<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-12252
EQUITY RESIDENTIAL PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
Maryland 13-3675988
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 474-1300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At May 11, 1998, 97,711,238 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- -----------
<S> <C> <C>
ASSETS
Investment in real estate
Land $ 829,111 $ 791,980
Depreciable property 6,486,759 6,293,415
Construction in progress 47,059 36,040
---------- -----------
7,362,929 7,121,435
Accumulated depreciation (508,394) (444,762)
---------- -----------
Investment in real estate, net of
accumulated depreciation 6,854,535 6,676,673
Cash and cash equivalents 77,575 33,295
Investment in mortgage notes, net 175,532 176,063
Rents receivable 3,798 3,302
Deposits - restricted 39,645 36,374
Escrow deposits - mortgage 45,314 44,864
Deferred financing costs, net 23,283 23,092
Other assets 109,660 100,968
---------- -----------
Total assets $7,329,342 $ 7,094,631
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $1,655,635 $ 1,582,559
Notes, net 1,130,461 1,130,764
Line of credit -- 235,000
Accounts payable and accrued expenses 66,787 67,699
Accrued interest payable 35,514 28,048
Rents received in advance and other liabilities 41,417 38,750
Security deposits 29,711 28,193
Distributions payable 89,015 20,223
---------- -----------
Total liabilities 3,048,540 3,131,236
---------- -----------
Commitments and contingencies
Minority Interests 282,240 273,404
---------- -----------
</TABLE>
See accompanying notes.
2
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands except for share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Shareholders' equity:
Preferred Shares of beneficial interest, $.01 par value;
100,000,000 shares authorized:
9 3/8% Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, liquidation preference
$25 per share, 6,120,000 shares issued and outstanding $ 153,000 $ 153,000
9 1/8% Series B Cumulative Redeemable Preferred
Shares of Beneficial Interest, liquidation preference
$250 per share, 500,000 shares issued and outstanding 125,000 125,000
9 1/8% Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest, liquidation preference
$250 per share, 460,000 shares issued and outstanding 115,000 115,000
8.60% Series D Cumulative Redeemable Preferred
Shares of Beneficial Interest, liquidation preference
$250 per share, 700,000 shares issued and outstanding 175,000 175,000
Series E Cumulative Convertible Preferred
Shares of Beneficial Interest, liquidation preference
$25 per share, 3,998,000 shares issued and outstanding 99,950 99,963
9.65% Series F Cumulative Redeemable Preferred
Shares of Beneficial Interest, liquidation preference
$25 per share, 2,300,000 shares issued and outstanding 57,500 57,500
7 1/4% Series G Convertible Cumulative Preferred
Shares of Beneficial Interest, liquidation preference
$250 per share, 1,265,000 shares issued and outstanding 316,250 316,250
Common Shares of beneficial interest, $.01 par value,
200,000,000 shares authorized, 96,355,220 shares issued
and outstanding as of March 31, 1998 and 89,085,265
shares issued and outstanding as of December 31, 1997 964 891
Paid in capital 3,122,344 2,785,661
Employee notes (4,987) (5,145)
Distributions in excess of accumulated earnings (161,459) (133,129)
------------- ------------
Total shareholders' equity 3,998,562 3,689,991
------------- ------------
Total liabilities and shareholders' equity $ 7,329,342 $ 7,094,631
============= ============
</TABLE>
See accompanying notes.
3
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------
1998 1997
-------------------------
REVENUES
<S> <C> <C>
Rental income $277,226 $134,235
Fee and asset management 1,360 1,578
Interest income - investment in mortgage notes 4,931 3,683
Interest and other income 2,824 1,891
-------- --------
Total revenues 286,341 141,387
-------- --------
EXPENSES
Property and maintenance 66,713 32,334
Real estate taxes and insurance 27,443 13,911
Property management 11,579 5,671
Fee and asset management 1,052 967
Depreciation 64,390 28,877
Interest:
Expense incurred 50,254 23,293
Amortization of deferred financing costs 624 603
General and administrative 4,880 2,975
-------- --------
Total expenses 226,935 108,631
-------- --------
Income before gain on disposition of properties
and allocation to Minority Interests 59,406 32,756
Gain on disposition of properties 1,869 3,632
-------- --------
Income before allocation to Minority Interests 61,275 36,388
Income allocated to Minority Interests (3,688) (3,426)
-------- --------
Net income 57,587 32,962
Preferred distributions (21,692) (9,061)
-------- --------
Net income available to Common Shares $ 35,895 $ 23,901
======== ========
Weighted average Common Shares outstanding 93,361 51,791
======== ========
Distributions declared per Common Share outstanding $ 0.67 $ 0.63
======== ========
Net income per weighted average Common Share outstanding $ 0.38 $ 0.46
======== ========
Net income per weighted average Common Share
outstanding - assuming dilution $ 0.38 $ 0.45
======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------
1998 1997
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 57,587 $ 32,962
Adjustments to reconcile net income to net cash provided by operating activities:
Income allocated to Minority Interests 3,688 3,426
Depreciation 64,390 28,877
Amortization of deferred financing costs (including discounts and premiums on debt) 100 681
Amortization of discount on investment in mortgage notes - (750)
Gain on disposition of properties (1,869) (3,632)
Changes in assets and liabilities:
(Increase) decrease in rents receivable (496) 99
Decrease in deposits - restricted 357 127
(Increase) in other assets (2,471) (4,299)
(Decrease) in accounts payable and accrued expenses (912) (1,874)
Increase in accrued interest payable 7,466 2,710
Increase in rents received in advance and other liabilities 3,600 3,379
--------- ---------
Net cash provided by operating activities 131,440 61,706
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate, net (142,203) (152,612)
Improvements to real estate (14,091) (6,276)
Additions to non-real estate property (2,385) (1,515)
Proceeds from disposition of real estate 16,665 4,771
Purchase of management contract rights (119) (3,500)
(Increase) in mortgage deposits (450) (2,148)
Deposits (made) on real estate acquisitions (11,898) (5,258)
Deposits applied on real estate acquisitions 8,270 16,761
Decrease in investment in mortgage notes 531 451
Investment in partnerships - development (11,094) -
Costs related to Mergers (987) -
Other investing activities 398 (101)
--------- ---------
Net cash (used for) investing activities (157,363) (149,427)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Common Shares 356,829 89,576
Proceeds from exercise of options 1,568 1,626
Payment of offering costs (10,013) (101)
Distributions to Common Share and Preferred Share owners (23,235) (41,034)
Distributions to Minority Interests (312) (4,904)
Principal receipts on employee notes 158 184
Repayments on line of credit (235,000) -
Principal payments on mortgage notes payable (20,542) (20,562)
Loan and bond acquisition costs (768) (501)
Increase in security deposits 1,518 995
--------- ---------
Net cash provided by financing activities 70,203 25,279
--------- ---------
Net increase (decrease) in cash and cash equivalents 44,280 (62,442)
Cash and cash equivalents, beginning of period 33,295 147,271
--------- ---------
Cash and cash equivalents, end of period $ 77,575 $ 84,829
========= =========
</TABLE>
See accompanying notes.
5
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------
1998 1997
-------------------------
Supplemental information:
<S> <C> <C>
Cash paid during the period for interest $42,788 $20,583
======= =======
Mortgage loans assumed through acquisitions of real estate $93,617 $60,851
======= =======
Net real estate contributed in exchange for OP units or Common Shares $ 50 -
======= =======
</TABLE>
See accompanying notes.
6
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Definition of Special Terms:
Capitalized terms used but not defined in this Quarterly Report on Form 10-Q are
as defined in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 ("Form 10-K").
1. Business
As used herein, the term "Company" means Equity Residential Properties
Trust ("EQR") and its subsidiaries as the survivor of the mergers between EQR
and each of Wellsford Residential Property Trust ("Wellsford") (the "Wellsford
Merger") and Evans Withycombe Residential, Inc. ("EWR") (the "EWR Merger"). The
Company is engaged in the acquisition, ownership and operation of multifamily
properties and is a self-administered and self-managed equity real estate
investment trust ("REIT"). As of March 31, 1998, the Company controlled a
portfolio of 476 multifamily properties (individually a "Property" and
collectively the "Properties"). The Company's interest in six of these
Properties at the time of acquisition thereof consisted solely of ownership of
debt collateralized by such Properties. The Company also has an investment in
partnership interests and subordinated mortgages collateralized by 21 properties
and mortgage loans collateralized by five properties (collectively, the
"Additional Properties").
2. Basis of Presentation
The balance sheet and statements of operations and cash flows as of
and for the quarter ended March 31, 1998 represent the consolidated financial
information of the Company and its subsidiaries.
Due to the Company's ability as general partner to control either
through ownership or by contract the Operating Partnership, the Management
Partnerships, the Financing Partnerships, the LLCs and the EWR Operating
Partnership, each such entity has been consolidated with the Company for
financial reporting purposes. In regard to Management Corp., Management Corp.
II and Evans Withycombe Management, Inc., the Company does not have legal
control; however, these entities are consolidated for financial reporting
purposes, the effects of which are immaterial.
These unaudited Consolidated Financial Statements of the Company have
been prepared pursuant to the Securities and Exchange Commission ("SEC") rules
and regulations and should be read in conjunction with the Financial Statements
and Notes thereto included in the Company's Annual Report on Form 10-K. The
following Notes to Consolidated Financial Statements highlight significant
changes to the notes included in the Form 10-K and present interim disclosures
as required by the SEC. The accompanying Consolidated Financial Statements
reflect, in the opinion of management, all adjustments necessary for a fair
presentation of the interim financial statements. All such adjustments are of a
normal and recurring nature.
7
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. Shareholders' Equity and Minority Interests
On January 27, 1998, the Company completed an offering of 4,000,000
publicly registered Common Shares, which were sold to the public at a price of
$50.4375 per share (the "January 1998 Common Share Offering"). The Company
received net proceeds of approximately $195.3 million in connection therewith.
On February 18, 1998, the Company completed offerings of 988,340 publicly
registered Common Shares, which were sold to the public at a price of $50.625
per share. On February 23, 1998, the Company completed an offering of 1 million
publicly registered Common Shares, which were sold to the public at a price of
$48 per share. The Company received net proceeds from these offerings
(collectively, the "February 1998 Common Share Offerings") of approximately $95
million.
On March 30, 1998, the Company completed an offering of 495,663 publicly
registered Common Shares, which were sold at a price of $47.9156 per share (the
"March 1998 Common Share Offering"). The Company received net proceeds of
approximately $23.7 million in connection therewith.
The following table presents the changes in the Company's issued and
outstanding Common Shares for the quarter ended March 31, 1998:
<TABLE>
=========================================================================================
<S> <C>
Balance at January 1, 1998 89,085,265
- -----------------------------------------------------------------------------------------
Common Shares issued through January 1998 Common Share Offering 4,000,000
Common Shares issued through February 1998 Common Share Offerings 1,988,340
Common Shares issued through March 1998 Common Share Offering 495,663
Common Shares issued through DRIP Plan 640,162
Common Shares issued through conversion of Series E Preferred Shares 278
Conversion of OP Units into Common Shares 8,705
Common Shares issued through Employee Share Purchase Plan 37,824
Common Shares issued through restricted share awards 44,899
Common Shares issued through exercise of options 54,084
----------
Balance at March 31, 1998 96,355,220
==========
=========================================================================================
</TABLE>
Assuming conversion of all OP Units into Common Shares, total Common Shares
outstanding at March 31, 1998 would have been 105,940,085.
The equity positions of various individuals and entities that contributed
their properties to the Operating Partnership in exchange for a partnership
interest are collectively referred to as the "Minority Interests". As of March
31, 1998, the Minority Interests held 9,584,865 OP Units which represented a
9.05% interest in the Operating Partnership.
Net proceeds from the Company's Common Share offerings are contributed by
the Company to the Operating Partnership in return for an increased ownership
percentage and are
8
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
treated as capital transactions in the Company's Consolidated Financial
Statements. As a result, the net offering proceeds are allocated between
shareholders' equity and Minority Interests to account for the change in their
respective percentage ownership of the underlying equity of the Operating
Partnership.
The Company paid a $0.67 per Common Share distribution on April 10, 1998
for the quarter ended March 31, 1998 to Common Share holders of record as of
March 27, 1998.
The following table summarizes the distributions paid to Preferred Share
and Depositary Share holders related to the quarter ended March 31, 1998:
<TABLE>
<CAPTION>
Distribution For the
------------ -------
Amount Date Paid Quarter ended Record Date
------ --------- ------------- -----------
<S> <C> <C> <C> <C>
Series A Preferred
Share holders $0.585938 04/15/98 03/31/98 03/27/98
Series B Depositary
Share holders $0.570313 04/15/98 03/31/98 03/27/98
Series C Depositary
Share holders $0.570313 04/15/98 03/31/98 03/27/98
Series D Depositary
Share holders $0.537500 04/15/98 03/31/98 03/27/98
Series E Preferred
Share holders $0.437500 04/01/98 03/31/98 03/13/98
Series F Preferred
Share holders $0.603125 04/15/98 03/31/98 03/27/98
Series G Depositary
Share holders $0.453125 04/15/98 03/31/98 03/27/98
</TABLE>
4. Real Estate
During the quarter ended March 31, 1998, the Company acquired the 15
Properties listed below from unaffiliated third parties. In connection with
certain of the acquisitions listed below, the Company assumed mortgage
indebtedness of approximately $93.6 million and issued OP Units having a value
of approximately $0.1 million. The cash portion of these transactions was funded
primarily from proceeds raised from the January 1998 Common Share Offering, the
February 1998 Common Share Offerings and working capital.
9
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Total
Date Number Acquisition Cost
Acquired Property Location of Units (in thousands)
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C>
01/07/98 Cityscape St. Louis Park, MN 156 $12,330
01/09/98 740 River Drive St. Paul, MN 162 12,861
01/13/98 Prospect Towers Hackensack, NJ 157 36,315
01/16/98 Park Place Houston, TX 229 13,571
01/16/98 Park Westend Richmond, VA 312 13,396
01/29/98 Emerald Bay at Winter Park Winter Park, FL 432 15,697
02/05/98 Farnham Park Houston, TX 216 15,755
02/25/98 Plantation Houston, TX 232 10,018
02/27/98 Balcones Club Austin, TX 312 12,314
03/02/98 Coach Lantern Scarborough, ME 90 4,849
03/02/98 Foxcroft Scarborough, ME 104 5,041
03/02/98 Yarmouth Woods Yarmouth, ME 138 6,775
03/20/98 Rolido Parque Houston, TX 369 10,835
03/26/98 The Fairfield Stamford, CT 263 45,824
03/26/98 Trails of Valley Ranch Irving, TX 216 10,719
----- --------
3,388 $226,300
===== ========
</TABLE>
5. Commitments to Acquire Rental Properties
As of March 31, 1998, in addition to the properties that were subsequently
acquired as discussed in Note 13 of the Notes to Consolidated Financial
Statements, the Company entered into separate agreements to acquire six
multifamily properties containing 1,701 units from unaffiliated third parties.
The expected combined purchase price is approximately $203.2 million, which
includes the assumption of mortgage indebtedness of approximately $40.7 million.
The closings of these pending transactions are subject to certain
contingencies and conditions; therefore, there can be no assurance that these
transactions will be consummated or that the final terms thereof will not differ
in material respects from those summarized in the preceding paragraph.
6. Dispositions
On March 12, 1998, the Company sold Mountain Brook Apartments and Ridgemont
Apartments, both located in Chattanooga, Tennessee for a sales price of $16.7
million. The gain for financial reporting purposes was approximately $1.9
million.
10
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. Calculation of Net Income Per Weighted Average Common Share
The following tables set forth the computation of net income per weighted
average Common Share outstanding and net income per weighted average Common
Share outstanding - assuming dilution.
11
<PAGE>
Equity Residential Properties Trust
Notes To Consolidated Financial Statements (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
-------------------------------
1998 1997
-------- --------
(Amounts in thousands except per share amounts)
<S> <C> <C>
Numerator:
Income before allocation of income to Minority Interests,
preferred distributions and gain on disposition of
properties $ 59,406 $32,756
Allocation of income to Minority Interests (3,688) (3,426)
Distributions to preferred shareholders (21,692) (9,061)
-------- -------
Income before gain on disposition of properties 34,026 20,269
Gain on disposition of properties 1,869 3,632
-------- -------
Numerator for net income per weighted average
Common Share outstanding 35,895 23,901
Effect of dilutive securities:
Allocation of income to Minority Interests 3,688 3,426
-------- -------
Numerator for net income per weighted average
Common Share outstanding - assuming dilution $ 39,583 $27,327
======== =======
Denominator:
Denominator for net income per weighted
average Common Share outstanding 93,361 51,791
Effect of dilutive securities:
Contingent incremental employee share options 1,152 898
OP Units 9,587 7,478
-------- -------
Denominator for net income per weighted average
Common Share outstanding - assuming dilution 104,100 60,167
======== =======
Net income per weighted average Common
Share outstanding $ 0.38 $ 0.46
======== =======
Net income per weighted average Common
Share outstanding - assuming dilution $ 0.38 $ 0.45
======== =======
</TABLE>
12
<PAGE>
Equity Residential Properties Trust
Notes To Consolidated Financial Statements (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Net income per weighted average Common Share
outstanding:
Income before gain on disposition of properties per
weighted average Common Share outstanding $0.36 $0.39
Gain on disposition of properties 0.02 0.07
----- -----
Net income per weighted average Common
Share outstanding $0.38 $0.46
===== =====
Net income per weighted average Common Share
outstanding - assuming dilution:
Income before gain on disposition of properties per
weighted average Common Share outstanding -
assuming dilution $0.36 $0.39
Gain on disposition of properties 0.02 0.06
----- -----
Net income per weighted average Common
Share outstanding - assuming dilution $0.38 $0.45
===== =====
</TABLE>
Convertible Preferred Shares that could be converted into 7,623,507 shares of
common shares were outstanding at March 31, 1998 but were not included in the
computation of diluted earnings per share because it would be anti-dilutive.
13
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. Mortgage Notes Payable
As of March 31, 1998, the Company had outstanding mortgage indebtedness of
approximately $1.66 billion encumbering 158 of the Properties. The carrying
value of such Properties (net of accumulated depreciation of $168.8 million) was
approximately $2.7 billion. The mortgage notes payables are generally due in
monthly installments of interest only. In connection with the Properties
acquired during the quarter ended March 31, 1998, the Company assumed the
outstanding mortgage balances on seven Properties in the aggregate amount of
$93.6 million.
Concurrent with the refinancing of certain tax-exempt bonds and as a
requirement of the credit provider of the bonds, the Financing Partnership,
which owns certain of the Properties, entered into interest rate protection
agreements, which were assigned to the credit provider as additional security.
The Financing Partnership pays interest based on a fixed interest rate and the
counterparty of the agreement pays interest to the Company at a floating rate
that is calculated based on the Public Securities Association Index for
municipal bonds ("PSA Municipal Index"). As of March 31, 1998, the aggregate
notional amount of these agreements was approximately $173.8 million. The fixed
interest rates for these agreements were 4.81%, 4.528% and 4.90%. The
termination dates are October 1, 2003, January 1, 2004 and April 1, 2004. The
Company simultaneously entered into substantially identical reverse interest
rate protection agreements. Under these agreements the Company pays interest
monthly at a floating rate based on the PSA Municipal Index and the counterparty
pays interest to the Company based on a fixed interest rate. As of March 31,
1998, the aggregate notional amount of these agreements was approximately $173.8
million. The fixed interest rates received by the Company in exchange for
paying interest based on the PSA Municipal Index for these agreements were
4.74%, 4.458% and 4.83%. The termination dates are October 1, 2003, January 1,
2004 and April 1, 2004. Collectively, these agreements effectively cost the
Company 0.07% per annum on the current outstanding aggregate notional amount.
The Company believes that it has limited exposure to the extent of non-
performance by the counterparties of the agreements since each counterparty is a
major U.S. financial institution, and the Company does not anticipate their non-
performance. Furthermore, any non-performance by the counterparty is offset by
non-performance by the Company.
The Company also has an interest rate cap agreement for a notional amount
of $228 million, for which it will receive payments if the PSA index exceeds
5.75%, that terminates on December 1, 1999. Any payments by the counterparty
under this agreement have been collaterally assigned to the provider of certain
sureties related to the tax exempt bonds secured by certain of it's Properties.
The Company has no payment obligations to the counterparty with respect to this
agreement.
As of March 31, 1998, scheduled maturities for the Company's outstanding
mortgage indebtedness are at various dates through October 1, 2030. During the
quarter ended March 31, 1998, the effective interest cost on these mortgage
notes was 7.3%. During the quarter ended March 31, 1998, the Company repaid the
outstanding mortgage balance on one Property in the amount of $18.2 million.
Subsequent to March 31, 1998, the Company repaid the outstanding mortgage
balances on four Properties in the aggregate amount of approximately $16
million.
14
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Line of Credit
During the quarter ended March 31, 1998, the Company repaid $235 million
outstanding on its line of credit with proceeds raised from the January 1998
Common Share Offering and the February 1998 Common Share Offerings. As of
March 31, 1998, there were no amounts outstanding on this line of credit.
10. Notes
As of March 31, 1998, the Company had outstanding unsecured notes of
approximately $1.1 billion (net of a $2.4 million discount and including a $7.9
million premium).
In February 1996, the Company entered into an interest rate protection
agreement that hedged the interest rate risk of the 1999 Notes by locking the
effective four year Treasury Rate, commencing May 15, 1999 through May 2003.
There was no current cost to the Company for entering into this agreement.
Prior to the issuance of the 2002 Notes, the Operating Partnership entered
into an interest rate protection agreement to effectively fix the interest rate
cost of such issuance. The Operating Partnership made a one time settlement
payment of this protection transaction, which was approximately $0.8 million and
is being amortized over the term of the 2002 Notes. As of March 31, 1998, the
unamortized balance of this cost was approximately $0.5 million.
Prior to the issuance of the 2026 Notes, the Company entered into an
interest rate protection agreement to effectively fix the interest rate cost of
this issuance to 7.5%. The Operating Partnership received a one-time settlement
payment of this transaction, which was approximately $0.6 million, which amount
is being amortized over the term of the 2026 Notes. As of March 31, 1998, the
unamortized balance was approximately $0.5 million.
Prior to the issuance of the 2001 and 2003 Notes, the Operating Partnership
entered into two interest rate protection agreements to effectively fix the
interest rate costs of such issuances. The Operating Partnership made a one
time settlement payment of each protection transaction, which was approximately
$5 million and $1.7 million, respectively, which are being amortized over the
term of the Notes on a straight-line basis. As of March 31, 1998 the
unamortized balance of these costs were approximately $4.6 million and $1.6
million, respectively.
In regard to all of the interest rate protection agreements mentioned in
the previous paragraphs, the Company believes that it has limited exposure to
the extent of non-performance by the counterparties of each agreement since each
counterparty is a major U.S. financial institution, and the Company does not
anticipate their non-performance.
15
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
11. Deposits - restricted
Deposits-restricted as of March 31, 1998 primarily included a deposit in
the amount of $20 million held in a third party escrow account to provide
collateral for third party construction financing in connection with the Joint
Venture Agreement. Also, approximately $12.1 million was held in third party
escrow accounts, representing proceeds received in connection with the Company's
disposition of two properties and earnest money deposits made for additional
acquisitions. In addition, approximately $7.5 million was for tenant security
and utility deposits for certain of the Company's Properties.
12. Commitments and Contingencies
The Company, as an owner of real estate, is subject to various
environmental laws of Federal and local governments. Compliance by the Company
with existing laws has not had a material adverse effect on the Company's
financial condition and results of operations. However, the Company cannot
predict the impact of new or changed laws or regulations on its current
Properties or on properties that it may acquire in the future.
The Company does not believe there is any other litigation, except as
mentioned in the previous paragraph, threatened against the Company other than
routine litigation arising out of the ordinary course of business, some of which
is expected to be covered by liability insurance, none of which is expected to
have a material adverse effect on the consolidated financial statements of the
Company.
In connection with the Joint Venture Agreement, the Company is obligated to
fund an additional $20 million in connection with the third party construction
financing.
In connection with the Wellsford Merger, the Company has provided a standby
obligation in the amount of $30 million pursuant to an agreement entered into
with Wellsford Real Properties, Inc., a Maryland corporation ("WRP"), for the
construction financing for a multifamily development project located in Denver,
Colorado. In addition, the Company has provided a $14.8 million credit
enhancement with respect to bonds issued to finance certain public improvements
at the multifamily development project.
13. Subsequent Events
On April 1, 1998, the Company acquired Harbor Pointe Apartments, a 595-unit
multifamily property located in Milwaukee, Wisconsin, from an unaffiliated third
party for a purchase price of approximately $24 million, which included securing
financing in the amount of $12 million and the issuance of OP Units having a
value of approximately $2.3 million.
On April 1, 1998, the Company acquired five of the Additional Properties
containing 1,371 units, from an unaffiliated third party for a total purchase
price of approximately $95.7 million, which included mortgage indebtedness of
$50 million and the issuance of OP Units having a value of approximately $6.3
million. In April 1997, the Company had made a $88 Million Mortgage Note
Investment collateralized by these five Additional Properties.
On April 1, 1998, the Company acquired Sonterra at Foothill Ranch
Apartments, a 300-unit multifamily property located in Foothill Ranch,
California from an unaffiliated third party for a purchase price of
approximately $31.5 million.
On April 7, 1998, the Company acquired Vista Pointe at the Valley
Apartments, a 231-unit multifamily property located in Irving, Texas, from an
unaffiliated third party for a purchase price of approximately $18.6 million.
On April 23, 1998, the Company acquired Emerson Place Apartments, a 462-
unit multifamily property located in Boston, Massachusetts, from an unaffiliated
third party for a purchase price of approximately $72.5 million.
In April 1998, the Operating Partnership issued 6.63% unsecured notes due
April 13, 2015 in a public debt offering (the "2015 Notes"). The Operating
Partnership received net proceeds of approximately $298.1 million in connection
with this issuance. The Operating Partnership also received approximately $8.1
million from the sale of an option to remarket the 2015 Notes in April 2005.
Prior to the issuance of the 2015 Notes, the Operating Partnership entered into
an interest rate
16
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
protection agreement to effectively fix the interest rate cost of such issuance
at 6.44%. The Operating Partnership received a one-time settlement payment from
this transaction, which was appproximately $0.6 million, will be amortized over
seven years.
In April 1998, the Company sold approximately 350,000 Common Shares
pursuant to the DRIP Plan and raised net proceeds of approximately $17.5
million.
On April 29, 1998, the Company completed an offering of 946,565 publicly
registered Common Shares, which were sold at a price of $46.5459 per share. The
Company received net proceeds of approximately $44.1 million in connection
therewith.
On May 1, 1998, the Company disposed of one Property located in Fort Myers,
Florida for a sales price of $8.5 million. The Company expects to record a gain
for financial reporting purposes of approximately $1.4 million.
17
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion and analysis of the results of operations and
financial condition of the Company should be read in connection with the
Consolidated Financial Statements and Notes thereto. Due to the Company's
ability to control the Operating Partnership, the EWR Operating Partnership, the
Management Partnerships, the Financing Partnerships and the LLCs, each entity
has been consolidated with the Company for financial reporting purposes.
Capitalized terms used herein and not defined, are as defined in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
words "believes", "expects" and "anticipates" and other similar expressions
which are predictions of or indicate future events and trends and which do not
relate solely to historical matters, identify forward-looking statements. Such
forward-looking statements are subject to risks and uncertainties, which could
cause actual results, performance, or achievements of the Company to differ
materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements. Factors that might
cause such differences include, but are not limited to, the following: the
alternative sources of capital to the Company are too high; occupancy levels and
market rents may be adversely affected by local economic and market conditions,
which are beyond the Company's control; and additional factors as discussed in
Part I of the Annual Report as filed on Form 10-K. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements, which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations
Since EQR's IPO and through March 31, 1998, the Company has acquired direct
or indirect interests in 427 properties (the "Acquired Properties"), containing
121,898 units in the aggregate for a total purchase price of approximately $6.8
billion, including the assumption of approximately $1.6 billion of mortgage
indebtedness and $0.4 billion of unsecured notes. The Company's interest in six
of the Acquired Properties at the time of acquisition thereof consisted solely
of ownership of the debt collateralized by such Acquired Properties. The
Company purchased its interests in 15 of such Acquired Properties consisting of
3,388 units in 1998 (the "1998 Acquired Properties").
During the quarter ended March 31, 1998, the Company disposed of two
properties (the "1998 Disposed Properties") for a total sales price of $16.7
million.
The Company's overall results of operations for the quarters ended March
31, 1998 and 1997 have been significantly impacted by the Company's acquisition
activity. The significant changes in rental revenues, property and maintenance
expenses, real estate taxes and insurance,
18
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
depreciation expense, property management and interest expense can all primarily
be attributed to the acquisition of the 1997 Acquired Properties and the 1998
Acquired Properties. The impact of the 1997 Acquired Properties and the 1998
Acquired Properties is discussed in greater detail in the following paragraphs.
Properties that the Company owned for all of the quarter ended March 31,
1998 and March 31, 1997 (the "First Quarter 1998 Same Store Properties") also
impacted the Company's results of operations and are discussed as well in the
following paragraphs.
Comparison of quarter ended March 31, 1998 to quarter ended March 31, 1997
For the quarter ended March 31, 1998, income before gain on disposition of
properties and allocation to Minority Interests increased by approximately $26.7
million when compared to the quarter ended March 31, 1997. This increase was
primarily due to increases in rental revenues net of increases in property and
maintenance expenses, real estate taxes and insurance, property management
expenses, depreciation, interest expense and general and administrative
expenses. All of the increases in the various line item accounts mentioned
above can be primarily attributed to the 1997 Acquired Properties. These
increases were partially offset by the 1997 Disposed Properties. The increase
in interest income of $1.2 million earned on the Company's mortgage note
investments is primarily attributable to its $88 Million Note Investment.
In regard to the First Quarter 1998 Same Store Properties, rental revenues
increased by approximately $6.5 million or 5.2% primarily as a result of higher
rental rates charged to new tenants and tenant renewals, as well as a 1%
increase in average occupancy levels. Overall property operating expenses which
include property and maintenance, real estate taxes and insurance and an
allocation of property management expenses increased approximately $1.3 million
or 2.7%. This increase was primarily attributable to increased leasing and
advertising as well as building, maintenance and utility costs.
Property management represents expenses associated with the management of
the Company's Properties. These expenses increased by approximately $5.9
million primarily due to the continued expansion of the Company's property
management business to facilitate the management of the Company's additional
properties. Subsequent to March 31, 1997, the Company opened approximately 14
new management offices.
Fee and asset management revenues and fee and asset management expenses are
associated with the management of properties not owned by the Company that are
managed for affiliates. These expenses were slightly higher for the quarter
ended March 31, 1998 when compared to the quarter ended March 31, 1997.
Interest expense, including amortization of deferred financing costs,
increased by approximately $27 million. This increase was primarily the result
of an increase in the Company's average indebtedness outstanding which increased
by $1.6 billion. However, the Company's
19
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
effective interest costs decreased from 7.62% for the quarter ended March 31,
1997 to 7.27% for the quarter ended March 31, 1998.
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.9 million between the periods under
comparison. This increase was primarily due to adding corporate personnel,
higher compensation costs and shareholder reporting costs as well as an increase
in professional fees. General and administrative expenses as a percentage of
total revenues were 1.7% for the quarter ended March 31, 1998, which was a
decrease from 2.1% for the quarter ended March 31, 1997.
Liquidity and Capital Resources
As of January 1, 1998, the Company had approximately $33.3 million of cash
and cash equivalents and $265 million available on its line of credit, of which
$24.7 million was restricted. After taking into effect the various transactions
discussed in the following paragraphs, the Company's cash and cash equivalents
balance at March 31, 1998 was approximately $77.6 million and the amount
available on the Company's line of credit was $500 million, of which $24.7
million was restricted. The following discussion also explains the changes in
net cash provided by operating activities, net cash (used for) investing
activities and net cash provided by financing activities, all of which are
presented in the Company's Statements of Cash Flows.
With respect to Property acquisitions during the quarter, the Company
purchased 15 Properties containing 3,388 units for a total purchase price of
approximately $225.2 million, including the assumption of mortgage indebtedness
of approximately $93.6 million. These acquisitions were primarily funded from
proceeds received from the January 1998 Common Share Offering, the February 1998
Common Share Offerings and working capital. Subsequent to March 31, 1998 and
through May 11, 1998, the Company acquired nine additional properties containing
2,959 units for a total purchase price of approximately $242.3 million,
including mortgage indebtedness of $62 million and the issuance of OP Units
having a value of approximately $8.6 million. These acquisitions were primarily
funded with proceeds from the February 1998 Common Share Offerings, the March
1998 Common Share Offering and working capital.
During the quarter ended March 31, 1998, the Company disposed of two
properties that generated net proceeds of $16.7 million. Subsequently, these
proceeds will be ultimately applied to purchase additional Properties.
As of March 31, 1998, the Company had total indebtedness of approximately
$2.79 billion, which included mortgage indebtedness of $1.66 billion (including
premiums of $3.7 million), of which $723 million represented tax exempt bond
indebtedness, and unsecured debt of $1.13 billion (including net discounts and
premiums in the amount of $5.5 million). During the quarter, the Company repaid
$18.2 million of mortgage indebtedness on one of its Properties.
20
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
This repayment was primarily funded from proceeds received from the January 1998
Common Share Offering.
The Company has, from time to time, entered into interest rate protection
agreements (financial instruments) to reduce the potential impact of increases
in interest rates but believes it has limited exposure to the extent of non-
performance by the counterparties of each protection agreement since each
counterparty is a major U.S. financial institution, and the Company does not
anticipate their non-performance. No such financial instrument has been used for
trading purposes. In February 1996, the Company entered into an interest rate
protection agreement that will hedge the Company's interest rate risk at
maturity of $125 million of indebtedness. This agreement hedged the interest
rate risk of the Operating Partnership's 1999 Notes by locking the effective
four-year Treasury Rate commencing May 15, 1999. There was no current cost to
the Company for entering into this agreement. In July 1997, the Company entered
into two interest rate protection agreements to effectively fix the interest
rate cost of the Company's 2001 Notes and 2003 Notes. One agreement was for a
notional amount of $100 million with a locked in treasury rate at 6.134%. The
second agreement was for a notional amount of $75 million with a locked in
treasury rate of 6.287%. The fair value of these instruments as of March 31,
1998 approximates their carrying or contract values.
The Company has a policy of capitalizing expenditures made for new assets,
including newly acquired properties and the costs associated with placing these
assets into service. Expenditures for improvements and renovations that
significantly enhance the value of existing assets or substantially extend the
useful life of an asset are also capitalized. Capital spent for replacement-type
items such as appliances, draperies, carpeting and floor coverings, mechanical
equipment and certain furniture and fixtures is also capitalized. Expenditures
for ordinary maintenance and repairs are expensed to operations as incurred.
With respect to acquired properties, the Company has determined that it
generally spends $1,000 per unit during its first three years of ownership to
fully improve and enhance these properties to meet the Company's standards. In
regard to replacement-type items described above, the Company generally expects
to spend $300 per unit on an annual recurring basis.
During the quarter ended March 31, 1998, total capital expenditures for the
Company approximated $16.5 million. Of this amount, approximately $3.4 million
related to capital improvements and major repairs for certain of the 1995, 1996
and 1997 Acquired Properties. Capital improvements and major repairs for all of
the Company's pre-IPO properties and certain Acquired Properties approximated
$3.8 million, or $28 per unit. Capital spent for replacement-type items
approximated $6.9 million, or $50 per unit. Also included in total capital
expenditures was approximately $2.4 million expended for non-real estate
additions such as computer software, computer equipment, furniture and fixtures
and leasehold improvements for the Company's property management offices and its
corporate headquarters. Such capital expenditures were primarily funded from
working capital reserves and from net cash provided by operating activities.
Total capital expenditures for the remaining portion of 1998 are budgeted to
21
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
be approximately $80 million.
Minority Interests as of March 31, 1998 increased by $8.8 million when
compared to December 31, 1997. The primary factors that impacted this account
during the three month period were distributions declared to Minority Interests,
which amounted to $6.4 million for the three month period, the allocation of
income from operations in the amount of $3.7 million and the conversion of OP
Units into Common Shares and the issuances of Common Shares during the quarter.
Total distributions paid in April 1998 amounted to approximately $92
million, which included distributions declared for the quarter ended March 31,
1998.
On April 29, 1998, the Company completed an offering of 946,565 publicly
registered Common Shares, which were sold at a price of $46.5459 per share. The
Company received net proceeds of approximately $44.1 million in connection
therewith.
In April 1998, the Operating Partnership issued 6.63% unsecured notes due
April 13, 2015 (the "2015 Notes") in a public debt offering. The Operating
Partnership received net proceeds of approximately $298.1 million in connection
with this issuance. The Operating Partnership also received approximately $8.1
million from the sale of an option to remarket the 2015 Notes in April 2005.
Prior to the issuance of the 2015 Notes, the Operating Partnership entered into
an interest rate protection agreement to effectively fix the interest rate cost
of such issuance at 6.44%. The Operating Partnership received a one-time
settlement payment from this transaction, which was approximately $0.6 million.
In April, 1998, the Company sold approximately 350,000 Common Shares
pursuant to the DRIP Plan and received net proceeds of approximately $17.5
million therefrom.
The Company expects to meet its short-term liquidity requirements,
including capital expenditures relating to maintaining its existing Properties,
generally through its working capital, net cash provided by operating activities
and borrowings under its line of credit. The Company considers its cash provided
by operating activities to be adequate to meet operating requirements and
payments of distributions. The Company also expects to meet its long-term
liquidity requirements, such as scheduled mortgage debt maturities, reduction of
outstanding amounts under its line of credit, property acquisitions, financing
of construction and development activities and capital improvements through the
issuance of unsecured notes and equity securities including additional OP Units
as well as from undistributed FFO and proceeds received from the disposition of
certain Properties. In addition, the Company has certain uncollateralized
Properties available for additional mortgage borrowings in the event that the
public capital markets are unavailable to the Company or the cost of alternative
sources of capital to the Company is too high.
The Company currently has a $500 million line of credit that is scheduled
to mature in
22
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
November 1999. As of May 11, 1998, no amounts were outstanding under the
Company's line of credit.
The Company has conducted a review of its computer operating systems and
has identified those areas that could be affected by the "Year 2000" issue and
has developed a plan to resolve this issue. The Company believes that by
modifying certain existing hardware and software and, in other cases, converting
to new application systems, the Year 2000 problem can be resolved without
significant operational difficulties. The Company has initiated formal
communications with all of its significant suppliers to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues. The Company has estimated the
Year 2000 project cost to be approximately $250,000.
Funds From Operations
The Company generally considers FFO to be one measure of the performance of
real estate companies including an equity REIT. The resolution adopted by the
Board of Governors of NAREIT defines FFO as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to reflect FFO on
the same basis. The Company believes that FFO is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities it provides
investors an understanding of the ability of the Company to incur and service
debt and to make capital expenditures. FFO in and of itself does not represent
cash generated from operating activities in accordance with GAAP and therefore
should not be considered an alternative to net income as an indication of the
Company's performance or to net cash flows from operating activities as
determined by GAAP as a measure of liquidity and is not necessarily indicative
of cash available to fund cash needs. The Company's calculation of FFO
represents net income available to Common Shares, excluding gains on
dispositions of properties, plus depreciation on real estate assets, income
allocated to Minority Interests and amortization of deferred financing costs
related to the Predecessor Business. The Company's calculation of FFO may differ
from the methodology for calculating FFO utilized by other REITs and,
accordingly, may not be comparable to such other REITs. The Company's accounting
policy with respect to replacement type items is to capitalize such items as
improvements and depreciate such improvements typically over a five year period.
For the quarter ended March 31, 1998, FFO increased by $48.8 million
representing a 93.5% increase when compared to the quarter ended March 31, 1997.
The following is a reconciliation of net income available to Common Shares
to FFO
23
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
Operations (Continued)
available to Common Shares and OP Units for the quarters ended March 31, 1998
and 1997:
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
3/31/98 3/31/97
-------- --------
<S> <C> <C>
Net income available to Common Shares $ 35,895 $ 23,901
Adjustments:
Income allocated to Minority Interests 3,688 3,426
Depreciation on real estate assets 63,225 28,432
Amortization of deferred financing costs
related to predecessor business 12 58
Gain on disposition of properties (1,869) (3,632)
-------- --------
FFO available to Common Shares and OP
Units $100,951 $ 52,185
======== ========
</TABLE>
24
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no new or significant developments related to the legal
proceedings that were discussed in Part I, Item III of the Company's Form 10-K
for the year ended December 31, 1997.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
12 Computation of Ratio of Earnings to Fixed Charges.
(B) Reports on Form 8-K:
A Report on Form 8-K dated January 21, 1998, reporting information on the
January 1998 Common Share Offering.
A Report on Form 8-K dated February 12, 1998, reporting information on the
February 1998 Common Share Offerings.
A Report on Form 8-K dated February 12, 1998, reporting information on the
February 1998 Common Share Offerings.
A Report on Form 8-K dated February 18, 1998, reporting information on the
February 1998 Common Share Offerings.
A Report on Form 8-K dated March 25, 1998, reporting information on the March
1998 Common Share Offering.
25
<PAGE>
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 thereunto duly authorized.
EQUITY RESIDENTIAL PROPERTIES TRUST
Date: May 11, 1998 By: /s/ Bruce C. Strohm
------------ --------------------------------------------------
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Date: May 11, 1998 By: /s/ Michael J. McHugh
------------ --------------------------------------------------
Michael J. McHugh
Executive Vice President, Chief Accounting Officer
and Treasurer
26
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
Consolidated and Combined Historical, Including Predecessor Business
Earnings to Combined Fixed Charges and Preferred Distributions Ratio
<TABLE>
<CAPTION>
Historical
-------- -------- -------- -------- -------- -------- --------
03/31/98 03/31/97 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
-------- -------- -------- -------- -------- -------- --------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $277,226 $134,235 $707,733 $454,412 $373,919 $220,727 $104,388
Fee income - outside managed 1,360 1,578 5,697 6,749 7,030 4,739 4,651
Interest income - investment in mortgage notes 4,931 3,683 20,366 12,819 4,862 - -
Interest and other income 2,824 1,891 13,525 4,405 4,573 5,568 3,031
-------- -------- -------- -------- -------- -------- --------
Total revenues 286,341 141,387 747,321 478,385 390,384 231,034 112,070
-------- -------- -------- -------- -------- -------- --------
EXPENSES
Property and maintenance 66,713 32,334 176,075 127,172 112,186 66,534 35,324
Real estate taxes and insurance 27,443 13,911 69,520 44,128 37,002 23,028 11,403
Property management 11,579 5,671 26,793 17,512 15,213 10,249 3,491
Property management - non-recurring - - - - - 879 -
Fee and asset management 1,052 967 3,364 3,837 3,887 2,056 2,524
Depreciation 64,390 28,877 156,644 93,253 72,410 37,273 15,384
Interest:
Expense incurred 50,254 23,293 121,324 81,351 78,375 37,044 26,042
Amortization of deferred financing costs 624 603 2,523 4,242 3,444 1,930 3,322
Refinancing costs - - - - - - 3,284
General and administrative 4,880 2,975 15,064 9,857 8,129 6,053 3,159
-------- -------- -------- -------- -------- -------- --------
Total expenses 226,935 108,631 571,307 381,352 330,646 185,046 103,933
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary items 59,406 32,756 176,014 97,033 59,738 45,988 8,137
======== ======== ======== ======== ======== ======== ========
Combined Fixed Charges and Preferred Distributions:
Interest and other financing costs 50,254 23,293 121,324 81,351 78,375 37,044 26,042
Refinancing costs - - - - - - 3,284
Amortization of deferred financing costs 624 603 2,523 4,242 3,444 1,930 3,322
Preferred distributions 21,692 9,061 59,012 29,015 10,109 - -
-------- -------- -------- -------- -------- -------- --------
Total Combined Fixed Charges
and Preferred Distributions 72,570 32,957 182,859 114,608 91,928 38,974 32,648
======== ======== ======== ======== ======== ======== ========
Earnings before combined fixed charges
and preferred distributions 110,284 56,652 299,861 182,626 141,557 84,962 40,785
======== ======== ======== ======== ======== ======== ========
Funds from operations before combined fixed
charges and preferred distributions 174,674 85,529 456,505 275,879 213,967 122,235 56,169
======== ======== ======== ======== ======== ======== ========
Ratio of earnings before combined fixed charges
and preferred distributions to combined fixed
charges and preferred distributions 1.52 1.72 1.64 1.59 1.54 2.18 1.25
======== ======== ======== ======== ======== ======== ========
Ratio of funds from operations before combined fixed
charges and preferred distributions to combined
fixed charges and preferred distributions 2.41 2.60 2.50 2.41 2.33 3.14 1.72
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 77,575
<SECURITIES> 0
<RECEIVABLES> 3,798
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 259,630
<PP&E> 7,362,929
<DEPRECIATION> (508,394)
<TOTAL-ASSETS> 7,329,342
<CURRENT-LIABILITIES> 262,444
<BONDS> 2,786,096
0
1,041,700
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,329,342
<SALES> 283,517
<TOTAL-REVENUES> 286,341
<CGS> 0
<TOTAL-COSTS> 106,787
<OTHER-EXPENSES> 4,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,878
<INCOME-PRETAX> 59,406
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,406
<DISCONTINUED> 1,869
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,583
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
