valiente I (k)................... 3,062 19,796 22,858 1,988 1997 1995
San Valiente II (k).................. 1,647 12,360 14,007 202 1999 1995
Scottsdale Greens.................... 3,489 28,527 32,016 4,553 1980 1994
Portland, Oregon:
Arbor Heights........................ 2,669 20,771 23,440 1,669 1998 1996
Brighton............................. 1,675 11,275 12,950 1,014 1985 1996
Cambridge Crossing................... 2,260 13,411 15,671 1,154 1998 1996
Hedges Creek......................... 3,758 23,809 27,567 605 1999 1997
Preston's Crossing................... 851 12,280 13,131 1,358 1996 1995
Timberline........................... 1,058 6,638 7,696 672 1990 1996
Raleigh, North Carolina:
52 Magnolia.......................... 2,732 15,765 18,497 978 1995 1998
Archstone at Preston................. 882 26,824 27,706 143 (c) 1998
Cameron at Six Forks................. 1,417 8,252 9,669 519 1985 1998
Cameron at Southpoint................ 1,719 19,138 20,857 369 1999 1998
Cameron Brooke....................... 2,031 11,766 13,797 925 1997 1998
Cameron Lake I & II.................. 3,145 19,162 22,307 1,145 (n) 1998
Cameron Ridge........................ 1,694 10,274 11,968 615 1985 1998
Cameron Square....................... 2,575 14,780 17,355 923 1987 1998
Cameron Woods........................ 2,107 20,122 22,229 512 1999 1998
Conifer Glen......................... 2,204 12,659 14,863 508 1997 1998
Cornerstone.......................... 3,748 21,573 25,321 1,335 1997 1998
Poplar Place......................... 2,189 13,179 15,368 816 1987 1998
Waterford Point...................... 3,136 17,763 20,899 1,307 1996 1998
Reno, Nevada:
Enclave, The......................... 1,947 13,810 15,757 723 1998 1996
Enclave II, The...................... 1,538 12,988 14,526 89 (c) 1996
Vista Ridge.......................... 2,002 19,416 21,418 2,096 1997 1995
Richmond, Virginia:
Archstone Swift Creek I.............. 812 21,336 22,148 41 (c) 1998
Cameron at Gayton.................... 1,905 10,964 12,869 688 1987 1998
Cameron at Virginia Center........... 2,907 17,699 20,606 779 1999 1998
Cameron at Virginia Center II........ 242 6,739 6,981 60 1999 1998
Cameron at Wyndham................... 3,782 22,425 26,207 1,161 1999 1998
Cameron Crossing I & II.............. 4,968 29,755 34,723 1,799 1998 1998
</TABLE>
62
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
--------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Salt Lake City, Utah
Archstone River Oaks................... 448 $ - $5,400 $ 213 $28,822
Brighton Place......................... 336 - 2,091 11,892 4,376
Carrington Place....................... 142 3,372 1,072 6,072 724
Cloverland............................. 186 4,124 1,392 7,886 1,265
Crossroads............................. 240 4,435 1,521 8,619 2,183
Fairstone at Riverview................. 492 - 4,636 - 27,383
Greenpointe............................ 224 - 923 5,050 3,237
Mountain Shadow........................ 262 - 927 4,730 6,294
Raintree............................... 152 - 948 5,373 905
Remington, The......................... 288 10,530 2,324 - 14,986
Riverbend.............................. 200 - 1,357 7,692 1,140
San Antonio, Texas:
Archstone Huebner Oaks................. 344 - 1,455 8,248 1,963
Austin Pointe.......................... 328 - 1,728 9,725 1,596
Camino Real............................ 176 - 1,084 4,338 2,577
Contour Place.......................... 126 - 456 1,829 632
Crescent, The.......................... 306 - 1,145 - 15,290
Dymaxion............................... 190 - 683 3,740 837
Marbach Park........................... 304 - 1,122 6,361 1,307
Rancho Mirage.......................... 254 - 724 2,971 1,909
St. Tropez I........................... 273 - 2,013 8,054 2,749
Stanford Heights....................... 276 - 1,631 - 12,002
Sterling Heights....................... 224 9,498 1,644 - 10,818
Villas of Castle Hills................. 163 - 1,037 4,148 1,147
Waters at Northern Hills, The.......... 305 - 1,251 7,105 1,932
San Diego, California:
Archstone La Jolla..................... 296 - 4,741 26,866 1,379
Archstone Mission Valley............... 736 - 20,893 656 10,543
Archstone Torrey Hills................. 340 - 10,400 659 28,745
Archstone University Towne Centre...... 328 20,846 4,616 26,160 2,095
Carmel Del Mar......................... 232 14,670 3,802 21,546 2,491
Club Pacifica.......................... 264 - 2,141 12,132 1,356
El Dorado Hills........................ 448 - 4,418 25,084 3,500
Ocean Crest............................ 450 - 3,918 22,207 3,265
Archstone Seaport Village.............. 387 - 5,963 33,789 1,725
Seascape............................... 208 - 2,659 15,066 1,675
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
---------------------------------
Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Salt Lake City, Utah
Archstone River Oaks................... $ 5,400 $29,035 $34,435 $ 318 (c) 1997
Brighton Place......................... 2,091 16,268 18,359 2,074 1979 1995
Carrington Place....................... 1,072 6,796 7,868 434 1986 1997
Cloverland............................. 1,392 9,151 10,543 576 1985 1997
Crossroads............................. 1,521 10,802 12,323 857 1986 1996
Fairstone at Riverview................. 4,636 27,383 32,019 2,079 1998 1996
Greenpointe............................ 923 8,287 9,210 881 (o) (o)
Mountain Shadow........................ 927 11,024 11,951 1,063 (p) (p)
Raintree............................... 948 6,278 7,226 337 1984 1998
Remington, The......................... 2,324 14,986 17,310 1,781 1997 1995
Riverbend.............................. 1,357 8,832 10,189 472 1985 1998
San Antonio, Texas:
Archstone Huebner Oaks................. 1,455 10,211 11,666 1,556 1983 1993
Austin Pointe.......................... 1,728 11,321 13,049 1,845 1982 1993
Camino Real............................ 1,084 6,915 7,999 1,051 1979 1993
Contour Place.......................... 456 2,461 2,917 694 1984 1992
Crescent, The.......................... 1,145 15,290 16,435 2,724 1994 1992
Dymaxion............................... 683 4,577 5,260 605 1984 1994
Marbach Park........................... 1,122 7,668 8,790 1,287 1985 1993
Rancho Mirage.......................... 724 4,880 5,604 788 1974 1993
St. Tropez I........................... 2,013 10,803 12,816 1,798 1982 1992
Stanford Heights....................... 1,631 12,002 13,633 1,705 1996 1993
Sterling Heights....................... 1,644 10,818 12,462 1,534 1995 1993
Villas of Castle Hills................. 1,037 5,295 6,332 871 1971 1993
Waters at Northern Hills, The.......... 1,251 9,037 10,288 1,348 1982 1994
San Diego, California:
Archstone La Jolla..................... 4,741 28,245 32,986 2,317 1991 1996
Archstone Mission Valley............... 20,893 11,199 32,092 (c) (c) 1998
Archstone Torrey Hills................. 10,400 29,404 39,804 95 (c) 1997
Archstone University Towne Centre...... 4,616 28,255 32,871 2,068 1986 1997
Carmel Del Mar......................... 3,802 24,037 27,839 1,071 1991 1998
Club Pacifica.......................... 2,141 13,488 15,629 1,328 1987 1996
El Dorado Hills........................ 4,418 28,584 33,002 2,583 1983 1996
Ocean Crest............................ 3,918 25,472 29,390 1,959 (q) (q)
Archstone Seaport Village.............. 5,963 35,514 41,477 999 1992 1999
Seascape............................... 2,659 16,741 19,400 661 1986 1998
</TABLE>
63
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
-------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
----- ------- ------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
San Francisco (Bay Area), California:
Archstone Emerald Park............... 324 $ - $ 8,950 $ 170 $36,575
Archstone Hacienda................... 540 5,002 18,696 668 47,785
Archstone Marina Bay................. 468 - 5,952 33,728 1,062
Archstone Monterey Grove............. 224 - 4,451 13 22,564
Archstone San Ramon.................. 496 - 7,820 44,311 1,924
Archstone Willow Glen................ 412 - 16,140 746 11,681
Ashton Place......................... 948 45,566 9,782 55,429 28,310
Los Padres Village................... 245 - 4,579 25,946 1,143
Redwood Shores....................... 304 23,608 5,608 31,778 2,473
Treat Commons........................ 510 - 5,788 32,802 1,458
Seattle, Washington:
Archstone Inglewood Hill............. 230 - 2,463 68 17,931
Archstone Northcreek................. 524 - 5,750 261 34,175
Cambrian, The........................ 422 - 6,231 35,309 1,854
Canyon Creek......................... 336 17,324 5,250 - 19,800
Canyon Creek II...................... 216 7,865 2,705 15,330 1,973
Fairwood Landing..................... 194 - 1,223 6,928 1,222
Forestview........................... 192 - 1,681 - 13,896
Harbour Pointe....................... 230 - 2,027 - 13,128
Redmond Hill Central................. 258 - 1,950 11,118 1,687
Newport Crossing..................... 192 - 1,694 9,602 781
Pebble Cove.......................... 288 14,261 1,895 - 15,742
Redmond Hill East.................... 332 - 2,795 15,593 3,242
Redmond Hill West.................... 184 6,251 2,084 11,833 1,567
Stonemeadow Farms.................... 280 - 4,370 - 18,134
Waterford Place...................... 360 - 4,131 23,407 1,383
Tampa/St. Petersburg, Florida:
Archstone Boot Ranch................. 250 - 2,102 11,910 546
Archstone Rocky Creek................ 264 - 511 2,896 15,268
Cameron Bayshore..................... 328 - 2,035 11,530 1,025
Cameron Lakes........................ 207 - 1,570 8,897 530
Cameron Palm Harbor.................. 168 5,517 1,293 7,325 436
Country Place Village I.............. 88 1,904 777 4,400 422
Country Place Village II............. 100 - 805 4,563 362
Tucson, Arizona:
Tierra Antigua....................... 147 - 992 3,967 1,000
Villa Caprice........................ 268 - 1,279 7,248 1,118
Ventura County, California:
Le Club.............................. 370 - 4,958 28,097 2,155
Pelican Point........................ 400 - 4,365 24,735 1,947
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
------------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------ ------------ ------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
San Francisco (Bay Area), California:
Archstone Emerald Park............... $ 8,950 $36,745 $45,695 $ 134 (c) 1997
Archstone Hacienda................... 18,696 48,453 67,149 96 (c) 1997
Archstone Marina Bay................. 5,952 34,790 40,742 2,652 1991 1997
Archstone Monterey Grove............. 4,451 22,577 27,028 277 (c) 1997
Archstone San Ramon.................. 7,820 46,235 54,055 3,620 1988 1997
Archstone Willow Glen................ 16,140 12,427 28,567 (c) (c) 1998
Ashton Place......................... 9,782 83,739 93,521 6,363 1970 1996
Harborside........................... 3,213 18,691 21,904 1,492 1989 1996
Los Padres Village................... 4,579 27,089 31,668 1,916 1988 1997
Redwood Shores....................... 5,608 34,251 39,859 2,932 1986 1996
Treat Commons........................ 5,788 34,260 40,048 3,620 1988 1995
Seattle, Washington:
Archstone Inglewood Hill............. 2,463 17,999 20,462 179 (c) 1997
Archstone Northcreek................. 5,750 34,436 40,186 446 (c) 1998
Cambrian, The........................ 6,231 37,163 43,394 2,566 1991 1997
Canyon Creek......................... 5,250 19,800 25,050 1,792 1997 1997
Canyon Creek II...................... 2,705 17,303 20,008 865 1989 1998
Fairwood Landing..................... 1,223 8,150 9,373 650 1982 1996
Forestview........................... 1,681 13,896 15,577 697 1998 1996
Harbour Pointe....................... 2,027 13,128 15,155 953 1997 1996
Redmond Hill Central................. 1,950 12,805 14,755 1,568 1987 1995
Newport Crossing..................... 1,694 10,383 12,077 841 1990 1997
Pebble Cove.......................... 1,895 15,742 17,637 1,542 1996 1995
Redmond Hill East.................... 2,795 18,835 21,630 2,204 1990 1995
Redmond Hill West.................... 2,084 13,400 15,484 539 1986 1999
Stonemeadow Farms.................... 4,370 18,134 22,504 741 1999 1997
Waterford Place...................... 4,131 24,790 28,921 1,495 1989 1997
Tampa/St. Petersburg, Florida:
Archstone Boot Ranch................. 2,102 12,456 14,558 778 1988 1998
Archstone Rocky Creek................ 511 18,164 18,675 137 (c) 1998
Cameron Bayshore..................... 2,035 12,555 14,590 754 1984 1998
Cameron Lakes........................ 1,570 9,427 10,997 600 1986 1998
Cameron Palm Harbor.................. 1,293 7,761 9,054 486 1988 1998
Country Place Village I.............. 777 4,822 5,599 289 1982 1998
Country Place Village II............. 805 4,925 5,730 301 1983 1998
Tucson, Arizona:
Tierra Antigua....................... 992 4,967 5,959 1,156 1979 1992
Villa Caprice........................ 1,279 8,366 9,645 1,316 1972 1993
Ventura County, California:
Le Club.............................. 4,958 30,252 35,210 2,091 1987 1997
Pelican Point........................ 4,365 26,682 31,047 1,779 1985 1997
</TABLE>
64
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Initial Cost to Archstone
---------------------------
Costs
Capitalized
Encum- Buildings & Subsequent to
Units brances Land Improvements Acquisition
------ -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartment Communities:
Washington, D.C.
Archstone Bellemeade Farms............ 316 $ 13,122 $ 3,250 $ 18,416 $ 787
Archstone Fair Lakes.................. 282 15,477 3,687 20,893 610
Archstone Governor's Green............ 338 -- 1,836 10,402 20,483
Archstone Milestone II................ 132 -- 2,009 435 1,271
Bristol Gables........................ 358 -- 5,429 30,760 33
Camden at Kendall Ridge............... 184 -- 2,089 11,838 157
Cameron at Milestone.................. 444 -- 5,633 31,920 311
Cameron at Saybrooke.................. 252 -- 3,210 18,190 154
Cameron Woodland Park................. 392 -- 6,989 494 10,645
Ellipse at Government Center, The..... 404 -- 5,704 38,310 1,061
West Springfield Terrace.............. 244 -- 2,918 16,537 268
------ -------- -------- ---------- ---------------
Total Apartment Communities -
Operating and Under Construction....... 76,085 $692,630 $732,260 $2,800,434 $ 1,474,615
====== ======== ======== ========== ===============
Other:
Development Communities in
Planning and Owned...................
Hotel Asset.............................
Other Real Estate Assets (r)............
Total Real Estate Assets................
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at
December 31, 1999
------------------------------------- Con-
Buildings & Accumulated struction Year
Land Improvements Totals Depreciation Year Acquired
------- ------------ ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Apartment Communities:
Washington, D.C.
Archstone Bellemeade Farms............ $ 3,250 $ 19,203 $ 22,453 $ 688 1988 1998
Archstone Fair Lakes.................. 3,687 21,503 25,190 576 1988 1998
Archstone Governor's Green............ 1,836 30,885 32,721 151 (c) 1998
Archstone Milestone II................ 2,009 1,706 3,715 (c) (c) 1999
Bristol Gables........................ 5,429 30,793 36,222 129 1988 1999
Camden at Kendall Ridge............... 2,089 11,995 14,084 769 1990 1998
Cameron at Milestone.................. 5,633 32,231 37,864 2,158 1997 1998
Cameron at Saybrooke.................. 3,210 18,344 21,554 1,161 1990 1998
Cameron Woodland Park................. 6,989 11,139 18,128 (c) (c) 1998
Ellipse at Government Center, The..... 5,704 39,371 45,075 57 1989 1999
West Springfield Terrace.............. 2,918 16,805 19,723 1,067 1978 1998
-------- ------------ ---------- ------------
Total Apartment Communities -
Operating and Under Construction....... $732,260 $ 4,275,049 5,007,309 296,303
======== ============ ========== ============
Other:
Development Communities in
Planning and Owned................... 45,481 --
---------- ------------
Hotel Asset............................. 22,870 4,355
---------- ------------
Other Real Estate Assets (r)............ 141,671 --
---------- ------------
Total Real Estate Assets................ $5,217,331 $ 300,658
========== ============
</TABLE>
(a) Phase I (118 units) was acquired in 1991 and Phase II (122 units) was
developed in 1992.
(b) Vistas at Seven Bar Ranch (364 units) was developed in 1996 and Corrales
Pointe (208 units) was acquired in 1993.
(c) As of 12/31/99, community was under construction.
(d) Phase I (108 units) was constructed in 1981 and Phase II (240 units) was
constructed in 1983.
(e) Phase I (332 units) was constructed in 1983 and Phase II (312 units) was
constructed in 1985.
(f) Phase I (240 units) was developed in 1995 and Phase II (160 units) was
developed in 1996.
(g) Phase I (408 units) was developed in 1996 and Phase II (286 units) was
developed in 1998.
(h) Phase I (160 units) was acquired in 1994 and constructed in 1984 and Phase
II (192 units) was acquired in 1996 and developed in 1998.
(i) Phase I (208 units) was acquired in 1993 and Phase II (208) was developed
in 1996.
(j) 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.
(k) Represents properties owned by third party developers that are subject to
presale agreements to Archstone to acquire such properties. Archstone's
investment as of December 31, 1999 represents development loans made by
Archstone to such developers.
(l) Phase I (302 units) was developed in 1996 and Phase II (253 units) was
developed in 1998.
(m) Phase I and II (624 units) were acquired in 1994 and Phase III (144 units)
was developed in 1996.
(n) Phase I (196 units) was constructed in 1985 and Phase II (172 units) was
constructed in 1982.
(o) Phase I (192 units) was acquired in 1995 and Phase II (32 units) was
developed in 1997.
(p) Phase I (174 units) was acquired in 1995 and constructed in 1985 and Phase
II (88 units) was acquired in 1996 and constructed in 1996.
(q) Camino Pointe and Ocean Crest were combined in 1999. Camino Pointe (150
units) was constructed in 1985 and acquired in 1998 and Ocean Crest (300
units) was constructed in 1993 and acquired in 1996.
(r) Includes land that is not In Planning and our investment in an
unconsolidated taxable subsidiary.
65
<PAGE>
Schedule III
The following is a reconciliation of the carrying amount and related
accumulated depreciation of Archstone's investment in real estate, at cost (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
Carrying Amounts 1999 1998 1997
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
$4,869,801 $2,604,919 $2,153,363
Balance at January 1..................................... ----------------- ----------------- -----------------
Apartment communities:
Real estate assets acquired in the Atlantic Merger..... - 1,823,727 -
Acquisition-related expenditures....................... 401,392 285,806 391,234
Redevelopment expenditures............................. 72,517 57,171 43,187
Recurring capital expenditures......................... 13,022 9,464 8,762
Development expenditures, excluding land acquisitions.. 334,049 378,161 205,619
Acquisition and improvement of land for development.... 43,417 67,248 75,196
Dispositions........................................... (542,554) (344,336) (268,210)
Provision for possible loss on investments............. (450) - (2,800)
----------------- ----------------- -----------------
Net apartment community activity......................... 321,393 2,277,241 452,988
----------------- ----------------- -----------------
Other:
Change in other real estate assets..................... 32,359 - -
Dispositions........................................... (4,672) (9,959) (1,232)
Provision for possible loss on investments............. (1,550) (2,400) (200)
----------------- ----------------- -----------------
Net other activity....................................... 26,137 (12,359) (1,432)
----------------- ----------------- -----------------
Balance at December 31................................... $5,217,331 $4,869,801 $2,604,919
================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
Accumulated Depreciation 1999 1998 1997
------------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at January 1..................................... $205,795 $129,718 $ 97,574
Depreciation for the year................................ 132,437 96,337 52,893
Accumulated depreciation on real estate dispositions..... (37,230) (20,260) (20,749)
Other.................................................... (344) - -
----------------- ----------------- -----------------
Balance at December 31................................... $300,658 $205,795 $129,718
================= ================= =================
</TABLE>
See accompanying independent auditors' report
66
<PAGE>
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each of Archstone Communities Trust, a
Maryland real estate investment trust, and the undersigned Trustees and officers
of Archstone Communities Trust, hereby constitutes and appoints, R. Scot
Sellers, Charles E. Mueller, Jr., William Kell and Caroline Brower its or
his/her true and lawful attorneys-in-fact and agents, for it or him/her and in
its or his/her 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/she 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.
67
<PAGE>
Archstone Communities Trust
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Archstone Communities Trust
By: /s/ R. Scot Sellers
------------------------------------
R. Scot Sellers
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ R. Scot Sellers Chairman, Chief Executive Officer March 6, 2000
- -----------------------------------
R. Scot Sellers
/s/ Charles E. Mueller, Jr. Chief Financial Officer March 6, 2000
- -----------------------------------
Charles E. Mueller, Jr.
/s/ William Kell Controller and Senior Vice President March 6, 2000
- -----------------------------------
William Kell
/s/ C. Ronald Blakenship Trustee March 6, 2000
- -----------------------------------
C. Ronald Blakenship
/s/ James A. Cardwell Trustee March 6, 2000
- -----------------------------------
James A. Cardwell
/s/ Ned S. Holmes Trustee March 6, 2000
- -----------------------------------
Ned S. Holmes
/s/ John T. Kelley III Trustee March 6, 2000
- -----------------------------------
John T. Kelley III
/s/ Calvin K. Kessler Trustee March 6, 2000
- -----------------------------------
Calvin K. Kessler
/s/ Constance B. Moore Trustee March 6, 2000
- -----------------------------------
Constance B. Moore
/s/ James H. Polk III Trustee March 6, 2000
- -----------------------------------
James H. Polk III
/s/ John M. Richman Trustee March 6, 2000
- -----------------------------------
John M. Richman
/s/ John C. Schweitzer Trustee March 6, 2000
- -----------------------------------
John C. Schweitzer
</TABLE>
68
<PAGE>
Index to Exhibits
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
3.1 Amended and Restated Declaration of Trust of Archstone (incorporated
by reference to Exhibit 4.1 to Archstone's Current Report on Form 8-K
dated July 7, 1998)
3.2 Second Amended and Restated Bylaws of Archstone
3.3 Articles Supplementary, dated August 3, 1999, related to the Series D
Cumulative Redeemable Preferred Shares of Beneficial (incorporated by
reference to Exhibit 99.2 to Archstone's Current Report on Form 8-K,
dated August 3, 1999)
3.4 Articles Supplementary, dated August 13, 1999, related to the Series E
Cumulative Redeemable Preferred Shares of Beneficial Interest
(incorporated by reference to exhibit 4.1 to Archstone's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999)
3.5 Certificate of Correction, dated October 12, 1999, to the Articles
Supplementary, dated August 13, 1999, related to the Series E
Cumulative Redeemable Preferred Shares of Beneficial Interest
(incorporated by reference to Exhibit 4.2 to Archstone's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999)
3.6 Articles Supplementary, dated September 27, 1999, related to the
Series F Cumulative Redeemable Preferred Shares of Beneficial Interest
(incorporated by reference to Exhibit 4.3 to Archstone's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999)
4.1 Indenture, dated as of February 1, 1994, between Archstone and Morgan
Guaranty Trust Company of New York, as Trustee relating to Archstone's
unsecured senior debt securities (incorporated by reference to Exhibit
4.2 to Archstone's Annual Report on Form 10-K for the year ended
December 31, 1993)
4.2 First Supplemental Indenture, dated as of February 2, 1994, among
Archstone, Morgan Guaranty Trust Company of New York and State Street
Bank and Trust Company, as successor Trustee (incorporated by
reference to Exhibit 4.3 to Archstone's Annual Report on Form 8-K
dated July 19, 1994)
4.3 Rights Agreement, dated as of July 21, 1994, between Archstone and
Chemical Bank, including Form of Rights Certificate (incorporated by
reference to Exhibit 4.2 to Archstone's Current Report on Form 8-K
dated July 19, 1994)
4.4 First Amendment, dated as of February 8, 1995, to the Rights Agreement
(incorporated by reference to Exhibit 4.13 to Archstone's Annual
Report on Form 10-K for the year ended December 31, 1994)
10.1 1987 Share Option Plan for Outside Trustees, as amended (incorporated
by reference to Exhibit 10.1 to Archstone's Annual Report on Form 10-K
for the year ended December 31, 1995)
10.2 1996 Share Option Plan for Outside Trustees (incorporated by reference
to Exhibit 4.1 to Archstone's Registration Statement on Form S-8 (File
No. 333-31031))
10.3 Amendment to the 1996 Share Option Plan for Outside Trustees
(incorporated by reference to Exhibit 4.6 to Archstone's Registration
Statement on Form S-8 (File No. 333-60815))
10.4 Archstone 1997 Long-Term Incentive Plan (incorporated by reference to
Annex II to Security Capital Group`s Registration Statement on Form
S-11 (File No. 333-26267))
10.5 First Amendment to Archstone 1997 Long-Term Incentive Plan
(incorporated by reference to Exhibit 4.6 to Archstone's Registration
Statement on Form S-8 (File No. 333-60847))
10.6 Form of Indemnification Agreement entered into between Archstone and
each of its officers and Trustees (incorporated by reference to
Exhibit 10.5 to Archstone's Registration Statement No. 333-43201))
</TABLE>
69
<PAGE>
Index to Exhibits - (Concluded)
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
10.7 Form of Change in Control Agreement between Archstone and certain of
its officers
10.8 Third Amended and Restated Investor Agreement, dated as of September
9, 1997, between Archstone and Security Capital (incorporated by
reference to Exhibit 10.2 to Security Capital's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997)
10.9 Amendment No. 1 to Third Amended and Restated Investor Agreement
(incorporated by reference to Exhibit 10.1 to Archstone's Current
Report on Form 8-K dated July 7, 1998)
10.10 Amended and Restated Credit Agreement, dated as of July 7, 1998, among
Archstone, Chase Bank of Texas, National Association, Morgan Guaranty
Trust company of New York, and Wells Fargo National Association, as
co-agents, and the lenders named therein (incorporated by reference to
Exhibit 10.1 to Archstone's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998)
10.11 Master Credit Facility Agreement, dated as of December 1, 1998, by and
among Archstone and ASN Multifamily Limited Partnership and Berkshire
Mortgage Finance Limited Partnership (incorporated by reference to
Exhibit 10.10 to Archstone's Annual Report on Form 10-K for the year
ended December 31, 1998.)
10.12 Amended and Restated Promissory Note, dated as of May 28, 1996, by
Homestead Village Incorporated in favor of Archstone (incorporated by
reference to Exhibit 4.3 to Homestead's Registration Statement on Form
S-4 (File No. 333-4455))
10.13 Amended and Restated Promissory Note, dated as of May 28, 1996, by PTR
Homestead Village Limited Partnership in favor of Archstone
(incorporated by reference to Exhibit 4.4 to Homestead's Registration
Statement on Form S-4 (File No. 333-4455))
10.14 Protection of Business Agreement, dated as of October 17, 1996, among
Security Capital Atlantic Incorporated, Archstone, Security Capital
and Homestead Village Incorporated (incorporated by Reference to
Exhibit 10.12 to Archstone's Annual Report on Form 10-K for the year
ended December 31, 1996)
10.15 Investor and Registration Rights Agreement, dated as of October 17,
1996, between Homestead Village Incorporated and Archstone
(incorporated by reference to Exhibit 10.13 to Archstone's Annual
Report on Form 10-K for the year ended December 31, 1996)
10.16 Archstone 1998 Dividend Reinvestment and Share Purchase Plan
(incorporated by reference to the prospectus contained in Archstone's
Form S-3 Registration Statement No. 333-44639)
10.17 Separation Agreement and General Release effective as of February 22,
2000, between Archstone and Jay S. Jacobson.
12.1 Computation of Ratio of Earnings to Fixed Charges
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Share Dividends
21 Subsidiaries of Archstone
22 Consent of KPMG LLP
23 Power of Attorney (included at page 68)
27 Financial Data Schedule
99.1 Current Development Activity
99.2 Long-Term Unsecured Debt
99.3 Mortgages Payable
</TABLE>
70
<PAGE>
Exhibit 3.2
ARCHSTONE COMMUNITIES TRUST
AMENDED AND RESTATED BYLAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Place. All meetings of shareholders ("Shareholders") of
Archstone Communities Trust (the "Trust") shall be held at the principal office
of the Trust or at such other place within the United States as shall be stated
in the notice of the meeting.
Section 2. Special Meetings. Requests for special meetings shall state the
purpose of such meeting and the matters proposed to be acted on at such meeting.
The Secretary shall inform the requesting Shareholders of the reasonably
estimated cost of preparing and mailing notice of the meeting and, upon payment
to the Trust by such Shareholders of such costs, the Secretary shall give notice
of the meeting. Unless requested by the Shareholders entitled to cast a majority
of the votes entitled to be cast at such meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of Shareholders held during the preceding twelve
months. The Board has the sole power to fix (i) the record date for determining
shareholders entitled to request a special meeting of the shareholders and the
record date for determining shareholders entitled to notice of and to vote at
the special meeting and (ii) the date, time and place of the special meeting.
Section 3. Notice. Notice of any meeting may be given in any manner
permitted by Maryland law. If mailed, notices of meetings of Shareholders shall
be deemed to be given when deposited in the United States mail addressed to the
Shareholder at his or her post office address as it appears on the records of
the Trust, with postage thereon prepaid.
Section 4. Scope of Notice. Any business of the Trust may be transacted at
an annual meeting of Shareholders without being specifically designated in the
notice, except such business as is required by any statute to be stated in such
notice.
Section 5. Waiver of Notice. Whenever any notice of a meeting of
Shareholders is required to be given pursuant to the Trust's Declaration of
Trust (as amended, supplemented or restated from time to time, the "Declaration
of Trust") or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the Shareholder or Shareholders entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any Shareholder at any
meeting shall constitute a waiver of notice of such meeting, except where such
Shareholder attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
<PAGE>
Exhibit 3.2
Section 6. Organization. At every meeting of Shareholders, the Chairman of
the Board, if there is one (or any Co-Chairman of the Board, if there is more
than one), shall conduct the meeting or, in the case of vacancy in office or
absence of the Chairman of the Board (or all Co-Chairmen of the Board), one of
the following officers present shall conduct the meeting in the order stated:
the President, the Managing Directors in their order of rank and seniority, the
Vice Presidents in their order of rank and seniority, or a chairman chosen by
the Shareholders entitled to cast a majority of the votes which all Shareholders
present in person or by proxy are entitled to cast, shall act as chairman, and
the Secretary, or, in his or her absence, an Assistant Secretary, or in the
absence of both the Secretary and Assistant Secretaries, a person appointed by
the chairman shall act as secretary. At any Shareholders' meeting, the chairman
shall determine the construction or interpretation of these Bylaws, or any part
thereof, and the ruling of the chairman shall be final.
Section 7. Quorum. If a quorum is not present at any meeting of the
Shareholders, the Shareholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn such meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at such meeting. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. Proxies. A Shareholder may cast the votes entitled to be cast
by the shares ("Shares") of the Trust owned of record by him, either in person
or by proxy in any manner authorized by law, by the Shareholder or by his or her
duly authorized attorney in fact. Such proxy shall be filed with the Secretary
before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
Section 9. Voting of Shares by Certain Holders.
(a) Shares Held by an Entity. Shares registered in the name of a
corporation, partnership, trust or other entity, if entitled to be voted, may be
voted by the president or a vice president, a general partner or trustee
thereof, as the case may be, or a proxy appointed by any of the foregoing
individuals, unless some other person who has been appointed to vote such Shares
pursuant to a bylaw or a resolution of the governing body of such corporation or
other entity or agreement of the partners of a partnership presents a certified
copy of such bylaw, resolution or agreement, in which case such person may vote
such Shares. Any director or other fiduciary may vote Shares registered in his
or her name as such fiduciary, either in person or by proxy.
(b) Shares Held by Certain Persons. Shares registered in the name of a
person adjudged incompetent may be voted and all rights incident thereto may be
exercised only by his
<PAGE>
Exhibit 3.2
guardian, in person or by proxy. Shares registered in the name of a deceased
person may be voted and all rights incident thereto may be exercised only by his
executor or administrator, in person or by proxy. Shares registered in the name
of a minor may be voted and all rights incident thereto may be exercised by his
guardian, in person or by proxy, or in the absence of such representation by his
guardian, by the minor, in person or by proxy, whether or not the Trust has
notice, actual or constructive, of the minority or the appointment of a
guardian, and whether or not a guardian has in fact been appointed.
(c) Shares Held by Two or More Persons. Shares registered in the names of
two or more persons shall be voted or represented in accordance with the vote or
consent of the majority of the persons in whose names the Shares stand. If only
one such person is present in person or by proxy, he or she may vote all the
Shares, and all the Shares standing in the names of such persons are represented
for the purpose of determining a quorum. This procedure also applies to the
voting of Shares by two or more administrators, executors, trustees or other
fiduciaries, unless the instrument or order of court appointing them otherwise
directs.
(d) Shares Held by the Trust. Shares of the Trust directly or indirectly
owned by it shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding Shares entitled to be voted at any
given time, unless they are held by it in a fiduciary capacity, in which case
they may be voted and shall be counted in determining the total number of
outstanding Shares at any given time.
(e) Certifications of Beneficial Ownership. The Board of Trustees (the
"Board") may adopt by resolution a procedure by which a Shareholder may certify
in writing to the Trust that any Shares registered in the name of the
Shareholder are held for the account of a specified person other than the
Shareholder. The resolution shall set forth: the class of Shareholders who may
make the certification; the purpose for which the certification may be made; the
form of certification; the information to be contained in it; if the
certification is with respect to a record date or closing of the Share transfer
books, the time after the record date or closing of the Share transfer books
within which the certification must be received by the Trust; and any other
provisions with respect to the procedure which the Board considers necessary or
desirable. On receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in the
certification, the Shareholder of record of the specified Shares in place of the
Shareholder who makes the certification.
Section 10. Inspectors. At any meeting of Shareholders, the chairman of
the meeting may, or upon the request of any Shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of Shares represented at the meeting based on their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with
3
<PAGE>
Exhibit 3.2
impartiality and fairness to all the Shareholders. Each report of an inspector
shall be in writing and signed by him or by a majority of them if there is more
than one inspector acting at such meeting. If there is more than one inspector,
the report of a majority shall be the report of the inspectors. The report of
the inspector or inspectors on the number of Shares represented at the meeting
and the results of the voting shall be prima facie evidence thereof.
Section 11. Action Without Meetings. Any action required or permitted to
be taken at a meeting of Shareholders may be taken without a meeting if there is
filed with the records of Shareholders' meetings a unanimous written consent
which sets forth the action and is signed by each Shareholder entitled to vote
on the matter and a written waiver of any rights to dissent signed by each
Shareholder entitled to notice of the meeting but not entitled to vote at such
meeting.
Section 12. Nominations and Proposals by Shareholders.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board and the proposal
of business to be considered by the Shareholders may be made at an annual
meeting of Shareholders (i) pursuant to the Trust's notice of a meeting, (ii) by
or at the direction of the Board or (iii) by any Shareholder of the Trust who
was a Shareholder of record at the time of the giving of notice provided for in
this Section 12(a) and at the time of the annual meeting, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
this Section 12(a).
(2) For nominations or other business to be properly brought before
an annual meeting by a Shareholder pursuant to clause (iii) of paragraph (a)(1)
of this Section 12, the Shareholder must have given timely notice thereof in
writing to the Secretary and such nomination or other business must otherwise be
a proper matter for action by Shareholders. To be timely, a Shareholder's notice
shall be delivered to the Secretary at the principal executive offices of the
Trust not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the proxy statement released to shareholders in
connection with the preceding year's annual meeting of shareholders; provided,
however, that if the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary of the preceding year's
annual meeting, notice by the Shareholder to be timely must be so delivered (x)
not more than 120 days prior to the first anniversary of the date of the proxy
statement released to shareholders in connection with the preceding year's
annual meeting nor less than 90 days prior to the first anniversary of the date
of the proxy statement released to shareholders in connection with the preceding
year's annual meeting or (y) not later than the close of business on the tenth
day following the day on which public announcement of the date of such meeting
is first made by the Trust. Such Shareholder's notice shall set forth (i) as to
each person whom the Shareholder proposes to nominate for election or reelection
as a Trustee all information relating to such person
4
<PAGE>
Exhibit 3.2
which is required to be disclosed in solicitations of proxies for election of
Trustees, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Trustee if elected); (ii) as to any other
business which the Shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such Shareholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the Shareholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such Shareholder, as they appear on the
Trust's books, and of such beneficial owner, (y) the number of Shares of each
class of the Trust which are owned beneficially and of record by such
Shareholder and such beneficial owner and (z) in the case of a nomination, (A) a
description of all arrangements or understandings between such Shareholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such Shareholder, (B) a
representation that such Shareholder intends to appear in person or by proxy at
the meeting, if there is a meeting, to nominate the persons named in its notice
and (C) any other information relating to such Shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of Trustees
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 12 to the contrary, if the number of Trustees to be
elected to the Board is increased and there is no public announcement by the
Trust naming all of the nominees for Trustee or specifying the size of the
increased Board at least 100 days prior to the first anniversary of the date of
the proxy statement released to shareholders in connection with the preceding
year's annual meeting of shareholders, a Shareholder's notice required by this
Section 12(a) shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Trust not later than the
close of business on the tenth day following the day on which such public
announcement is first made by the Trust.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of Shareholders as shall have been brought before
the meeting pursuant to the Trust's notice of meeting. Nominations of persons
for election to the Board may be made at a special meeting of Shareholders at
which Trustees are to be elected (i) pursuant to the Trust's notice of meeting,
(ii) by or at the direction of the Board or (iii) provided that the Board has
determined that Trustees shall or may be elected at such special meeting, by any
Shareholder of the Trust who was a Shareholder of record both at the time of
giving of notice provided for in this Section 12(b) and at the time of the
special meeting, who is entitled to vote at the meeting and who
5
<PAGE>
Exhibit 3.2
complied with the notice procedures set forth in this Section 12(b). If the
Trust calls a special meeting of Shareholders for the purpose of electing one or
more Trustees to the Board, any such Shareholder may nominate a person or
persons (as the case may be) for election to such position as specified in the
Trust's notice of meeting, if the Shareholder's notice containing the
information required by paragraph (a)(2) of this Section 12 shall be delivered
to the Secretary at the principal executive offices of the Trust (A) not more
than 120 days prior to such special meeting nor less than 90 days prior to such
special meeting or (B) not later than the close of business on the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected at such
meeting.
(c) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as Trustees
and only such business shall be conducted at a meeting of Shareholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 12. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed in accordance with the procedures set forth in this
Section 12 and, if any proposed nomination or business is not in compliance with
this Section 12, to declare that such nomination or proposal shall be
disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the Trust
with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 12, a
Shareholder shall also comply with all applicable requirements of Maryland law
and of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 12. Nothing in this Section 12 shall be
deemed to affect any rights of Shareholders to request inclusion of, nor any
rights of the Trust to omit, proposals in the Trust's proxy statement pursuant
to Rule 14a-8 under the Exchange Act.
Section 13. Voting by Ballot. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any Shareholder
shall demand that voting be by ballot.
6
<PAGE>
Exhibit 3.2
ARTICLE II. TRUSTEES
Section 1. Annual And Regular Meetings. An annual meeting of the Board
shall be held immediately after and at the same place as the annual meeting of
Shareholders, no notice other than this bylaw being necessary. The Board may
provide, by resolution, the time and place, either within or without the State
of Maryland, for the holding of regular meetings of the Board without other
notice than such resolution.
Section 2. Special Meetings. Special meetings of the Board may be called
by or at the request of the Chairman of the Board (or any Co-Chairman of the
Board, if there is more than one), the Chief Executive Officer or by a majority
of the Trustees then in office. The person or persons authorized to call special
meetings of the Board may fix any place, either within or without the State of
Maryland, as the place for holding any special meeting of the Board called by
them.
Section 3. Notice. Notice of any special meeting of the Board shall be
delivered personally or by telephone, facsimile transmission, United States mail
or courier to each Trustee at his or her business or residence address. Notice
by personal delivery, by telephone or a facsimile transmission shall be given at
least two days prior to the meeting. Notice by mail shall be given at least five
days prior to the meeting and shall be deemed to be given when deposited in the
United States mail properly addressed, with postage thereon prepaid. Telephone
notice shall be deemed to be given when the Trustee is personally given such
notice in a telephone call to which he is a party. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the message
to the number given to the Trust by the Trustee and receipt of a completed
transmission indicating receipt. Neither the business to be transacted at, nor
the purpose of, any annual, regular or special meeting of the Board need be
stated in the notice, unless specifically required by statute or these Bylaws.
Section 4. Waiver of Notice. Whenever any notice of a meeting of the Board
or any committee thereof is required to be given pursuant to the Declaration of
Trust or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the Trustee or Trustees entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any Trustee at any meeting shall
constitute a waiver of notice of such meeting, except where such Trustee attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Section 5. Organization. A majority of the Board may designate or elect a
Trustee to preside at Board meetings. In the absence of such designation or
election, the Chairman of the
7
<PAGE>
Exhibit 3.2
Board (or any Co-Chairman of the Board, if there is more than one) or the Chief
Executive Officer shall preside at Board meetings; in his absence, the Trustees
present at each meeting shall elect one of the Trustees present as chairman. All
rules of conduct adopted and used at Board meetings shall be determined by the
chairman, whose ruling on all procedural matters shall be final.
Section 6. Quorum. If less than a quorum of Trustees is present at a
meeting, a majority of the Trustees present may adjourn the meeting from time to
time without further notice, and further provided that if, pursuant to the
Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a majority
of such group. The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section 7. Voting at Meetings. Voting at Board meetings may be conducted
orally, by show of hands, or, if requested by any Trustee, by written ballot.
The results of all voting shall be recorded by the Secretary in the minute book.
Section 8. Telephone Meetings. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. Compensation. Trustees shall not receive any stated salary for
their services as Trustees but, by resolution of the Board, may receive fixed
sums per year and/or per meeting and/or per visit to real property owned or to
be acquired by the Trust and for any service or activity they performed or
engaged in as Trustees. Trustees may be reimbursed for expenses of attendance,
if any, at each annual, regular or special meeting of the Board or of any
committee thereof and for their expenses, if any, in connection with each
property visit and any other service or activity they performed or engaged in as
Trustees; but nothing herein contained shall be construed to preclude any
Trustees from serving the Trust in any other capacity and receiving compensation
therefor.
Section 10. Distributions. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Trust available
for dividends or other distributions such sum or sums as the Board may from time
to time, in its absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for repairing or
maintaining any property of the Trust or for such other purpose as the Board
shall determine to be in the best interest of the Trust and the Board may modify
or abolish any such reserve in the manner in which it was created.
8
<PAGE>
Exhibit 3.2
Section 11. Investment Policy. Subject to the provisions of the
Declaration of Trust, the Board may from time to time adopt, amend, revise or
terminate any policy or policies with respect to investments by the Trust as it
shall deem appropriate in its sole discretion.
Section 12. Loss of Deposits. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association or other institution with whom moneys or shares have been
deposited.
Section 13. Surety Bonds. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his or her duties.
Section 14. Reliance. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his or her duties with respect to the Trust,
be fully justified and protected with regard to any act or failure to act in
reliance in good faith on the books of account or other records of the Trust, on
an opinion of counsel or on reports made to the Trust by any of its officers or
employees or by the adviser, accountants, appraisers or other experts or
consultants selected by the Board or officers of the Trust, regardless of
whether such counsel or expert may also be a Trustee.
Section 15. Certain Rights of Trustees, Officers, Employees And Agents.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the Trust, in
his or her personal capacity or in a capacity as an affiliate, employee or agent
of any other person, or otherwise, may have business interests and engage in
business activities similar to or in addition to or in competition with those of
or relating to the Trust.
ARTICLE III. COMMITTEES
Section 1. Number, Tenure And Qualifications. The Board may appoint from
among its members an Executive Committee, an Audit Committee, an Executive
Compensation Committee, an Investment Committee and other committees, composed
of one or more Trustees, to serve at the pleasure of the Board.
Section 2. Meetings. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board. A majority of the
members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The Board may designate a chairman of
any committee and such chairman or any two members of any committee may fix the
time and place of its meeting unless the Board shall otherwise provide. In the
absence of any member of any such committee, the members thereof present at any
meeting,
9
<PAGE>
whether or not they constitute a quorum, may appoint another Trustee to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.
Section 3. Telephone Meetings. Members of a committee of the Board may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 4. Informal Action by Committees. Any action required or permitted
to be taken at any meeting of a committee of the Board may be taken without a
meeting, if a consent in writing to such action is signed by each member of the
committee and such written consent is filed with the minutes of proceedings of
such committee.
Section 5. Vacancies. Subject to the provisions hereof, the Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member or to dissolve any such committee.
ARTICLE IV. OFFICERS
Section 1. General Provisions. The officers of the Trust shall be elected
annually by the Board at the first meeting of the Board held after each annual
meeting of Shareholders, except that the Chairman of the Board (or any Co-
Chairman of the Board, if there is more than one) or the Chief Executive Officer
may appoint a President, a Chief Operating Officer, a Chief Financial Officer
and a Treasurer, and one or more Managing Directors, Vice Presidents, Assistant
Secretaries and Assistant Treasurers, or such other officers as the Board, the
Chairman of the Board or the Chief Executive Officer shall deem proper. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his or her successor is elected and qualifies or until his or her death,
resignation or removal in the manner hereinafter provided. Any two or more
offices may be held by the same person. In its discretion, the Board may leave
unfilled any office except that of Chairman of the Board (or Co-Chairman of the
Board, if there is more than one) and Secretary. Any two offices except
President and Vice President may be held concurrently by the same person.
Section 2. Resignation. Any officer of the Trust may resign at any time by
giving written notice of his or her resignation to the Board, the Chairman of
the Board (or any Co-Chairman of the Board, if there is more than one), the
Chief Executive Officer or the Secretary. Any resignation shall take effect at
any time subsequent to the time specified therein or, if the time when it shall
become effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in
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the resignation. Such resignation shall be without prejudice to the contract
rights, if any, of the Trust.
Section 3. Vacancies. A vacancy in any office may be filled by the Board
for the balance of the term.
Section 4. Chairman of The Board. The Chairman of the Board (or the Co-
Chairmen of the Board in the order of their election, if there is more than one)
shall also serve as the Chief Executive Officer and, as such, shall have general
supervision, direction and control of the business and affairs of the Trust,
subject to the control of the Board, shall preside at meetings of Shareholders
and shall have such other functions, authority and duties as customarily
appertain to the office of the chief executive of a business corporation or as
may be prescribed by the Board.
Section 5. Chief Executive Officer. The Chief Executive Officer, if
elected, shall be the chief executive officer of the Trust and, as such, shall
have general supervision, direction and control of the business and affairs of
the Trust, subject to the control of the Board, shall preside at meetings of
Shareholders and shall have such other functions, authority and duties as
customarily appertain to the office of the chief executive of a business
corporation or as may be prescribed by the Board or the Chairman of the Board.
Section 6. President. The President shall have such functions, authority
and duties as may be prescribed by the Board or the Chairman of the Board (or
any Co-Chairman of the Board, if there is more than one).
Section 7. Managing Director. The Managing Director (or the Managing
Directors, if there is more than one), shall have such functions, authority and
duties, and shall have such additional descriptive designations in his or her
title (if any), as may be prescribed by the Board, the Chairman of the Board (or
any Co-Chairman of the Board, if there is more than one), the Chief Executive
Officer or the President.
Section 8. Chief Operating Officer. The Chief Operating Officer shall
have such functions, authority and duties, and have such additional descriptive
designations in his or her title (if any), as may be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer or the President.
Section 9. Chief Financial Officer. The Chief Financial Officer shall
have the custody of the funds and securities of the Trust and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Trust and shall deposit all moneys and other valuable effects in the name and to
the credit of the Trust in such depositories as may be designated by the Board
and shall perform such other duties as may be prescribed by the Board,
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the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer or the President.
Section 10. Vice Presidents. Each Vice President shall have such
functions, authority and duties, and have such additional descriptive
designations in his or her title (if any), as may be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer, the President or any Managing Director.
Section 11. Secretary. The Secretary shall keep a record of all
proceedings of the Shareholders of the Trust and of the Board and shall perform
like duties for the standing committees when required. The Secretary shall give,
or cause to be given, notice, if any, of all meetings of the Shareholders and
shall perform such other duties as may be prescribed by the Board, the Chairman
of the Board (or any Co-Chairman of the Board, if there is more than one), the
Chief Executive Officer or the President. The Secretary shall have custody of
the corporate seal of the Trust and the Secretary or, in the absence of the
Secretary, any Assistant Secretary shall have authority to affix the same to any
instrument requiring it and when so affixed it may be attested by the signature
of the Secretary or any Assistant Secretary. The Board may give general
authority to any other officer to affix the seal of the Trust and to attest such
affixing of the seal.
Section 12. Assistant Secretary. The Assistant Secretary, or if there is
more than one, the Assistant Secretaries in the order determined by the Board
(or if there is no such determination, then in the order of their election),
shall, in the absence of the Secretary or if the Secretary is unable or refuses
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties as may from time to time be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer, the President or the Secretary.
Section 13. Treasurer. The Treasurer shall have such functions, authority
and duties, and have such additional descriptive designations in his or her
title (if any), as may be prescribed by the Board, the Chairman of the Board (or
any Co-Chairman of the Board, if there is more than one), the Chief Executive
Officer or the President.
Section 14. Assistant Treasurer. The Assistant Treasurer, or if there is
more than one, the Assistant Treasurers in the order determined by the Board (or
if there is no such determination, then in the order of their election), shall,
in the absence of the Treasurer or if the Treasurer is unable or refuses to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties as may from time to time be prescribed by the Board, the
Chairman of the Board (or any Co-Chairman of the Board, if there is more than
one), the Chief Executive Officer, the President or the Treasurer.
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Section 15. Salaries. The salaries and other compensation of the officers
shall be fixed from time to time by the Board and no officer shall be prevented
from receiving such salary or other compensation by reason of the fact that he
or she is also a Trustee.
Section 16. Execution of Documents. A person who holds more than one
office in the Trust may not act in more than one capacity to execute,
acknowledge or verify an instrument required by law to be executed, acknowledged
or verified by more than one officer.
Section 17. Bonds. The Board may require any officer, agent or employee
of the Trust to give a bond to the Trust, conditioned on the faithful discharge
of his or her duties, with one or more sureties and in such amount as may be
satisfactory to the Board.
ARTICLE V. INDEMNIFICATION
Section 1. Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the Trustee or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent jurisdiction, if (i) the Trust denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be reimbursed by the Trust. It shall be a
defense to any action for advance of expenses that (a) a determination has been
made that the facts then known to those making the determination would preclude
indemnification or (b) the Trust has not received both (i) an undertaking as
required by law to repay such advances if it shall ultimately be determined that
the standard of conduct has not been met and (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good faith belief that the
standard of conduct necessary for indemnification by the Trust has been met.
Section 2. Exclusivity, Etc. The indemnification and advance of expenses
provided by the Declaration of Trust and these Bylaws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advance of expenses may be entitled under any law (common or statutory), or any
agreement, vote of Shareholders or disinterested Trustees or other provision
which is consistent with law, both as to action in his or her official capacity
and as to action in another capacity while holding office or while employed by
or acting as agent for the Trust, shall continue in respect of all events
occurring while a person was a Trustee or officer after such person has ceased
to be a Trustee or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such person. All rights to indemnification and
advancement of expenses under the Declaration of Trust and these Bylaws shall be
deemed to be a contract between the Trust and each Trustee or officer of the
Trust who serves or served in such capacity
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at any time while such provisions are in effect. Nothing herein shall prevent
the amendment of these Bylaws, provided that no such amendment shall diminish
the rights of any person hereunder with respect to events occurring or claims
made before its adoption or as to claims made after its adoption in respect of
events occurring before its adoption. Any repeal or modification of these Bylaws
shall not in any way diminish any rights to indemnification or advancement of
expenses of such Trustee or officer of the obligations of the Trust arising
hereunder with respect to events occurring, or claims made, while these Bylaws
or any provision hereof is in effect.
ARTICLE VI. CONTRACTS AND ACCOUNTING
Section 1. Contracts. The Board may authorize any officer or agent to
enter into any contract or to execute and deliver any instrument in the name of
and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding on the Board and on the Trust when authorized or ratified by
action of the Board.
Section 2. Checks And Drafts. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Trust shall be signed by such officer or agent of the Trust in such manner
as shall from time to time be determined by the Board.
Section 3. Deposits. All funds of the Trust not otherwise employed shall
be deposited from time to time to the credit of the Trust in such banks, trust
companies or other depositories as the Board may designate.
Section 4. Books and Records. The Trust shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Shareholders and Board and of any executive or other
committee when exercising any of the powers of the Board. The books and records
of the Trust may be in written form or in any other form which can be converted
within a reasonable time into written form for visual inspection. Minutes shall
be recorded in written form but may be maintained in the form of a reproduction.
The original or a certified copy of the Bylaws shall be kept at the principal
office of the Trust.
Section 5. Fiscal Year. The fiscal year of the Trust shall be the twelve
months ending December 31 in each year, unless otherwise provided by the Board.
ARTICLE VII. SHARES
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Section 1. Certificates. Each Shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
Shares of each class held by him or her in the Trust; provided, however, that
the Board may provide by resolution or resolutions that some or all of any class
or series of Shares shall be uncertificated. Each certificate shall be signed by
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the President or a Vice President and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be
sealed with the seal, if any, of the Trust. The signatures may be either manual
or facsimile. Certificates shall be consecutively numbered; and if the Trust
shall, from time to time, issue several classes of Shares, each class may have
its own number series. A certificate is valid and may be issued whether or not
an officer who signed it is still an officer when it is issued. Each certificate
representing Shares which are restricted as to their transferability or voting
powers, which are preferred or limited as to their dividends or as to their
allocable portion of the assets upon liquidation or which are redeemable at the
option of the Trust, shall have a statement of such restriction, limitation,
preference or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Trust has authority to issue Shares of more than one class,
the certificate shall contain on the face or back a full statement or summary of
the designations and any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class of Shares
and, if the Trust is authorized to issue any preferred or special class in
series, the differences in the relative rights and preferences between the
Shares of each series to the extent they have been set and the authority of the
Board to set the relative rights and preferences of subsequent series. In lieu
of such statement or summary, the certificate may state that the Trust will
furnish a full statement of such information to any Shareholder upon request and
without charge. If any class of Shares is restricted by the Trust as to
transferability, the certificate shall contain a full statement of the
restriction or state that the Trust will furnish information about the
restrictions to the Shareholder on request and without charge.
Section 2. Transfers. Upon surrender to the Trust or the transfer agent of
the Trust of a Share certificate duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, the Trust shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction on its books. Notwithstanding the foregoing, transfers of
Shares of any class will be subject in all respects to the Declaration of Trust
and all of the terms and conditions contained therein.
Section 3. Replacement Certificate. Any officer designated by the Board
may direct a new certificate to be issued in place of any certificate previously
issued by the Trust alleged to have been lost, stolen or destroyed upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen or destroyed. When authorizing the issuance of a new certificate,
an officer designated by the Board may, in his or her discretion and as a
condition
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<PAGE>
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or the owner's legal representative to advertise the same
in such manner as he or she shall require and/or to give bond, with sufficient
surety, to the Trust to indemnify it against any loss or claim which may arise
as a result of the issuance of a new certificate.
Section 4. Closing of Transfer Books or Fixing of Record Date.
(a) Fixing of Record Date. The Board may set, in advance, a record date
for the purpose of determining Shareholders entitled to notice of or to vote at
any meeting of Shareholders or determining Shareholders entitled to receive
payment of any dividend or the allotment of any other rights, or in order to
make a determination of Shareholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record date
is fixed and shall be not more than 90 days, and in the case of a meeting of the
Shareholders not less than ten days, before the date on which the particular
action requiring such determination of Shareholders of record is to be held or
taken. In lieu of fixing a record date, the Board may provide that the Share
transfer books shall be closed for a stated period but not longer than 20 days.
(b) If Record Date Not Fixed. If no record date is fixed and the Share
transfer books are not closed for the determination of Shareholders, the record
date for the determination of Shareholders entitled to receive a payment of a
dividend or an allotment of any other rights shall be the close of business on
the day on which the resolution of the Board, declaring the dividend or
allotment of rights, is adopted.
(c) Record Dates for Adjourned Meetings. When a determination of
Shareholders entitled to vote at any meeting of Shareholders has been made as
provided in the Declaration of Trust, such determination shall apply to any
adjournment thereof, except when the meeting is adjourned to a date more than
120 days after the record date fixed for the original meeting, in which case a
new record date shall be determined as set forth in the Declaration of Trust.
(d) Share Transfers After Record Date. Except where the Board fixes a new
record date for any adjourned meeting as provided above, any Shareholder who was
a Shareholder on the original record date shall be entitled to receive notice of
and to vote at a meeting of Shareholders or any adjournment thereof and to
receive a dividend or allotment of rights even though he or she has since such
date disposed of his or her Shares, and no Shareholder becoming a Shareholder
after such date shall be entitled to receive notice of or to vote at such
meeting or any adjournment thereof or to receive such dividend or allotment of
rights.
(e) Paying of Pro Rata Dividends. Notwithstanding anything in this Section
4 to the contrary, the Board may declare and pay dividends or an allotment or
any other rights to those
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who are Shareholders as of a specified record date or, alternatively, to those
who are or were Shareholders at any time during any quarter, year or other
applicable period with respect to which any such dividend or allotment of rights
is paid so that each Shareholder shall receive, with respect to each Share, the
proportion of such dividend or allotment of rights per Share which the number of
days each Share is owned of record by such Shareholder during such quarter, year
or other applicable period bears to the total number of days in such quarter,
year or other applicable period.
Section 5. Share Ledger. The Trust shall maintain at its principal office
or at the office of its counsel, accountants or transfer agent, an original or
duplicate Share ledger containing the name and address of each Shareholder and
the number of Shares of each class held by such Shareholder. The Trust shall be
entitled to treat the holder of record of any Share as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such Share or on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of the State of Maryland.
Section 6. Fractional Shares; Issuance of Units. The Board may issue
fractional Shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other provision
of the Declaration of Trust or these Bylaws to the contrary, the Board may issue
units consisting of different securities of the Trust. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Trust, except that the Board may provide that, for a specified period,
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII. SEAL
Section 1. Seal. The Board may adopt a suitable seal, bearing the name of
the Trust, which shall be in the charge of the Secretary. The Board may
authorize one or more duplicate seals and provide for the custody thereof.
Section 2. Affixing Seal. Whenever the Trust is permitted or required to
affix its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
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Exhibit 10.7
FORM OF
CHANGE IN CONTROL AGREEMENT
This Agreement entered into as of the 30th day of November, 1999, by and
between Archstone Communities Trust, a Maryland real estate investment trust
("REIT") (the "Trust"), and [insert name] (the "Executive").
- ------ ----- ---------
WHEREAS the Trust wishes to assure itself of the continuity of the
Executive's services in the event of any change in control of the Trust;
WHEREAS the Trust and the Executive accordingly desire to enter into this
Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the promises and mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed by and between
the parties as follows:
1. Term of Agreement. The term of this Agreement (the "Term") shall
----------------- ----
commence on the date hereof and shall continue through December 31, 2000;
provided, however, that on such date and on each December 31 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than sixty (60) days prior to December 31 either party shall
have given notice that such party does not wish to extend the Term; and
provided, further, that if a Change in Control (as defined in Paragraph 3 below)
shall have occurred during the original or any extended Term of this Agreement,
the Term of this Agreement shall continue for a period of [insert thirty-six for
Tier 1, or twenty-four for Tier 2] calendar months beyond the calendar month in
which such Change in Control occurs.
2. Employment After Change in Control. If the Executive is in the employ
----------------------------------
of the Trust on the date of a Change in Control, the Trust hereby agrees to
continue Executive in its employ for the period commencing on the date of the
Change in Control and ending on the last day of the Term of this Agreement (the
"Employment Period"). During the Employment Period, the Executive shall hold
such position with the Trust and exercise such authority and perform such duties
as are substantially commensurate with the Executive's position, authority and
duties immediately prior to the Change in Control. The Executive agrees that,
during the Employment Period, the Executive shall devote his full professional
-----------------
time and attention to the Executive's duties and perform such duties faithfully
and efficiently; provided, however, that nothing in this Agreement shall prevent
the Executive from voluntarily resigning from employment upon 30 days' written
notice to the Trust under circumstances which do not constitute a Termination
(as defined in Paragraph 5 below).
<PAGE>
3. Change in Control. For purposes of this Agreement, "Change in Control"
----------------- -----------------
means the occurrence of any of the following:
a. the shareholders of the Trust approve a definitive agreement to
merge the Trust into or consolidate the Trust with another entity, sell or
otherwise dispose of all or substantially all of its assets, or adopt a plan of
liquidation. However, a Change in Control shall not be deemed to have occurred
by reason of a transaction (or a substantially concurrent or otherwise related
series of transactions) (a "Transaction") upon the completion of which 75% or
-----------
more of the beneficial ownership of the voting power of the Trust, the surviving
corporation or corporation directly or indirectly controlling the Trust or the
surviving corporation, as the case may be, is held by the same persons (although
not necessarily in the same proportion) as held the beneficial ownership of the
voting power of the Trust immediately prior to the Transaction (except that upon
the completion thereof, employees or employee benefit plans of the Trust may be
a new holder of such beneficial ownership); provided, however, that in the event
that the shareholders of the Trust immediately prior to the consummation of a
Transaction beneficially own (not giving effect to any shares beneficially owned
by such persons in any party to the Transaction other than the Trust) less than
75% of the voting power of the Trust, the surviving corporation or corporation
directly or indirectly controlling the Trust or the surviving corporation, as
the case may be, immediately after the consummation of the Transaction, then a
Change in Control shall be deemed to have occurred. A transaction with an
"Affiliate" of the Trust (as defined in the Securities Exchange Act of 1934, as
---------
amended (the "Exchange Act")) shall not be treated as a Change in Control; or,
------------
b. the "beneficial ownership" (as defined in Rule 13(d)(3) under the
--------------------
Exchange Act) of securities representing 25% or more of the combined voting
power of the Trust is acquired, other than from the Trust, by any "person" as
defined in Sections 13(d) and 14(d) of the Exchange Act (other than by any
trustee or other fiduciary holding securities under an employee benefit plan or
other similar stock plan of the Trust), provided that any purchase by Security
Capital Group Incorporated or any of its Affiliates of securities representing
50% or more of the combined voting power of the Trust shall not be treated as a
Change in Control; or
c. at any time during any period of two consecutive years,
individuals who at the beginning of such period were members of the Board of
Trustees of the Trust cease for any reason to constitute at least a majority
thereof (unless the election, or the nomination for election by the Trust's
shareholders, of each new Trustee was approved by a vote of at least two-thirds
of the Trustees still in office at the time of such election or nomination who
were trustees at the beginning of such period).
4. Compensation During the Employment Period. During the Employment
-----------------------------------------
Period, the Executive shall be compensated as follows:
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<PAGE>
a. The Executive shall receive an annual salary which is not less
than his annual salary immediately prior to the Employment Period and shall be
eligible to receive an increase in annual salary which is not materially less
favorable than the average increases in salary for the Trust's other executives
with comparable duties and responsibilities;
b. the Executive shall be eligible to participate in short-term and
long-term cash-based incentive compensation plans which, in the aggregate,
provide bonus opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided to the Trust's
other executives with comparable duties and responsibilities; and, (ii) the
opportunities provided to the Executive under all such plans in which the
Executive was participating prior to the Employment Period;
c. the Executive shall be eligible to participate in stock option,
performance awards, restricted stock and other equity-based incentive
compensation plans (the "Plans") on a basis not materially less favorable to the
-----
Executive than the greater of the Plans available (i) to the Executive
immediately prior to the Employment Period, or (ii) to other executives of the
Trust with comparable duties and responsibilities; and,
d. the Executive shall be eligible to receive employee benefits
(including, but not limited to, tax-qualified and nonqualified savings plan
benefits, medical insurance, disability income protection, life insurance
coverage and death benefits) and perquisites which are not materially less
favorable to the Executive than the greater of (i) the employee benefits and
perquisites provided to the Trust's other executives with comparable duties and
responsibilities, or (ii) the employee benefits and perquisites to which the
Executive would be entitled under the Trust's employee benefit plans and
perquisites as in effect immediately prior to the Employment Period.
5. Termination. For purposes of this Agreement, the term "Termination"
----------- -----------
shall mean termination of the employment of the Executive during the Employment
Period (i) by the Trust, for any reason other than death, Disability (as defined
below) or Cause (as described below), or (ii) by resignation of the Executive
upon the occurrence of one of the following events:
a. a material adverse change in the nature or scope of the
Executive's [title], position, authority or duties, a breach of any of the
subparagraphs of Paragraph 4 above, or the breach by the Trust of any other
provision of this Agreement;
b. a material reduction in the base salary and/or target bonus
received by the Executive;
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<PAGE>
c. the relocation of the Executive's office to a location more than
thirty miles from the location of the Executive's office immediately prior to
the Employment Period;
d. the failure of the Trust to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Paragraph 19 below.
The date of the Executive's Termination under this Paragraph 5 shall be the
date specified by the Executive or the Trust, as the case may be, in a written
notice to the other party complying with the requirements of Paragraph 15 below.
For purposes of this Agreement, the Executive shall be considered to have a
"Disability" during the period in which the Executive is unable, by reason of a
----------
medically determinable physical or mental impairment, to engage in the material
and substantial duties of his regular occupation, which condition is expected to
be permanent. For purposes of this Agreement, "Cause" means, in the reasonable
-----
judgment of the Board of Trustees of the Trust, (i) the willful and continued
failure by the Executive to substantially perform the Executive's duties with
the Trust, after written notification by the Trust of such failure, (ii) the
willful engaging by the Executive in conduct which is demonstrably injurious to
the Trust, monetarily or otherwise, or (iii) the engaging by Executive in
egregious misconduct involving serious moral turpitude. For purposes of this
Agreement, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that such action was in the best interest of the
Trust.
6. Severance Payments. Subject to the provisions of Paragraph 9 below, in
------------------
the event of a Termination described in Paragraph 5 above, in lieu of the amount
otherwise payable under Paragraph 4 above, the Executive shall continue to
receive, at the Trust's expense, medical insurance, disability income
protection, life insurance coverage and death benefits, and perquisites in
accordance with Subparagraph 4(d) above for a period of [insert thirty-six
months for Tier 1, or twenty-four months for Tier 2] after the date of
Termination (under COBRA or through an individual conversion policy, as
appropriate), and shall be entitled to a lump sum payment in cash no later than
ten (10) business days after the date of Termination equal to the sum of:
a. the Executive's unpaid salary, accrued vacation pay and
unreimbursed business expenses through and including the date of Termination;
b. an amount equal to [insert 3 for Tier 1, or 2 for Tier 2] times
the Executive's annual salary rate plus an amount equal to [insert 3 for Tier 1,
or 2 for Tier 2] times the Executive's target bonus award in effect immediately
prior to the date of Termination.
4
<PAGE>
c. an amount equal to the assigned target bonus for the Executive
for the year of Termination prorated through the date of Termination.
7. Deferred Compensation Plans.
---------------------------
a. For purposes of this Paragraph, "deferred compensation plans"
-------- ------------ -----
shall mean all nonqualified deferred compensation plans presently maintained by
the Trust or adopted in the future by the Trust, including without limitation
the Archstone Communities Trust Nonqualified Savings Plan. If a Change in
Control occurs during the original or any extended Term of this Agreement, the
Trust shall, within thirty (30) days after the date of such Change in Control,
establish a "rabbi trust" and transfer to such "rabbi trust" an amount of cash
sufficient to provide all benefits accrued by the Executive under all deferred
compensation plans. Thereafter, the Trust will, at least quarterly, transfer to
the "rabbi trust" an amount of cash sufficient to provide any additional
benefits accrued by the Executive under all deferred compensation plans.
b. In the event of a Termination as set forth in Paragraph 5 above
(and only in the event of such Termination): any election by the Executive as to
the form of payment of benefits under the Archstone Communities Trust
Nonqualified Savings Plan that is made within thirty (30) days after the date of
Change in Control, and before the Executive is entitled to such benefits, will
be given effect, whether or not such election was on file at least twelve (12)
months prior to such Termination.
8. Share Awards. In the event of a Termination as set forth in Paragraph
------------
5 above, the restrictions on any outstanding share awards (including
nonqualified options, incentive share options, matching share options, purchased
shares and restricted share units) granted to Executive under any incentive plan
or arrangement shall lapse and such share awards shall become 100% vested, and
all other awards granted to Executive shall become immediately exercisable and
shall become 100% vested. The expiration date of Executive's share options shall
be the three-month anniversary of the date of the Termination as set forth in
Paragraph 5 above.
9. Make-Whole Payments. Subject to the following three sentences, if any
-------------------
payment or benefit to which the Executive is entitled, whether under this
Agreement or otherwise, in connection with a Change in Control or the
Executive's termination of employment (a "Payment") is subject to any tax under
-------
section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
----
any similar federal or state law (an "Excise Tax"), the Trust shall pay to the
----------
Executive an additional amount (the "Make Whole-Amount") which is equal to (i)
-----------------
the amount of the Excise Tax, plus (ii) the aggregate amount of any interest,
penalties, fines or additions to any tax that are imposed in connections with
such Excise Tax, plus (iii) all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state or local
5
<PAGE>
government or taxing authority by reason of the payments required under clause
(i) and clause (ii) and this clause (iii). Such Make Whole-Amount will not be
paid to the Executive if the Payment is less than ten (10) percent above the
maximum amount that may be paid without incurring Excise Tax. In the event that
the Payment is greater than the maximum amount that may be paid without
incurring Excise Tax, but less than 10 percent greater than the maximum amount,
then the Payment shall be capped at the maximum amount that may be paid without
incurring Excise Tax. In such event, the cash severance payments provided in
Paragraph 6 above and/or the outplacement services provided in Paragraph 10
below, at the Executive's election, shall be reduced to a level that results in
the total Payment being equal to the maximum amount that may be paid without
incurring Excise Tax.
a. For purposes of determining the Make-Whole Amount, the Executive
shall be deemed to be taxed at the highest marginal rate under all applicable
local, state, federal and foreign income tax laws for the year in which the
Make-Whole Amount is paid. The Make-Whole Amount payable with respect to an
Excise Tax shall be paid by the Trust coincident with the Payment with respect
to which such Excise Tax relates.
b. All calculations under this Paragraph 9 shall be made initially
by the Trust and the Trust shall provide prompt written notice thereof to the
Executive to enable the Executive to timely file all applicable tax returns.
Upon request of the Executive, the Trust shall provide the Executive with
sufficient tax and compensation data to enable the Executive or his tax advisor
to independently make the calculations described in subparagraph (a) above and
the Trust shall reimburse the Executive for reasonable fees and expenses
incurred for any such verification.
c. If the Executive gives written notice to the Trust of any
objection to the results of the Trust's calculations within sixty (60) days of
the Executive's receipt of written notice thereof, the dispute shall be referred
for determination to tax counsel selected by the independent auditors of the
Trust ("Tax Counsel"). The Trust shall pay all reasonable fees and expenses of
-----------
such Tax Counsel. Pending such determination by Tax Counsel, the Trust shall pay
the Executive the Make-Whole Amount as determined by the Trust in good faith.
The Trust shall pay the Executive any additional amount determined by Tax
Counsel to be due under this Paragraph 9 (together with interest thereon at a
rate equal to 120% of the Federal short-term rate compounded daily determined
under section 1274(d) of the Code) promptly after such determination.
d. The determination by Tax Counsel shall be conclusive and binding
upon all parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency (a "Tax
---
Authority") determines that the Executive owes a greater or lesser amount of
- ---------
Excise Tax with respect to any Payment than the amount determined by Tax
Counsel.
6
<PAGE>
e. If a Taxing Authority makes a claim against the Executive which,
if successful, would require the Trust to make a payment under this Paragraph 9,
the Executive agrees to contest the claim, with counsel reasonably satisfactory
to the Trust, on request of the Trust, subject to the following conditions:
(1) The Executive shall notify the Trust of any such claim
within ten (10) days of becoming aware thereof. In the event that the Trust
desires the claim to be contested, it shall promptly (but in no event more than
thirty (30) days after the notice from the Executive or such shorter time as the
Taxing Authority may specify for responding to such claim) request the Executive
to contest the claim. The Executive shall not make any payment of any tax which
is subject of the claim before the Executive has given the notice or during the
thirty (30) day period thereafter unless the Executive receives written
instructions from the Trust to make such payment together with an advance of
funds sufficient to make the requested payment plus any amounts payable under
this Paragraph 9 determined as if such advance were an Excise Tax, in which case
the Executive will act promptly in accordance with such instructions.
(2) If the Trust so requests, the Executive will contest the
claim by either contesting the claim in the United States Tax Court or other
appropriate court, as directed by the Trust; provided, however, that any request
by the Trust for the Executive to pay the tax shall be accompanied by an advance
from the Trust to the Executive of funds sufficient to make the requested
payment plus any amounts payable under this Paragraph 9 determined as if such
advance were an Excise Tax. If directed by the Trust in writing, the Executive
will take all action necessary to compromise or settle the claim, but in no
event will the Executive compromise or settle the claim or cease to contest the
claim without the written consent of the Trust; provided, however, that the
Executive may take any such action if the Executive waives in writing his right
to a payment under this Paragraph 9 for any amounts payable in connection with
such claim. The Executive agrees to cooperate in good faith with the Trust in
contesting the claim and to comply with any reasonable request from the Trust
concerning the contest of the claim, including the pursuit of administrative
remedies, the appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the Trust, the Executive shall
take appropriate appeals of any judgment or decision that would require the
Trust to make a payment under this Paragraph 9. Provided that the Executive is
in compliance with the provisions of this paragraph, the Trust shall be liable
for and indemnify the Executive against any loss in connection with, and all
costs and expenses, including attorneys' fees, which may be incurred as a result
of, contesting the claim, and shall provide to the Executive, within ten (10)
days after each written request therefor by the Executive, cash advances or
reimbursement for all such costs and expenses actually incurred or reasonably
expected to be incurred by the Executive as a result of contesting the claim.
7
<PAGE>
f. Should a Tax Authority finally determine that an additional
Excise Tax is owed, then the Trust shall pay an additional Make-Whole Amount to
the Executive in a manner consistent with this Paragraph 9 with respect to any
additional Excise Tax and any assessed interest, fines, or penalties. If any
Excise Tax as calculated by the Trust or Tax Counsel, as the case may be, is
finally determined by a Tax Authority to exceed the amount required to be paid
under applicable law, then the Executive shall repay such excess to the Trust
within thirty (30) days of such determination; provided that such repayment
shall be reduced by the amount of any taxes paid by the Executive on such excess
which is not offset by the tax benefit attributable to the repayment.
10. Outplacement Services. If the Executive's Termination occurs
---------------------
during the Employment Period, the Trust shall provide to the Executive, at the
Executive's election, outplacement services of an experienced firm, selected by
the Trust and acceptable to the Executive, located not more than thirty miles
from the location of Executive's office immediately prior to the Employment
Period, provided that the cost of such services shall not exceed [insert $20,000
for Tier 1, or $15,000 for Tier 2] and such services shall not extend beyond six
(6) months from the date of Executive's Termination.
11. Pooling of Interests Accounting Treatment. If the application of
-----------------------------------------
any provision of this Agreement, or of the Agreement in its entirety, would
preclude the use of pooling of interests accounting treatment with respect to a
transaction for which such treatment otherwise is available and to be adopted by
the Trust, this Agreement, upon the determination of the Board, shall be
modified as it applies to such transaction, to the minimum extent necessary to
prevent such impact and preserving to the greatest extent possible the
protections and rights afforded the Executive under this Agreement.
12. Deductions and Withholding. All payments to the Executive under
--------------------------
this Agreement will be subject to applicable deductions and withholding of state
and federal taxes.
13. Confidentiality, Non-Solicitation and Non-Competition. The
-----------------------------------------------------
Executive agrees that:
a. Except as may be required by the lawful order of a court or
agency of competent jurisdiction, or except to the extent that the Executive has
the express written authorization from the Trust, the Executive agrees to keep
secret and confidential for a period of two years following the termination of
Executive's employment all non-public information concerning the Trust or any
entity in which the Trust has a 25% or greater ownership interest ("Trust-
-----
Related Entity") which was acquired by or disclosed to Executive during the
- --------------
course of Executive's employment with the Trust or any Trust-Related Entity
controlled by the Trust, and not to disclose the same, either directly or
indirectly, to any other person, firm or business entity or to use it in any
way.
8
<PAGE>
b. While the Executive is employed by the Trust or Trust-
Related Entity and for a period of one year after the date the Executive
terminates employment for any reason, the Executive covenants and agrees that
Executive will not, whether for Executive or for any other person, business,
partnership, association, firm, company or corporation, initiate contact with,
solicit, divert or take away any of the customers (entities or individuals from
which the Trust or any Trust-Related Entity receives rents or payments for
services) of the Trust or any Trust-Related Entity or employees of the Trust or
any Trust-Related Entity in existence from time to time during Executive's
employment with the Trust or any Trust-Related Entity and at the time of such
initiation, solicitation or diversion.
c. While the Executive is employed by the Trust or any Trust-
Related Entity, the Executive covenants and agrees that Executive will not,
directly or indirectly, engage in, assist, perform services for, plan for,
establish or open, or have any financial interest (other than (i) ownership of
1% or less of the outstanding stock of any corporation listed on the New York or
American Stock Exchange or included in the National Association of Securities
Dealers Automated Quotation System, or (ii) ownership of securities in any
entity affiliated with the Trust) in any person, firm, corporation, or business
entity (whether as an employee, officer, director or consultant) that engages in
the operation, development, management or financing of multifamily communities.
14. Arbitration of All Disputes. Any controversy or claim arising
---------------------------
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in Denver, Colorado, in accordance with the laws of the State of
Colorado. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. In the
event that the Executive determines that it is either necessary or desirable for
the Executive to retain legal counsel or incur other costs and expenses in
connection with enforcement of his or her rights under this Agreement, the Trust
shall pay the Executive's reasonable attorneys' fees and costs and expenses in
connection with enforcement of his or her rights (including the enforcement of
any arbitration award in court). If, however, the arbitrator shall determine
that, under the circumstances, payment by the Trust of all or any part of any
such fees, costs and expenses would be unjust, the Executive shall repay such
amount to the Trust in accordance with the order of the arbitrator. Any award
of the arbitrator shall include interest at a rate or rates considered just
under the circumstances by the arbitrator.
15. Mitigation and Set-Off. The Executive shall not be required to
----------------------
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Trust shall not be entitled to set-off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Trust by the Executive, or any amounts earned, or which
9
<PAGE>
could have been earned, by the Executive after the date of Termination of
Executive's employment with the Trust.
16. Notices. Except as otherwise provided herein, either the Trust
-------
or the Executive may terminate the employment relationship upon no less than
thirty (30) days' notice to the other party. Any notices, requests, demands or
other communications provided for by this Agreement shall be sufficient if in
writing and if sent by telecopy or facsimile transmission or by hand delivery or
registered, certified, or overnight mail to the Executive at the last address
Executive has filed in writing with the Trust or, in the case of the Trust, to
the attention of the Secretary of the Trust, at its principal executive offices.
Such notices and communications shall be deemed to have been received on the
date of confirmation of receipt, in the case of telecopy or facsimile
transmission, or upon the date of delivery thereof or the fifth (5/th/) business
day after the mailing thereof, whichever is earlier, in the case of the
remaining delivery methods.
17. Binding Effect; Assignment. This Agreement shall inure to the
--------------------------
benefit of, and shall be binding upon, the parties hereto and their respective
successors, assigns, heirs, and legal representatives. This Agreement may not
be assigned by Executive, nor may Executive assign or pledge any of his rights,
including rights to payment, hereunder.
18. Governing Law. The provisions of this Agreement shall be
-------------
construed in accordance with the laws of the State of Colorado, without
application of conflict of laws provisions thereunder.
19. Successors to the Trust. The Trust shall require any successor,
-----------------------
whether direct or indirect, by purchase, merger, consolidation or otherwise, and
whether to all or substantially all of the business and/or assets of the Trust,
to assume the obligations of this Agreement. Such assumption shall be by an
express agreement signed by both the successor Company and the Executive and
shall be reasonably satisfactory to the Executive.
20. Employment Status. Nothing in this Agreement shall be deemed to
-----------------
create an employment agreement between the Trust and the Executive providing for
the employment of the Executive for any fixed period of time. The Executive's
employment is terminable at will by the Trust of the Executive, meaning either
party may terminate the employment relationship at any time, with or without
Cause, subject in the event of a Termination, as defined in this Agreement, to
(i) the notice provisions of Paragraph 2, 5, and 16, and (ii) the Trust's
obligations to provide severance payments as required by Paragraph 6, the
election rights of the Executive set forth in Paragraph 7(b) and the
modifications to any outstanding awards set forth in Paragraph 8. Upon
termination of the Executive's employment prior to the date of a Change in
Control, there shall be no further rights under this Agreement.
10
<PAGE>
21. Entire Agreement. This Agreement, contains the entire agreement
----------------
between the parties hereto and supersedes all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof, except with respect to the Archstone Communities Trust
1997 Long-Term Incentive Plan, which, subject to the modifications thereto set
forth in this Agreement, remains as a separate document in full force and effect
in accordance with its terms.
22. Amendments and Waivers. This Agreement may not be modified or
----------------------
amended except by an instrument or instruments in writing signed by the party
against whom enforcement or any such modification or amendment is sought.
Either party hereto may, by an instrument in writing, waive compliance by the
other party with any term or provision of this Agreement on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
23. Section Headings. The headings contained in this Agreement are
----------------
for reference purposes only and shall not be deemed to be a part of this
Agreement or to control or affect the meaning or construction of any provision
of this Agreement.
24. Severability. In the event that any provision or portion of this
------------
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
25. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
[Signatures are on following page]
11
<PAGE>
SIGNATURE PAGE TO
CHANGE IN CONTROL AGREEMENT
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Trustees, the Trust has caused these
presents to be executed in its name and on its behalf, all as of the day and
year first above written.
____________________________________
[Insert name]
[Insert title]
ARCHSTONE COMMUNITIES TRUST
By: _______________________________
Name: ____________________________
Title: ____________________________
12
<PAGE>
SCHEDULE TO CHANGE IN CONTROL AGREEMENT
---------------------------------------
The following persons have executed Change in Control Agreements with Archstone,
which Agreements are in the same form as is set forth in Exhibit 10.7, with the
only differences being those provisions noted in such form which vary based upon
whether the individual is a Tier 1 Executive or a Tier 2 Executive.
TIER 1 EXECUTIVES: R. Scot Sellers, Chairman and Chief Executive Officer, and
Patrick R. Whelan, Chief Operating Officer.
TIER 2 EXECUTIVES: Richard A. Banks, Managing Director West Region, and J.
Lindsay Freeman, Managing Director East Region are Tier 2 Executives for
purposes of the Change in Control Agreements.
13
<PAGE>
Exhibit 10.17
SEPARATION AGREEMENT AND GENERAL RELEASE
----------------------------------------
THIS AGREEMENT made and entered by and between Jay S. Jacobson ("Employee")
the undersigned Employee and Archstone Communities Trust (together with its
affiliates and their trustees, directors, officers, shareholders and other
affiliates, collectively referred to hereinafter as "Employer").
WHEREAS, Employee has been employed by the Employer; and
WHEREAS, the parties have engaged in discussions resulting in an amicable
and mutually satisfactory separation of Employee's employment with the Employer.
NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
below, the parties hereby agree as follows:
1. Employee hereby resigns Employee's employment with Employer effective
February 22, 2000, the date of separation.
2. Upon this Agreement becoming effective as set forth in paragraph 19,
Employer and Employee shall be obligated as set forth herein: a)
Employer shall pay Employee severance in a lump sum amount of
$424,480.00 (one year's salary and target bonus, plus accrued bonus
from January 1, 2000 - February 25, 2000), minus applicable deductions
and withholding for state and federal taxes and any health insurance
premiums incurred at Employee's election, on such amount. Employee
agrees not to accept a full-time position with a publicly traded REIT
or national apartment developer for six months after last date of
employment, however, if Employee obtains full-time employment with any
related or affiliated entity of Archstone Communities,
<PAGE>
including Security Capital Group affiliates, or a competitor of
Archstone Communities, including any publicly traded REIT or national
apartment developer prior to six months after the separation date,
Employee will reimburse Employer for six months of salary and target
bonus, minus applicable deductions and withholdings. Employee agrees
that he will notify Archstone, c/o Ms. Sharon Orlopp, 7670 S. Chester,
Suite 100, Englewood, CO 80112 within five (5) days of accepting any
full-time employment. b) Employer shall provide Employee with
outplacement services for six months. c) Concurrently with the
execution of the Agreement, Employee shall repay the loan from
Employer, in the principal amount of $950,000.00 used to purchase
45,325 shares of Employer stock (the "Shares"), which repayment shall
be effected through the tender of the 45,325 shares of Employer stock
purchased with such loan, which the parties agree shall have an
aggregate value of $950,000.00. Employee waives the right to the
vested and unvested matching two-for-one shares in the Share Purchase
Program. Employee also received a loan from the Employer in the amount
of $50,000 plus interest in order to assist with the purchase of the
shares. Employee has paid $26,361.00 to date. At the time this
Agreement becomes binding on Employee in accordance with Paragraph 19,
Employer shall pay Employee $26,361.00 which represents the payments
on the loan made by Employee to purchase the shares of Employer stock,
and will forgive and release Employee from all remaining debt on the
loan. d) Employee shall be entitled
2
<PAGE>
to retain ownership of his lap top computer, a Portege 3010CT. e)
Employee will be entitled to all vested Options, Restricted Share
Units, and Dividend Equivalent Units, in accordance with the terms of
the 1997 Long Term Incentive Plan.
3. In the Employee's regular paycheck, due March 10, 2000, the Employer
shall pay to Employee, all accrued and unpaid salary and vacation as
of February 25, 2000, less the applicable deductions.
4. Employee is entitled to continue Employer's group health and dental
insurance coverage as provided by the Consolidated Omnibus Budget and
Reconciliation Act (COBRA). Employer will pay for the COBRA expense
until the earlier of the date Employee becomes eligible, as a full-
time employee of a new employer, for coverage under a comparable group
health and dental insurance plan, or twelve months from the date of
separation. Information regarding COBRA enrollment forms and payment
requirements will be forwarded to Employee by Employer's human
resources department.
5. In consideration of the promises contained in this Agreement, the
Employee and Employer hereby mutually agree to do the following:
a. Except for a claim based upon a breach of this Agreement, the
Employee and Employer hereby release and forever discharge the
other (including, in the case of the Employer, its related and
affiliated entities, including employee benefit plans and
fiduciaries of employee benefit plans, and each of their
trustees, officers, directors,
3
<PAGE>
representatives, agents, employees and insurers) (Employee,
Employer and said related parties are hereinafter collectively
and individually "said Releasee(s)") from any and all rights,
claims, demands, debts, dues, sums of money, accounts, attorneys'
fees, complaints, judgements, executions, actions and causes of
action of any nature whatsoever, cognizable at law or equity,
which Employee and Employer have or claim, or might hereafter
have or claim, against said Releasee(s) based upon or arising out
of any matter or thing whatsoever, from the beginning of the
world through the date of this Agreement, including but not
limited to any rights, claims, complaints or actions or causes of
action which were or could have been asserted by Employee or
Employer arising out of or related to Employee's employment by
the Employer or Employee's separation and/or resignation
therefrom, the purchase (or sale to Employer) of any Employer
securities by Employee, or under any local state, or federal law
dealing with employment discrimination including, without
limitation, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act and the Americans with
Disabilities Act.
b. Upon request of the Employer, Employee shall promptly provide the
Employer with a written report and verbal briefings concerning
all
4
<PAGE>
current business activities engaged in by Employee on behalf of
the Employer.
c. Employee shall cooperate reasonably with the Employer in the
transition of Employee's responsibilities to other employees of
the Employer including, without limitation, being available by
telephone during normal business hours to answer questions and to
assist other employees or designees of the Employer.
d. Employee shall promptly submit to the Employer an expense account
report accounting for all business expenses charged by Employee
to the Employer and all advances received, and repay the Employer
for all advances and all non-business related items charged by
Employee to the Employer, if any. Employee hereby agrees that
such advances and non-business related expenses may, at the
option of the Employer, be deducted by the Employer from any of
its payments to Employee under this Agreement.
6. In addition to the confidentiality and nonsolicitation covenants
contained in that certain Confidentiality and Non-Competition
Agreement dated as of September 7, 1997, by and between Employee and
Employer, Employee agrees that, for a period of one (1) year from the
of separation, Employee shall maintain in confidence and shall not,
directly or indirectly, use, publish or otherwise disclose to any
competitor or other third party any trade secrets
5
<PAGE>
disclosed to the Employee in confidence. For purposes of this
paragraph, trade secret means information that derives independent
economic value from not being generally known to the public or to
other persons who can obtain economic value from its disclosure or use
and is subject to efforts that are reasonable under the circumstances
to maintain its secrecy. All duties and obligations set forth herein
shall be in addition to those which exist at common law and pursuant
to statute. In addition, Employee agrees not to recruit or hire any
current Employer associates for a period of one (1) year.
7. Employee hereby agrees to immediately turn over to the Employer all
notes, offering materials, slide shows, investment summaries,
memoranda, records, documents and all other information, no matter how
produced or reproduced, kept by Employee or in Employee's possession
or control, used in or pertaining to the business of the Employer, it
being hereby acknowledged that all of said items are the sole and
exclusive property of the Employer.
8. Except as may be required to the contrary by the final order issued by
a court of competent jurisdiction and except for any communication
with members of Employee's immediate family and any attorney or
accountant rendering advice to Employee in connection with this
Agreement, Employee and Employer shall not, directly or indirectly,
discuss or communicate the facts of this Agreement, or any of its
terms and provisions with any third party.
9. The Employer agrees not to contest the Employee's claim for
unemployment
6
<PAGE>
benefits.
10. From and after the date of presentment of this Agreement, Employee
shall not, directly or indirectly, take any action which is in fact,
or is intended to be, contrary to the interests of the Employer, nor
will Employee disparage or make negative, derogatory or defamatory
statements about the Employer, its related and affiliated entities and
their trustees, directors, officers, employees, agents or
representatives, or any of them, to any other person or business
entity. Employer shall not make any negative, derogatory or
defamatory statements about Employee. All requests for references for
Employee shall be referred to R. Scot Sellers. Mr. Sellers will make
a general statement to the effect that it is not the practice of
Employer to provide references regarding prior performance of
employees, but that Employer will, if requested, provide information
regarding the dates of employment, rate of pay and last title held.
11. Nothing in this Agreement shall be deemed an admission of wrongdoing
or any kind of liability by either party.
12. In the event Employee engages in a material breach of any of the terms
or provisions of this Agreement, all of Employee's obligations shall
remain and shall be enforceable, but the Employer's obligations under
this Agreement shall immediately terminate, including, without
limitation, all remaining monetary obligations of the Employer to
Employee which are outstanding at
7
<PAGE>
the time of said breach. Similarly, Employee shall be relieved of any
further obligation under this Agreement if Employer materially
breaches its covenants in this Agreement.
13. This Agreement shall be binding upon and inure to the benefit of both
parties, their successors and assigns, and any affiliated or related
entity, as well as Employee's heirs, assigns, administrators,
executors and legal representatives.
14. This instrument constitutes the entire agreement between the parties
with respect to the matters addressed herein, and may not be modified
or amended in any way except by a subsequent, written agreement
between the parties.
15. If any provision, section, subsection or other portion of this
Agreement shall be determined by any court of competent jurisdiction
to be invalid, illegal or unenforceable in whole or in part, and such
determination shall become final, such provision or portion shall be
deemed to be severed or limited, but only to the extent required to
render the remaining provisions and portions of this Agreement
enforceable. This Agreement as thus amended shall be enforced so as
to give effect to the intention of the parties insofar as this is
possible. In addition, the parties hereby expressly empower a court of
competent jurisdiction to modify any term or provision of this
Agreement to the extent necessary to comply with existing law and to
enforce this Agreement as modified.
16. This Agreement shall be construed in accordance with the laws of the
State of
8
<PAGE>
Colorado.
17. The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any person.
18. This Agreement may be signed in multiple counterparts, each of which
shall be deemed to be an original for all purposes.
19. Employee may revoke this Agreement within seven days of Employee's
signing it. Revocation should be delivered to Employer's offices at
7670 S. Chester, Suite 100, Englewood, CO, attention Sharon Orlopp,
Vice President Human Resources. For such revocation to be effective,
the notice and the cashier's check must be received no later than 5:00
p.m. on the seventh calendar day after Employee signs this Agreement.
If Employee does not revoke this Agreement within seven days, this
Agreement shall be effective on the next calendar day.
20. Employee affirms that Employee has been given a period of at least
twenty one days within which to consider this Agreement, and that
Employee has carefully read and reviewed all the terms and conditions
contained in this Agreement and fully understands this Agreement to be
a release of all claims, known or unknown, present or future, that
Employee has or may have against the Employer arising out of
Employee's employment by Employer or its termination. Employee also
9
<PAGE>
affirms that Employee has been advised to consult with an attorney
prior to executing this Agreement and that Employee has, in fact, been
given full opportunity to review this Agreement with counsel, and that
Employee signs it voluntarily of his own volition, without duress or
coercion. Employee represents that Employee is signing this Agreement
because of the compensation to be paid by Employer under this
Agreement which exceeds separation compensation generally available
under the Employer's policies.
10
<PAGE>
IN WITNESS THEREOF, the parties have executed this Agreement on the date(s)
set forth below.
Archstone Communities
By: /s/ Patrick R. Whelan
----------------------------------
Patrick R. Whelan
Date: March 3, 2000
---------------------------------
Employee: Jay Jacobson
/s/ Jay S. Jacobson
--------------------------------------
(Signature)
Date: March 3, 2000
---------------------------------
11
<PAGE>
State of Texas )
)
County of Travis )
The above and foregoing was acknowledged before me this third day of March,
2000, by Jay Jacobson.
/s/ Yvonne Gonzalez
--------------------------------
Notary Public
My Commission expires April 22, 2003.
County of Travis )
)
State of Texas )
12
<PAGE>
EXHIBIT 12.1
Archstone Communities Trust
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997 (1) 1996 1995
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Earnings from operations.............. $ 167,279 $ 133,926 $ 24,686 $ 94,089 $ 81,696
Add:
Interest expense.................... 121,494 83,350 61,153 35,288 19,584
--------- --------- --------- --------- ---------
Earnings as adjusted.................. $ 288,773 $ 217,276 $ 85,839 $ 129,377 $ 101,280
========= ========= ========= ========= =========
Fixed charges:
Interest expense.................... $ 121,494 $ 83,350 $ 61,153 $ 35,288 $ 19,584
Capitalized interest................ 31,912 29,942 17,606 16,941 11,741
--------- --------- --------- --------- ---------
Total fixed charges............... $ 153,406 $ 113,292 $ 78,759 $ 52,229 $ 31,325
========= ========= ========= ========= =========
Ratio of earnings to fixed charges.... 1.9 1.9 1.1 2.5 3.2
========= ========= ========= ========= =========
</TABLE>
(1) Earnings from operations for 1997 includes a one-time, non-cash charge of
$71.7 million associated with costs incurred in acquiring Archstone's REIT
and property management companies from Security Capital. Excluding this
charge, the ratio of earnings to fixed charges for the year ended
December 31, 1997 would be 2.0.
<PAGE>
EXHIBIT 12.2
Archstone Communities Trust
Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Share Dividends
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997/(1)/ 1996 1995
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings from operations................ $167,279 $133,926 $24,686 $ 94,089 $ 81,696
Add:
Interest expense...................... 121,494 83,350 61,153 35,288 19,584
-------- -------- ------- -------- --------
Earnings as adjusted.................... $288,773 $217,276 $85,839 $129,377 $101,280
======== ======== ======= ======== ========
Combined fixed charges and Preferred
Share dividends:
Interest expense...................... $121,494 $ 83,350 $61,153 $ 35,288 $ 19,584
Capitalized interest.................. 31,912 29,942 17,606 16,941 11,741
-------- -------- ------- -------- --------
Total fixed charges................. 153,406 113,292 78,759 52,229 31,325
-------- -------- ------- -------- --------
Preferred Share dividends............. 23,731 20,938 19,384 24,167 21,823
-------- -------- ------- -------- --------
Combined fixed charges and Preferred
Share dividends........................ $177,137 $134,230 $98,143 $ 76,396 $ 53,148
======== ======== ======= ======== ========
Ratio of earnings to combined fixed
charges and Preferred Share dividends.. 1.6 1.6 0.9 1.7 1.9
======== ======== ======= ======== ========
</TABLE>
(1) Earnings from operations for 1997 includes a one-time, non-cash charge of
$71.7 million associated with costs incurred in acquiring Archstone's REIT
and property management companies from Security Capital. Accordingly,
earnings from operations were insufficient to cover combined fixed charges
and Preferred Share dividends by $12.3 million for the year ended December
31, 1997. Excluding this charge, the ratio of earnings to combined fixed
charges and Preferred Share dividends for the year ended December 31, 1997
would be 1.6.
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
State of Incorporation
----------------------
Subsidiary Name or Organization
- --------------- ---------------
<S> <C>
Archstone Communities Incorporated Delaware
SCP Nevada Holdings 1 Incorporated Nevada
SCP Utah Holdings 4 Incorporated Utah
SCP Utah Holdings 5 Incorporated Utah
Las Flores Development Texas
PTR-California Holdings (1) Incorporated Maryland
PTR-California Holdings (2) Incorporated Maryland
PTR-California Holdings (3) Incorporated Delaware
PTR Multifamily Holdings Incorporated Delaware
Archstone Financial Services, Inc. Delaware
PTR-Colorado (1), LLC Colorado
Security Capital Atlantic Multifamily Inc. Delaware
SCA Florida Holdings (1) Incorporated Florida
Atlantic-Alabama (5) Incorporated Maryland
Atlantic-Alabama (6) Incorporated Maryland
SCA-Alabama Multifamily Trust Alabama
SCA-North Carolina (1) Incorporated Maryland
SCA-North Carolina (2) Incorporated Maryland
SCA North Carolina Limited Partnership Delaware
SCA-Indiana Limited Partnership Delaware
SCA-Tennessee (3) Incorporated Maryland
SCA-Tennessee (4) Incorporated Maryland
Atlantic-Tennessee Limited Partnership Delaware
SCA Florida Holdings (2) Incorporated Delaware
SCA-1 Incorporated Delaware
Atlantic Multifamily Limited Partnership-1 Delaware
Archstone Communities Limited Partnership Delaware
ASN Minnesota Holdings (1) LLC Delaware
ASN Multifamily Limited Partnership Delaware
ASN-Massachusetts Holdings (1) Incorporated Delaware
ASN-Washington Holdings (1) Incorporated Delaware
NEC Tatum and Bell Owner's Association, Inc. Arizona
Turtle Run at Coral Springs, LLC Delaware
Archstone Communities Limited Partnership II Delaware
ASN- Massachusetts Holdings (3) Incorporated Delaware
Archstone Communities Investment LLC-I Delaware
ASN- San Diego Incorporated Delaware
ASN Studio City Incorporated Delaware
</TABLE>
<PAGE>
EXHIBIT 22
Independent Auditors' Consent
The Board of Trustees
of Archstone Communities Trust:
We consent to incorporation by reference in registration statements No. 333-
43723 (Form S-8), No. 333-60847 (Form S-8), No. 333-60815 (Form S-8), No. 333-
60817 (Form S-8), No. 333-44639 (Form S-3), No. 333-68591 (Form S-3) and No.
333-51139 (Form S-4) of Archstone Communities Trust of our reports dated
January 27, 2000, except as to Note 16 which is as of February 4, 2000, relating
to the balance sheets of Archstone Communities Trust as of December 31, 1999 and
1998, and the related statements of earnings, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1999,
and the related schedule, which reports appear in the December 31, 1999 annual
report on Form 10-K of Archstone Communities Trust.
KPMG LLP
Chicago, Illinois
March 6, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Form 10-K for the twelve months ended December 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,072
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,217,331
<DEPRECIATION> 300,658
<TOTAL-ASSETS> 5,302,437
<CURRENT-LIABILITIES> 0
<BONDS> 1,971,520
0
297,635
<COMMON> 139,008
<OTHER-SE> 2,130,863
<TOTAL-LIABILITY-AND-EQUITY> 5,302,437
<SALES> 637,808
<TOTAL-REVENUES> 666,872
<CGS> 0
<TOTAL-COSTS> 349,964
<OTHER-EXPENSES> 26,135
<LOSS-PROVISION> 2,000
<INTEREST-EXPENSE> 121,494
<INCOME-PRETAX> 205,641
<INCOME-TAX> 0
<INCOME-CONTINUING> 205,641
<DISCONTINUED> 0
<EXTRAORDINARY> 1,113
<CHANGES> 0
<NET-INCOME> 204,528
<EPS-BASIC> 1.46
<EPS-DILUTED> 1.46
</TABLE>
<PAGE>
EXHIBIT 99.1
Current Development Activity
The following table summarizes Archstone's development communities under
construction as of December 31, 1999 (dollar amounts in thousands):
<TABLE>
<CAPTION>
Actual or Expected
Expected Date Stabilization
Total Start Date for First Units Date
Number of Archstone Expected (Quarter/ (Quarter/ (Quarter/ %
Units Investment Investment(1) Year) Year)(2) Year) Leased(3)
--------- ---------- ------------- ---------- -------------- ------------ ---------
Central Region:
Austin, Texas:
<S> <C> <C> <C> <C> <C> <C> <C>
Archstone Monterey Ranch III.... 448 $ 13,089 $ 31,669 Q3/98 Q2/00 Q2/01 N/A
----- -------- --------
Denver, Colorado:
Cedars II, The.................. 172 $ 5,549 $ 16,376 Q3/99 Q2/00 Q2/01 N/A
----- -------- --------
Salt Lake City, Utah:
Archstone River Oaks.............. 448 $ 34,435 $ 37,483 Q2/98 Q1/99 Q4/00 79.2%
----- -------- --------
Total Central Region.......... 1,068 $ 53,073 $ 85,528
----- -------- --------
East Region:
Birmingham, Alabama:
Cameron at the Summit II.......... 268 $ 18,040 $ 18,939 Q2/98 Q2/99 Q3/00 69.0%
----- -------- --------
Boston, Massachusetts:
Archstone Tewksbury II............ 168 $ 20,066 $ 21,402 Q1/99 Q4/99 Q3/00 44.6%
----- -------- --------
Charlotte, North Carolina:
Archstone Tyvola Centre........... 404 $ 7,629 $ 31,398 Q3/99 Q3/00 Q2/02 N/A
----- -------- --------
Indianapolis, Indiana:
Archstone River Ridge............. 202 $ 15,754 $ 16,083 Q2/98 Q2/99 Q2/00 56.9%
----- -------- --------
Raleigh, North Carolina:
Archstone at Preston.............. 388 $ 27,706 $ 31,289 Q2/98 Q2/99 Q4/00 56.7%
----- -------- --------
Richmond, Virginia:
Archstone Swift Creek I........... 288 $ 22,148 $ 22,873 Q2/98 Q3/99 Q1/01 27.4%
----- -------- --------
Southeast Florida:
Archstone at Woodbine............. 408 $ 9,857 $ 30,722 Q3/99 Q3/00 Q4/01 N/A
----- -------- --------
Washington, D.C.:
Archstone Governor's Green........ 338 $ 32,721 $ 36,446 Q3/98 Q3/99 Q3/00 62.4%
Archstone Milestone II............ 132 3,715 13,615 Q4/99 Q3/00 Q1/01 N/A
Cameron Woodland Park............. 392 18,128 42,622 Q2/99 Q2/00 Q3/01 N/A
----- -------- --------
Total Washington, D.C........... 862 $ 54,564 $ 92,683
----- -------- --------
West Coast, Florida:
Archstone Rocky Creek............. 264 $ 18,675 $ 19,750 Q3/98 Q2/99 Q3/00 73.1%
----- -------- --------
Total East Region............... 3,252 $194,439 $285,139
----- -------- --------
West Region:
Reno, Nevada:
Enclave II, The................... 180 $ 14,526 $ 16,204 Q4/98 Q3/99 Q4/00 52.2%
----- -------- --------
San Diego, California:
Archstone Mission Valley.......... 736 $ 32,092 $106,328 Q4/99 Q4/00 Q3/03 N/A
Archstone Torrey Hills............ 340 39,804 43,139 Q1/98 Q3/99 Q3/00 30.9%
----- -------- --------
Total San Diego, California..... 1,076 $ 71,896 $149,467
----- -------- --------
San Francisco Bay Area, California:
Archstone Emerald Park............ 324 $ 45,695 $ 47,963 Q4/97 Q3/99 Q3/00 43.2%
Archstone Hacienda................ 540 67,149 77,363 Q2/98 Q3/99 Q1/01 26.5%
Archstone Monterey Grove.......... 224 27,028 27,150 Q4/97 Q1/99 Q1/00 93.3%
----- -------- --------
Total San Francisco Bay Area.... 1,088 $139,872 $152,476
----- -------- --------
San Jose, California:
Archstone Willow Glen............. 412 $ 28,566 $ 69,581 Q3/99 Q1/01 Q1/02 N/A
----- -------- --------
Seattle, Washington:
Archstone Inglewood Hill.......... 230 $ 20,462 $ 20,939 Q2/98 Q2/99 Q2/00 82.6%
Archstone Northcreek.............. 524 40,186 44,025 Q2/98 Q2/99 Q1/01 60.9%
----- -------- --------
Total Seattle................... 754 $ 60,648 $ 64,964
----- -------- --------
Total West Region............. 3,510 $315,508 $452,692
----- -------- --------
Total Communities
Under Construction........ 7,830 $563,020 $823,359
===== ======== ========
</TABLE>
(1) Represents total budgeted land and development costs.
(2) Represents the quarter that the first completed units were made available
for leasing (or are expected to be made available). Archstone begins
leasing completed units prior to completion of the entire community.
(3) The percentage leased is based on leased units divided by total number of
units in the community (completed and under construction) as of December
31, 1999. A "n/a" indicates the communities where Lease-Up has not yet
commenced.
<PAGE>
EXHIBIT 99.2
Long-Term Unsecured Debt
As of December 31, 1999, Archstone had $1.3 billion of Long-Term Unsecured
Debt issued and outstanding. The following table summarizes the Long-Term
Unsecured Debt as of December 31, 1999 (dollar amounts in thousands):
<TABLE>
<CAPTION>
Effective Average Principal
Outstanding Coupon Interest Maturity Remaining Payment
Date of Issuance Principal Amount Rate Rate/(1)/ Date Life (Years) Requirement
- --------------------------- ---------------- ------ --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
06/29/99/(2)/.............. $ 10,000 3.91% 4.29% 06/01/08 8.42 (3)
06/29/99/(2)/.............. 21,700 3.91 4.37 06/01/08 8.42 (3)
06/29/99/(2)/.............. 16,000 3.91 4.29 06/01/08 8.42 (3)
06/29/99/(2)/.............. 12,900 3.91 4.33 06/01/08 8.42 (3)
07/28/99/(2)/.............. 15,115 3.86 4.13 06/01/08 8.42 (3)
---------------- ------ --------- ------------
Subtotal Average........... $ 75,715 3.90% 4.29% 8.42
---------------- ------ --------- ------------
12/08/98................... $ 10,000 7.00% 7.35% 01/15/09 9.05 (3)
10/30/98................... 120,000 7.20 7.34 04/15/03 3.29 (3)
10/29/98................... 3,000 7.00 7.11 10/30/01 1.83 (3)
10/28/98................... 5,000 7.00 7.12 10/29/01 1.83 (3)
10/27/98................... 18,000 7.00 7.13 10/29/01 1.83 (3)
10/26/98................... 13,000 6.63 6.78 10/26/00 0.82 (3)
10/23/98................... 15,000 6.75 6.92 10/23/00 0.81 (3)
10/20/98................... 3,000 6.89 7.09 10/20/00 0.81 (3)
10/19/98................... 9,000 6.81 7.02 10/19/00 0.80 (3)
10/15/98................... 10,000 6.93 7.18 10/15/00 0.79 (3)
10/13/98/(4)/.............. 5,000 6.62 6.87 10/15/01 1.79 (3)
10/09/98/(4)/.............. 50,000 6.95 7.14 10/09/02 2.78 (3)
10/01/98................... 5,000 6.32 6.51 10/01/01 1.75 (3)
10/01/98................... 10,000 6.95 7.08 10/01/08 8.76 (3)
09/25/98................... 25,000 6.17 6.40 10/13/00 0.79 (3)
09/23/98................... 21,200 6.37 6.57 10/15/01 1.79 (3)
---------------- ------ --------- ------------
Subtotal/Average........... $322,200 6.91% 7.08% 2.72
---------------- ------ --------- ------------
03/06/98................... $125,000 7.20% 7.86% 03/01/13 11.17 (5)
---------------- ------ --------- ------------
08/20/97................... $ 52,147 7.86% 7.91% 08/15/17 15.63 (6)
08/20/97................... 101,510 7.25 7.27 08/15/09 5.95 (7)
---------------- ------ --------- ------------
Subtotal/Average........... $153,657 7.46% 7.49% 9.25
---------------- ------ --------- ------------
03/31/97................... $ 20,000 7.50% 7.44% 04/01/07 7.25 (3)
03/31/97................... 30,000 8.05 8.04 04/01/17 17.26 (3)
---------------- ------ --------- ------------
Subtotal/Average........... $ 50,000 7.91% 7.85% 13.26
---------------- ------ --------- ------------
10/21/96................... $ 20,000 6.95% 7.40% 10/15/02 2.79 (3)
10/21/96................... 20,000 7.15 7.50 10/15/03 3.79 (3)
10/21/96................... 20,000 7.25 7.63 10/15/04 4.79 (3)
10/21/96................... 20,000 7.30 7.64 10/15/05 5.79 (3)
10/21/96................... 20,000 7.38 7.69 10/15/06 6.79 (3)
---------------- ------ --------- ------------
Subtotal/Average........... $100,000 7.21% 7.57% 4.79
---------------- ------ --------- ------------
</TABLE>
<PAGE>
EXHIBIT 99.2
<TABLE>
<CAPTION>
Effective Average Principal
Outstanding Coupon Interest Maturity Remaining Payment
Date of Issuance Principal Amount Rate Rate/(1)/ Date Life (Years) Requirement
- --------------------------- ---------------- ------ --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
08/06/96................... $ 20,000 7.55% 7.68% 08/01/08 8.59 (3)
08/06/96................... 20,000 7.63 7.73 08/01/09 9.59 (3)
08/06/96................... 20,000 7.65 7.77 08/01/10 10.59 (3)
08/06/96................... 20,000 8.10 8.21 08/01/15 15.59 (3)
08/06/96................... 20,000 8.15 8.25 08/01/16 16.59 (3)
---------------- ------ --------- ------------
Subtotal/Average........... $ 100,000 7.84% 7.95% 12.19
---------------- ------ --------- ------------
02/23/96................... $ 50,000 7.15% 7.30% 02/15/10 6.63 (8)
02/23/96................... 100,000 7.90 8.03 02/15/16 14.14 (9)
---------------- ------ --------- ------------
Subtotal/Average........... $ 150,000 7.71% 7.84% 11.63
---------------- ------ --------- ------------
02/08/94................... $ 100,000 6.88% 6.98% 02/15/08 4.63 (10)
02/08/94................... 100,000 7.50 7.65 02/15/14 12.14 (11)
---------------- ------ --------- ------------
Subtotal/Average........... $ 200,000 7.24% 7.37% 8.38
---------------- ------ --------- ------------
Grand Total/Average........ $1,276,572 7.11% 7.31% 7.92
================ ====== ========= ============
</TABLE>
(1) Includes the effect of interest rate hedges and loan cost amortization,
where applicable.
(2) Tax-exempt unsecured bonds. See Note 11, Fair Values of Financial
Instruments, for information related to the derivative financial
instruments on these bonds.
(3) Entire principal amount due at maturity.
(4) The $5.0 million and $50.0 million of notes were originally issued at
floating interest rates of 7.10% and 7.36%, respectively. In January 1999,
the notes were converted through interest rate swap agreements to fixed
interest rates of 6.87% and 7.14%, respectively.
(5) These notes require annual principal payments of $25.0 million commencing
in 2009.
(6) These notes require annual principal payments of $10.0 million commencing
in 2013.
(7) These notes require aggregate annual principal payments of $15.0 million in
2002, $12.5 million from 2003 to 2008 and $10.0 million in 2009.
(8) These notes require aggregate annual principal payments of $6.25 million
commencing in 2003.
(9) These notes require aggregate annual principal payments of $10.0 million in
2011, $12.5 million in 2012, $15.0 million in 2013, $17.5 million in 2014,
$20.0 million in 2015 and $25.0 million in 2016.
(10) These notes require annual principal payments of $12.5 million commencing
in 2001.
(11) These notes require aggregate annual principal payments of $10.0 million in
2009, $12.5 million in 2010, $15.0 million in 2011, $17.5 million in 2012,
$20.0 million in 2013 and $25.0 million in 2014.
<PAGE>
EXHIBIT 99.3
Mortgages Payable
Mortgages payable at December 31, 1999 consisted of the following (dollar
amounts in thousands):
<TABLE>
<CAPTION>
Principal Balance
Effective Scheduled Periodic Balloon at December 31,
Interest Maturity Payment Payment Due -------------------
Community Rate /1/ Date Terms at Maturity 1999 1998
- --------- --------- --------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Conventional fixed rate:
Fairwood Landing .................... N/A 12/21/99 (2) N/A $ -- $ 5,621
Country Place Village I ............. 6.71% 11/01/00 (2) 1,849 1,904 1,967
Cameron Hidden Harbor ............... 6.86 05/12/01 (2) 4,869 5,233 5,475
Archstone Knoxbridge ................ 7.63 07/01/03 (2) 14,741 15,462 15,650
Cameron at Hickory Grove ............ 7.09 07/10/03 (2) 5,556 6,063 6,187
Foxfire ............................. 7.32 10/01/05 (2) 7,334 8,119 --
Shadowbluff ......................... 7.10 12/01/05 (2) 4,926 5,720 5,835
Canyon Creek II ..................... 7.63 02/10/06 (4) 6,600 7,865 8,020
Cameron Palm Harbor ................. 7.10 11/01/06 (2) 4,661 5,517 5,622
Archstone Tewksbury ................. 8.45 01/01/07 (2) 2,621 3,076 --
Ashton Place ........................ 8.25 10/01/23 (5) N/A 45,566 46,204
Redmond Hill West ................... 9.63 06/01/26 (5) N/A 6,251 --
Cameron on the Cahaba II ............ N/A 03/01/29 (3) N/A -- 8,007
-------- --------
$110,776 $108,588
-------- --------
Tax-exempt fixed rate /6/:
Cherry Creek ........................ N/A 11/01/01 (3) N/A $ -- $ 3,598
Cameron Station ..................... 5.81 05/01/07 (2) 12,563 15,058 15,352
Redwood Shores ...................... 5.74 10/01/08 (2) 16,820 23,608 24,280
Cloverland .......................... 7.35 03/01/10 (2) 3,273 4,124 4,178
Crossroads .......................... 6.66 12/15/18 (7) 4,435 4,435 4,435
Carrington Place .................... 7.93 04/01/19 (5) N/A 3,372 3,444
Eden Commons ........................ 7.88 03/01/25 (5) N/A 5,979 6,317
-------- --------
$ 56,576 $ 61,604
-------- --------
Tax-exempt floating rate /6/:
Arboretum, The ...................... 4.63 06/15/04 (8) 36,346 $ 36,346 $ --
Rivermeadows ........................ N/A 10/01/05 (9) N/A -- 10,000
Seascape ............................ N/A 12/01/05 (9) N/A -- 15,115
Prairie Court ....................... 4.09 12/01/06 (10) 7,250 7,250 --
Amberwood at Bellevue ............... 4.77 07/01/13 (11) 3,702 5,002 5,102
Garden Glen ......................... 5.01 12/01/13 (8) 33,410 33,410 --
Archstone University Towne Centre ... 3.98 08/01/14 (11) 13,232 20,846 21,200
Regency Park ........................ 5.05 12/15/14 (7) 8,500 8,500 --
Oakridge ............................ N/A 06/01/15 (9) N/A -- 13,050
Le Club ............................. N/A 11/01/15 (9) N/A -- 21,700
Carmel Del Mar ...................... 3.62 12/01/15 (8) 13,608 13,608 13,608
Azalea Park ......................... 4.36 06/01/25 (5) N/A 15,033 15,179
Cameron Brook ....................... 4.36 06/01/25 (5) N/A 18,774 18,950
Cameron Cove ........................ 4.50 06/01/25 (5) N/A 8,173 8,259
Clairmont Crest ..................... N/A 06/01/25 (3) N/A -- 11,273
Forestwood .......................... 4.40 06/01/25 (5) N/A 11,058 11,158
Foxbridge on the Bay ................ N/A 06/01/25 (3) N/A -- 10,109
Cameron Green ....................... 4.25 06/01/25 (5) N/A 10,013 10,107
Parrot's Landing I .................. N/A 06/01/25 (3) N/A -- 15,386
Winterscreek ........................ 4.47 06/01/25 (5) N/A 4,834 4,880
Fox Creek ........................... N/A 08/15/27 (3) N/A -- 4,240
-------- --------
$192,847 $209,316
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Balance at
Effective Scheduled Periodic Balloon December 31,
Interest Maturity Payment Payment Due -----------------------
Community Rate(1) Date Terms at Maturity 1999 1998
- --------- --------- --------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Other:
Las Flores(12)....................... 9.16% 06/01/24 (5) N/A $ 5,648 $ 5,726
Mello-Roos bonds(13)................. 5.65 Various (5) N/A 24,736 22,929
--------- ---------
$ 30,384 $ 28,655
--------- ---------
Fannie Mae secured debt(14).......... 6.53 (15) (16) 300,051 304,365 268,450
--------- --------- ---------
Total/Average...................... 6.14% $ 694,948 $ 676,613
========= ========= =========
</TABLE>
(1) Represents the effective interest rate, including interest rate hedges,
loan cost amortization and other ongoing fees and expenses, where
applicable.
(2) Regular amortization with a balloon payment due at maturity.
(3) Mortgage was prepaid by Archstone or assumed by the buyer upon disposition
of the community.
(4) Apartment community has two notes; one note is interest only with a balloon
payment of $6.6 million and the second note is fully amortizing.
(5) Fully amortizing.
(6) Tax-exempt effective interest rates include credit enhancement and other
bond-related costs, where applicable.
(7) Semi-annual payments are interest only until December 2003 at 5.4%, at
which time the interest rate is adjusted to the current market rate.
(8) Payments are interest only until maturity and the interest rate is adjusted
weekly or monthly.
(9) These bonds were refinanced during 1999 and are now classified as Long-Term
Unsecured Debt.
(10) Semi-annual payments are interest only until December 1999 at 8% at which
time the bond will be tendered.
(11) Requires annual principal payments of $100,000 each year until maturity and
variable interest is paid monthly to the sub-servicers.
(12) 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.
(13) Primarily represents bonded indebtedness associated with improvements to
public facilities and infrastructure in certain California taxing
jurisdictions known as "Mello-Roos districts." The bonds have a
weighted-average rate of 5.65% and mature at dates ranging from 2007 to
2027.
(14) The following apartment communities secure the Fannie Mae secured debt:
Canyon Creek, Pebble Cove, The Remington, Hunters Run I & II, Monterey
Ranch II, Legacy Heights, Memorial Heights I & II, Miralago I, Scottsdale
Greens, Cameron Creek, Cameron Landing, Cameron Pointe, Cameron Matthews,
52 Magnolia, Waterford Point, Oaks at Fair Lakes, Bellemeade Farms,
Sterling Heights, Oaks at Medical Center I.
(15) The $268.5 million issued in December 1998 matures on January 1, 2006. The
remaining $35.9 million issued in March 1999 matures on April 1, 2008.
(16) In December 1998, Archstone closed on a $268.5 million long term secured
debt agreement with Fannie Mae. In March 1999, Archstone closed on an
additional $36.0 million at an effective fixed interest rate of 6.7%. See
Note 11, Fair Values of Financial Instruments, for information on the
derivative financial instruments related to the Fannie Mae secured debt.
