<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 SEPTEMBER 30, 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 November 5, 1998, 117,522,781 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>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Investment in real estate
Land $1,108,417 $ 791,980
Depreciable property 7,522,306 6,293,415
Construction in progress 49,589 36,040
---------- ----------
8,680,312 7,121,435
Accumulated depreciation (640,452) (444,762)
---------- ----------
Investment in real estate, net
of accumulated depreciation 8,039,860 6,676,673
Real estate held for disposition 72,336 -
Cash and cash equivalents 154,013 33,295
Investment in mortgage notes, net 87,937 176,063
Rents receivable 3,978 3,302
Deposits - restricted 50,840 36,374
Escrow deposits - mortgage 63,878 44,864
Deferred financing costs, net 23,377 23,092
Other assets 136,388 100,968
---------- ----------
Total assets $8,632,607 $7,094,631
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $1,960,340 $1,582,559
Notes, net 1,672,148 1,130,764
Line of credit 310,000 235,000
Accounts payable and accrued expenses 96,522 67,699
Accrued interest payable 48,484 28,048
Rents received in advance and other liabilities 52,561 38,750
Security deposits 36,558 28,193
Distributions payable 90,979 20,223
---------- ----------
Total liabilities 4,267,592 3,131,236
---------- ----------
Commitments and contingencies
Minority Interests 384,824 273,404
---------- ----------
</TABLE>
See accompanying notes.
2
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS (continued)
(Amounts in thousands except for share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, 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, 3,997,000 shares issued and outstanding 99,925 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, 95,581,404 shares issued
and outstanding as of September 30, 1998 and 89,085,265
shares issued and outstanding as of December 31, 1997 956 891
Paid in capital 3,152,762 2,785,661
Employee notes (4,911) (5,145)
Distributions in excess of accumulated earnings (210,291) (133,129)
---------- ----------
Total shareholders' equity 3,980,191 3,689,991
---------- ----------
Total liabilities and shareholders' equity $8,632,607 $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>
Nine Months Ended September 30, Quarter Ended September 30,
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental income $901,087 $482,980 $329,717 $192,181
Fee and asset management 4,204 4,364 1,414 1,254
Interest income - investment in mortgage notes 14,405 14,821 4,184 6,810
Interest and other income 12,994 7,513 3,984 3,109
-------- -------- -------- --------
Total revenues 932,690 509,678 339,299 203,354
-------- -------- -------- --------
EXPENSES
Property and maintenance 224,457 117,681 86,547 46,921
Real estate taxes and insurance 88,552 48,560 32,068 18,893
Property management 38,278 18,765 13,168 6,946
Fee and asset management 3,289 2,523 1,049 954
Depreciation 208,394 106,114 76,484 43,339
Interest:
Expense incurred 170,143 82,775 64,492 31,851
Amortization of deferred financing costs 1,962 1,810 687 590
General and administrative 15,598 10,037 5,327 3,831
-------- -------- -------- --------
Total expenses 750,673 388,265 279,822 153,325
-------- -------- -------- --------
Income before gain on disposition of properties
and allocation to Minority Interests 182,017 121,413 59,477 50,029
Gain on disposition of properties 12,717 3,923 1,625 291
-------- -------- -------- --------
Income before allocation to Minority Interests 194,734 125,336 61,102 50,320
Income allocated to Minority Interests (12,840) (9,431) (4,530) (3,086)
-------- -------- -------- --------
Net income 181,894 115,905 56,572 47,234
Preferred distributions (65,075) (37,287) (21,691) (16,348)
-------- -------- -------- --------
Net income available to Common Shares $116,819 $ 78,618 $ 34,881 $ 30,886
======== ======== ======== ========
Weighted average Common Shares outstanding 95,965 61,577 97,089 73,757
======== ======== ======== ========
Distributions declared per Common Share outstanding $ 2.01 $ 1.88 $ 0.67 $ 0.63
======== ======== ======== ========
Net income per weighted average Common Share outstanding $ 1.22 $ 1.28 $ 0.36 $ 0.42
======== ======== ======== ========
Net income per weighted average Common Share
outstanding - assuming dilution $ 1.21 $ 1.26 $ 0.36 $ 0.41
======== ======== ======== =========
</TABLE>
See accompanying notes.
4
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 181,894 $ 115,905
Adjustments to reconcile net income to net cash provided by operating activities:
Income allocated to Minority Interests 12,840 9,431
Depreciation 208,394 106,114
Amortization of deferred financing costs (including discounts and premiums on debt) 457 1,652
Amortization of discount on investment in mortgage notes (1,900) (2,480)
Gain on disposition of properties (12,717) (3,923)
Changes in assets and liabilities:
(Increase) in rents receivable (676) (862)
(Increase) in deposits - restricted (7,033) (736)
(Increase) in other assets (24) (6,306)
Increase in accounts payable and accrued expenses 29,626 20,813
Increase in accrued interest payable 20,436 7,756
Increase in rents received in advance and other liabilities 8,640 6,978
------------ -----------
Net cash provided by operating activities 439,937 254,342
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate, net (947,018) (630,419)
Improvements to real estate (60,614) (23,725)
Additions to non-real estate property (7,928) (6,293)
Proceeds from disposition of real estate 75,976 5,477
Purchase of management contract rights (119) (5,000)
(Increase) in mortgage deposits (19,014) (14,704)
Deposits on real estate acquisitions (7,433) 13,911
Investment in mortgage notes, net 1,842 (86,975)
Investment in partnerships - development (21,708) --
Costs related to Mergers (4,528) (60,429)
Other investing activities (18,975) (57,304)
------------ -----------
Net cash (used for) investing activities (1,009,519) (865,461)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Common Shares 423,796 515,465
Buy back of EQR Common Shares (94,705) --
Proceeds from sale of Preferred Shares -- 450,000
Proceeds from exercise of options 5,172 4,321
Proceeds from sale of 2015 Notes, net of discount 298,125 --
Proceeds from sale of August 2003 Notes, net of discount 99,650 --
Proceeds from sale of 2000 Notes, net of discount 144,452 --
Proceeds from option to remarket the 2015 Notes 8,130 --
Payment of offering costs (10,379) (18,840)
Distributions to Common Share and Preferred Share owners (196,374) (144,220)
Distributions to Minority Interests (13,264) (14,072)
Principal receipts on employee notes 234 240
Proceeds from restructuring of tax-exempt bond investments -- 9,350
Repayments on line of credit (370,000) (185,000)
Proceeds from line of credit 445,000 185,000
Principal payments on mortgage notes payable (55,711) (62,993)
Loan and bond acquisition costs (2,191) (1,697)
Increase in security deposits 8,365 3,843
------------ -----------
Net cash provided by financing activities 690,300 741,397
------------ -----------
Net increase in cash and cash equivalents 120,718 130,278
Cash and cash equivalents, beginning of period 33,295 147,271
------------ -----------
Cash and cash equivalents, end of period $ 154,013 $ 277,549
============ ===========
</TABLE>
See accompanying notes.
5
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
-------------------------------
<S> <C> <C>
Supplemental information:
Cash paid during the period for interest $149,707 $ 75,019
======== ========
Mortgage loans and unsecured notes assumed and or entered
into through Mergers and acquisitions of real estate $433,492 $517,639
======== ========
Net real estate contributed in exchange for OP units $164,149 $ 5,134
======== ========
</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 herein are as defined in the Company's
Annual Report on Form 10-K, as amended by Form 10-K/A, 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 September 30, 1998, the Company controlled a
portfolio of 550 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
(the "Additional Properties").
2. Basis of Presentation
The balance sheet as of September 30, 1998, the statements of operations
for the nine months and the three months ended September 30, 1998 and cash flows
for the nine months ended September 30, 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 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.
Certain reclassifications have been made to the prior period's financial
statements in order to conform to current period presentations.
3. Shareholders' Equity and Minority Interests
During the first nine months of 1998, the Company issued 68,414 Common
Shares pursuant to the Employee Share Purchase Plan and received net proceeds of
approximately $2.8 million.
7
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
During the first nine months of 1998, the Company issued 1,018,763 Common
Shares pursuant to the Direct Share Purchase Plan and received net proceeds of
approximately $50.5 million.
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 1,000,000
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.
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
"April 1998 Common Share Offering"). The Company received net proceeds of
approximately $44.1 million in connection therewith.
On September 20, 1998, the Company completed its repurchase of 2,367,400 of
its Common Shares of beneficial interest, on the open market, for an average
price of $40 per share. The purchases were made between August 5 and September
17, 1998. The Company paid approximately $94.7 million in connection therewith.
The following table presents the changes in the Company's issued and
outstanding Common Shares for the nine months ended September 30, 1998:
<TABLE>
<CAPTION>
=================================================================================================
<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 April 1998 Common Share Offering 946,565
Common Shares issued through Direct Share Purchase Plan 1,018,763
Common Shares issued through DRIP Plan 997
Common Shares issued through conversion of Series E Preferred Shares 834
Conversion of OP Units into Common Shares 95,641
Common Shares issued through Employee Share Purchase Plan 68,414
Common Shares issued through restricted share awards 53,883
=================================================================================================
</TABLE>
8
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Common Shares issued through exercise of options 178,459
Common Shares issued through 401(k) Plan 15,980
Repurchase of Common Shares (2,367,400)
----------
Balance at September 30, 1998 95,581,404
================================================================================
</TABLE>
Assuming conversion of all OP Units into Common Shares, total Common Shares
outstanding at September 30, 1998 would have been 108,431,079.
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
September 30, 1998, the Minority Interests held 12,849,675 OP Units, which
represented an 11.85% 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 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 October 9, 1998
for the quarter ended September 30, 1998 to Common Shareholders of record as of
September 16, 1998.
The following table summarizes the distributions paid to Preferred Share
and Depositary Share holders related to the quarter ended September 30, 1998:
<TABLE>
<CAPTION>
Distribution
------------
Amount Date Paid Record Date
------ --------- -----------
<S> <C> <C> <C>
Series A Preferred
Share holders $0.585938 10/15/98 09/16/98
Series B Depositary
Share holders $0.570313 10/15/98 09/16/98
Series C Depositary
Share holders $0.570313 10/15/98 09/16/98
Series D Depositary
Share holders $0.537500 10/15/98 09/16/98
Series E Preferred
Share holders $0.437500 10/01/98 09/16/98
Series F Preferred
Share holders $0.603125 10/15/98 09/16/98
Series G Depositary
Share holders $0.453125 10/15/98 09/16/98
</TABLE>
9
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Real Estate
During the nine months ended September 30, 1998, the Company acquired the
96 Properties listed below from unaffiliated third parties. In connection with
certain of the acquisitions listed below, the Company assumed and/or entered
into mortgage indebtedness of approximately $433.5 million and issued OP Units
having a value of approximately $164.1 million. The cash portion of these
transactions was funded primarily from proceeds raised from the various capital
transactions as discussed in Note 3 of the Notes to Consolidated Financial
Statements, the various debt offerings as discussed in Note 10 of the Notes to
Consolidated Financial Statements, the Company's line of credit and working
capital.
<TABLE>
<CAPTION>
Total
Acquisition
Date Number Cost
Acquired Property Location of Units (in thousands)
- --------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
01/07/98 Cityscape St. Louis Park, MN 156 $12,399
01/09/98 740 River Drive St. Paul, MN 162 13,041
01/13/98 Prospect Towers Hackensack, NJ 157 36,368
01/16/98 Park Place Houston, TX 229 13,602
01/16/98 Park Westend Richmond, VA 312 13,436
01/29/98 Emerald Bay at Winter Park Winter Park, FL 432 15,889
02/05/98 Farnham Park Houston, TX 216 15,799
02/25/98 Plantation Houston, TX 232 10,294
02/27/98 Balcones Club Austin, TX 312 12,496
03/02/98 Coach Lantern Scarborough, ME 90 4,896
03/02/98 Foxcroft Scarborough, ME 104 5,067
03/02/98 Yarmouth Woods Yarmouth, ME 138 6,832
03/20/98 Rolido Parque Houston, TX 369 10,974
03/26/98 The Fairfield Stamford, CT 263 45,973
03/26/98 Trails of Valley Ranch Irving, TX 216 10,827
04/01/98 Sonterra at Foothill Ranch Foothill Ranch, CA 300 31,587
04/01/98 Harbor Pointe Milwaukee, WI 595 25,401
04/01/98 Gates at Carlson Center Minnetonka, MN 435 28,166
04/01/98 GlenGarry Club Bloomingdale, IL 250 19,058
04/01/98 Plum Tree I II III Hales Corners, WI 332 22,286
04/01/98 Ravinia Greenfield, WI 206 13,336
04/01/98 The Woodlands of Brookfield Brookfield, WI 148 15,458
04/07/98 Vista Pointe at the Valley Irving, TX 231 19,147
04/23/98 Emerson Place Boston, MA 462 72,459
05/13/98 Sierra Canyon Santa Clarita, CA 232 16,069
05/14/98 Northridge Pleasant Hill, CA 221 20,273
05/22/98 The Arboretum Canton, MA 156 15,705
05/28/98 Woodridge Eagan, MN 200 12,072
05/28/98 Townhomes of Meadowbrook Auburn Hills, MI 230 13,794
06/01/98 Brookside Boulder, CO 144 13,809
06/10/98 The Greystone Atlanta, GA 150 7,484
</TABLE>
10
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Total
Acquisition
Date Number Cost
Acquired Property Location of Units (in thousands)
- --------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
06/11/98 Coconut Palm Club Coconut Creek, FL 300 20,713
06/11/98 Portside Towers Jersey City, NJ 527 119,282
06/16/98 Defoor Village Atlanta, GA 156 13,538
06/16/98 Plantation Ridge Marietta, GA 454 23,342
06/18/98 Wynbrook Norcross, GA 318 13,589
06/24/98 Cross Creek Matthews, NC 420 23,479
06/26/98 Copper Hill Bedford, TX 204 7,032
06/26/98 Walker's Mark Dallas, TX 164 7,019
06/26/98 Royal Crest Estates Waterbury, CT 156 7,343
06/26/98 Tyrone Gardens Randolph, MA 165 10,766
07/01/98 Trowbridge Atlanta, GA 210 12,020
07/01/98 Bellevue Meadows Bellevue, WA 180 17,052
07/01/98 Chelsea Square Redmond, WA 113 12,647
07/01/98 Olde Redmond Place Redmond, WA 192 18,891
07/01/98 Surry Downs Bellevue, WA 122 10,865
07/01/98 Woodlake Kirkland, WA 288 23,375
07/01/98 Bramblewood San Jose, CA 108 14,807
07/01/98 Creekside San Mateo, CA 192 30,765
07/01/98 Grandview I & II Las Vegas, NV 456 17,949
07/01/98 Lincoln Green I & II Sunnyvale, CA 174 27,479
07/01/98 Lincoln Village I & II Larkspur, CA 342 48,503
07/01/98 Mountain Shadows Las Vegas, NV 300 9,411
07/01/98 Parkside Union City, CA 208 18,243
07/01/98 Summerwood Hayward, CA 162 11,769
07/01/98 Timberwood Aurora, CO 336 16,131
07/01/98 Turf Club Littleton, CO 324 17,604
07/01/98 Willowick Aurora, CO 100 4,646
07/01/98 Woodleaf Campbell, CA 178 25,501
07/08/98 Parkcrest Southfield, MI 210 11,682
07/08/98 Broadway Garland, TX 288 9,239
07/08/98 Cedar Ridge Townhomes Arlington, TX 121 4,823
07/08/98 Fielder Crossing Arlington, TX 119 4,620
07/08/98 Lakeshore at Preston Plano, TX 302 18,515
07/08/98 Lakewood Greens Dallas, TX 252 11,036
07/08/98 River Park Fort Worth, TX 280 11,038
07/08/98 Villas of Josey Ranch Carrollton, TX 198 8,827
07/08/98 Wimbledon Oaks Arlington, TX 248 10,310
07/08/98 Pleasant Ridge Arlington, TX 63 2,410
07/08/98 Sandstone Euless, TX 40 1,805
07/09/98 Woodridge I Aurora, CO 212 8,642
07/09/98 Woodridge II Aurora, CO 116 4,728
07/09/98 Woodridge III Aurora, CO 256 10,435
</TABLE>
11
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Total
Acquisition
Date Number Cost
Acquired Property Location of Units (in thousands)
- --------- -------- -------- -------- --------------
<S> <C> <C> <C> <C>
07/09/98 Southwood Palo Alto, CA 99 21,237
07/10/98 Martins Landing Roswell, GA 300 17,749
07/10/98 The Lakes at Vinings Atlanta, GA 464 28,341
07/14/98 Summer Creek Plymouth, MN 72 4,407
07/15/98 Patchen Oaks Lexington, KY 192 9,490
07/15/98 Lexington Village Alpharetta, GA 352 24,576
07/15/98 Overlook Manor I Frederick, MD 108 5,202
07/15/98 Overlook Manor II Frederick, MD 182 8,458
07/15/98 Overlook Manor III Frederick, MD 64 4,032
07/15/98 Brookside II Frederick, MD 204 9,372
07/16/98 Coachman Trails Plymouth, MN 154 10,772
07/21/98 Colony Woods Birmingham, AL 414 23,477
07/22/98 Arbors at Century Center Memphis, TN 420 17,780
07/31/98 Briarwood Sunnyvale, CA 192 32,176
07/31/98 Skylark Union City, CA 174 18,290
07/31/98 Greenhaven Union City, CA 250 22,635
07/31/98 Alderwood Park Lynnwood, WA 188 11,814
08/05/98 Fernbrook Townhomes Plymouth, MN 72 7,247
08/14/98 North Creek Everett, WA 264 16,072
08/21/98 Esprit Del Sol Solana Beach, CA 146 17,012
09/25/98 Smoketree Polo Club Indio, CA 288 8,004
09/29/98 Georgian Woods I Wheaton, MD 97 5,719
09/29/98 Georgian Woods III Wheaton, MD 102 6,013
------ ----------
22,032 $1,605,743
====== ==========
</TABLE>
5. Commitments to Acquire/Dispose of Real Estate
As of September 30, 1998, in addition to the Properties that were
subsequently acquired as discussed in Note 14 of the Notes to Consolidated
Financial Statements, the Company entered into separate agreements to acquire 16
multifamily properties containing 4,645 units from unaffiliated third parties.
The expected combined purchase price is approximately $293.2 million, which
includes the assumption of mortgage indebtedness of approximately $115.6
million.
As of September 30, 1998, in addition to the Properties that were
subsequently disposed of as discussed in Note 14 of the Notes to Consolidated
Financial Statements, the Company entered into separate agreements to dispose of
10 multifamily properties containing 2,490 units to unaffiliated third parties.
The expected combined disposition price is approximately $79.5 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.
12
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Disposition of Real Estate
<TABLE>
<CAPTION>
Disposition
Date Number Price (in
Disposed Property Location of Units thousands)
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
03/12/98 Mountain Brook/Ridgemont Chattanooga, TN 506 $16,700
05/01/98 The Place Fort Myers, FL 230 8,500
05/15/98 Terraces at Peachtree Atlanta, GA 96 7,225
06/02/98 Stonelake Club Ocala, FL 240 8,680
07/31/98 Country Club I & II Silver Springs, MD 376 20,750
09/04/98 Miramonte Scottsdale, AZ 151 9,500
09/30/98 Gold Pointe Tacoma, WA 84 5,700
----- -------
1,683 $77,055
===== =======
</TABLE>
The Company recognized a total net gain for financial reporting purposes of
approximately $12.7 million on the disposition of these nine properties.
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.
13
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(Amounts in thousands except per share amounts)
<S> <C> <C> <C> <C>
Numerator:
Income before allocation of income to Minority Interests,
preferred distributions and gain on disposition of
properties $182,017 $121,413 $ 59,477 $ 50,029
Allocation of income to Minority Interests (12,840) (9,431) (4,530) (3,086)
Distributions to preferred shareholders (65,075) (37,287) (21,691) (16,348)
-------- -------- -------- --------
Income before gain on disposition of properties 104,102 74,695 33,256 30,595
Gain on disposition of properties 12,717 3,923 1,625 291
-------- -------- -------- --------
Numerator for net income per weighted average
Common Share outstanding 116,819 78,618 34,881 30,886
Effect of dilutive securities:
Allocation of income to Minority Interests 12,840 9,431 4,530 3,086
-------- -------- -------- --------
Numerator for net income per weighted average
Common Share outstanding - assuming dilution $129,659 $ 88,049 $ 39,411 $ 33,972
======== ======== ======== ========
Denominator:
Denominator for net income per weighted
average Common Share outstanding 95,965 61,577 97,089 73,757
Effect of dilutive securities:
Contingent incremental employee share options 922 989 628 1,191
Weighted Average OP Units outstanding 10,665 7,393 12,599 7,377
-------- -------- -------- --------
Denominator for net income per weighted average
Common Share outstanding - assuming dilution 107,552 69,959 110,316 82,325
======== ======== ======== ========
Net income per weighted average Common
Share outstanding $ 1.22 $ 1.28 $ 0.36 $ 0.42
======== ======== ======== ========
Net income per weighted average Common
Share outstanding - assuming dilution $ 1.21 $ 1.26 $ 0.36 $ 0.41
======== ======== ======== ========
</TABLE>
14
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income per weighted average Common Share
outstanding:
Income before gain on disposition of properties per
weighted average Common Share outstanding $1.09 $1.22 $0.34 $0.42
Gain on disposition of properties 0.13 0.06 0.02 0.00
----- ----- ----- -----
Net income per weighted average Common
Share outstanding $1.22 $1.28 $0.36 $0.42
===== ===== ===== =====
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 $1.09 $1.20 $0.34 $0.41
Gain on disposition of properties 0.12 0.06 0.02 0.00
----- ----- ----- -----
Net income per weighted average Common
Share outstanding - assuming dilution $1.21 $1.26 $0.36 $0.41
===== ===== ===== =====
</TABLE>
Convertible Preferred Shares that could be converted into 7,622,951 shares of
common shares were outstanding at September 30, 1998 but were not included in
the computation of diluted earnings per share because it would be anti-dilutive.
15
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. Mortgage Notes Payable
As of September 30, 1998, the Company had mortgage indebtedness of
approximately $1.96 billion encumbering 184 of the Properties. The carrying
value of such Properties (net of accumulated depreciation of $209.7 million) was
approximately $3.2 billion. The mortgage notes payables are generally due in
monthly installments of interest only. In connection with the Properties
acquired during the nine months ended September 30, 1998, the Company assumed
and/or entered into mortgage indebtedness on 40 Properties in the aggregate
amount of $433.5 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 September 30, 1998, the aggregate
notional amount of these agreements was approximately $172.6 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
September 30, 1998, the aggregate notional amount of these agreements was
approximately $172.6 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.
The Company also has an interest rate swap 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 its Properties.
The Company has no payment obligations to the counterparty with respect to this
agreement.
As of September 30, 1998, scheduled maturities for the Company's
outstanding mortgage indebtedness are at various dates through February 1, 2032.
During the nine months ended September 30, 1998, the Company repaid the
outstanding mortgage balance on seven Properties in the amount of $46.9 million.
Subsequent to September 30, 1998, the Company repaid the outstanding mortgage
balances on two Properties in the aggregate amount of approximately $17 million.
16
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Line of Credit
As of September 30, 1998, there was $310 million outstanding on the line of
credit, bearing interest at a weighted average interest rate of 6.07%.
10. Notes
As of September 30, 1998, the Company had outstanding unsecured notes of
approximately $1.7 billion (net of a $4.9 million discount and including a $7
million premium).
In February 1996, the Company entered into a forward starting swap
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 cost to the Company for entering into this agreement.
Prior to the issuance of the 2002 Notes, the Company entered into an
interest rate protection agreement to effectively fix the interest rate cost of
such issuance. The Company 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 September 30, 1998, the unamortized balance of
this cost was approximately $0.4 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
such issuance. The Company received a one-time settlement payment of this
transaction, which was approximately $0.6 million and is being amortized over
ten years. As of September 30, 1998, the unamortized balance was approximately
$0.5 million.
Prior to the issuance of the 2001 and 2003 Notes, the Company entered into
two interest rate protection agreements to effectively fix the interest rate
costs of such issuance's. The Company made a one time settlement payment of each
protection transaction, which was approximately $5 million and $1.7 million,
respectively, and are being amortized over the term of the Notes on a straight-
line basis. As of September 30, 1998 the unamortized balance of these costs were
approximately $3.9 million and $1.4 million, respectively.
In April 1998, the Operating Partnership issued $300 million of unsecured
fixed rate notes (the "2015 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Sixth Public Debt Offering"). The
2015 Notes were issued at a discount, which is being amortized over the life of
the notes on a straight-line basis. The 2015 Notes are due April 13, 2015. The
annual interest rate on the 2015 Notes to April 13, 2005 (the "Remarketing
Date") is 6.63%, which is payable semi-annually in arrears on October 13 and
April 13, commencing October 13, 1998. The 2015 Notes are subject to mandatory
tender on the Remarketing Date. The Operating Partnership received net proceeds
of approximately $298.1 million in connection with this issuance. The Operating
Partnership also
17
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
received approximately $8.1 million from the sale of the option to remarket the
2015 Notes on the Remarketing Date, which is being amortized over the term of
the 2015 Notes. As of September 30, 1998 the unamortized balance was
approximately $7.9 million. 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 until the Remarketing
Date. The Operating Partnership received a one-time settlement payment from this
transaction, which was approximately $0.6 million and is being amortized over
seven years. As of September 30, 1998 the unamortized balance was approximately
$0.6 million.
In August 1998, the Operating Partnership issued $100 million of Remarketed
Reset Notes (the "August 2003 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Seventh Public Debt Offering"). The
August 2003 Notes were issued at a discount, which is being amortized over the
life of the notes on a straight-line basis. The August 2003 Notes are due August
21, 2003. During the period from and including August 21, 1998 to but excluding
August 23, 1999 (the "Initial Spread Period") the interest rate on the August
2003 Notes will be reset quarterly, and will equal LIBOR plus an applicable
spread. The spread during the Initial Spread Period is .45%. After the Initial
Spread Period, the character (i.e. fixed or floating rate) and duration of the
interest rate on the notes will be agreed to by the Operating Partnership and
the Remarketing Underwriter on each applicable determination date, and the
subsequent spread will be agreed to by the Operating Partnership and the
Remarketing Underwriter, initially Merrill Lynch, Pierce Fenner and Smith, Inc.
on the corresponding spread determination date. The Operating Partnership
received net proceeds of approximately $99.7 million in connection with this
issuance.
In September 1998, the Operating Partnership issued $145 million of
unsecured fixed rate notes (the "2000 Notes") in connection with the Debt Shelf
Registration in a public debt offering (the "Eighth Public Debt Offering"). The
2000 Notes were issued at a discount, which is being amortized over the life of
the notes on a straight-line basis. The 2000 Notes are due September 15, 2000.
The annual interest rate on the 2000 Notes is 6.15%, which is payable semi-
annually in arrears on March 15 and September 15, commencing March 15, 1999. The
Operating Partnership received net proceeds of approximately $144.5 million in
connection with this issuance.
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.
11. Deposits - restricted
Deposits-restricted as of September 30, 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 $16.2 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 $14.6 million was for tenant security
and utility deposits for certain of the Company's Properties.
18
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
12. Summarized Pro Forma Condensed Statement of Operations
The following Summarized Pro Forma Condensed Statement of Operations has
been prepared as if the January 1998 Common Share Offering, the February 1998
Common Share Offerings, the March 1998 Common Share Offering, the April 1998
Common Share Offering, the Sixth Public Debt Offering, the Seventh Public Debt
Offering, the Eighth Public Debt Offering, the acquisition of an additional 96
Properties, including the related assumption of $433.5 million of mortgage
indebtedness, the issuance of OP Units with a value of $164.1 million and the
disposition of nine properties (as described in Note 3, Note 4, Note 6, Note 8
and Note 10 of Notes to Consolidated Financial statements) had occurred on
January 1, 1998. This would result in 97,283,225 Common Shares outstanding. In
management's opinion, the Summarized Pro Forma Condensed Statement of Operations
does not purport to present what actual results would have been had the above
transactions occurred on January 1, 1998, or to project results for any future
period. The amounts presented in the following statement are in thousands except
for share amounts:
<TABLE>
<CAPTION>
Summarized
Pro Forma
Condensed Statement
Of Operations
For the Nine Months
Ended
September 30, 1998
-------------------
<S> <C>
Total Revenues $1,011,035
----------
Total Expenses 828,672
----------
Pro Forma income before allocation to Minority Interests 195,080
----------
Pro Forma net income 179,861
Preferred distributions 65,075
----------
Pro Forma net income available for Common Shares $ 114,786
==========
Pro Forma net income per Common Share $ 1.18
==========
</TABLE>
13. 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 litigation 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.
19
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In connection with the Joint Venture Agreement, the Company has a
contingent obligation 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. The aforementioned multifamily
development project was completed during the third quarter of 1998. As a result
of this the Company anticipates that permanent financing will be secured in the
fourth quarter of 1998, at which time, the Company's standby commitment will be
terminated.
14. Subsequent Events
On October 6, 1998, the Company sold Windridge Apartments located in
Lakewood, Washington for a sales price of $3.4 million.
On October 7, 1998, the Company sold a portfolio of five properties located
in Oklahoma City, Oklahoma for a sales price of $49.9 million.
On October 19, 1998, the Company acquired, through the merger of the
multifamily property business of Merry Land and Investment Company, Inc.
("Merry Land") with and into the Company, 118 multifamily properties containing
34,990 units in nine states, including 6 properties consisting of 1,962 units
under development. In the Merger, each outstanding common share of beneficial
interest of Merry Land will be converted into .53 of a common share of the
surviving company. The transaction is valued at approximately $2.2 billion,
which includes the issuance of $1.1 billion of common stock, $370 million of
preferred stock and the assumption of indebtedness of $700 million.
On October 29, 1998, the Company sold Newport Cove Apartments located in
Henderson, Nevada for a sales price of $8.5 million.
20
<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.
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:
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; the Year 2000 Issue discussed below; 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 September 30, 1998, the Company has
acquired direct or indirect interests in 508 properties (the "Acquired
Properties"), containing 140,542 units in the aggregate for a total purchase
price of approximately $8.2 billion, including the assumption of and/or new
mortgage indebtedness of approximately $2.4 billion 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 96 of such Acquired Properties consisting of 22,032 units in 1998 (the "1998
Acquired Properties").
During the nine months ended September 30, 1998, the Company disposed
of nine properties (the "1998 Disposed Properties") for a total sales price of
$77.1 million.
The Company's overall results of operations for the nine months ended
September 30, 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
21
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
insurance, 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 both nine month periods ended
September 30, 1998 and September 30, 1997 (the "Nine-Month 1998 Same Store
Properties") impacted the Company's results of operations. Properties that the
Company owned for all of both the quarters ended September 30, 1998 and
September 30, 1997 (the "Third-Quarter 1998 Same Store Properties") also
impacted the Company's results of operations. Both the Nine-Month 1998 Same
Store Properties and Third-Quarter 1998 Same Store Properties are discussed in
the following paragraphs.
Comparison of nine months ended September 30, 1998 to nine months ended
September 30, 1997
For the nine months ended September 30, 1998, income before gain on
disposition of properties and allocation to Minority Interests increased by
$60.6 million when compared to the nine months ended September 30, 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 expense, 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 1998 Acquired Properties and
1997 Acquired Properties. These increases were partially offset by the 1997
Disposed Properties and the 1998 Disposed Properties.
In regard to the Nine-Month 1998 Same Store Properties, which represents
63,710 units, rental revenues increased by approximately $18.5 million to $396.4
million or 4.9% primarily as a result of higher rental rates charged to new
tenants and tenant renewals, as well as a 1.34% increase in average economic
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 $4 million or 2.7%. This increase
was primarily the result of higher compensation costs, utilities, administrative
costs, maintenance costs and leasing and advertising costs.
Property management represents expenses associated with the management
of the Company's Properties. These expenses increased by approximately $19.5
million primarily due to the continued expansion of the Company's property
management business to facilitate the management of the Company's additional
properties.
Interest expense, including amortization of deferred financing costs,
increased by approximately $87.5 million. This increase was primarily the
result of an increase in the Company's average indebtedness outstanding which
increased by $1.7 billion. However, the
22
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Company's effective interest costs decreased from 7.53% for the nine months
ended September 30, 1997 to 7.17% for the nine months ended September 30, 1998.
General and administrative expenses, which include corporate operating
expenses, increased approximately $5.6 million between the periods under
comparison. This increase was primarily due to the addition of corporate
personnel, higher compensation costs and shareholder reporting costs as well as
an increase in professional fees. However, by gaining certain economies of
scale with a much larger operation these expenses as a percentage of total
revenues were 1.67% for the nine months ended September 30, 1998 compared to
1.97% of total revenues for the nine months ended September 30, 1997.
Comparison of quarter ended September 30, 1998 to quarter ended
September 30, 1997
For the quarter ended September 30, 1998, income before gain on
disposition of properties and allocation to Minority Interests increased by $9.4
million when compared to the quarter ended September 30, 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 continued purchase of multifamily
properties, specifically the 1998 Acquired Properties and 1997 Acquired
Properties. These increases were partially offset by the 1997 Disposed
Properties and the 1998 Disposed Properties.
In regard to the Third Quarter 1998 Same Store Properties, which represents
91,240 units, rental revenues increased by approximately $9.2 million to $188.9
million or 5.13% primarily as a result of higher rental rates charged to new
tenants and tenant renewals, as well as a 1.21% increase in average economic
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 $2.7 million or 3.7%. This increase
was primarily the result of higher compensation costs, utilities, administrative
costs, maintenance costs and leasing and advertising costs.
Property management represents expenses associated with the management
of the Company's Properties. These expenses increased by approximately $6.2
million primarily due to the continued expansion of the Company's property
management business to facilitate the management of the Company's additional
properties.
Interest expense, including amortization of deferred financing costs,
increased by approximately $32.7 million. This increase was primarily the
result of an increase in the Company's average indebtedness outstanding which
increased by $2 billion. However, the Company's effective interest costs
decreased from 7.52% for the quarter ended September 30, 1997 to 6.99% for the
quarter ended September 30, 1998.
General and administrative expenses, which include corporate operating
expenses, increased approximately $1.5 million between the periods under
comparison. This increase was primarily due
23
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
to adding corporate personnel, higher compensation costs and shareholder
reporting costs as well as an increase in professional fees. However, by gaining
certain economies of scale with a much larger operation these expenses as a
percentage of total revenues were 1.57% for the quarter ended September 30,
1998, which was a decrease from 1.88% for the quarter ended September 30, 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 September 30, 1998 was approximately $154 million and the amount
available on the Company's line of credit was $190 million of which $36.7
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 nine months, the Company
purchased 96 Properties containing 22,032 units for a total acquisition cost of
approximately $1.6 billion, including the assumption of and/or new mortgage
indebtedness of approximately $433.5 million and the issuance of OP Units with a
value of $164.1 million. These acquisitions were primarily funded from proceeds
received from the various capital and debt transactions as discussed in Note 3
and 10, respectively, of the Notes to Consolidated Financial Statements, the
Company's line of credit and working capital.
Subsequent to September 30, 1998, the Company closed its merger with Merry
Land and through this merger acquired 118 multifamily properties containing
34,990 units, including 6 properties consisting of 1,962 units under
development. In the Merger, each outstanding common share of beneficial interest
of Merry Land will be converted into .53 of a common share of the surviving
company. The transaction is valued at approximately $2.2 billion, including the
issuance of $1.1 billion of common stock, $370 million of preferred stock and
the assumption of indebtedness of $700 million. Also, in connection with the
merger, the Company was required to pay off one of Merry Land's unsecured notes
issued in the amount of $120 million as well as various merger costs. The
Company borrowed certain amounts under its line of credit to fund these needs.
During the nine months ended September 30, 1998, the Company disposed of
nine properties that generated net sales proceeds of $76 million. These proceeds
were applied to pay down the Company's line of credit.
As of September 30, 1998, the Company had total indebtedness of
approximately $3.9 billion, which included mortgage indebtedness of $1.96
billion (including premiums of $3.2 million), of which $818 million represented
tax-exempt bond indebtedness, unsecured debt of $1.67 billion (including net
discounts and premiums in the amount of $2.2 million) and $310 million
outstanding on the Company's line of credit. During the first nine months, the
Company repaid $46.9 million of mortgage indebtedness on seven of its
Properties. These repayments were funded from the Company's line of credit or
from proceeds received from the various capital and debt transactions as
discussed in Note 3 and 10, respectively, of the Notes to Consolidated Financial
Statements.
24
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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 a forward starting swap
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.
In August 1996, the Company entered into an interest rate protection
agreement to effectively fix the interest rate cost of the Company's 2026 Notes.
The agreement was for a notional amount of $150 million with a locked in
treasury rate of 7.57%.
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 of 6.134%. The second agreement was for a notional
amount of $75 million with a locked in treasury rate of 6.287%.
In April 1998, the Company entered into an interest rate protection
agreement to effectively fix the interest rate cost of the Company's 2015 Notes.
The agreement was for a notional amount of $300 million with a locked in
treasury rate of 6.63%.
In May 1998, the Company entered into an interest rate protection
agreement to effectively fix the interest rate cost of the Evans Withycombe
Financing Limited Partnership indebtedness to within a range of 5.6% to 6.0%.
The agreement was for a notional amount of $131 million with a settlement date
of August 2001. There was no initial cost to the Company for entering into this
agreement.
In August 1998, the Company entered into an interest rate protection
agreement to effectively fix the interest rate cost of the Company's planned
financing in the fourth quarter of 1998. The agreement was for a notional amount
of $100 million.
In August 1998, the Company entered into an interest rate swap agreement
that fixed the Company's interest rate risk on a portion of the Operating
Partnership's variable rate tax-exempt bond indebtedness at a rate of 3.65125%.
This agreement was for a notional amount of $150 million with a termination date
of August 2003.
In August 1998, the Company entered into an interest rate swap agreement
that fixed the Company's interest rate risk on a portion of the Operating
Partnership's variable rate tax-exempt bond indebtedness at a rate of 3.683%.
This agreement was for a notional amount of $150 million with a termination date
of August 2005.
The fair value of these instruments as of September 30, 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
regards to replacement-type items described above, the Company generally expects
to spend, on an annual basis, $300 per unit.
25
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
During the nine months ended September 30, 1998, total capital expenditures
for the Company approximated $68.5 million. Of this amount, approximately $14.8
million related to capital improvements and major repairs for certain of the
1995, 1996, 1997 and 1998 Acquired Properties. Capital improvements and major
repairs for all of the Company's pre-IPO properties and certain Acquired
Properties approximated $18.2 million, or $127 per unit. Capital spent for
replacement-type items approximated $27.6 million, or $192 per unit. Also
included in total capital expenditures was approximately $7.9 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 be approximately $27.5 million.
Minority Interests as of September 30, 1998 increased by $111.4 million
when compared to December 31, 1997. The primary factors that impacted this
account during the nine month period were distributions declared to Minority
Interests, which amounted to $21.4 million for the nine month period, the
allocation of income from operations in the amount of $12.8 million, the
conversion of OP Units into Common Shares and the issuance of OP Units and/or
Common Shares during the first nine months.
Total distributions paid in October 1998 amounted to approximately $94.3
million, which included distributions declared for the quarter ended September
30, 1998.
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.
In connection with the Merry Land merger the Company assumed a line of
credit facility in the amount of $120 million. Combined with the Company's
existing line of credit the Company has total availability of $620 million. As
of November 11, 1998, $400 million was outstanding under these combined
facilities.
Year 2000 Issue
The year 2000 issue ("Year 2000") is the result of computer programs being
written using
26
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive hardware and software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
collect rents, or engage in similar normal business activities.
The Company believes that it has identified all of its information
technology ("IT") and non-IT systems to assess their Year 2000 readiness.
Critical systems include, but are not limited to: accounts receivable and rent
collections, accounts payable and general ledger, human resources and payroll
(both property and corporate levels), cash management, fixed assets, all IT
hardware (such as desktop/laptop computers, data networking equipment, telephone
systems, fax machines, copy machines, etc.) and software, and property
environmental, health safety and security systems (such as elevators and alarm
systems).
The Company anticipates that previously scheduled system upgrades to many
of its IT systems will remediate any existing Year 2000 problems. The Company is
currently in the process of testing and implementing the majority of its Year
2000 IT and non-IT system projects with completion anticipated during the second
quarter of 1999. The Company has estimated that the total Year 2000 project cost
will approximate $1 million, of which approximately 70% has been incurred as of
September 30, 1998. This estimate is based on management's best estimates, which
were derived utilizing numerous assumptions of future events, and there can be
no guarantees that these estimates will be achieved.
In some cases, various third party vendors have been queried on their Year
2000 readiness. The Company continues to query its significant suppliers and
vendors 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. To date, the Company is not aware of any significant suppliers or
vendors with a Year 2000 issue that would materially impact the Company's
results of operations, liquidity, or capital resources. However, there can be no
assurances that the systems of other companies, on which the Company's systems
rely, will be timely converted and would not have an adverse effect on the
Company's systems.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. In addition, the Company has
commenced its contingency planning for critical operational areas that might be
affected by the Year 2000 issue if compliance by the Company is delayed. Aside
from catastrophic failure of banks or governmental agencies, the Company
believes that it could continue its normal business operations if compliance by
the Company is delayed. The Company does not believe that the Year 2000 issue
will materially impact its results of operations, liquidity or capital
resources.
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
27
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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
with 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.
For the nine months ended September 30, 1998, FFO increased by $132.8
million representing an 70.4% increase when compared to the nine months ended
September 30, 1997. For the quarter ended September 30, 1998, FFO increased by
$36.7 million representing a 48.2% increase when compared to the quarter ended
September 30, 1997.
The following is a reconciliation of net income available to Common Shares
to FFO available to Common Shares and OP Units for the nine months and quarters
ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine Nine
Months Months Quarter Quarter
Ended Ended Ended Ended
9/30/98 9/30/97 9/30/98 9/30/97
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income available to Common Shares $ 116,819 $ 78,618 $ 34,881 $ 30,886
Adjustments:
Income allocated to Minority
Interests 12,840 9,431 4,530 3,086
Depreciation on real estate assets 204,401 104,288 75,014 42,403
Amortization of deferred financing
costs related to predecessor
business 35 157 -- 41
Gain on disposition of properties (12,717) (3,923) (1,625) (291)
---------- --------- --------- ---------
FFO available to Common Shares and
OP Units $ 321,378 $ 188,571 $ 112,800 $ 76,125
========== ========= ========= =========
</TABLE>
28
<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 4. Submission of Matters to a vote.
The special shareholder meetings of both the Company and Merry Land were held on
October 15, 1998. At such meetings, the shareholders of the Company and of Merry
Land both voted to approve the merger of Equity Residential Properties and Merry
Land and Investment, Inc.
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 July 8, 1998, reporting information on the proposed
Merger with Merry Land and Investment Company, Inc.
A Report on Form 8-K dated July 23, 1998, reporting financial information of
Merry Land and Investment Company, Inc.
A Report on Form 8-K/A dated July 23, 1998, reporting additional financial
information of Merry Land and Investment Company, Inc.
A Report on Form 8-K dated August 11, 1998, relating to Ernst & Young LLP
consents to various 33 Act Registration Statements.
29
<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: November 12, 1998 By: /s/ Bruce C. Strohm
----------------- -----------------------------------------
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Date: November 12, 1998 By: /s/ Michael J. McHugh
----------------- -----------------------------------------
Michael J. McHugh
Executive Vice President, Chief Accounting
Officer and Treasurer
30
<PAGE>
EXHIBIT 12
EQUITY RESIDENTIAL PROPERTIES TRUST
Consolidated and Combined Historical, Including Predecessor Business
Earnings to Combined Fixed Charges and Preferred Distributions Ratio
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------------
09/30/98 09/30/97 12/31/97 12/31/96 12/31/95 12/31/94
--------- -------- --------- --------- --------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 901,087 $482,980 $ 707,733 $ 454,412 $ 373,919 $ 220,727
Fee income - outside managed 4,204 4,364 5,697 6,749 7,030 4,739
Interest income - investment in
mortgage notes 14,405 14,821 20,366 12,819 4,862 -
Interest and other income 12,994 7,513 13,525 4,405 4,573 5,568
--------- -------- --------- --------- --------- ---------
Total revenues 932,690 509,678 747,321 478,385 390,384 231,034
--------- -------- --------- --------- --------- ---------
EXPENSES
Property and maintenance 224,457 117,681 176,075 127,172 112,186 66,534
Real estate taxes and insurance 88,552 48,560 69,520 44,128 37,002 23,028
Property management 38,278 18,765 26,793 17,512 15,213 10,249
Property management - non-recurring - - - - - 879
Fee and asset management 3,289 2,523 3,364 3,837 3,887 2,056
Depreciation 208,394 106,114 156,644 93,253 72,410 37,273
Interest:
Expense incurred 170,143 82,775 121,324 81,351 78,375 37,044
Amortization of deferred financing costs 1,962 1,810 2,523 4,242 3,444 1,930
General and administrative 15,598 10,037 15,064 9,857 8,129 6,053
--------- -------- --------- --------- --------- ---------
Total expenses 750,673 388,265 571,307 381,352 330,646 185,046
--------- -------- --------- --------- --------- ---------
Income before extraordinary items $ 182,017 $121,413 $ 176,014 $ 97,033 $ 59,738 $ 45,988
========= ======== ========= ========= ========= =========
Combined Fixed Charges and
Preferred Distributions:
Interest and other financing costs $ 170,143 $ 82,775 $ 121,324 $ 81,351 $ 78,375 $ 37,044
Amortization of deferred financing costs 1,962 1,810 2,523 4,242 3,444 1,930
Preferred distributions 65,075 37,287 59,012 29,015 10,109 -
--------- -------- --------- --------- --------- ---------
Total Combined Fixed Charges
and Preferred Distributions $ 237,180 $121,872 $ 182,859 $ 114,608 $ 91,928 $ 38,974
========= ======== ========= ========= ========= =========
Earnings before combined fixed charges
and preferred distributions $ 354,122 $205,998 $ 299,861 $ 182,626 $ 141,557 $ 84,962
========= ======== ========= ========= ========= =========
Funds from operations before combined fixed
charges and preferred distributions $ 562,516 $312,112 $ 456,505 $ 275,879 $ 213,967 $ 122,235
========= ======== ========= ========= ========= =========
Ratio of earnings before combined fixed
charges and preferred distributions to
combined fixed charges and preferred
distributions 1.49 1.69 1.64 1.59 1.54 2.18
========= ======== ========= ========= ========= =========
Ratio of funds from operations before
combined fixed charges and preferred
distributions to combined fixed
charges and preferred distributions 2.37 2.56 2.50 2.41 2.33 3.14
========= ======== ========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 154,013
<SECURITIES> 0
<RECEIVABLES> 3,978
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 381,634
<PP&E> 8,680,312
<DEPRECIATION> (640,452)
<TOTAL-ASSETS> 8,632,607
<CURRENT-LIABILITIES> 325,104
<BONDS> 3,942,488
0
1,041,675
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,632,607
<SALES> 919,696
<TOTAL-REVENUES> 932,690
<CGS> 0
<TOTAL-COSTS> 354,576
<OTHER-EXPENSES> 15,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 172,105
<INCOME-PRETAX> 182,017
<INCOME-TAX> 0
<INCOME-CONTINUING> 182,017
<DISCONTINUED> 12,717
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,659
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.21
</TABLE>
