<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported): September 17, 1997
Post Properties, Inc.
------------------------------------------------------------------
(Exact name of Registrant as Specified in Charter)
Georgia 1-12080 58-1550675
- ---------------------------- ------------------------ -------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
3350 Cumberland Circle, Atlanta, Georgia 30339
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 850-4400
Not Applicable
------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE> 2
Item 5. Other Events
On August 4, 1997, the Registrant announced that it has entered into a
definitive agreement and plan of merger (the "Merger Agreement") with Columbus
Realty Trust, a Texas real estate investment trust ("Columbus"), pursuant to
which Columbus would be merged into a wholly owned subsidiary of the Registrant
(the "Merger").
If the Merger is consummated, each outstanding common share of
beneficial interest, par value $.01 per share, of Columbus will be converted
into the right to receive 0.615 shares of common stock of the Registrant, par
value $.01 per share ("Post Common Stock"), with cash being paid in lieu of
fractional shares of Post Common Stock. The Merger is subject to the
satisfaction or waiver of certain conditions, including (i) approval of the
Merger Agreement by the shareholders of the Registrant and Columbus, (ii)
approval of the listing of the shares of Post Common Stock to be issued to the
shareholders of Columbus in the Merger on the New York Stock Exchange, (iii)
the receipt by each of the Registrant and Columbus of an opinion of counsel,
dated as of the closing date of the Merger (the "Closing Date"), that, for such
party's taxable year ended December 31, 1993 and all subsequent taxable years
ending on or before the Closing Date, such party was organized and has operated
in conformity with the requirements for qualification as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code") and (iv) the receipt by each of the Registrant and Columbus of
either (A) a ruling by the Internal Revenue Service or (B) an opinion of
counsel dated as of the Closing Date to the effect that the Merger should
qualify as a reorganization under the provisions of the Secton 368(a) of the
Code and that the surviving company will constitute a "qualified REIT
subsidiary" under Section 856(i) of the Code.
Based on the closing stock price of the Registrant on August 1, 1997,
the transaction values Columbus at approximately $600 million, including debt
and other liabilities. Following the Merger, the Registrant will be the largest
multi-family REIT concentrating on the development of upscale multi-family
apartment homes in the major metropolitan markets of the Southeast and
Southwest, with a total market capitalization of approximately $2.2 billion.
On September 3, 1997, the Registrant filed a Registration Statement on
Form S-4 (the "Form S-4") relating to the merger, which contained a Joint Proxy
Statement/Prospectus, with the Securities and Exchange Commission. The
Securities and Exchange Commission has indicated that the Form S-4 will not be
subject to review. The Registrant and Columbus expect to mail the Joint Proxy
Statement to their shareholders on or about September 24, 1997 and to hold
their special shareholders meetings on October 24, 1997. The closing of the
Merger is expected to take place on October 24, 1997. However, the consummation
of the Merger is subject to the approval of the shareholders of the Registrant
and Columbus and other customary conditions and there can be no assurance that
the Merger will be consummated at the end of October 1997, if at all.
If the Merger is not consummated for any reason, the Registrant will
continue to execute its strategic objective of being a leading apartment owner
and developer in major Sunbelt markets. To the extent such opportunities are
available, it would likely consider other potential combinations with public of
private apartment owners that the Board of Directors of the Registrant and
management believe add value and enhance the future earnings of the Registrant
and otherwise are in the best interests of shareholders of the Registrant.
Item 7. Financial Statement, Pro Forma Financial Information and Exhibits.
-2-
<PAGE> 3
(c) Exhibits.
Exhibit 2 - Agreement and Plan of Merger, dated as of
August 1, 1997, among Post Properties, Inc.,
Post LP Holdings, Inc. and Columbus Realty
Trust (incorporated by reference to the
Current Report on Form 8-K of the Registrant
dated as of August 4, 1997).
Exhibit 23 - Consent of Ernst & Young LLP
Exhibit 99.1 - Financial Statements of Acquired Company
The following financial statements of Columbus, together
with the independent auditors' report on certain of such
financial statements:
(i) Consolidated Balance Sheets as of December 31, 1996
and December 31, 1995
(ii) Consolidated Statements of Operations For the
Years Ended December 31, 1996, 1995 and 1994
(iii) Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1996, 1995 and
1994
(iv) Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994
(vi) Notes to Consolidated Financial Statements
The following financial statements of Columbus:
(vii) Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996
(viii) Consolidated Statements of Operations For the
Three and Six Months Ended June 30, 1997 and 1996
(ix) Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996
(x) Notes to Consolidated Financial Statements
Exhibit 99.2 - Pro Forma Financial Information
The following pro forma consolidated financial information
of the Registrant:
(i) Unaudited Pro Forma Consolidated Balance Sheet as
of June 30, 1997
(ii) Unaudited Pro Forma Combined Statements of
Operations For the Six Months Ended June 30, 1997
and the Year Ended December 31, 1996
(iii) Notes to Unaudited Pro Forma Balance Sheet and
Statement of Operations
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POST PROPERTIES, INC.
Date: September 17, 1997 By: John A. Williams
--------------------------------
John A. Williams
Chairman of the Board,
Chief Executive Officer
and Director
-4-
<PAGE> 5
INDEX TO EXHIBITS
Exhibit Number and Description
2 Agreement and Plan of Merger, dated as of August 1, 1997,
among Post Properties, Inc., Post LP Holdings, Inc. and
Columbus Realty Trust (incorporated by reference to the
Current Report on Form 8-K of the Registrant dated as of
August 4, 1997).
23 Consent of Ernst & Young LLP
99.1 Financial Statements of Acquired Company
99.2 Pro Forma Financial Information
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-3555, Form S-3 No. 33-81772, Form S-3 No. 33-85714, Form S-8
No. 33-86674, Form S-8 No. 333-02734, Form S-8 No. 33-00020, and Form S-8 No.
33-85712) of Post Properties, Inc. of our report dated January 28, 1997, except
for Note 15, as to which the date is March 7, 1997, with respect to the
consolidated financial statements and schedule of Columbus Realty Trust as of
December 31, 1996 and 1995 and for the three years ended December 31, 1996,
included in its Annual Report on Form 10-K/A for the year ended December 31,
1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Dallas, Texas
September 15, 1997
<PAGE> 1
EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITORS
Board of Trust Managers
Columbus Realty Trust
We have audited the accompanying consolidated balance sheets of Columbus Realty
Trust as of December 31, 1996, and 1995 and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. Our audits also included the financial
statement schedule of Columbus Realty Trust listed in the Index referenced at
Item 14(a). These financial statements and schedule are the responsibility of
management of Columbus Realty Trust. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Columbus Realty Trust as of December 31, 1996, and 1995 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
January 28, 1997, except for
Note 15, as to which the date
is March 7, 1997
<PAGE> 2
COLUMBUS REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
-------------------------
1996 1995
-------------------------
<S> <C> <C>
Real estate:
Land $ 54,399 $ 48,104
Buildings and improvements 285,104 232,428
Furniture, fixtures, and equipment 4,696 4,433
Construction-in-progress 55,614 50,081
-------------------------
399,813 335,046
Less accumulated depreciation 40,492 31,667
-------------------------
Real estate held for investment 359,321 303,379
Real estate held for sale 3,980 -
-------------------------
363,301 303,379
Cash and cash equivalents 2,641 10,754
Restricted cash 554 470
Accounts receivable 663 861
Receivables from affiliates 152 418
Deferred assets, net of accumulated
amortization of $1,112 and $932
at December 31, 1996 and 1995,
respectively 420 454
Deferred financing costs, net of
accumulated amortization of $2,197 and
$1,438 at December 31, 1996 and 1995,
respectively 1,316 1,795
Other assets 5,529 2,845
-------------------------
Total assets $374,576 $320,976
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $179,855 $145,492
Accrued dividends - 4,322
Accounts payable and accrued expenses 3,536 4,912
Accrued interest 288 292
Accrued property taxes 6,727 5,203
Tenant security deposits 1,671 1,273
Prepaid rent 358 592
Minority interest 2,063 2,063
-------------------------
Total liabilities 194,498 164,149
Shareholders' equity:
Preferred shares, $.01 par value;
10,000,000 shares authorized;
none issued or outstanding - -
Common shares, $.01 par value;
100,000,000 shares authorized;
13,059,137 and 11,524,618 shares
issued at December 31, 1996
and 1995, respectively 131 115
Additional paid-in capital 206,564 176,061
Retained earnings (deficit) (26,611) (19,343)
-------------------------
180,084 156,833
Less 900 common shares in treasury,
at cost 6 6
-------------------------
Total shareholders' equity 180,078 156,827
-------------------------
Total liabilities and shareholders'
equity $374,576 $320,976
=========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 3
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Revenues:
Rental $ 45,910 $ 39,023 $ 28,963
Property management 298 479 640
Interest and other 2,322 1,749 1,278
--------------------------------------
Total revenues 48,530 41,251 30,881
Expenses:
Repairs and maintenance 3,573 3,117 2,346
Other property operating 2,504 1,976 1,493
Advertising 723 551 366
General and administrative - properties 3,183 2,754 2,405
General and administrative - corporate 2,073 2,057 1,841
Real estate taxes 6,382 5,025 3,687
Interest 7,884 5,596 2,848
Interest related to amortization of 515
deferred financing costs 393 474
Depreciation and amortization 10,603 9,232 6,660
--------------------------------------
Total expenses 37,318 30,823 22,120
--------------------------------------
Income from operations 11,212 10,428 8,761
Gain on sale of real estate 246 - -
--------------------------------------
Net income $ 11,458 $ 10,428 $ 8,761
======================================
Net income per common share, primary
and fully diluted:
Income from operations $0.92 $0.90 $0.89
Gain on sale of real estate 0.02 - -
--------------------------------------
Net income $0.94 $0.90 $0.89
======================================
Weighted average number of common shares
outstanding (including common share
equivalents):
Primary 12,099,291 11,536,110 9,832,417
Fully diluted 12,142,069 11,556,269 9,845,759
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Shares Treasury Shares
-------------------- --------------------------
Retained Total
Number Paid-in Earnings Number of Shareholders'
of Shares Amount Capital (Deficit) Shares Amount Equity
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993 8,500,084 $ 85 $121,722 $ (6,347) - $ - $115,460
Dividends declared - - - (14,962) - - (14,962)
Net adjustments to
purchase price - - (103) - - - (103)
Issuance of common shares,
net of offering costs 2,900,000 29 52,435 - - - 52,464
Issuance of common shares
under employee plan 13,200 - 245 - - - 245
Repurchase of common shares - - - - 900 (6) (6)
Net income - - - 8,761 - - 8,761
---------------------------------------------------------------------------------------------
Balance at December 31,
1994 11,413,284 114 174,299 (12,548) 900 (6) 161,859
Dividends declared - - - (17,223) - - (17,223)
Issuance of common shares
under employee and
shareholder plans 112,234 1 1,762 - - - 1,763
Net income - - - 10,428 - - 10,428
---------------------------------------------------------------------------------------------
Balance at December 31,
1995 11,525,518 115 176,061 (19,343) 900 (6) 156,827
Dividends declared - - - (18,726) - - (18,726)
Issuance of common
shares, net
of offering costs 1,166,600 12 23,477 - - - 23,489
Issuance of common shares
under employee and
shareholder plans 352,019 4 6,762 - - - 6,766
Option exercise 15,000 - 264 - - - 264
Net income - - - 11,458 - - 11,458
---------------------------------------------------------------------------------------------
Balance at December 31,
1996 13,059,137 $131 $206,564 $(26,611) 900 $(6) $180,078
=============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,458 $ 10,428 $ 8,761
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 10,603 9,232 6,660
Amortization of deferred financing
costs 393 515 474
Gain on sale of real estate (246) - -
Noncash compensation expense related
to issuance of shares to employees - - 245
Net effect of changes in operating
assets and liabilities (2,791) 2,248 3,380
---------------------------------
Net cash provided by operating
activities 19,417 22,423 19,520
INVESTING ACTIVITIES
Acquisition of properties (7,095) (6,648) (84,862)
Acquisition of ownership interests in
predecessors - - (103)
Payment of construction costs (58,592) (54,322) (20,465)
Proceeds from sale of real estate 520 - -
Improvements to real estate investments (2,214) (3,331) (2,638)
Purchase of furniture, fixtures, and
equipment (312) (605) (933)
Increase in restricted cash (84) (31) (439)
---------------------------------
Net cash used in investing activities (67,777) (64,937) (109,440)
FINANCING ACTIVITIES
Net proceeds from offerings of common
shares 23,915 - 53,114
Proceeds from employee and shareholder
plans 5,810 1,188 -
Payment of offering costs (513) (231) (2,132)
Proceeds from notes payable 59,206 118,342 103,813
Payment of financing costs (280) (1,180) (1,170)
Payment of notes payable (24,843) (52,174) (52,552)
Payment of dividends (23,048) (17,181) (10,682)
Purchase of treasury stock - - (6)
--------------------------------
Net cash provided by financing
activities 40,247 48,764 90,385
--------------------------------
Net (decrease) increase in cash and
cash equivalents (8,113) 6,250 465
Cash and cash equivalents at beginning
of period 10,754 4,504 4,039
---------------------------------
Cash and cash equivalents at end of
period $ 2,641 $ 10,754 $ 4,504
=================================
Supplemental cash flow information:
Interest payments, including $5,148,
$3,072 and $941 capitalized in 1996,
1995 and 1994, respectively $ 13,036 $ 8,619 $ 3,555
Noncash investing and financing
activities:
Issuance of shares under employee
plans $ 1,305 $ 807 $ -
Contribution of land $ - $ 2,063 $ -
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND FORMATION
Columbus Realty Trust (the Company) was organized as a Texas real estate
investment trust on October 12, 1993, to continue the multifamily operations of
Columbus Realty Holdings, Inc. (CRH) and certain of its affiliates and
predecessors (collectively, the Columbus Group). The Company commenced
operations December 29, 1993, upon completion of an initial public offering of
6,898,566 common shares at a price of $17.25 per share.
Net proceeds from the public offering were approximately $111.6 million before
offering costs. In connection with the offering, the Company drew $15 million on
a credit facility agreement (the Credit Facility, more fully described in Note
5), for total proceeds of approximately $126.6 million. The proceeds were
primarily used to pay off mortgage notes payable and the related debt prepayment
penalties of the Columbus Group and of Texana-RAT II Associates, Inc. and
certain of its affiliates (collectively, the Texana Group), and for the
acquisition of the ownership interests in certain properties of the Columbus
Group and the Texana Group (collectively, the predecessors to Columbus Realty
Trust).
Upon consummation of the public offering, the ownership interests of the
predecessors to Columbus Realty Trust in twelve multifamily residential
properties, two industrial properties and one retail property were transferred
to the Company. The properties are located primarily in the greater Dallas,
Texas, metropolitan area. In addition, the property management contracts of
affiliates of the predecessors to Columbus Realty Trust were transferred to
Columbus Management Services, Inc. (CMSI), a wholly owned subsidiary of the
Company. CMSI manages the properties of the Company, as well as properties owned
by other parties.
The ownership interests, with a net book value of approximately $17.0 million,
and the property management contracts were acquired for a purchase price of
approximately $16.2 million, plus 1,601,518 common shares and options for
100,000 shares at an option price of $19.8375 per share.
For financial reporting purposes, the ownership interests acquired were recorded
by the Company at their historical values, with the exception of the payments
made to the third-party owners, which have been accounted for under the purchase
method of accounting. The payments made to third-party owners have been
allocated to the related real estate based on their estimated fair values.
CONSOLIDATION AND PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, CMSI, and Addison Circle One, Ltd. The formation of Addison
Circle One, Ltd. is more fully discussed in Note 3. All significant intercompany
transactions and accounts have been eliminated. Certain prior year financial
statement amounts have been reclassified to conform with current year
presentation.
USES OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statement and accompanying notes.
Actual results could differ from those estimates.
<PAGE> 7
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES
The Company has made an election to be taxed as a real estate investment trust
(REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the Code). As a REIT, the Company generally is not subject to federal
income tax to the extent it distributes at least 95% of its REIT taxable income
to its shareholders. Shareholders are taxed on dividends declared and must
report such dividends as either ordinary income, short term gains, long term
gains, or as return of capital. No provision for federal income taxes has been
included in the Company's financial statements as of December 31, 1996, 1995, or
1994 (see Note 6).
If the Company fails to qualify as a REIT in any taxable year, the Company will
be subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain state
and local taxes on its income and property and to federal income and excise
taxes on its undistributed income.
Earnings and profits, which determine the taxability of dividends to
shareholders, differ from net income reported for financial reporting purposes
due to differences for federal tax purposes in the estimated useful lives used
to compute depreciation and the carrying value (basis) of the investment in
properties.
REVENUE RECOGNITION
Rental income attributable to residential leases is recorded when due from
residents. Rental income from the industrial and retail properties is recognized
on a straight-line basis over the term of the related lease.
REAL ESTATE ASSETS AND RELATED DEPRECIATION
Real estate assets held for investment are stated at depreciated cost unless the
asset is determined to be impaired. The Company records impairment losses on its
real estate assets when events and circumstances indicate that the assets might
be impaired and the expected undiscounted cash flows are less than the carrying
amounts of those assets. In cases where the Company does not expect to recover
its carrying costs, the Company reduces its carrying costs to fair value. No
such impairment losses have been recognized to date.
Real estate assets held for sale are stated at the lower of depreciated cost, or
fair market value less selling costs at the date the Company begins marketing
efforts to sell the properties. The Company records impairment losses on real
estate investments held for sale if the Company determines the fair market value
less selling costs is less than depreciated cost. No such impairment losses on
real estate held for sale have been recognized to date. In 1996, the Company
began marketing efforts with respect to certain of its condominium units (see
Note 4). No depreciation of the real estate assets held for sale has been
recognized since the inception of marketing efforts for the properties.
<PAGE> 8
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REAL ESTATE ASSETS AND RELATED DEPRECIATION (CONTINUED)
Costs related directly to the acquisition, development and improvement of real
estate, including tenant improvements on the industrial and retail properties,
are capitalized. Interest costs incurred during construction periods are
capitalized.
Ordinary repairs and maintenance are expensed as incurred; major replacements
and betterments are capitalized and depreciated over their estimated useful
lives. Depreciation is computed on a straight-line basis over the expected
useful lives of depreciable property, which is generally 15 to 40 years for
buildings and improvements, and 5 to 7 years for furniture, fixtures and
equipment.
Costs incurred in connection with resident turnover such as unit cleaning,
painting, carpet cleaning or replacement, appliance replacement, and other
associated costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash and cash equivalent investments with
original maturities of three months or less.
RESTRICTED CASH
Restricted cash includes an escrow account established for property taxes on a
property and a construction deposit for public infrastructure improvements made
on one of the Company's development projects.
DEFERRED ASSETS
Deferred assets include costs incurred in obtaining tenant leases at the
Company's industrial and retail properties. Such costs are amortized over the
term of the related lease using the straight-line method.
DEFERRED FINANCING COSTS
Loan origination costs and commitment fees are deferred and amortized on a
straight-line basis, which approximates the effective interest method, over the
initial term of the related note payable.
STOCK COMPENSATION
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and intends to continue to do so. See Note 7 for a
discussion of the Company's stock compensation arrangements and pro forma
disclosure of the effect on income from operations and earnings per share of
such arrangements pursuant to the requirements of Financial Accounting Standards
Board Statement 123, Accounting for Stock-Based Compensation (SFAS 123).
<PAGE> 9
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
CONCENTRATIONS
The Company invests primarily in multifamily residential properties. At December
31, 1996, the Company owned 26 multifamily residential properties, two
industrial properties, one retail property, one development site, and had five
multifamily residential properties under development. All but three of these
properties are located in the Dallas, Texas, metropolitan area. The multifamily
residential industry is highly competitive and the Company competes with other
REITs as well as other real estate owners and developers with respect to the
acquisition of land for development and the acquisition of existing multifamily
residential properties. In addition the Company's properties compete with other
multifamily residential properties for residents. The Company believes that the
location and quality of its multifamily residential properties, the management
services and amenities provided to residents, and its long-term commitment to
the ownership of its properties and to its surrounding communities are the
principal competitive factors affecting its real estate investments.
2. REAL ESTATE
YEAR ENDED DECEMBER 31, 1996
ACQUISITIONS OF DEVELOPMENT SITES
The Company purchased four multifamily residential development sites in the year
ended December 31, 1996. All of the acquisitions were funded through the
Company's Credit Facility more fully described in Note 5.
Two development sites were purchased in the Uptown district of Dallas, Texas,
for an aggregate purchase price of approximately $5.2 million in January 1996.
Construction of a 196-unit multifamily residential project, The Heights of
State-Thomas, began on one of the sites in the fourth quarter of 1996.
Development of the second site is expected to begin in 1997. A third multifamily
development site in the Uptown district was acquired in July 1996 for
approximately $1.3 million. Construction of a 186-unit multifamily residential
project, Cole's Corner, began on this site in August 1996.
The Company acquired a multifamily residential development site in Jackson,
Mississippi, for approximately $620,000 in February 1996. Construction of a 240-
unit multifamily residential project, Columbus Pointe, began on this site in the
second quarter of 1996.
COMPLETED CONSTRUCTION
The Company completed construction of five multifamily residential projects
during the year ended December 31, 1996. The aggregate development and
construction costs of the projects as set forth in the table below have been
reclassified from construction in progress to buildings and improvements in the
Company's consolidated financial statements as of December 31, 1996.
<PAGE> 10
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. REAL ESTATE (CONTINUED)
COMPLETED CONSTRUCTION (CONTINUED)
<TABLE>
<CAPTION>
Number Development/Construction
Project Name Location of Units Completion Date Cost
------------ -------- -------- --------------- ----
<S> <C> <C> <C> <C>
(in thousands)
Hackberry Creek II Dallas, TX 192 April 1996 $ 9,617
The Abbey Dallas, TX 34 April 1996 4,364
The Vineyard Dallas, TX 116 May 1996 7,418
Winsted Village Dallas, TX 314 August 1996 15,881
Columbus Square Dallas, TX 218 September 1996 18,120
--- -------
874 $55,400
=== =======
</TABLE>
YEAR ENDED DECEMBER 31, 1995
ACQUISITIONS
In March 1995 the Company acquired a 160-unit multifamily residential property
known as The Parks, located in Coppell, Texas. The purchase price of
approximately $6.6 million was funded through the Company's Credit Facility.
The Company acquired two condominium units in the Ascension Point Phase I
condominium community located in Arlington, Texas, during the year ended
December 31, 1995, for purchases prices totaling $98,000. The purchases were
funded from the Company's cash reserves.
COMPLETED CONSTRUCTION
The Company completed construction of three apartment projects during the year
ended December 31, 1995, as set forth in the table below.
<TABLE>
<CAPTION>
Number Development/Construction
Project Name Location of Units Completion Date Cost
------------ -------- -------- --------------- ----
<S> <C> <C> <C> <C>
(in thousands)
Trace II Jackson, MS 204 January 1995 $ 7,488
Uptown Village Dallas, TX 300 May 1995 13,144
Ascension Point II Dallas, TX 86 September 1995 4,598
--- -------
590 $25,230
=== =======
</TABLE>
3. REAL ESTATE JOINT VENTURE
In December 1995 the Company executed a partnership agreement with Gaylord
Properties, Inc. for the development and construction of a 460-unit multifamily
and retail development to be known as Addison Circle One. The partnership,
Addison Circle One, Ltd., was formed pursuant to a master development agreement
between the Company and Gaylord Properties, Inc. The Company paid an affiliate
$150,000 in January 1996 upon formation of Addison Circle One, Ltd. See Note 10.
<PAGE> 11
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. REAL ESTATE JOINT VENTURE (CONTINUED)
The Company, as general partner in Addison Circle One, Ltd. made an initial
capital contribution of approximately $8.6 million to the partnership, funded
through the Company's Credit Facility. Gaylord Properties, Inc., as limited
partner, contributed the development site valued at $2.1 million to the
partnership. The limited partner contribution has been reflected in the
Company's consolidated financial statements as a minority interest. The assets
and liabilities of Addison Circle One, Ltd. have been consolidated in the
Company's consolidated balance sheets as of December 31, 1996, and 1995. The
formation and operations of Addison Circle One, Ltd. had no effect on the
Company's statements of operations for the years ended December 31, 1996, and
1995.
The Company is solely responsible for the operation of the partnership,
construction and development of Addison Circle One, and management of the
property upon completion. Construction on Addison Circle One began in January
1996. Addison Circle One, Ltd., obtained a $21.3 million construction loan for
the unfunded projected development costs in June 1996, as more fully described
in Note 5.
4. REAL ESTATE HELD FOR SALE
In June 1996 the Company began marketing efforts to sell 130 condominium units
owned by it in the Springstead and Villas of Valley Ranch condominium
communities located in Dallas, Texas. The aggregate net book value of the
condominium properties totaling approximately $4.0 million has been classified
as real estate held for sale in the Company's consolidated financial statements
as of December 31, 1996.
Six units in the Villas of Valley Ranch condominium community were sold during
the year ended December 31, 1996, for net proceeds of $433,000 resulting in a
net gain of approximately $246,000.
5. NOTES PAYABLE
CREDIT FACILITY
The Company's $170 million Credit Facility is secured by a first mortgage and
assignment of rents on all of the Company's real estate portfolio, except for
the Lakeside Village Apartments and nine properties securing a loan from
Nationwide Life Insurance Company, more fully described below. The Credit
Facility, as amended in February 1995 and March 1996, bears interest at LIBOR
(5.50% at December 31, 1996) plus 165 basis points on completed property debt
and LIBOR plus 205 basis points on development property debt. When the Credit
Facility matures on December 31, 1997, the Company will be required to secure
substitute financing for the balance then outstanding.
Approximately $118.0 million and $84.7 million was outstanding under the Credit
Facility at December 31, 1996, and 1995, respectively. The unused commitment
under the Credit Facility at December 31, 1996, was approximately $52.0 million.
The Company's weighted average borrowing rates during 1996 were 7.10% on
completed property debt and 7.53% on development debt. The Company's weighted
average borrowing rates during 1995 were 7.78% on completed property debt and
8.22% on development debt. The Company's ability to draw amounts under the
Credit Facility from time to time is subject to the satisfaction of certain
conditions. The payment of dividends and capital share repurchases are
restricted to 90% of funds from operations, as defined by NAREIT, plus net
taxable gain from the sale of properties.
<PAGE> 12
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
5. NOTES PAYABLE (CONTINUED)
CREDIT FACILITY (CONTINUED)
The Credit Facility requires the Company to maintain a minimum level of tangible
net worth and also to meet specified ratios of liabilities to market
capitalization, liquid assets and debt to market capitalization.
CONSTRUCTION LOAN
In June 1996 Addison Circle One, Ltd., an affiliated partnership, the majority
interest of which is held by the Company, obtained a $21.3 million construction
loan from Wells Fargo Realty Advisors Funding, Inc. (Wells Fargo). The loan will
be funded in increments corresponding to the development and construction costs
incurred to complete the Addison Circle One multifamily residential and retail
project more fully described in Note 3.
The Wells Fargo loan is secured by a first lien deed of trust on the land and
improvements comprising the project and a security interest in its rents and
leases. Interest is due and payable monthly at LIBOR plus 165 basis points
applied to the daily principal balance outstanding (7.27% at December 31, 1996).
The loan matures in June 1999 when the principal balance then outstanding is
due. Approximately $1.9 million had been drawn on the construction loan as of
December 31, 1996.
MORTGAGE LOANS
In November 1995, $50 million of variable rate debt outstanding under the Credit
Facility was retired when the Company closed on a $50 million loan from
Nationwide Life Insurance Company (Nationwide). The 7.45% fixed-rate loan
(principal balance of approximately $49.3 million at December 31, 1996) is
collateralized by nine completed multifamily residential properties. Regular
principal payments required to amortize the note are $768,000 in 1997, $828,000
in 1998, $892,000 in 1999, $960,000 in 2000, approximately $1.0 million in 2001,
and approximately $1.0 million in 2002 until the note's maturity in November
2002 when the scheduled unpaid principal balance of approximately $43.8 million
is due.
The Company obtained approximately $11 million in financing from an unaffiliated
third party in connection with the purchase of the Lakeside Village Apartments
in May 1994. The note payable (principal balance of approximately $10.7 million
at December 31, 1996) bears interest at 7% per annum, requires monthly payments
of principal and interest, and matures in May 1999 when the scheduled unpaid
principal balance of approximately $10.4 million is due. Regular principal
payments required to amortize the note are $133,000 in 1997, $143,000 in 1998,
and $62,000 in 1999.
6. SHAREHOLDERS' EQUITY
Common shareholders are entitled to one vote for each share held on all matters
presented for a vote of shareholders. There is no right of cumulative voting in
connection with the election of Trust Managers. Shareholders are entitled to
receive pro rata, such dividends, if any, as may be declared by the Board of
Trust Managers in their discretion from funds legally available. Upon
liquidation or dissolution, shareholders are entitled to share ratably in all
assets available for distribution to shareholders, subject to the rights of the
holders of the Company's creditors and to the rights of any preferred class of
the Company's securities (if any are outstanding). The common shareholders have
no redemption, preference, conversion, exchange or preemptive rights to
subscribe to any securities of the Company. The common shares issued are fully
paid and non-assessable.
<PAGE> 13
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. SHAREHOLDERS' EQUITY (CONTINUED)
For the Company to qualify as a REIT under the Code, not more than 50% in value
of its outstanding common shares may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include pension funds and
certain other tax-exempt entities) during the last half of a taxable year, and
such shares must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months, or during a proportionate part of a
shorter taxable year. The Company's Declaration of Trust provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 9.8% of the total outstanding shares, subject to certain
exceptions.
EQUITY OFFERINGS
The Company sold 2,700,000 common shares in a second public offering in July
1994, receiving net proceeds of approximately $48.8 million after underwriting
commissions and offering costs. In August 1994, the Company received
approximately $3.8 million for an additional 200,000 shares sold pursuant to the
underwriters' exercise of a portion of an overallotment option. The aggregate
net proceeds of approximately $52.6 million were used to repay a portion of the
indebtedness then outstanding on the Company's Credit Facility.
In January 1995 the Company registered for resale 1,940,618 restricted common
shares issued in connection with the formation of the Company with the
Securities and Exchange Commission. Approximately $78,000 was incurred for legal
and accounting fees related to the registration, and has been reflected in the
Company's financial statements as additional paid in capital.
The Company registered an aggregate of $200 million of debt securities, common
shares, preferred shares and warrants (collectively, the Registered Securities)
pursuant to a "shelf" Registration Statement with the Securities and Exchange
Commission in August 1996. The Registered Securities may be issued separately or
together, in separate series, and in amounts and at prices and terms to be
determined by the Company. In October 1996 the Company completed the sale of
1,166,600 of the Registered Securities to certain institutional investors. The
Company received net proceeds of approximately $23.5 million after expenses from
the sale of such common shares for $20.50 per share. The proceeds were used to
repay a portion of the Company's indebtedness under the Credit Facility.
INCOME PER SHARE
Income per share has been computed by dividing net income by the weighted
average number of common shares and dilutive common share equivalents
outstanding during the periods presented. In years in which there are no
earnings, common share equivalents are not included in the computation as they
are anti-dilutive.
<PAGE> 14
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. SHAREHOLDERS' EQUITY (CONTINUED)
DIVIDENDS
During the year ended December 31, 1996, the Company modified its policy
regarding the timing of its declaration and payment of quarterly dividends such
that dividends will be declared and paid in the same calendar quarter. The
following table presents the sources of the four quarterly dividends declared
during the year ended December 31, 1996 on a per common share basis. The
characterization of the dividends for federal income tax purposes has been
allocated based upon the earnings and profits of the Company for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
Long-term
Ordinary Return Capital Total
Record Payment Income of Capital Gain Dividend
Date Date (63.3%) (35.1%) (1.6%) (100%)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 25, 1996 April 15, 1996 $0.237 $0.132 $0.006 $0.375
June 28, 1996 July 15, 1996 0.250 0.139 0.006 0.395
September 30, 1996 October 15, 1996 0.250 0.139 0.006 0.395
December 23, 1996 December 26, 1996 0.250 0.139 0.006 0.395
--------------------------------------------------
$0.987 $0.549 $0.024 $1.560
--------------------------------------------------
</TABLE>
DIVIDEND REINVESTMENT PLAN
Effective with the first quarterly dividend in 1995, the Company adopted a
dividend reinvestment and share purchase plan (the Dividend Reinvestment Plan).
Under terms of the Dividend Reinvestment Plan, common shareholders are eligible
to purchase the Company's common shares directly from the Company with all or
any portion of the quarterly dividend for a purchase price of 95% of the then
current market price for the shares. Shareholders may also make additional cash
purchases of additional shares on the same terms, not to exceed $10,000 per
quarter, subject to certain other limitations. Under the Dividend Reinvestment
Plan, the Company issued 276,762 common shares for net proceeds of approximately
$5.4 million in the year ended December 31, 1996, and 63,669 common shares for
net proceeds of approximately $1.0 million in the year ended December 31, 1995.
7. SHARE OPTION PLANS
In connection with the initial public offering, the Company established the
Columbus Realty Trust 1993 Share Option Plan (the Share Option Plan). A maximum
of 1,400,000 common shares were reserved for issuance under the Share Option
Plan which provides for the grant of incentive and nonqualified options. The
plan provides for the right of an option holder to elect to receive, in lieu of
common shares issuable upon exercise of the option, cash or common shares equal
to the excess of the market price of the common shares over the exercise price
for such common shares. The share options are exercisable beginning six months
from the date they are granted and are exercisable over a period determined by
the Plan Administrators, but no longer than ten years after the date they are
granted. All common share options authorized under the plan were granted as of
December 31, 1996.
<PAGE> 15
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. SHARE OPTION PLANS (CONTINUED)
In January 1996 the Company established the Long-Term Management Incentive Plan
(Management Incentive Plan) pursuant to which the Plan Administrators are
authorized to award 500,000 common shares in the form of share options, share
purchase awards and restricted and unrestricted share awards under such terms as
allowed in the plan. Pursuant to the Management Incentive Plan, the Company
awarded 228,876 nonqualified options to employee and non-employee Trust
Managers, executives and employees in the year ended December 31, 1996.
Additionally, 260,000 common shares were reserved for issuance pursuant to
performance based share performance awards to certain executive officers and
11,124 common shares were awarded as share bonuses as described in Note 8.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method of that statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model and the following assumptions: a dividend yield of 7.826%
and a volatility factor of 0.165 based on the average monthly closing price of
the Company's common shares since inception (December 29, 1993), risk free
interest rates ranging from 5.80% to 6.89% corresponding to the expected lives
of the grants, and expected lives generally corresponding to the terms of the
grants (weighted average of approximately nine years).
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of the pro forma disclosures required by SFAS 123, the estimated
fair value of options granted after December 31, 1994, is amortized to expense
over the options' vesting periods. SFAS 123 does not require pro forma
presentation for the year ended December 31, 1994, or earlier. The Company's pro
forma information follows (in thousands except for share and per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
--------------------------
<S> <C> <C>
Pro forma net income $ 11,162 $ 10,369
Pro forma earnings per share $ 0.91 $ 0.90
Pro forma fully diluted weighted
average number of common
shares outstanding 12,221,123 11,557,721
</TABLE>
<PAGE> 16
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. SHARE OPTION PLANS (CONTINUED)
SUMMARY OF SHARE OPTION ACTIVITY
<TABLE>
<CAPTION>
Number of Options, Number of Options, Number of Total
Share Option Plan Incentive Plans Options, Other Options
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1993 860,000 (a) - 340,000 (b) 1,200,000
Options granted 50,000 (c) - - 50,000
Options exercised - - - -
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1994 910,000 - 340,000 1,250,000
Options granted 335,000 - - 335,000 (d)
Options exercised - - - -
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1995 1,245,000 - 340,000 1,585,000 (e)
Options granted 155,000 228,876 - 383,876 (f)
Options exercised (15,000) - - (15,000) (g)
Options expired - - - -
--------------------------------------------------------------------------------------
Outstanding, December 31, 1996 1,385,000 228,876 340,000 1,953,876 (h)
======================================================================================
</TABLE>
_________________________
(a) Option prices range from $17.25 to $17.375 per share.
(b) Granted to affiliates and non-affiliates in connection with development site
acquisitions. Option price of $19.8375 per share.
(c) Option prices range from $17.25 to $18.375 per share.
(d) Weighted average option price of $18.60 per share. Weighted average fair
value according to the Black Scholes option valuation model of $1.15 per
share.
(e) Weighted average option price of $18.11 per share.
(f) Weighted average option price of $20.39 per share. Weighted average fair
value according to the Black Scholes option valuation model of $1.20 per
share.
(g) Weighted average option price of $17.63 per share.
(h) Weighted average option price and contractual life of $18.56 per share and
93.8 months, respectively. Option prices range from $17.25 to $20.875 per
share.
The number of common share options exercisable as of December 31, 1996, 1995,
and 1994 were 1,670,137; 1,363,781; and 965,442, respectively. The weighted
average option price of options exercisable at December 31, 1996, is $18.31.
8. SHARE BONUS AND INCENTIVE PLANS
The Company has established certain bonus and incentive plans for the purpose of
advancing the long term interests of the Company and its shareholders by
increasing the grantees' ownership in the Company, and providing additional
incentive to promote its success and growth.
<PAGE> 17
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
8. SHARE BONUS AND INCENTIVE PLANS (CONTINUED)
During the year ended December 31, 1994, the Company issued all of the 13,200
common shares authorized for issuance under the Columbus Realty Trust 1993 Share
Bonus Plan to certain nonexecutive employees and other key personnel for a
purchase price equal to par value ($.01 per share). The difference between the
fair market value for the shares on the date issued and the purchase price was
$245,000 and was recognized as compensation expense in the Company's
consolidated financial statements for the year ended December 31, 1994.
During the years ended December 31, 1996, and 1995, pursuant to the Share Bonus
Plan and the Management Incentive Plan, the Company granted 34,085 and 17,649
restricted common shares, respectively, to certain executive officers at their
election in lieu of payment of annual base salary, such shares having fair
market values on the dates of grant of $652,000 and $333,000, respectively,
equal to 150% of the annual base salary otherwise payable. The determination to
grant common shares having a fair market value of 150% over the base salary
otherwise payable was based upon the risks of forfeiture of the shares awarded
and the other restrictions on transfer of the shares described below. In
addition, the Company granted 33,749 and 25,641 restricted common shares in the
years ended December 31, 1996 and 1995, (having fair market values on the dates
of grant of $646,000 and $474,000, respectively) to certain executive officers
and other employees as bonuses. The restricted common shares are generally
subject to forfeiture in the event of termination of the recipient's employment
with the Company within the three year period following the dates of grant, and
may not be transferred until the end of the three-year restricted periods.
Each of the restricted common shares was granted for a purchase price of $0.01
per share. The difference between the purchase prices of the common shares and
the aggregate fair market values of the common shares on the dates of grant
(approximately $1.3 million in 1996 and $807,000 in 1995) will, to the extent
such amounts are allocable to operations, be amortized as compensation expense
ratably over the three-year periods commencing on the dates of grant.
Accordingly, during the years ended December 31, 1996, and 1995, the Company did
not recognize the compensation expense which would have been recognized if such
annual base salaries and bonuses had been paid. However, for the years ended
December 31, 1996, and 1995, the Company recognized $107,000 and $45,000,
respectively, as amortization of deferred compensation expense, and $126,000 and
$89,000, respectively, as bonus expense, based upon the portion of the
amortization of the fair market values of restricted common shares granted in
1996 and 1995 allocable to operations.
In November 1996 the Company entered into performance based stock and dividend
equivalent award agreements with its Chairman of the Board, Chief Executive
Officer, and Chief Operating Officer. Under terms of the agreements, an
aggregate of 260,000 common shares could be issued to the three executive
officers in 2000 or 2002 if certain company performance criteria is met.
Additionally, such executive officers could receive dividend equivalent
payments, plus interest and reinvestment earnings, on the 260,000 common shares
annually for the period beginning in January 1997. The performance based stock
will be issued and the dividend equivalent payments will be made if the increase
in the total return on the Company's common shares for the applicable period
exceeds (by a specified amount) the weighted average total return per common
share of all publicly traded equity residential apartment REITs, as determined
by NAREIT indices.
<PAGE> 18
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK PURCHASE PLAN
On July 23, 1995, the Company established the Columbus Realty Trust Employee
Stock Purchase Plan whereby employees of the Company are eligible to purchase
common shares directly from the Company for a purchase price equal to 85% of the
current market price on the date of purchase. Employees are limited to purchases
aggregating a market value of no more than $25,000 per plan year based on the
market price on the first day of the plan year. Under the Employee Stock
Purchase Plan, the Company issued 7,423 common shares for net proceeds of
$121,000 in the year ended December 31, 1996, and 5,275 common shares for net
proceeds of $51,000 in the year ended December 31, 1995.
401(K) SAVINGS PLAN
Pursuant to Columbus Realty Trust 401(k) Savings Plan (the 401(k) Plan),
eligible employees (as defined in the 401(k) Plan) may join the 401(k) Plan on
semi-annual enrollment dates. Participants may elect to defer up to 15% of their
annual compensation to a maximum of $9,500 as pre-tax contributions to the plan
(subject to certain limitations for highly-compensated employees). The Company
has the option, but is not required, to make contributions to the 401(k) Plan.
In January 1997 the Company contributed $27,000 to the 401(k) Plan for the
benefit of participants contributing the 401(k) Plan during the six month period
ended December 31, 1996.
10. TRANSACTIONS WITH AFFILIATES
<TABLE>
<CAPTION>
Receivables from affiliates include the
following (in thousands): December 31,
--------------
1996 1995
--------------
<S> <C> <C>
Amounts advanced to condominium
homeowners' associations $ 54 $ 47
Amounts advanced to non-management
employees 34 12
Receivable from Employee Stock
Purchase Plan 3 1
Amounts advanced to affiliates in
ordinary course of business for third
party property management 6 353
Amounts receivable from owners of
predecessors in connection with the
acquisition of their interests 55 5
-------------
$152 $418
=============
</TABLE>
The Company provides property management services in connection with the
management of certain properties owned by affiliates. Property management fee
income relating to these contracts during the years ended December 31, 1996,
1995 and 1994, was approximately $238,000, $331,000, and $379,000, respectively.
Included in management fee income from affiliates in the year ended December 31,
1996, is $197,000 attributable to the Madison Office Building (The Madison),
which the affiliates sold in January 1996. The Company received a marketing fee
of $50,000 pursuant to the sale.
<PAGE> 19
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
10. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Company paid approximately $160,000 and $106,000 in rent for office space at
The Madison in the years ended December 31, 1995 and 1994, respectively. The
Company continues to occupy the office space at The Madison pursuant to its
lease obligation more fully described in Note 11.
In January 1996 the Company paid $150,000 to Wolverine Asset Management, Inc.,
an affiliate of a Trust Manager, for real estate advisory services in connection
with the joint development agreement with Gaylord Properties, Inc. more fully
described in Note 14.
The Company entered into certain note purchase agreements pursuant to borrowing
arrangements between a bank and two of the Company's executive officers in the
year ended December 31, 1996, as more fully described in Note 14.
11. OPERATING LEASES
The Company receives rental income from the properties under operating leases
with terms ranging from less than one year to twenty years for the industrial
and retail properties, and less than one year for most of the residential
properties.
The minimum future rentals under operating leases for the industrial and retail
properties as of December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------
<S> <C>
1997 $ 5,424
1998 5,052
1999 4,067
2000 1,594
2001 1,229
Thereafter 3,295
-------
$20,661
=======
</TABLE>
Included in the rentals under operating leases is one multifamily residential
property that is subject to a master lease expiring in October 1999 with
Electronic Data Systems (EDS). EDS has an option to purchase the property at the
end of each lease year with the purchase price compounding 5% each year the
option is not exercised.
The original term of Company's lease for its corporate offices at The Madison
expired December 31, 1996, subject to three one-month renewal options. The
Company expects to exercise all three renewal options for monthly base rent
payments of approximately $15,000.
<PAGE> 20
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash equivalents, accounts receivable, accounts payable and accrued expenses and
other liabilities are carried at amounts that reasonably approximate their fair
values. Notes payable result from (a) draws made on the Company's Credit
Facility and the Wells Fargo loan during the years ended December 31, 1996, and
1995, which accrue interest at floating interest rates based on market rates and
(b) two first mortgage loans that accrue interest at 7.0% and 7.45%. The
carrying values of the notes payable at December 31, 1996, and 1995 reasonably
approximate their fair values.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited results of operations for 1996,
1995, and 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
-------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
- --------------------------------
Total revenues $10,934 $11,762 $12,554 $13,280
Net income 2,696 2,809 2,848 3,105
Per common share:
Net income $ 0.23 $ 0.24 $ 0.24 $ 0.24
Year ended December 31, 1995
- --------------------------------
Total revenues $ 9,414 $10,271 $10,668 $10,898
Net income 2,546 2,491 2,650 2,741
Per common share:
Net income $ 0.22 $ 0.22 $ 0.23 $ 0.24
Year ended December 31, 1994
- --------------------------------
Total revenues $ 6,237 $ 7,385 $ 8,379 $ 8,880
Net income 1,829 1,979 2,458 2,495
Per common share:
Net income $ 0.21 $ 0.23 $ 0.23 $ 0.22
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
GENERAL
The Company is subject to legal proceedings, claims and liabilities which arise
in the ordinary course of its business. In the opinion of the Company, none of
such proceedings is material in relation to the Company's consolidated financial
statements.
<PAGE> 21
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
JOINT DEVELOPMENT AGREEMENT
The Company has entered into a joint development agreement with Gaylord
Properties, Inc., to develop between 2,500 and 3,500 multifamily residential
units in Addison, Texas. The first development under the agreement, Addison
Circle One, is described in Note 3. The Company has the option, but is not
obligated, to pursue additional development activities under the joint
development agreement, subject to the agreement of Gaylord.
NOTE PURCHASE AGREEMENTS
In June 1996 the Company entered into Note Purchase Agreements (Purchase
Agreements) pursuant to loans made between Bank One, Texas, N.A. (Bank One), and
two of the Company's executive officers. The loans, in the form of credit
facilities which may be drawn upon at the discretion of the borrowers up to
maximum principal amounts of $350,000 and $300,000, are secured by pledges of
36,532 and 32,066 of the Company's common shares, respectively, owned by such
executive officers. Should an event of default occur, Bank One may require the
Company to purchase the notes for a purchase price equal to the balance then
outstanding under the terms of the note agreements. If the Company is required
to purchase the notes, the Company will obtain all rights of Bank One, as a
secured party, with respect to the common shares securing the loans. Based on
the closing market price for the Company's common shares on December 31, 1996,
of $22.75, the market value of the pledged shares was approximately $831,000,
and $730,000, respectively.
Such loans require quarterly interest-only payments beginning August 1, 1996,
and mature on June 12, 1999. Interest accrues at floating rates determined by
Bank One. The applicable interest rate in effect as of December 31, 1996, was
8.25% on principal balances outstanding under the credit facilities of $150,000
and $100,000. The borrowers were current on all obligations under the loans as
of December 31, 1996.
LETTER OF CREDIT
Addison Circle One Ltd. obtained an irrevocable standby letter of credit of
approximately $3.4 million in the year ended December 31, 1996. The letter of
credit was obtained for the benefit of the Town of Addison, Texas, as a guaranty
for payment of certain public infrastructure costs required in the construction
of the Addison Circle One multifamily residential project. As of December 31,
1996, no amounts had been drawn on the letter, which expires on June 30, 1997.
15. SUBSEQUENT EVENTS
REAL ESTATE TRANSACTIONS
On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado. The Company expects to
complete a purchase of the site when demolition of existing buildings,
remediation of the properties, and certain other conditions are met.
<PAGE> 22
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
15. SUBSEQUENT EVENTS (CONTINUED)
REAL ESTATE TRANSACTIONS (CONTINUED)
On February 24, 1997, the Company purchased a 158-unit multifamily residential
property known as The Commons at Turtle Creek, located in Dallas, Texas, for a
purchase price of approximately $6.9 million. The purchase was funded from the
Company's Credit Facility.
On February 27, 1997, the Company executed a forty-year land lease agreement for
a redevelopment project, The Rice Hotel, located in Houston, Texas. The Rice
Hotel is an 18-story structure originally built in 1913. Under terms of the
agreement, the Company will fund redevelopment of the hotel into a mixed-use
residential and retail facility comprised of 317 loft-style apartments and
21,000 square feet of retail space. The Company, in partnership with a Houston-
based development company, will manage all aspects of the renovation, currently
budgeted at approximately $33.3 million, and operations of the project upon
completion. The Houston Housing Finance Corporation (HHFC), owner of the land,
will fund approximately $6.6 million of abatement and infrastructure costs, and
the Company will provide the balance of the funding. Concurrently with closing
the lease agreement, the Company guaranteed a $20.0 million construction loan
for the project. The remainder of the Company's renovation costs will be funded
from draws on the Credit Facility or other short term financing.
OTHER
On February 25, 1997 the Company filed a Registration Statement on Form S-8 with
the Securities and Exchange Commission registering 1,000,000 common shares for
issuance pursuant to the Columbus Realty Trust Employee Incentive Plan.
On March 7, 1997, the Company declared a dividend of $0.395 per common share,
payable on March 25, 1997, to shareholders of record on March 21, 1997.
<PAGE> 23
COLUMBUS REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------------------------
ASSETS (Unaudited)
<S> <C> <C>
Real Estate:
Land $ 58,337 $ 54,399
Buildings and improvements 328,322 285,104
Furniture, fixtures, and
equipment 4,912 4,696
Construction in progress 61,785 55,614
---------------------------
453,356 399,813
Less accumulated
depreciation 46,576 40,492
---------------------------
Real estate held for
investment 406,780 359,321
Real estate held for sale 3,058 3,980
---------------------------
409,838 363,301
Cash and cash equivalents 6,688 2,641
Restricted cash 313 554
Accounts receivable 1,186 663
Receivables from affiliates 184 152
Deferred assets, net of
accumulated amortization 1,361 1,736
Investment in unconsolidated
subsidiary 300 -
Other assets 10,843 5,529
---------------------------
Total assets $430,713 $374,576
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $231,477 $179,855
Accounts payable and
accrued expenses 7,494 3,536
Accrued interest 332 288
Accrued property taxes 4,228 6,727
Tenant security deposits 1,841 1,671
Prepaid rent 384 358
Minority interest 2,063 2,063
---------------------------
Total liabilities 247,819 194,498
Shareholders' equity:
Preferred shares, $.01 par
value; 10,000,000 shares
authorized; none issued
or outstanding - -
Common shares, $.01 par
value; 100,000,000 shares
authorized; 13,409,467
and 13,059,137 shares
issued at June 30, 1997,
and December 31, 1996,
respectively 134 131
Additional paid-in capital 213,981 206,564
Retained earnings (deficit) (30,765) (26,611)
Notes due on common stock
purchases (450) -
---------------------------
182,900 180,084
Less 900 common shares in
treasury, at cost (6) (6)
---------------------------
Total shareholders' equity 182,894 180,078
---------------------------
Total liabilities and
shareholders' equity $430,713 $374,576
===========================
The accompanying notes are an integral part of the
financial statements.
</TABLE>
<PAGE> 24
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 14,018 $ 11,066 $ 26,879 $ 21,367
Property management 38 74 71 149
Interest and other 763 622 1,357 1,180
--------------------------------------------------------
Total revenue 14,819 11,762 28,307 22,696
Expenses:
Repairs and maintenance 1,030 912 1,944 1,702
Other property operating 662 601 1,279 1,191
Advertising 193 168 429 281
General and administrative
- properties 864 811 1,706 1,622
General and administrative
- corporate 685 538 1,331 1,046
Real estate taxes 2,115 1,516 4,091 2,937
Interest 2,746 1,869 4,898 3,364
Interest related to
amortization of deferred
financing costs 150 92 252 159
Depreciation and
amortization 3,245 2,488 6,201 4,931
--------------------------------------------------------
Total expenses 11,690 8,995 22,131 17,233
--------------------------------------------------------
Income from operations 3,129 2,767 6,176 5,463
Equity in earnings of
unconsolidated subsidiary - - - -
--------------------------------------------------------
Income before gain on sale of
real estate 3,129 2,767 6,176 5,463
Gain on sale of real estate 276 42 561 42
--------------------------------------------------------
Net income $ 3,405 $ 2,809 $ 6,737 $ 5,505
========================================================
Net income per common share,
primary and fully diluted:
Income before gain on sale of
real estate $0.23 $0.24 $0.46 $0.47
Gain on sale of real estate 0.02 - 0.04 -
--------------------------------------------------------
Net income $0.25 $0.24 $0.50 $0.47
========================================================
Weighted average number of
common shares outstanding
(including common share
equivalents): 13,629,781 11,767,043 13,496,035 11,723,562
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 25
COLUMBUS REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,737 $ 5,505
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 6,201 4,931
Amortization of deferred
financing costs 252 159
Gain on sale of real estate (561) (42)
Net effect of changes in
operating assets and
liabilities (7,171) (6,490)
-------------------------------
Net cash provided by operating
activities 5,458 4,063
INVESTING ACTIVITIES
Payment of construction costs (38,713) (32,694)
Acquisition of real estate (9,759) (5,805)
Proceeds from sale of real estate 2,113 91
Improvements to real estate
investments (1,033) (1,126)
Advances for common stock
purchases (450) -
Purchase of furniture, fixtures,
and equipment (216) (206)
Decrease in restricted cash 242 153
-------------------------------
Net cash used in investing
activities (47,816) (39,587)
FINANCING ACTIVITIES
Proceeds from notes payable 52,068 38,725
Payment of dividends (10,442) (8,678)
Proceeds from employee and
shareholder plans 5,362 1,262
Payment of notes payable (446) (414)
Payment of offering costs (89) (73)
Payment of financing costs (48) (257)
----------------------------
Net cash provided by financing
activities 46,405 30,565
----------------------------
Net increase (decrease) in cash
and cash equivalents 4,047 (4,959)
Cash and cash equivalents at
beginning of period 2,641 10,754
----------------------------
Cash and cash equivalents at end
of period $ 6,688 $ 5,795
============================
Supplemental cash flow
information:
Interest payments, including
approximately $2,720 and
$2,920 interest capitalized
in 1997 and 1996,
respectively $ 7,573 $ 6,217
Noncash investing and financing
activity:
Investment in unconsolidated
subsidiary $ 300 $ -
Issuance of shares under
compensation and bonus plans 1,698 1,305
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 26
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. BASIS PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND FORMATION
Columbus Realty Trust (the Company) was organized as a Texas real estate
investment trust on October 12, 1993, to continue the multifamily operations of
Columbus Realty Holdings, Inc. (CRH) and certain of its affiliates and
predecessors (collectively, the Columbus Group). The Company commenced
operations December 29, 1993, upon completion of an initial public offering of
6,898,566 common shares at a price of $17.25 per share.
Net proceeds from the public offering were approximately $111.6 million before
offering costs. In connection with the offering, the Company drew $15 million on
its credit facility, for total proceeds of approximately $126.5 million. The
proceeds were primarily used to pay off mortgage notes payable and the related
debt prepayment penalties of the Columbus Group and of Texana-RAT II Associates,
Inc. and certain of its affiliates (collectively, the Texana Group), and for the
acquisition of the ownership interests of the Columbus Group and the Texana
Group (collectively, the predecessors to Columbus Realty Trust).
Upon consummation of the public offering, the ownership interests of the
Columbus Group in seven multifamily residential properties were transferred to
the Company. Concurrently, the ownership interests of the Texana Group in five
multifamily residential, two industrial, and one retail property were
transferred to the Company. The properties are located primarily in the greater
Dallas, Texas, metropolitan area.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of the Company, its
subsidiaries and partnerships in which the Company has a controlling interest.
The Company's investment in Armada Homes, Inc. (Armada), is accounted for using
the equity method. At June 30, 1997, the Company owned an approximate 95% non-
voting interest in Armada. The Company's share of net income of Armada is
included in the Company's statement of operations. The effects of all
significant intercompany transactions have been eliminated.
INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In management's opinion, the interim financial statements reflect all
adjustments necessary for a fair presentation of the financial position of the
Company. All adjustments were of a normal recurring nature except for the
adjustments to reflect real estate transactions more fully described in Note 2.
The operating results for the interim period ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 1997. For further information, refer to the financial
statements and accompanying footnotes included in the Columbus Realty Trust Form
10-K/A for the fiscal year ended December 31, 1996 (the 1996 Annual Report).
<PAGE> 27
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. REAL ESTATE TRANSACTIONS
PROPERTY ACQUISITION
On February 24, 1997, the Company purchased a 158-unit multifamily residential
property known as The Commons at Turtle Creek, located in Dallas, Texas, for a
purchase price of approximately $6.9 million. The purchase was funded from the
Company's credit facility (the Credit Facility) more fully described in the 1996
Annual Report.
DEVELOPMENT PROJECTS
On January 16, 1997, the Company paid a deposit of $300,000 pursuant to an
earnest money contract to purchase and redevelop a ten-acre tract known as the
St. Luke's Hospital Campus located in Denver, Colorado. The Company expects to
complete a purchase of the site when the seller completes demolition of certain
existing buildings and meets other conditions.
On February 27, 1997, the Company executed a forty year land lease agreement for
a redevelopment project, The Rice Hotel, located in Houston, Texas. The Rice
Hotel is an 18-story structure originally built in 1913. Under terms of the
agreement, the Company will fund redevelopment of the hotel into a mixed-use
residential and retail facility comprised of 317 loft-style apartments and
21,000 square feet of retail space. The Company, in partnership with a Houston-
based development company, will manage all aspects of the renovation (currently
budgeted at approximately $33.3 million) and operations of the project upon
completion. The Houston Housing Finance Corporation (HHFC), owner of the land,
will fund approximately $6.6 million of abatement and infrastructure costs.
Concurrently with closing the lease agreement, the Company guaranteed a $20.0
million construction loan for the project. The remainder of the partnership's
renovation costs will be funded from draws on a short term unsecured credit line
more fully described in Note 4, the Credit Facility, cash flow from operations,
or other short term financing.
On May 7, 1997, the Company purchased a redevelopment site, The American Beauty
Mill, located in Dallas, Teaxas for $565,000. The Company expects to renovate
the property, formerly a flour mill and office complex, for adaptive reuse as a
multifamily residential project. The project is budgeted at approximately $5.0
million and will include 82 loft-style residential units upon completion. The
acquisition and development costs to date have been funded from the Company's
unsecured credit line.
On May 12, 1997, the Company purchased a development site for a multifamily
residential project in the Uptown District of Dallas, Texas, for approximately
$2.3 million. The purchase was primarily funded with seller financing of
approximately $2.0 million. See Note 4.
SALES OF CONDOMINIUM UNITS
Eight units in the Villas of Valley Ranch condominium community and 19 units in
the Springstead condominium community were sold during the six months ended June
30, 1997, for net proceeds of approximately $2.1 million resulting in a net gain
of $561,000.
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The investment in unconsolidated subsidiary at June 30, 1997, reflects a
contribution of land to be used as a development site in exchange for 300 shares
of non-voting preferred stock ($1,000.00 par value per share) in Armada. In
July 1997 the Company purchased 8,999 shares of non-voting common stock ($0.01
par value per share), and an additional 100 shares of non-voting preferred stock
in Armada.
<PAGE> 28
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE
UNSECURED CREDIT LINE
The Company obtained a short term $15 million unsecured credit line (the
Unsecured Credit Line) from Bank One, Texas, N.A. in the first quarter of 1997.
On August 1, 1997, the Company and Bank One agreed to increase the credit line
to $17 million and to extend the maturity date to September 2, 1997. The
Unsecured Credit Line will be drawn upon in increments determined by the
Company, and may be repaid at any time without penalty. Interest-only payments
are due monthly on the unpaid principal balance at LIBOR plus 205 basis points
(7.4875% at June 30, 1997). Approximately $5.2 million was outstanding on the
Unsecured Credit Line at June 30, 1997.
CONSTRUCTION LOAN
On May 1, 1997, Wells Fargo Realty Advisors Funding, Inc. (Wells Fargo) agreed
to increase the amount available under its construction loan to Addison Circle
One, Ltd., a subsidiary of the Company, by $901,000 to approximately $22.2
million. The increased borrowing capacity will be used to fund energy
management systems at the Addison Circle One multifamily residential and retail
project. No other terms of the construction loan were modified. As of June 30,
1997, Addison Circle One, Ltd. had drawn approximately $12.3 million on the
Wells Fargo loan.
MORTGAGE LOAN
In connection with the development site acquired in May 1997, the Company
obtained a first lien mortgage loan in the amount of approximately $2.0 million
from the unaffiliated seller. Monthly interest-only payments are due at 8% per
annum until December 1, 1997, when the interest rate increases to 10% per annum.
The note matures on May 12, 1998, and may be prepaid without penalty.
5. SHAREHOLDERS' EQUITY
NET INCOME PER COMMON SHARE
Net income per common share has been computed by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding during the period presented.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128), which
specifies the computation, presentation and disclosure requirements for basic
earnings per share and diluted earnings per share. The Company believes the
adoption of SFAS 128 will not have a material effect on earnings per share of
the Company.
NOTES DUE ON COMMON STOCK PURCHASES
On May 23, 1997, the Company received proceeds of $900,000 as a result of the
purchase by three of the Company's Trust Managers of an aggregate of 46,152 of
the Company's common shares pursuant to stock purchase awards granted in May
1996 at a purchase price of $19.50 per share (the fair market value of the
common shares on the date of grant). The stock purchase awards included
provisions that allowed the Trust Managers to borrow up to 50% of the purchase
price of the common shares. Accordingly, the Company loaned an aggregate of
$450,000 to the Trust Managers on the exercise date. Quarterly interest-only
payments at 7.34% per annum are required on the notes which are secured by the
common shares purchased. The loans mature on May 30, 2007, unless accelerated
due to resignation from the Board of Trust Managers or under certain other
circumstances.
<PAGE> 29
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. SHAREHOLDERS' EQUITY, CONTINUED
DISTRIBUTIONS
The Company paid two quarterly dividends of $0.395 per common share totaling
approximately $10.4 million in the six months ended June 30, 1997. The Company
received approximately $4.4 million in proceeds from the sale of 222,073 common
shares issued concurrently with the dividend payments pursuant to the Dividend
Reinvestment Plan.
SHAREHOLDER RIGHTS PLAN
Effective May 23, 1997, the Board of Trust Managers of the Company adopted a
shareholder rights plan. Under the plan, shareholders have certain rights to
purchase Series A Junior Participating Preferred Shares, par value $.01 per
share (Series A Junior Preferred) under certain circumstances, including the
event of unsolicited attempts to acquire a controlling interest in the Company.
Each right, when exercisable, will entitle the holder to purchase from the
Company one one-hundredth of a share of Series A Junior Preferred at a price of
$70.00 or, in certain circumstances, such right will entitle the holder, other
than an acquiring person, to receive, upon exercise at the then current price of
the right, common shares of the Company having a value equal to two times the
exercise price of the right. Of the 10,000,000 preferred shares the Company is
authorized to issue, 500,000 shares have been designated Series A Junior
Preferred. The Series A Junior Preferred has certain dividend, voting and
liquidation preferences. No preferred shares have been issued.
6. SHARE BONUS AND INCENTIVE PLANS
The Company has established certain bonus incentive plans for the purpose of
advancing the long term interests of the Company and its shareholders by
increasing the grantees' ownership in the Company, and providing additional
incentive to promote its success and growth.
During the six months ended June 30, 1997, pursuant to the Columbus Realty Trust
Employee Incentive Plan (Employee Incentive Plan), the Company granted 48,280
restricted common shares to certain executive officers, at their election, in
lieu of payment of annual base salary, such shares having a fair market value on
the date of grant of approximately $1.0 million, equal to 150% of the annual
base salary otherwise payable. In addition, the Company granted 2,464 restricted
common shares (having fair market values on the dates of grant of $50,000) to
certain Trust Managers equal to 150% of the quarterly trust manager fee
otherwise payable. The determination to grant common shares having a fair market
value of 150% of the base salary or trust manager fees otherwise payable was
based upon the risks of forfeiture of the shares awarded and the other
restrictions on transfer of the shares as described below. In addition, the
Company granted 30,264 restricted common shares having a fair market value on
the date of grant of $636,000 to certain executive officers and other employees
as bonuses. The restricted common shares are generally subject to forfeiture in
the event of termination of the recipient's employment with the Company within
the three year period following the date of grant and may not be transferred
until the end of the three year restricted period.
Each of the restricted common shares was granted for a purchase price of $0.01
per share. The difference between the purchase price of the common shares and
the aggregate fair market values of the common shares on the dates of grant
(approximately $1.6 million in the aggregate) will, to the extent such amounts
are allocable to operations, be amortized as compensation expense ratably over
the three year periods commencing on the dates of grant. Accordingly, during the
three and six months ended June 30, 1997, the Company did not recognize the
compensation expense which would have been recognized if such annual base
salaries and cash bonuses had been
<PAGE> 30
COLUMBUS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHARE BONUS AND INCENTIVE PLANS, CONTINUED
paid. The portion of the amortization of the fair market values of restricted
common shares granted in 1997, 1996, and 1995 allocable to operations is set
forth in the following table (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
Amortization of deferred
compensation expense $ 59 $ 33 $ 88 $ 44
Amortization of deferred
bonus expense 52 37 85 53
------------------------------------------------------
$ 111 $ 70 $ 173 $ 97
======================================================
</TABLE>
7. TRANSACTIONS WITH AFFILIATES
Amounts receivable from affiliates include the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------------------
<S> <C> <C>
Amounts advanced to condominium homeowners'
associations $ 61 $ 54
Amounts advanced to non-management employees 38 34
Receivable from Employee Stock Purchase Plan 4 3
Amounts receivable from owners of predecessors in
connection with the acquisition of their interests 57 55
Amounts advanced to affiliates in ordinary course
of business for third party property management 24 6
--------------------
$ 184 $ 152
====================
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
GENERAL
The Company is subject to certain legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of the
Company's management, none of such proceedings is material in relation to the
Company's consolidated financial statements.
OPERATING LEASE
In March 1997 the Company executed an agreement to extend its lease for the
corporate offices. The lease agreement, which expires in December 1998, requires
minimum rent payments of $306,000 for the year ended December 31, 1997, and
$347,000 for the year ended December 31, 1998.
9. SUBSEQUENT EVENT
On August 4, 1997, the Company announced that it has entered into a definitive
agreement and plan of merger with Post Properties, Inc., a Georgia corporation
(Post), pursuant to which the Company would be merged into Post. Post, which is
one of the largest developers and operators of multifamily properties, currently
owns 21,673 apartment homes located primarily in metropolitan Atlanta, Georgia
and Tampa, Florida. Pursuant to the merger agreement, each outstanding common
share of the Company will be converted into .615 shares of common stock of Post
which will result in the issuance of approximately 8.4 million shares of common
stock of Post. The merger is expected to be completed in November 1997, subject
to the approval of the shareholders of the Company and Post and other customary
conditions.
<PAGE> 1
EXHIBIT 99.2
POST PROPERTIES, INC.
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
JUNE 30, 1997
The Post Properties, Inc. Unaudited Pro Forma Combined Balance Sheet gives
effect to the proposed Merger of Post and Columbus as if the Merger had occurred
on June 30, 1997. The Unaudited Pro Forma Combined Balance Sheet gives effect to
the Merger under the "purchase" method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the Merger have been
made.
The Unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position of Post and Columbus would have been at June 30, 1997, nor
does it purport to represent the future combined financial position of Post and
Columbus. This Post Properties, Inc. Unaudited Pro Forma Combined Balance Sheet
should be read in conjunction with, and is qualified in its entirety by, the
respective historical financial statements and notes thereto of Post and
Columbus incorporated by reference into this Joint Proxy Statement/Prospectus.
<PAGE> 2
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(A) HISTORICAL(A) ADJUSTMENTS(B) COMBINED
------------- ------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Real estate assets
Land..................................... $ 149,071 $ 46,663 $ 21,907(C) $ 217,641
Building and improvements................ 736,891 331,380 154,204(C) 1,222,475
Furniture, fixtures and equipment........ 76,835 4,912 81,747
Construction in progress (includes land
on properties under development)...... 203,477 73,459 276,936
Land held for future development......... 8,660 -- 8,660
---------- -------- -------- ----------
1,174,934 456,414 176,111 1,807,459
Less: accumulated depreciation........... (185,068) (46,576) (231,644)
---------- -------- -------- ----------
Real estate held for investment.......... 989,866 409,838 176,111 1,575,815
Cash and cash equivalents................ 1,771 6,688 8,459
Restricted cash.......................... 1,016 313 1,329
Deferred charges, net.................... 9,652 1,361 375(D) 11,388
Other assets............................. 11,468 12,963 (2,078)(E) 22,353
---------- -------- -------- ----------
Total assets..................... $1,013,773 $431,163 $174,408 $1,619,344
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable.............................. $ 473,683 $231,477 $ 20,943(F) $ 726,103
Accrued interest payable................... 4,305 332 4,637
Dividend and distribution payable.......... 16,220 -- 16,220
Accounts payable and accrued expenses...... 30,573 11,722 42,295
Security deposits and prepaid rents........ 5,179 2,225 7,404
Other liabilities.......................... -- 2,063 2,063
---------- -------- -------- ----------
Total liabilities................ 529,960 247,819 20,943 798,722
---------- -------- -------- ----------
Minority interest of unitholders in
Operating Partnership.................... 83,297 -- 29,611(G) 112,908
---------- -------- -------- ----------
Shareholders' equity
Preferred stock.......................... 10 -- 10
Common stock............................. 220 134 (50)(H) 304
Additional paid-in capital................. 400,286 213,981 93,133(I) 707,400
Accumulated earnings(deficit).............. -- (30,765) 30,765(J) 0
Treasury stock............................. -- (6) 6(J) 0
---------- -------- -------- ----------
Total shareholders' equity....... 400,516 183,344 123,854 707,714
---------- -------- -------- ----------
Total liabilities and
shareholders' equity........... $1,013,773 $431,163 $174,408 $1,619,344
========== ======== ======== ==========
</TABLE>
<PAGE> 3
POST PROPERTIES, INC.
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
The Post Properties, Inc. Unaudited Pro Forma Combined Statements of
Operations for the six months ended June 30, 1997 and the year ended December
31, 1996 are presented as if the Merger had occurred on January 1, 1996. The
Post Properties, Inc. Unaudited Pro Forma Combined Statements of Operations give
effect to the Merger under the "purchase" method of accounting in accordance
with Accounting Principles Board Opinion No. 16. and assumes that the combined
entity qualifying as a REIT distributing at least 95% of its taxable income, and
therefore, incurring no federal income tax liability for the year. In the
opinion of management, all significant adjustments necessary to reflect the
effects of these transactions have been made.
The Post Properties, Inc. Unaudited Pro Forma Combined Statements of
Operations are presented for comparative purposes only and are not necessarily
indicative of what the actual combined results of Post and Columbus would have
been for the six months ended June 30, 1997 and the year ended December 31,
1996, nor do they purport to be indicative of the results of operations in
future periods. The Post Properties, Inc. Unaudited Pro Forma Combined
Statements of Operations should be read in conjunction with, and are qualified
in their entirety by, the respective historical financial statements and notes
thereto of Post and Columbus incorporated by reference into this Joint Proxy
Statement/Prospectus.
<PAGE> 4
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(K) HISTORICAL(K) ADJUSTMENTS COMBINED
------------- ------------- ----------- -----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental................................ $ 84,131 $ 26,879 $ 111,010
Property management - third party..... 1,092 71 1,163
Landscape services - third party...... 2,446 -- 2,446
Interest.............................. 15 181 196
Other................................. 2,996 1,176 4,172
---------- ---------- ---------- -----------
Total revenues................ 90,680 28,307 118,987
---------- ---------- ---------- -----------
Expenses:
Property operating and maintenance
(exclusive of items shown
separately below).................. 31,132 9,449 40,581
Depreciation (real estate assets)..... 12,563 6,056 286(L) 18,905
Depreciation (non-real estate
assets)............................ 495 145 640
Property management - third party..... 814 -- 814
Landscape services - third party...... 2,031 -- 2,031
Interest.............................. 11,070 4,898 (343)(M) 15,625
Amortization of deferred loan costs... 552 252 (187)(N) 617
General and administrative............ 3,419 1,331 (725)(O) 4,025
---------- ---------- ---------- -----------
Total expenses................ 62,076 22,131 (969) 83,238
---------- ---------- ---------- -----------
Income before net gain on sale of
assets, minority interest of
unitholders in Operating
Partnership and extraordinary
item............................... 28,604 6,176 969 35,749
Net gain on sale of assets............ 3,512 561 4,073
Minority interest of unitholders in
Operating Partnership.............. (5,751) -- 250(P) (5,501)
---------- ---------- ---------- -----------
Net income before extraordinary
item............................... 26,365 6,737 1,219 34,321
Dividend to preferred shareholders.... (2,125) -- (2,125)
---------- ---------- ---------- -----------
Net income available to common
shareholders before extraordinary
item............................... $ 24,240 $ 6,737 $ 1,219 $ 32,196
========== ========== ========== ===========
Per common share data:
Weighted average common shares
outstanding -- primary............. 21,989,132 13,496,035 (5,089,205)(Q) 30,395,962
Net income available to common
shareholders before extraordinary
item............................... $ 1.10 $ 0.50 $ (0.54) $ 1.06
</TABLE>
<PAGE> 5
POST PROPERTIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POST COLUMBUS MERGER PRO FORMA
HISTORICAL(K) HISTORICAL(K) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental.............................. $ 157,735 $ 45,910 $ 203,645
Property management - third party... 2,828 298 3,126
Landscape services - third party.... 4,834 - 4,834
Interest............................ 326 228 554
Other............................... 4,985 2,094 7,079
---------- ---------- ---------- ----------
Total revenues.............. 170,708 48,530 -- 219,238
---------- ---------- ---------- ----------
Expenses:
Property operating and maintenance
(exclusive of items shown
separately below)................ 57,335 16,365 73,700
Depreciation (real estate assets)... 22,676 10,257 2,426(L) 35,359
Depreciation (non-real estate
assets).......................... 927 346 1,273
Property management - third party... 2,055 - 2,055
Landscape services - third party.... 3,917 - 3,917
Interest............................ 22,131 7,884 (282)(M) 29,733
Amortization of deferred loan
costs............................ 1,352 393 (285)(N) 1,460
General and administrative.......... 7,716 2,073 (1,450)(O) 8,339
---------- ---------- ---------- ----------
Total expenses.............. 118,109 37,318 409 155,836
---------- ---------- ---------- ----------
Income before net gain on sale of
assets, minority interest of
unitholders in Operation
Partnership and extraordinary
item............................. 52,599 11,212 (409) 63,402
Net gain on sale of assets.......... 854 246 1,100
Minority interest of unitholders in
Operating Partnership............ (9,984) -- 807(P) (9,177)
---------- ---------- ---------- ----------
Net income before extraordinary
item............................. 43,469 11,458 398 55,325
Dividend to preferred
shareholders..................... (1,063) (1,063)
---------- ---------- ---------- ----------
Net income available to common
shareholders before extraordinary
item............................. $ 42,406 $ 11,458 $ 398 $ 54,262
========== ========== ========== ==========
Per common share data:
Weighted average common shares
outstanding - primary............ 21,787,648 12,142,069 (3,735,239)(Q) 30,194,478
Net income available to common
shareholders before extraordinary
item............................. $ 1.95 $ 0.94 $ (1.09) $ 1.80
</TABLE>
<PAGE> 6
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) Represents the respective historical balance sheet of Post and Columbus as
of June 30, 1997. Certain reclassifications have been made to Columbus'
historical balance sheet to conform to Post's balance sheet presentation.
(B) Represents adjustments to record the Merger in accordance with the purchase
method of accounting, based upon the assumed purchase price of $602,889
assuming a market value of $40.09 per share of Post's Common Stock, as
follows:
<TABLE>
<S> <C>
Issuance of 8,407 shares of Post Common Stock based on the
0.615 exchange for 13,669 Columbus Common Shares, which
includes 260 Columbus Common Shares issued immediately
prior to the Merger....................................... $337,009
Assumption of Columbus' liabilities (including $2,240 of
purchase adjustments)..................................... 249,859
Merger costs (see calculation below)........................ 18,703
--------
$605,571
========
</TABLE>
The following is a calculation of the estimated fees and other expenses
related to the Merger:
<TABLE>
<S> <C>
Buyout of employment agreements............................. $ 8,800
Advisory fees............................................... 7,453
Legal and accounting fees................................... 1,500
Other, including printing, filing and transfer costs........ 950
-------
Total............................................. $18,703
=======
</TABLE>
(C) Represents the estimated increase in Columbus' real estate assets, net
based upon Post's purchase price and the adjustment to eliminate the basis
of Columbus' net assets acquired:
<TABLE>
<S> <C>
Purchase Price (see Note B)................................. $605,571
Less: Historical basis of Columbus' net assets acquired
Real estate assets..................................... (409,838)
Other assets, net of purchase adjustments.............. (19,622)
--------
Step-up to record fair value of Columbus' real estate
assets.................................................... $176,111
========
</TABLE>
The allocation to land and building and improvements to record the step-up
was based upon relative fair values of Columbus' real estate assets.
(D) Increase due to estimated loan costs incurred to refinance Columbus' debt
($1,345) net of elimination of Columbus' historical deferred loan costs
($970).
(E) Decrease due to recognition of historical deferred compensation expense
upon vesting of certain options of Columbus prior to the Merger.
(F) Increase to notes payable reflects the financing of the following:
<TABLE>
<S> <C>
Transaction costs........................................... $18,703
Loan costs on refinanced debt............................... 1,345
Prepayment penalties on existing debt....................... 695
Registration costs.......................................... 200
-------
$20,943
=======
</TABLE>
<PAGE> 7
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA -- (CONTINUED)
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(G) The pro forma allocation to the Minority Interest in Operating Partnership
is based upon the percentage owned by such Minority Interest as follows:
<TABLE>
<S> <C>
Total Shareholders' Equity and Minority Interest in
Operating Partnership..................................... $820,622
Less: Equity related to Post's Preferred Stock.............. (48,613)
--------
772,009
Minority Interest percentage ownership in Operating
Partnership (see Note I).................................. 14.6%
--------
Pro Forma Combined Minority Interest ownership in Operating
Partnership............................................... 112,908
Post historical Minority Interest ownership in Operating
Partnership............................................... 83,297
--------
Adjustment to Minority Interest ownership in Operating
Partnership............................................... $ 29,611
========
</TABLE>
(H) Decrease results from elimination of Columbus Common Shares at $.01 par
value ($134) net of the issuance of Post Common Stock at $.01 par value
($84) (see Note I).
(I) Increase to paid-in capital to reflect the following:
<TABLE>
<S> <C>
Issuance of 8,407 shares of Post Common Stock at $40.09 per
share..................................................... $ 337,009
Less: Par value of Common Stock issued.................... (84)
Registration costs incurred in connection with the
Merger.............................................. (200)
Columbus' historical paid in capital............... (213,981)
Adjustment to Minority Interest in Operating
Partnership (see Note G)........................... (29,611)
---------
$ 93,133
=========
</TABLE>
The Minority Interest ownership in Post, is calculated as follows:
<TABLE>
<CAPTION>
SHARES UNITS
------ -----
<S> <C> <C>
Columbus' historical Common Shares outstanding............ 13,669
======
Post Common Stock to be issued based on the .615 Merger
exchange ratio.......................................... 8,407
Post's historical Common Stock/Units outstanding.......... 22,044 5,216
------ -----
Post's pro forma Common Stock/Units outstanding........... 30,451 5,216
====== =====
Post's ownership percentage of the Operating
Partnership............................................. 85.4%
======
Minority Interest ownership percentage of the Operating
Partnership............................................. 14.6%
======
</TABLE>
(J) Reflects the elimination of Columbus' distribution in excess of accumulated
earnings and treasury stock to paid in capital, as a result of the Merger.
(K) Represents the respective historical statement of operations of Post and
Columbus for the period indicated. Certain reclassifications have been made
to Columbus' Historical Statement of Operations to conform to Post's
Statement of Operations presentation.
<PAGE> 8
POST PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA -- (CONTINUED)
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(L) Represents the net increase in depreciation of real estate owned as a
result of recording Columbus' real estate assets at fair value versus
historical cost. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets which have a useful life of
approximately 35 years.
The calculation of the fair value of depreciable real estate assets at June
30, 1997 is as follows:
<TABLE>
<S> <C>
Historical basis of Columbus' real estate property, net..... $409,838
Plus: Step up to Columbus' real estate property, net (see
Note C)................................................... 176,111
--------
Pro forma basis of Columbus' real estate property at fair
value..................................................... 585,949
Less: Fair value allocated to land.......................... (68,570)
Construction in progress.............................. (73,459)
--------
Pro forma basis of Columbus' depreciable real estate
property at fair value.................................... $443,920
========
</TABLE>
Calculation of depreciation of real estate property for the six months
ended June 30, 1997:
<TABLE>
<S> <C>
Depreciation expense based upon an estimated useful life of
approximately 35 years.................................... $ 6,342
Less: Historic Columbus depreciation of real estate
property.................................................. (6,056)
-------
Pro forma adjustment........................................ $ 286
=======
</TABLE>
Calculation of depreciation of real estate property for the year ended
December 31, 1996 is as follows:
<TABLE>
<S> <C>
Depreciation expense based upon an estimated useful like of
approximately 35 years.................................... $12,683
Less: Historic Columbus depreciation of real estate
property.................................................. 10,257
-------
Pro forma adjustment........................................ $ 2,426
=======
</TABLE>
(M) Decrease results from refinancing of Columbus' debt at lower interest
rates.
(N) Decrease results from the elimination of amortization of Columbus' deferred
financing costs, which costs would be eliminated in connection with the
Merger, net of estimated amortization of deferred financing costs for
refinanced debt.
(O) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Merger as follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 650
Reduction in salaries and benefits.......................... 600
Other....................................................... 200
------
Annual total...................................... $1,450
======
</TABLE>
(P) A portion of income was allocated to Minority Interest representing
interests in the Operating Partnership not owned by Post. The pro forma
allocation to Minority Interest is based upon the percentage estimated to
be owned by such Minority Interests as a result of the pro forma
transactions.
(Q) Decrease of Weighted Average Common Shares Outstanding based on the
conversion of Columbus Common Shares to Post Common Stock at a conversion
ratio of 0.615 Columbus Common Shares per Post Common Stock and a par value
of $.01.
