<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 JUNE 30, 1999
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 Identification No.)
Incorporation or Organization)
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 AUGUST 5, 1999, 122,299,926 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>
JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Investment in real estate
Land $ 1,373,812 $ 1,326,148
Depreciable property 9,730,434 9,519,579
Construction in progress 59,744 96,336
---------------- ----------------
11,163,990 10,942,063
Accumulated depreciation (902,351) (718,491)
---------------- ----------------
Investment in real estate, net of accumulated depreciation 10,261,639 10,223,572
Real estate held for disposition 32,844 29,886
Cash and cash equivalents 95,496 3,965
Investment in mortgage notes, net 85,882 88,041
Rents receivable 957 4,758
Deposits - restricted 70,701 69,339
Escrow deposits - mortgage 68,416 68,725
Deferred financing costs, net 28,932 27,569
Other assets 196,942 184,405
---------------- ----------------
TOTAL ASSETS $ 10,841,809 $ 10,700,260
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 2,323,247 $ 2,341,011
Notes, net 2,299,497 2,049,516
Lines of credit 85,000
290,000
Accounts payable and accrued expenses 107,763 100,926
Accrued interest payable 45,000 46,176
Rents received in advance and other liabilities 57,943 54,616
Security deposits 35,967 37,439
Distributions payable 114,103 18,755
---------------- ----------------
TOTAL LIABILITIES 5,068,520 4,938,439
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
Minority Interests 419,316 431,374
---------------- ----------------
Shareholders' equity:
Preferred Shares of beneficial interest, $.01 par value;
100,000,000 shares authorized; 26,110,352 shares issued
and outstanding as of June 30, 1999 and 29,097,951
shares issued and outstanding as of December 31, 1998 1,335,884 1,410,574
Common Shares of beneficial interest, $.01 par value;
350,000,000 shares authorized; 122,236,781 shares issued
and outstanding as of June 30, 1999 and 118,230,009
shares issued and outstanding as of December 31, 1998 1,222 1,182
Paid in capital 4,305,522 4,169,102
Employee notes (4,778) (4,873)
Distributions in excess of accumulated earnings (283,877) (245,538)
---------------- ----------------
Total shareholders' equity 5,353,973 5,330,447
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,841,809 $ 10,700,260
================ ================
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTER ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 819,178 $ 571,370 $ 413,116 $ 294,144
Fee and asset management 2,414 2,790 1,180 1,430
Interest income - investment in mortgage notes 5,644 10,221 2,749 5,290
Interest and other income 11,323 9,010 5,277 6,186
------------ ------------- ------------ -----------
Total revenues 838,559 593,391 422,322 307,050
EXPENSES
Property and maintenance 196,865 138,303 99,818 71,391
Real estate taxes and insurance 84,515 56,484 42,467 29,041
Property management 27,973 25,007 13,772 13,516
Fee and asset management 1,624 2,247 757 1,197
Depreciation 197,134 131,910 100,233 67,520
Interest:
Expense incurred 158,499 105,651 79,302 55,397
Amortization of deferred financing costs 1,661 1,275 816 651
General and administrative 10,914 9,974 5,047 5,203
------------ ------------- ------------ -----------
Total expenses 679,185 470,851 342,212 243,916
Income before gain on disposition of properties, net,
extraordinary item and allocation to Minority 159,374 122,540 80,110 63,134
Interests
Gain on disposition of properties, net 45,807 11,092 24,391 9,223
------------ ------------- ------------ -----------
Income before extraordinary item and allocation to
Minority Interests 205,181 133,632 104,501 72,357
Loss on early extinguishment of debt (451) - (451) -
------------ ------------- ------------ -----------
Income before allocation to Minority Interests 204,730 133,632 104,050 72,357
Income allocated to Minority Interests (14,514) (8,310) (7,388) (4,622)
------------ ------------- ------------ -----------
Net income 190,216 125,322 96,662 67,735
Preferred distributions (57,111) (43,384) (27,734) (21,692)
------------ ------------- ------------ -----------
Net income available to Common Shares $ 133,105 $ 81,938 $ 68,928 $ 46,043
============ ============= ============ ===========
Weighted average Common Shares outstanding 119,762 95,394 120,558 97,405
============ ============= ============ ===========
Distributions declared per Common
Share outstanding $ 1.42 $ 1.34 $ 0.71 $ 0.67
============ ============= ============ ===========
Net income per weighted average Common Share
outstanding $ 1.11 $ 0.86 $ 0.57 $ 0.47
============ ============= ============ ===========
Net income per weighted average Common Share
outstanding - assuming dilution $ 1.11 $ 0.85 $ 0.57 $ 0.47
============ ============= ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1999 1998
-------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 190,216 $ 125,322
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Income allocated to Minority Interests 14,514 8,310
Depreciation 197,134 131,910
Amortization of deferred financing costs 1,661 1,275
Amortization of discounts and premiums on debt (1,172) (1,026)
Amortization of treasury locks and options on debt 513 976
Amortization of discount on investment in mortgage notes - (1,000)
Gain on disposition of properties, net (45,807) (11,092)
CHANGES IN ASSETS AND LIABILITIES:
Decrease (increase) in rents receivable 3,428 (1,825)
(Increase) in deposits - restricted (4,342) (4,537)
Decrease in other assets 51,052 3,000
Increase in accounts payable and accrued expenses 6,936 11,466
(Decrease) increase in accrued interest payable (1,176) 6,904
(Decrease) increase in security deposits (1,577) 5,607
Increase (decrease) in rents received in advance and
other liabilities 6,411 (3,337)
--------------- ---------------
Net cash provided by operating activities 417,791 271,953
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate, net (200,613) (499,239)
Improvements to real estate (55,783) (32,397)
Additions to non-real estate property (3,640) (4,445)
Interest capitalized to real estate developments (943) (811)
Proceeds from disposition of real estate, net 125,150 40,488
Purchase of management contract rights (285) (119)
Decrease (increase) in mortgage deposits 131 (12,791)
Decrease (increase) in deposits on real estate acquisitions, net 2,961 (7,781)
Decrease in investment in mortgage notes 2,159 963
Investment in limited partnerships (44,314) (13,042)
Costs related to Mergers (4,002) (1,851)
Other investing activities 603 (10,583)
--------------- ---------------
Net cash used by investing activities (178,576) (541,608)
--------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1999 1998
-------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Common Shares 5,661 419,619
Proceeds from exercise of options 24,254 4,459
Payment of offering costs (296) (10,314)
Principal receipts on employee notes 95 196
Principal receipts on pledged notes receivable 7,375 -
DISTRIBUTIONS:
Common Shares (84,672) (64,258)
Preferred Shares (57,111) (44,894)
Minority Interests (9,654) (6,733)
MORTGAGE NOTES PAYABLE:
Proceeds 62,885 -
Payoffs (54,231) (34,141)
Monthly principal payments (8,400) (5,663)
NOTES, NET:
Proceeds 298,014 306,255
Payoffs (125,000) -
LINES OF CREDIT:
Proceeds 689,000 175,000
Payments (894,000) (235,000)
Loss on early extinguishment of debt 451 -
Loan and bond acquisition costs (2,055) (2,251)
---------------- ---------------
Net cash (used by) provided by financing activities (147,684) 502,275
---------------- ---------------
Net increase in cash and cash equivalents 91,531 232,620
Cash and cash equivalents, beginning of period 3,965 33,295
---------------- ---------------
Cash and cash equivalents, end of period $ 95,496 $ 265,915
================ ===============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest $ 160,618 $ 98,747
================ ===============
Mortgage loans assumed and/or entered into through
acquisitions of real estate $ 58,320 $ 232,801
================ ===============
Net real estate contributed in exchange for OP Units
or Preference Units $ 14,183 $ 16,270
================ ===============
Transfers to real estate held for disposition $ 32,844 $ -
================ ===============
Refinancing of mortgage notes payable in favor of notes, net $ 75,790 $ -
================ ===============
</TABLE>
SEE ACCOMPANYING NOTES
5
<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, 1998 ("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"), Evans Withycombe Residential, Inc. ("EWR") (the
"EWR Merger") and Merry Land & Investment Company, Inc. ("MRY") (the "MRY
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 June 30, 1999, the Company
controlled a portfolio of 659 multifamily properties (individually a
"Property" and collectively the "Properties"). The Company's interest in six
of these Properties consists 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 an investment
in six joint ventures consisting of six properties (collectively, the
"Additional Properties").
2. BASIS OF PRESENTATION
The balance sheet and statements of operations and cash flows as of and
for the six months and quarter ended June 30, 1999 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 Merry Land DownREIT I LP,
each such entity has been consolidated with the Company for financial reporting
purposes. In regard to Management Corp., Management Corp. II, Evans Withycombe
Management, Inc. and ML Services, Inc., the Company does not have legal control;
however, these entities are consolidated for financial reporting purposes, the
effects of which are immaterial. Certain reclassifications have been made to the
prior year's financial statements in order to conform to the current year
presentation.
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.
6
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. SHAREHOLDERS' EQUITY AND MINORITY INTERESTS
The following table presents the changes in the Company's issued and
outstanding Common Shares for the six months ended June 30, 1999:
<TABLE>
<S> <C>
------------------------------------------------------------------------------
Common Shares outstanding at January 1, 1999 118,230,009
COMMON SHARES ISSUED:
Conversion of Series H Preferred Shares 5,495
Conversion of Series I Preferred Shares 1,912,263
Employee Share Purchase Plan 98,483
Dividend Reinvestment - DRIP Plan 9,838
Share Purchase - DRIP Plan 12,716
Exercise of options 705,393
Restricted share grants, net 300,738
Conversion of OP Units 931,586
Profit-sharing contribution/401(k) Plan 30,260
------------------------------------------------------------------------------
Common Shares outstanding at June 30, 1999 122,236,781
------------------------------------------------------------------------------
</TABLE>
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 June 30, 1999, the Minority Interests held 12,644,403 OP Units, which
included the OP Unit equivalent of 157,382 for the Junior Convertible Preference
Units that were outstanding at June 30, 1999. As a result, the Minority
Interests had a 9.37% interest in the Operating Partnership at June 30, 1999.
Assuming conversion of all OP Units and Junior Convertible Preference
Units into Common Shares, total Common Shares outstanding at June 30, 1999 would
have been 134,881,184.
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 following table presents the Company's issued and outstanding
Preferred Shares as of June 30, 1999 and December 31, 1998 (amounts are in
thousands):
7
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred Shares of beneficial interest, $.01 par value; 100,000,000
shares authorized:
9 3/8% Series A Cumulative Redeemable Preferred $ 153,000 $ 153,000
$25 per share, 6,120,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
9 1/8% Series B Cumulative Redeemable Preferred 125,000 125,000
$250 per share, 500,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
9 1/8% Series C Cumulative Redeemable Preferred 115,000 115,000
$250 per share, 460,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
8.60% Series D Cumulative Redeemable Preferred 175,000 175,000
$250 per share, 700,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
Series E Cumulative Convertible Preferred 99,925 99,925
$25 per share, 3,997,000 shares issued and outstanding at June
30, 1999 and December 31, 1998
9.65% Series F Cumulative Redeemable Preferred 57,500 57,500
$25 per share, 2,300,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
7 1/4% Series G Convertible Cumulative Preferred 316,250 316,250
$250 per share, 1,265,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
7.00% Series H Cumulative Convertible Preferred 3,724 3,914
$25 per share, 148,952 and 156,551 shares issued and
outstanding at June 30, 1999 and December 31,
1998, respectively
8.82% Series I Cumulative Convertible Preferred 25,500 100,000
$25 per share, 1,020,000 and 4,000,000 shares issued
and outstanding at June 30, 1999 and
December 31, 1998, respectively
8.60% Series J Cumulative Convertible Preferred 114,985 114,985
$25 per share, 4,599,400 shares issued and outstanding
at June 30, 1999 and December 31, 1998
8.29% Series K Cumulative Redeemable Preferred 50,000 50,000
$50 per share, 1,000,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
7.625% Series L Cumulative Redeemable Preferred 100,000 100,000
$25 per share, 4,000,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998
----------------------------------------------------------------------------------------------------------
$ 1,335,884 $ 1,410,574
----------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table summarizes the distributions paid to Preferred and
Depositary Shareholders and Common Shareholders related to the six months ended
June 30, 1999:
<TABLE>
<CAPTION>
FOR THE
DIVIDEND QUARTER OR PERIOD RECORD
AMOUNT DATE PAID ENDED DATE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Preferred Share holders $0.5859380 04/15/99 03/31/99 03/19/99
$0.5859370 07/15/99 06/30/99 06/18/99
Series B Depositary Share holders $0.5703130 04/15/99 03/31/99 03/19/99
$0.5703120 07/15/99 06/30/99 06/18/99
Series C Depositary Share holders $0.5703130 04/15/99 03/31/99 03/19/99
$0.5703120 07/15/99 06/30/99 06/18/99
Series D Depositary Share holders $0.5375000 04/15/99 03/31/99 03/19/99
$0.5375000 07/15/99 06/30/99 06/18/99
Series E Preferred Share holders $0.4375000 04/01/99 03/31/99 03/19/99
$0.4375000 07/01/99 06/30/99 06/18/99
Series F Preferred Share holders $0.6031250 04/15/99 03/31/99 03/19/99
$0.6031250 07/15/99 06/30/99 06/18/99
Series G Depositary Share holders $0.4531250 04/15/99 03/31/99 03/19/99
$0.4531250 07/15/99 06/30/99 06/18/99
Series H Preferred Share holders $0.4375000 03/31/99 03/31/99 03/19/99
$0.4375000 06/30/99 06/30/99 06/18/99
Series I Preferred Share holders $0.5512500 03/31/99 03/31/99 03/19/99
$0.5512500 06/30/99 06/30/99 06/18/99
Series J Preferred Share holders $0.5375000 03/31/99 03/31/99 03/19/99
$0.5375000 06/30/99 06/30/99 06/18/99
Series K Preferred Share holders $1.0362500 03/31/99 03/31/99 03/19/99
$1.0362500 06/30/99 06/30/99 06/18/99
Series L Preferred Share holders $0.4765625 03/31/99 03/31/99 03/19/99
$0.4765625 06/30/99 06/30/99 06/18/99
Common Shares $ 0.71 04/09/99 03/31/99 03/19/99
$ 0.71 07/09/99 06/30/99 06/18/99
</TABLE>
4. REAL ESTATE ACQUISITIONS
During the six months ended June 30, 1999, the Company acquired the
sixteen Properties listed below, of which nine were acquired from unaffiliated
third parties and seven were acquired from an affiliated party. In connection
with certain of the acquisitions listed below, the Company
9
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
assumed mortgage indebtedness of approximately $58.3 million, issued OP Units
having a value of approximately $11.3 million and issued Junior Convertible
Preference Units having a value of approximately $2.9 million. The cash
portion of these transactions was funded primarily from proceeds received
from the disposition of certain properties and working capital.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DATE NUMBER PURCHASE PRICE
ACQUIRED PROPERTY LOCATION OF UNITS (IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01/22/99 Fireside Park Rockville, MD 236 $14,279
01/22/99 Mill Pond Glen Burnie, MD 240 11,745
01/28/99 Aspen Crossing Wheaton, MD 192 11,386
02/24/99 Copper Canyon Highlands Ranch, CO 222 16,200
03/04/99 Siena Terrace Lake Forest, CA 356 33,000
03/23/99 Greenbriar Kirkwood, MO 218 12,033
03/24/99 Fairland Gardens Silver Spring, MD 400 25,897
04/28/99 Pine Tree Club Wildwood, MO 150 7,988
04/28/99 Westbrooke Village I & II Manchester, MO 252 12,642
04/29/99 Brookside Frederick, MD 228 10,809
04/30/99 Skyview Rancho Santa Margarita, CA 260 21,800
05/20/99 Lincoln at Defoors Atlanta, GA 300 25,500
05/25/99 Rosecliff Quincy, MA 156 18,263
05/25/99 Canyon Crest Santa Clarita, CA 158 12,500
06/29/99 Greentree I Glen Burnie, MD 350 15,625
06/29/99 Greentree III Glen Burnie, MD 207 9,598
- ----------------------------------------------------------------------------------------------------------------
3,925 $259,265
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
5. REAL ESTATE DISPOSITIONS
During the six months ended June 30, 1999, the Company disposed of the
eleven Properties listed below to unaffiliated third parties. The Company
recognized a net gain for financial reporting purposes of approximately $45.8
million.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
DISPOSITION
DATE NUMBER PRICE
DISPOSED PROPERTY LOCATION OF UNITS (IN THOUSANDS)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01/06/99 Fox Run Little Rock, AR 337 $10,623
01/06/99 Greenwood Forest Little Rock, AR 239 7,533
01/06/99 Walnut Ridge Little Rock, AR 252 7,943
01/06/99 Williamsburg Little Rock, AR 211 6,651
01/27/99 The Hawthorne Phoenix, AZ 276 20,500
03/02/99 The Atrium Durham, NC 208 10,750
03/24/99 Greenbriar Kirkwood, MO 218 12,525
05/06/99 Sandstone at Bear Creek Euless, TX 40 2,075
05/12/99 La Costa Brava/Cedar Cove Jacksonville, FL 464 17,650
05/18/99 Lands End Pacifica , CA 260 30,100
-------------------------------------------------------------------------------------------------------
2,505 $126,350
-------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. COMMITMENTS TO ACQUIRE/DISPOSE OF REAL ESTATE
As of June 30, 1999, 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 an agreement to acquire one
multifamily property containing 919 units from an unaffiliated third party. The
expected purchase price is approximately $128 million.
As of June 30, 1999, 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
eleven multifamily properties containing 2,522 units to unaffiliated third
parties. The expected combined disposition price is approximately $88.4 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 paragraphs.
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>
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
--------------------------------- ------------------------------
1999 1998 1999 1998
--------------------------------- ------------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NUMERATOR:
Income before gain on disposition of properties, net,
extraordinary item, allocation of income to
Minority Interests and preferred distributions $ 159,374 $ 122,540 $ 80,110 $ 63,134
Allocation of income to Minority Interests
(14,514) (8,310) (7,388) (4,622)
Distributions to preferred shareholders (57,111) (43,384) (27,734) (21,692)
--------------------------------- --------------------------------
Income before gain on disposition of properties, net
and extraordinary item
87,749 70,846 44,988 36,820
Gain on disposition of properties, net
45,807 11,092 24,391 9,223
Loss on early extinguishment of debt
(451) - (451) -
--------------------------------- --------------------------------
Numerator for net income per weighted average
Common Share outstanding 133,105 81,938 68,928 46,043
Effect of dilutive securities:
Allocation of income to Minority Interests
14,514 8,310 7,388 4,622
--------------------------------- --------------------------------
Numerator for net income per weighted average
Common Share outstanding - assuming dilution $ 147,619 $ 90,248 $ 76,316 $ 50,665
================================= ================================
DENOMINATOR:
Denominator for net income per weighted
Average Common Share outstanding 119,762 95,394 120,558 97,405
Effect of dilutive securities:
Contingent incremental employee share options 742 1,118 908 1,047
OP Units 13,064 9,683 12,920 9,777
--------------------------------- --------------------------------
Denominator for net income per weighted average
Common Share outstanding - assuming dilution 133,568 106,195 134,386 108,229
================================= ================================
Net income per weighted average Common
Share outstanding $ 1.11 $ 0.86 $ 0.57 $ 0.47
================================= ================================
Net income per weighted average Common
Share outstanding - assuming dilution $ 1.11 $ 0.85 $ 0.57 $ 0.47
================================= ================================
</TABLE>
12
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, QUARTER ENDED JUNE 30,
--------------------------------- ----------------------------
1999 1998 1999 1998
--------------------------------- ----------------------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
NET INCOME PER WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Income before gain on disposition of properties, net
and extraordinary item per weighted average
Common Share outstanding $ 0.77 $ 0.75 $ 0.39 $ 0.39
Gain on disposition of properties, net
0.34 0.11 0.18 0.08
Loss on early extinguishment of debt
- - - -
---------------- --------------- -------------- ---------------
Net income per weighted average Common
Share outstanding $ 1.11 $ 0.86 $ 0.57 $ 0.47
================ =============== ============== ===============
NET INCOME PER WEIGHTED AVERAGE COMMON SHARE
OUTSTANDING - ASSUMING DILUTION:
Income before gain on disposition of properties, net
and extraordinary item per weighted average
Common Share outstanding - assuming dilution $ 0.77 $ 0.75 $ 0.39 $ 0.38
Gain on disposition of properties, net
0.34 0.10 0.18 0.09
Loss on early extinguishment of debt
- - - -
---------------- --------------- -------------- ---------------
Net income per weighted average Common
Share outstanding - assuming dilution $ 1.11 $ 0.85 $ 0.57 $ 0.47
================ =============== ============== ===============
</TABLE>
CONVERTIBLE PREFERRED SHARES THAT COULD BE CONVERTED INTO 12,761,757 AND
7,623,664 WEIGHTED COMMON SHARES FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
1998, AND 12,404,422 AND 7,623,507 WEIGHTED COMMON SHARES FOR THE QUARTER ENDED
JUNE 30, 1999 AND 1998, RESPECTIVELY, WERE OUTSTANDING BUT WERE NOT INCLUDED IN
THE COMPUTATION OF DILUTED EARNINGS PER SHARE BECAUSE THE EFFECTS WOULD BE
ANTI-DILUTIVE.
13
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8. MORTGAGE NOTES PAYABLE
On June 1, 1999, the Company refinanced the debt on four existing
properties with a net increase in mortgage indebtedness of approximately $18.0
million. During the quarter ended June 30, 1999, the Company repaid the
outstanding mortgage balances on two Properties in the aggregate amount of $9.3
million. In connection with the above transactions, the Company incurred
prepayment penalties of $0.5 million, which have been classified as losses on
early extinguishment of debt.
As of June 30, 1999, the Company had outstanding mortgage indebtedness
of approximately $2.3 billion encumbering 217 of the Properties. The carrying
value of such Properties (net of accumulated depreciation of $312.7 million) was
approximately $3.7 billion. The mortgage notes payables are generally due in
monthly installments of principal and interest. In connection with the
Properties acquired during the six months ended June 30, 1999, the Company
assumed the outstanding mortgage balances on seven Properties in the aggregate
amount of $58.3 million.
As of June 30, 1999, scheduled maturities for the Company's outstanding
mortgage indebtedness are at various dates through October 1, 2030. During the
six months ended June 30, 1999, the effective interest cost on all of the
Company's debt was 7.02%.
9. NOTES
On May 15, 1999, the Company repaid the 1999 Notes.
On June 17, 1999, the Company refinanced the bond indebtedness
collateralized by four existing properties. The bond indebtedness on all four
properties totaling $75.8 million is now unsecured.
In June 1999, the Operating Partnership issued $300 million of
redeemable unsecured fixed rate notes (the "June 2004 Notes") in connection with
the Debt Shelf Registration in a public debt offering (the "Seventh Public Debt
Offering"). The June 2004 Notes were issued at a discount, which is being
amortized over the life of the June 2004 Notes on a straight-line basis. The
June 2004 Notes are due June 23, 2004. The annual interest rate on the June 2004
Notes is 7.10%, which is payable semiannually in arrears on December 23 and June
23, commencing December 23, 1999. The Operating Partnership received net
proceeds of approximately $298 million in connection with this issuance.
As of June 30, 1999, the Company had outstanding unsecured notes
of approximately $2.3 billion, net of a $5.0 million discount and
including an $8.1 million premium.
10. LINES OF CREDIT
The Company has a revolving credit facility with Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") and Bank of America Illinois ("Bank of
America") as co-agents
14
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
to provide the Operating Partnership with potential borrowings of up to $500
million. As of June 30, 1999, $40 million was outstanding under this
facility, bearing interest at a weighted average rate of 5.40%.
In connection with the MRY Merger, the Company assumed an additional
credit facility with First Union Bank as agent with potential borrowings of up
to $120 million. As of June 30, 1999, $45 million was outstanding under this
facility, bearing interest at a weighted average rate of 5.46%.
11. DEPOSITS - RESTRICTED
Deposits-restricted as of June 30, 1999 primarily included a deposit in
the amount of $25 million held in a third party escrow account to provide
collateral for third party construction financing in connection with two
separate joint venture agreements. Also, approximately $19.3 million was held in
third party escrow accounts, representing proceeds received in connection with
the Company's disposition of three properties and earnest money deposits made
for additional acquisitions. In addition, approximately $26.4 million was for
tenant security, utility deposits, and other 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 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.
In regard to the joint venture agreements with two multifamily
residential real estate developers during the six months ended June 30, 1999,
the Company funded a total of $44.3 million and during the remainder of 1999 the
Company expects to fund approximately $24.1 million in connection with these
agreements. Also in connection with these two agreements, the Company has an
obligation to fund up to an additional $55 million to guarantee third party
construction financing.
In regard to certain other properties that were under development
and/or expansion during the six months ended June 30, 1999, the Company funded
$7.9 million. During the remainder of 1999, the Company expects to fund $43.1
million related to the continued development and/or expansion of as many as five
Properties.
15
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
In regards to certain properties that were under earnout/development
agreements, during the six months ended June 30, 1999, the Company funded the
following:
- - $16.2 million relating to the acquisition of Copper Canyon Apartments,
- - $22.8 million relating to the acquisition of Skyview Apartments, which
included a $1.0 million advance of the earnout payment to the developer of
Skyview; and
- - $18.3 million relating to the acquisition of Rosecliff Apartments.
Subsequent to June 30, 1999, the Company funded an additional $1
million earnout payment to the developer of Copper Canyon as certain
specified operation levels were achieved. During the remainder of 1999, the
Company expects to fund approximately $3.1 million related to other
earnout/development projects.
In connection with the Wellsford Merger, the Company has provided a
$14.8 million credit enhancement with respect to bonds issued to finance certain
public improvements at a multifamily development project. Pursuant to the terms
of a Stock Purchase Agreement with Wellsford Real Properties, Inc. ("WRP
Newco"), the Company has agreed to purchase up to 1,000,000 shares of WRP Newco
Series A Preferred at $25.00 per share on a standby basis over a three-year
period ending on May 30, 2000. As of June 30, 1999, no shares of WRP Newco
Series A Preferred had been acquired by the Company.
In connection with the MRY Merger, the Company extended a $25 million,
one year, non-revolving Senior Debt Agreement to MRYP Spinco. On June 24, 1999,
MRYP Spinco repaid the Senior Note outstanding balance of $18.3 million and
there is no further obligation by either party in connection with this
agreement.
13. REPORTABLE SEGMENTS
The following tables set forth the reconciliation of net income and
total assets for the Company's reportable segments for the six months and
quarter ended June 30, 1999 and net income for the six months and quarter ended
June 30, 1998.
16
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 RENTAL REAL CORPORATE/
(AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income $ 819,178 $ - $ 819,178
Property and maintenance expense (196,865) - (196,865)
Real estate tax and insurance expense (84,515) - (84,515)
Property management expense (27,973) - (27,973)
-----------------------------------------------------
Net operating income 509,825 - 509,825
Fee and asset management income - 2,414 2,414
Interest income - investment in mortgage notes - 5,644 5,644
Interest and other income - 11,323 11,323
Fee and asset management expense - (1,624) (1,624)
Depreciation expense on non-real estate assets - (3,423) (3,423)
Interest expense:
Expense incurred - (158,499) (158,499)
Amortization of deferred financing costs - (1,661) (1,661)
General and administrative expense - (10,914) (10,914)
Preferred distributions - (57,111) (57,111)
Adjustment for depreciation expense related to
equity in unconsolidated joint ventures - 551 551
-----------------------------------------------------
Funds from operations available to Common Shares
and OP Units 509,825 (213,300) 296,525
Depreciation expense on real estate assets (193,711) - (193,711)
Gain on disposition of properties, net 45,807 - 45,807
Loss on early extinguishment of debt (451) (451)
Income allocated to Minority Interests - (14,514) (14,514)
Adjustment for depreciation expense related to
equity in unconsolidated joint ventures - (551) (551)
-----------------------------------------------------
Net income available to Common Shares $ 361,921 $ (228,816) $ 133,105
=====================================================
Investment in real estate, net of accumulated depreciation
as of June 30, 1999 $10,246,211 $ 15,428 $ 10,261,639
=====================================================
Total assets as of June 30, 1999 $10,279,055 $ 562,754 $ 10,841,809
=====================================================
</TABLE>
17
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998 RENTAL REAL CORPORATE/
(AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income $ 571,370 $ - $ 571,370
Property and maintenance expense (138,303) - (138,303)
Real estate tax and insurance expense (56,484) - (56,484)
Property management expense (25,007) - (25,007)
-------------------------------------------------
Net operating income 351,576 - 351,576
Fee and asset management income - 2,790 2,790
Interest income - investment in mortgage notes - 10,221 10,221
Interest and other income - 9,010 9,010
Fee and asset management expense - (2,247) (2,247)
Depreciation expense on non-real estate assets - (2,523) (2,523)
Interest expense:
Expense incurred - (105,651) (105,651)
Amortization of deferred financing costs - (1,275) (1,275)
General and administrative expense - (9,974) (9,974)
Preferred distributions - (43,384) (43,384)
-
Adjustment for amortization of deferred financing costs
related to predecessor business - 35 35
-------------------------------------------------
Funds from operations available to Common Shares
and OP Units 351,576 (142,998) 208,578
Depreciation expense on real estate assets (129,387) - (129,387)
Gain on disposition of properties, net 11,092 - 11,092
Income allocated to Minority Interests - (8,310) (8,310)
Adjustment for amortization of deferred financing costs
related to predecessor business - (35) (35)
-------------------------------------------------
Net income available to Common Shares $233,281 $(151,343) $ 81,938
=================================================
</TABLE>
18
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1999 RENTAL REAL CORPORATE/
(AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income $ 413,116 $ - $ 413,116
Property and maintenance expense (99,818) - (99,818)
Real estate tax and insurance expense (42,467) - (42,467)
Property management expense (13,772) - (13,772)
-------------------------------------------------
Net operating income 257,059 - 257,059
Fee and asset management income - 1,180 1,180
Interest income - investment in mortgage notes - 2,749 2,749
Interest and other income - 5,277 5,277
Fee and asset management expense - (757) (757)
Depreciation expense on non-real estate assets - (1,719) (1,719)
Interest expense:
Expense incurred - (79,302) (79,302)
Amortization of deferred financing costs - (816) (816)
General and administrative expense - (5,047) (5,047)
Preferred distributions - (27,734) (27,734)
Adjustment for depreciation expense related to
equity in unconsolidated joint ventures - 276 276
-------------------------------------------------
Funds from operations available to Common Shares
and OP Units 257,059 (105,893) 151,166
Depreciation expense on real estate assets (98,514) - (98,514)
Gain on disposition of properties, net 24,391 - 24,391
Loss on early extinguishment of debt - (451) (451)
Income allocated to Minority Interests - (7,388) (7,388)
Adjustment for depreciation expense related to
equity in unconsolidated joint ventures - (276) (276)
-------------------------------------------------
Net income available to Common Shares $ 182,936 $(114,008) $ 68,928
=================================================
Investment in real estate, net of accumulated depreciation
as of June 30, 1999 $ 10,246,211 $ 15,428 $ 10,261,639
=================================================
Total assets as of June 30, 1999 $ 10,279,055 $ 562,754 $ 10,841,809
=================================================
</TABLE>
19
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30, 1998 RENTAL REAL CORPORATE/
(AMOUNTS IN THOUSANDS) ESTATE (1) OTHER (2) CONSOLIDATED
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income $ 294,144 $ - $ 294,144
Property and maintenance expense (71,391) - (71,391)
Real estate tax and insurance expense (29,041) - (29,041)
Property management expense (13,516) - (13,516)
-------------------------------------------------
Net operating income 180,196 - 180,196
Fee and asset management income - 1,430 1,430
Interest income - investment in mortgage notes - 5,290 5,290
Interest and other income - 6,186 6,186
Fee and asset management expense - (1,197) (1,197)
Depreciation expense on non-real estate assets - (1,358) (1,358)
Interest expense:
Expense incurred - (55,397) (55,397)
Amortization of deferred financing costs - (651) (651)
General and administrative expense - (5,203) (5,203)
Preferred distributions - (21,692) (21,692)
Adjustment for amortization of deferred financing costs
related to predecessor business - 23 23
-------------------------------------------------
Funds from operations available to Common Shares
and OP Units 180,196 (72,569) 107,627
Depreciation expense on real estate assets (66,162) - (66,162)
Gain on disposition of properties, net 9,223 - 9,223
Income allocated to Minority Interests - (4,622) (4,622)
Adjustment for amortization of deferred financing costs
related to predecessor business - (23) (23)
-------------------------------------------------
Net income available to Common Shares $ 123,257 $(77,214) $ 46,043
=================================================
</TABLE>
(1) The Company has one primary reportable business segment, which consists
of investment in rental real estate. The Company's primary business is
owning, managing, and operating multifamily residential properties which
includes the generation of rental and other related income through the
leasing of apartment units to tenants.
(2) The Company has a segment for corporate level activity including such
items as interest income earned on short-term investments, interest
income earned on investment in mortgage notes, general and administrative
expenses, and interest expense on mortgage notes payable and unsecured
note issuances. In addition, the Company has a segment for third party
management activity that is immaterial and does not meet the threshold
requirements of a reportable segment as provided for in Statement No.
131. Interest expense on debt is not allocated to individual Properties,
even if the Properties secure such debt. Further, income allocated to
Minority Interests is not allocated to the Properties.
20
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
14. SUBSEQUENT EVENTS
On July 1, 1999, the Company disposed of The Willows Apartments, a
250-unit multifamily property located in Knoxville, TN, to an unaffiliated third
party for a total sales price of $12 million.
On July 1, 1999, the Company announced that they have entered into a
definitive agreement and plan of merger with Lexford Residential Trust
("Lexford"). The Lexford portfolio of 402 properties consists of 36,609 units in
sixteen states. The tax-free merger calls for EQR to issue approximately 4.4
million new common shares and assume approximately $533 million of debt. The
closing of this pending transaction is subject to entering into a binding
agreement, shareholder approval and certain other contingencies and conditions;
therefore, there can be no assurance that this transaction will be consummated
or that the final terms thereof will not differ in material respects from those
summarized above.
On July 14, 1999, the Company acquired Brookdale Village Apartments, a
252-unit multifamily property located in Naperville, IL, from an unaffiliated
third party for a purchase price of approximately $19.6 million, which included
the assumption of approximately $11.6 million of mortgage indebtedness.
On July 21, 1999, the Company filed a Form S-8 with the SEC to register
an additional 4.5 million common shares for eventual grant and issuance under
EQR's Fifth Amended and Restated 1993 Share Option and Share Award Plan.
On July 23, 1999, the Company filed a Form S-4 with the SEC
representing the joint prospectus/information statement for the merger of EQR
and Lexford.
On July 26, 1999, the Company disposed of Tivoli Lakes Club Apartments,
a 278-unit multifamily property located in Deerfield Beach, FL, to an
unaffiliated third party for a total sales price of $17 million.
On July 29, 1999, the Company acquired Longfellow Place Apartments, a
710-unit multifamily property along with one ten story office building and two
parking garages all located in Boston, MA, from an unaffiliated third party for
a purchase price of approximately $237 million, which included the issuance of
OP Units having an approximate value of $13.9 million, the issuance of
Preference Units having an approximate value of $0.2 million and was partially
financed by the issuance of new mortgage indebtedness of approximately $126.5
million, which is being collateralized by eleven previously unencumbered assets
(not including Longfellow Place).
On July 29, 1999, the Company disposed of The Seasons Apartments, a
120-unit multifamily property located in Boise, ID, to an unaffiliated third
party for a total sales price of $6 million.
On July 30, 1999, the Company acquired Greentree II Apartments, a
239-unit multifamily property located in Glen Burnie, MD, from an affiliated
party for a purchase price of approximately $10.9 million.
21
<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 Management Partnerships, the
Financing Partnerships, the LLCs, and Merry Land DownREIT I LP, 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, 1998.
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 higher than
anticipated;
- 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 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
The acquired properties are presented in the Consolidated Financial Statements
of the Company from the date of each acquisition or the closing dates of the
Mergers. During the year ended 1998, the Company acquired 207 properties
containing 55,143 units and four properties under development representing 1,378
units (the "1998 Acquired Properties"). In addition, during the six months ended
June 30, 1999, the Company acquired sixteen properties containing 3,925 units
(the "1999 Acquired Properties").
The Company also disposed of twenty properties containing 4,719 units
during 1998 (the "1998 Disposed Properties"); and eleven properties containing
2,505 units during the six months ended June 30, 1999 (the "1999 Disposed
Properties").
22
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company's overall results of operations for the six months ended
June 30, 1999 and 1998 have been significantly impacted by the Company's
acquisition and disposition activity. The significant changes in rental
revenues, property and maintenance expenses, real estate taxes and insurance,
depreciation expense, property management and interest expense can all primarily
be attributed to the acquisition of the 1998 Acquired Properties and the 1999
Acquired Properties, partially offset by the disposition of the 1998 Disposed
Properties and the 1999 Disposed Properties. The impact of the 1998 Acquired
Properties, the 1999 Acquired Properties, the 1998 Disposed Properties and the
1999 Disposed Properties is discussed in greater detail in the following
paragraphs.
Properties that the Company owned for all of both six month periods
ended June 30, 1999 and June 30, 1998 (the "Six-Month 1999 Same Store
Properties"), which represented 126,790 units, impacted the Company's results of
operations. Properties that the Company owned for all of both the quarters ended
June 30, 1999 and June 30, 1998 (the "Second-Quarter 1999 Same Store
Properties"), which represented 130,182 units, also impacted the Company's
results of operations. Both the Six-Month 1999 Same Store Properties and
Second-Quarter 1999 Same Store Properties are discussed in the following
paragraphs.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED JUNE 30, 1998
For the six months ended June 30, 1999, income before gain on
disposition of properties, net, extraordinary item and allocation to Minority
Interests increased by $36.8 million when compared to the six months ended June
30, 1998. This increase was primarily due to the acquisition of the 1998
Acquired Properties and the 1999 Acquired Properties as well as 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.
In regard to the Six-Month 1999 Same Store Properties, total revenues
increased by approximately $20.1 million to $544.6 million or 3.83% primarily as
a result of higher rental rates charged to new tenants and tenant renewals and
an increase in income from billing tenants for their share of utility costs as
well as other ancillary services provided to tenants. 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 1.36%. This increase was primarily the result of
higher on-site compensation costs and an increase in real estate taxes on
certain properties, but was partially offset by lower expenses for leasing and
advertising, administrative, maintenance and start-up costs.
Property management represents expenses associated with the
self-management of the Company's Properties. These expenses increased by
approximately $3 million primarily due to the continued expansion of the
Company's property management business.
Fee and asset management revenues and fee and asset management expenses
are associated
23
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
with the management of properties not owned by the Company that are managed
for affiliates. These revenues and expenses decreased due to the Company
acquiring certain of these properties that were formerly only fee-managed.
Interest expense, including amortization of deferred financing costs,
increased by approximately $53.2 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 effective interest costs decreased from
7.23% for the six months ended June 30, 1998 to 7.02% for the six months ended
June 30, 1999.
General and administrative expenses, which include corporate operating
expenses, increased approximately $0.9 million between the periods under
comparison. This increase was primarily due to the addition of corporate
personnel. However, by gaining certain economies of scale with a much larger
operation these expenses as a percentage of total revenues were 1.30% for the
six months ended June 30, 1999 compared to 1.68% of total revenues for the six
months ended June 30, 1998.
COMPARISON OF QUARTER ENDED JUNE 30, 1999 TO QUARTER ENDED JUNE 30, 1998
For the quarter ended June 30, 1999, income before gain on disposition
of properties, net, extraordinary item and allocation to Minority Interests
increased by approximately $17 million when compared to the quarter ended June
30, 1998. This increase was primarily due to the acquisition of the 1998
Acquired Properties and the 1999 Acquired Properties as well as increases in
rental revenues net of increases in property and maintenance expenses, real
estate taxes and insurance, property management expenses, depreciation expense,
and interest expense.
In regard to the Second Quarter 1999 Same Store Properties, total
revenues increased by approximately $9.7 million or 3.57% primarily as a result
of higher rental rates charged to new tenants and tenant renewals and an
increase in income from billing tenants for their share of utility costs as well
as other ancillary services provided to tenants. Overall, property operating
expenses, which include property and maintenance, real estate taxes and
insurance and an allocation of property management expenses, increased
approximately $0.4 million or 0.38%. This increase was primarily the result of
higher on-site compensation costs and an increase in real estate taxes on
certain properties, but was partially offset by lower expenses for leasing and
advertising, administrative and maintenance.
Property management represents expenses associated with the
self-management of the Company's Properties. These expenses increased by
approximately $0.3 million primarily due to the continued expansion of the
Company's property management business.
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 revenues and expenses decreased due to the
Company acquiring certain of these properties
24
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
that were formerly only fee-managed.
Interest expense, including amortization of deferred financing costs,
increased by approximately $24.1 million. This increase was primarily the result
of an increase in the Company's average indebtedness outstanding which increased
by $1.5 billion. However, the Company's effective interest costs decreased from
7.20% for the quarter ended June 30, 1998 to 6.95% for the quarter ended June
30, 1999.
General and administrative expenses, which include corporate operating
expenses, decreased approximately $0.2 million between the periods under
comparison. These expenses as a percentage of total revenues were 1.20% for the
quarter ended June 30, 1999 compared to 1.69% of total revenues for the quarter
ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of January 1, 1999, the Company had approximately $4 million of cash
and cash equivalents and $330 million available on its lines of credit, of which
$12 million was restricted. After taking into effect the various transactions
discussed in the following paragraphs, the Company's cash and cash equivalents
balance at June 30, 1999 was approximately $95.5 million and the amount
available on the Company's lines of credit was $535 million, of which $12
million was restricted. The following discussion also explains the changes in
net cash provided by operating activities, net cash used by investing activities
and net cash provided by (used by) financing activities, all of which are
presented in the Company's Statements of Cash Flows.
Part of the Company's strategy in funding the purchase of multifamily
properties, funding its Properties in the development stage and the funding of
the Company's investment in two joint ventures with multifamily real estate
developers is to utilize its lines of credit and to subsequently repay the lines
of credit from the issuance of additional equity or debt securities or the
disposition of Properties. Utilizing this strategy during the first six months
of 1999, the Company:
- - issued the June 2004 Notes and received net proceeds of $298 million;
- - refinanced four Properties and received additional net proceeds of $18
million;
- - disposed of eleven properties and received net proceeds of $125.2 million;
and
- - issued approximately 0.8 million Common Shares and received net
proceeds of $29.6 million.
All of these proceeds were utilized to either:
- - purchase additional properties;
- - provide funding for properties in the development stage; and/or
- - repay the lines of credit and mortgage indebtedness on certain
Properties.
25
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
With respect to the 1999 Acquired Properties, the Company assumed
and/or entered into new mortgage indebtedness of approximately $58.3 million,
issued OP Units with a value of $11.3 million and issued Junior Convertible
Preference Units with a value of $2.9 million. The total purchase price of the
1999 Acquired Properties was approximately $259.3 million.
Subsequent to June 30, 1999 and through August 9, 1999, the Company
acquired three additional properties containing 1,201 units for a total
purchase price of approximately $267.5 million, which included the assumption
of and/or issuance of new mortgage indebtedness of approximately $138.1 million,
the issuance of OP Units having an approximate value of $13.9 million and the
issuance of Junior Convertible Preference Units having an approximate value
of $0.2 million.
Subsequent to June 30, 1999 and through August 9, 1999, the Company
disposed of three properties for a total sales price of $35 million. These
proceeds will be utilized to purchase additional properties. The Company
anticipates that it will continue to sell certain Properties in the portfolio.
In regard to the joint venture agreements with two multifamily
residential real estate developers during the six months ended June 30, 1999,
the Company funded a total of $44.3 million and during the remainder of 1999 the
Company expects to fund approximately $24.1 million in connection with these
agreements. Also in connection with these two agreements, the Company has an
obligation to fund up to an additional $55 million to guarantee third party
construction financing.
In regard to certain other properties that were under development
and/or expansion during the six months ended June 30, 1999, the Company funded
$7.9 million. During the remainder of 1999, the Company expects to fund $43.1
million related to the continued development and/or expansion of as many as five
Properties.
In regards to certain properties that were under earnout/development
agreements, during the six months ended June 30, 1999, the Company funded the
following:
- - $16.2 million relating to the acquisition of Copper Canyon Apartments,
- - $22.8 million relating to the acquisition of Skyview Apartments, which
included a $1.0 million advance of the earnout payment to the
developer of Skyview; and
- - $18.3 million relating to the acquisition of Rosecliff Apartments.
Subsequent to June 30, 1999, the Company funded an additional $1
million earnout payment to the developer of Copper Canyon as certain
specified operation levels were achieved. During the remainder of 1999, the
Company expects to fund approximately $3.1 million related to other
earnout/development projects.
26
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
In May 1999, the Company repaid its 1999 Notes that matured on May 15,
1999. The $125 million repayment was funded from borrowings under the Company's
lines of credit. In addition, during the first six months of 1999, the Company
repaid $9.3 million of mortgage indebtedness on two of its Properties. These
repayments were funded from the Company's lines of credit and/or from
disposition proceeds.
As of June 30, 1999, the Company had total indebtedness of
approximately $4.7 billion, which included mortgage indebtedness of $2.3 billion
(including premiums of $3.9 million), of which $840.7 million represented
tax-exempt bond indebtedness, and unsecured debt of $2.3 billion (including net
discounts and premiums in the amount of $3.1 million), of which $111.4 million
represented tax-exempt bond indebtedness.
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 $250 per unit on an annual recurring basis.
During the six months ended June 30, 1999, total capital expenditures
for the Company approximated $59.4 million. Of this amount, approximately $21.1
million, or $175 per unit, related to capital improvements and major repairs for
the 1997, 1998 and 1999 Acquired Properties. Capital improvements and major
repairs for all of the Company's pre-EQR IPO properties and 1993, 1994, 1995 and
1996 Acquired Properties approximated $12.7 million, or $198 per unit. Capital
spent for replacement-type items approximated $22 million, or $119 per unit.
Also included in total capital expenditures was approximately $3.6 million
expended for non-real estate additions such as computer software, computer
equipment, and 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 1999 are budgeted to be approximately $60 million.
Minority Interests as of June 30, 1999 decreased by $12.1 million when
compared to December 31, 1998. The primary factors that impacted this account
during the six month period were distributions declared to Minority Interests,
which amounted to $18.3 million for the six month period, the allocation of
income from operations in the amount of $14.5 million and the conversion of OP
Units into Common Shares and the issuance of Common Shares and OP Units during
the six months ended June 30, 1999.
27
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Total distributions paid in July 1999 amounted to approximately
$117 million, which included distributions declared for the quarter ended
June 30, 1999.
The Company expects to meet its short-term liquidity requirements,
including capital expenditures related to maintaining its existing Properties
and certain scheduled unsecured note and mortgage note repayments, generally
through its working capital, net cash provided by operating activities and
borrowings under its lines 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 unsecured note and mortgage debt maturities,
reduction of outstanding amounts under its lines 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 has a revolving credit facility with Morgan Guaranty and
Bank of America as co-agents to provide the Operating Partnership, with
potential borrowings of up to $500 million. This credit facility matures in
November 1999 and will continue to be used to fund property acquisitions, costs
for certain Properties under development and short term liquidity requirements.
As of August 9, 1999, $90 million was outstanding under this facility.
In connection with the MRY Merger, the Company assumed a second
revolving credit facility with First Union Bank as agent with potential
borrowings of up to $120 million. This credit facility matures in September 2000
and will also be used to fund property acquisitions, costs for certain
Properties under development and short term liquidity requirements. As of August
9, 1999, no amounts were outstanding under this facility.
The Company anticipates closing on a new revolving credit facility in
mid-August 1999 for potential borrowings of up to $700 million. The existing
revolving credit facilities will be repaid in full and terminated upon the
closing of the new facility.
In connection with the Wellsford Merger, the Company provided a $14.8
million credit enhancement with respect to bonds issued to finance certain
public improvements at a multifamily development project. Pursuant to the terms
of a Stock Purchase Agreement with Wellsford Real Properties, Inc. ("WRP
Newco"), the Company has agreed to purchase up to 1,000,000 shares of WRP Newco
Series A Preferred at $25.00 per share on a standby basis over a three-year
period ending on May 30, 2000. As of August 9, 1999, no shares of WRP Newco
Series A Preferred had been acquired by the Company.
In conjunction with the MRY Merger in October 1998, the Company entered
into six
28
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
joint venture agreements with MRYP Spinco, the entity spun-off in the
MRY Merger. The Company contributed six properties with an initial value of
$52.7 million in return for a 50% ownership interest in each joint venture. In
return for the spin-off of certain assets and liabilities to MRYP Spinco, the
Company received (from MRYP Spinco) a Subordinated Note receivable totaling $20
million, a preferred stock investment with an initial value of $5 million and a
$25 million, one year, non-revolving Senior Note receivable with an initial
value of $18.3 million. On June 24, 1999, the Subordinated Note receivable, the
preferred stock investment and the Senior Note receivable were all repaid by
MRYP Spinco for a total amount of $41 million, which represented a discount of
$2.3 million on the combined outstanding balance of these instruments and there
is no further obligation by either party in connection therewith.
YEAR 2000 ISSUE
The year 2000 issue ("Year 2000") is the result of computer programs
being written using 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 third quarter of 1999. The Company has estimated that the total Year 2000
project cost will approximate $1 million, of which approximately 90% has been
incurred as of June 30, 1999. During the first six months of 1999, the primary
focus of the Year 2000 remediation efforts has been on implementing and testing
the previously scheduled upgrades and Year 2000 compliant versions of existing
IT systems as well as continuing the assessment of the Company's exposure
regarding non-IT systems at property sites. Of the remaining $100,000 budgeted
to complete the Company's Year 2000 remediation project, approximately $50,000
has been allocated to engage Year 2000 consultants to help the Company monitor
its IT compliance progress and to complete final IT testing and implementation.
The remaining $50,000 has been allocated to remediate non-IT systems at various
property sites. The estimates are 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
29
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
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 is
developing its contingency plans 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 utility companies, 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 Funds From Operations ("FFO") to be one
measure of the performance of real estate companies. 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 a real estate company 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 and gains/losses on early extinguishment of debt,
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 real estate companies and, accordingly, may
not be comparable to such other real estate companies.
For the six months ended June 30, 1999, FFO increased by $87.9 million
representing a
30
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
42.2% increase when compared to the six months ended June 30, 1998. For the
quarter ended June 30, 1999, FFO increased by $43.5 million representing a
40.5% increase when compared to the quarter ended June 30, 1998.
The following is a reconciliation of net income available to Common
Shares to FFO available to Common Shares and OP Units for the six months and
quarters ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Months Six Months Quarter Quarter
Ended Ended Ended Ended
6/30/99 6/30/98 6/30/99 6/30/98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income available to Common Shares $ 133,105 $ 81,938 $ 68,928 $ 46,043
Adjustments:
Income allocated to Minority Interests 14,514 8,310 7,388 4,622
Depreciation on real estate assets* 194,262 129,387 98,790 66,162
Amortization of deferred financing
costs related to predecessor business - 35 - 23
Loss on early extinguishment of debt 451 - 451 -
Gain on disposition of properties, net (45,807) (11,092) (24,391) (9,223)
- ----------------------------------------------------------------------------------------------------------------------
FFO available to Common Shares and
OP Units $ 296,525 $ 208,578 $ 151,166 $ 107,627
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes $551 and $276 related to the Company's share of depreciation from
unconsolidated joint ventures for the six months and quarter ended June 30,
1999, respectively.
31
<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, 1998.
ITEM 5. OTHER INFORMATION
Any proposal which a stockholder intends to present at the annual
meeting of stockholders in 2000 must be received by the Company by December 1,
1999 in order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting. In addition, if any business should properly come
before such annual meeting other than that which is stated in such proxy
statement, then, if the Company does not receive timely notice of the matter,
the persons designated in such proxy form will vote or refrain from voting in
respect thereof in accordance with the judgment of the persons voting such
proxies. To be timely, a shareholder's notice shall be delivered to the
secretary of the Company at the Company's principal executive offices no later
than January 1, 2000 and no earlier than December 1, 1999. Such notice also must
otherwise comply with the provisions of the Company's bylaws.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
3.2 Third Amended and Restated bylaws of Equity Residential Properties
Trust.
12 Computation of Ratio of Earnings to Fixed Charges.
(B) Reports on Form 8-K:
None.
32
<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: August 12, 1999 By: /s/ Bruce C. Strohm
--------------- ------------------------------------------
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Date: August 12, 1999 By: /s/ Michael J. McHugh
--------------- -------------------------------------------
Michael J. McHugh
Executive Vice President, Chief Accounting
Officer and Treasurer
33
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
THIRD AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Trust shall be
located at such place or places as the Board of Trustees may designate.
Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at
such places as the Board of Trustees may from time to time determine or the
business of the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States as
shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders for
the election of Trustees and the transaction of any business within the powers
of the Trust shall be held each year, after the delivery of the annual report
referred to in Section 12 of this Article II, on a date and at the time set by
the Board of Trustees. Failure to hold an annual meeting does not invalidate the
Trust's existence or affect any otherwise valid acts of the Trust.
Section 3. SPECIAL MEETINGS. (a) General. The Chairman of the Board or
the President or one-third of the Trustees then in office may call special
meetings of the shareholders. Subject to subsection (b) of this Section 3, a
special meeting of shareholders shall also be called by the secretary upon the
written request of the holders of shares entitled to cast not less than a
majority of all the votes entitled to be cast at such meeting.
(b) SHAREHOLDER REQUESTED SPECIAL MEETINGS. (1) Any shareholder
of record seeking to have shareholders request a special meeting shall, by
sending written notice to the secretary (the "Record Date Request Notice") by
registered mail, return receipt requested, request the Board of Trustees to fix
a record date to determine the shareholders entitled to request a special
meeting (the "Request Record Date"). The Record Date Request Notice shall set
forth the purpose of the meeting and the matters proposed to be acted on at it,
shall be signed by one or more shareholders of record as of the date of
signature (or their duly authorized proxies or other agents), shall bear the
date of signature of each such shareholder (or proxy or other agent) and shall
set forth all information relating to each such shareholder that must be
disclosed in solicitations of proxies for election of trustees in an election
contest (even if an election contest is
<PAGE>
not involved), or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 14a-11 thereunder. Upon receiving the Record Date Request
Notice, the Board of Trustees may fix a Request Record Date. The Request
Record Date shall not precede and shall not be more than ten days after the
close of business on the date on which the resolution fixing the Request
Record Date is adopted by the Board of Trustees. If the Board of Trustees,
within ten days after the date on which a valid Record Date Request Notice is
received, fails to adopt a resolution fixing the Request Record Date and make
a public announcement of such Request Record Date, the Request Record Date
shall be the close of business on the tenth day after the first date on which
the Record Date Request Notice is received by the Secretary.
(2) In order for any shareholder to request a special
meeting, one or more written requests for a special meeting signed by
shareholders of record (or their duly authorized proxies or other agents) as of
the Request Record Date entitled to cast not less than a majority (the "Special
Meeting Percentage") of all of the votes entitled to be cast at such meeting
(the "Special Meeting Request) shall be delivered to the Secretary. In addition,
the Special Meeting Request shall set forth the purpose of the meeting and the
matters proposed to be acted on at it (which shall be limited to the matters set
forth in the Record Date Request Notice received by the secretary), shall bear
the date of signature of each such shareholder (or proxy or other agent) signing
the Special Meeting Request, shall set forth the name and address, as they
appear in the Trust's books, of each shareholder signing such request (or on
whose behalf the Special Meeting Request is signed) and the class and number of
shares of the Trust which are owned of record and beneficially by each such
shareholder, shall be sent to the Secretary by registered mail, return receipt
requested, and shall be received by the secretary within 60 days after the
Request Record Date. Any requesting shareholder may revoke his, her or its
request for a special meeting at any time by written revocation delivered to the
Secretary.
(3) The Secretary shall inform the requesting
shareholders of the reasonably estimated cost of preparing and mailing the
notice of meeting (including the Trust's proxy materials). The Secretary shall
not be required to call a special meeting upon shareholder request and such
meeting shall not be held unless, in addition to the documents required by
paragraph (2) of this Section 3(b), the Secretary receives payment of such
reasonably estimated cost prior to the mailing of any notice of the meeting.
(4) Except as provided in the next sentence, any
special meeting shall be held at such place, date and time as may be designated
by the Chairman of the Board, the President or the Board of Trustees, whoever
has called the meeting. In the case of any special meeting called by the
Secretary upon the request of shareholders (a "Shareholder Requested Meeting"),
such meeting shall be held at such place, date and time as may be designated by
the Board of Trustees; PROVIDED, however, that the date of any Shareholder
Requested Meeting shall be not more than 90 days after the record date for such
meeting (the "Meeting Record Date"); and PROVIDED FURTHER that if the Board of
Trustees fails to designate, within ten days after the date that a valid Special
Meeting Request is actually received by the Secretary (the "Delivery Date"), a
date and time for a Shareholder Requested Meeting, then such meeting shall be
held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or,
if such 90th day is not a Business Day (as defined below), on the first
preceding Business Day; and PROVIDED FURTHER that
2
<PAGE>
in the event that the Board of Trustees fails to designate a place for a
Shareholder Requested Meeting within ten days after the Delivery Date, then
such meeting shall be held at the principal executive offices of the Trust.
In fixing a date for any special meeting, the Chairman of the Board, the
president or the Board of Trustees may consider such factors as he, she or it
deems relevant within the good faith exercise of business judgment,
including, without limitation, the nature of the matters to be considered,
the facts and circumstances surrounding any request for meeting and any plan
of the Board of Trustees to call an annual meeting or a special meeting. In
the case of any Shareholder Requested Meeting, if the Board of Trustees fails
to fix a Meeting Record Date that is a date within 30 days after the Delivery
Date, then the close of business on the 30th day after the Delivery Date
shall be the Meeting Record Date.
(5) If at any time as a result of written revocations
of requests for the special meeting, shareholders of record (or their duly
authorized proxies or other agents) as of the Request Record Date entitled to
cast less than the Special Meeting Percentage shall have delivered and not
revoked requests for a special meeting, the Secretary may refrain from mailing
the notice of the meeting or, if the notice of the meeting has been mailed, the
Secretary may revoke the notice of the meeting at any time before ten days
before the meeting if the Secretary has first sent to all other requesting
shareholders written notice of such revocation and of intention to revoke the
notice of the meeting. Any request for a special meeting received after a
revocation by the Secretary of a notice of a meeting shall be considered a
request for a new special meeting.
(6) The Chairman of the Board, the President or the
Board of Trustees may appoint regionally or nationally recognized independent
inspectors of elections to act as the agent of the Trust for the purpose of
promptly performing a ministerial review of the validity of any purported
Special Meeting Request received by the Secretary. For the purpose of permitting
the inspectors to perform such review, no such purported request shall be deemed
to have been delivered to the Secretary until the earlier of (i) five Business
Days after receipt by the Secretary of such purported request and (ii) such date
as the independent inspectors certify to the Trust that the valid requests
received by the Secretary represent at least a majority of the issued and
outstanding shares that would be entitled to vote at such meeting. Nothing
contained in this paragraph (6) shall in any way be construed to suggest or
imply that the Trust or any shareholder shall not be entitled to contest the
validity of any request, whether during or after such five Business Day period,
or to take any other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect thereto, and the seeking
of injunctive relief in such litigation).
(7) For purposes of these Bylaws, "Business Day" shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of Illinois are authorized or obligated by law or
executive order to close.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of shareholders, the secretary shall give to each shareholder entitled
to vote at such meeting and to each shareholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by
3
<PAGE>
mail, electronic mail or other electronic means, or by presenting it to such
shareholder personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given when deposited
in the United States mail addressed to the shareholder at his post office
address as it appears on the records of the Trust, with postage thereon
prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Trust may be transacted
at an annual meeting of shareholders without being specifically designated in
the notice, except such business as is required by any statute to be stated in
such notice. No business shall be transacted at a special meeting of
shareholders except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of the shareholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the Chairman of the Board, one of the
following officers present shall conduct the meeting in the order stated: the
President, the Vice Presidents in their order of rank and seniority, or a
Chairman chosen by the shareholders entitled to cast a majority of the votes
which all shareholders present in person or by proxy are entitled to cast, shall
act as Chairman, and the Secretary, or, in his absence, an assistant secretary,
or in the absence of both the Secretary and assistant secretaries, a person
appointed by the Chairman, shall act as Secretary.
Section 7. QUORUM. At any meeting of shareholders, the presence in
person or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Declaration of Trust
of the Trust (the "Declaration of Trust") for the vote necessary for the
adoption of any matter. If, however, such quorum shall not be present at any
meeting of the shareholders, the shareholders entitled to vote at such meeting,
present in person or by proxy, shall have the power to adjourn the meeting from
time to time to a date not more than 120 days after the original record date
without notice other than announcement at the meeting. At such adjourned meeting
at which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a Trustee. Each share may be voted for as many individuals as there are
Trustees to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly called and at
which a quorum is present shall be sufficient to approve any other matter which
may properly come before the meeting, unless more than a majority of the votes
cast is required herein or by statute or by the Declaration of Trust. Unless
otherwise provided in the Declaration of Trust, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of shareholders.
Section 9. PROXIES. A shareholder may cast the votes entitled to be
cast by the shares owned of record by him either in person or by proxy. A proxy
may be executed or authorized in any manner not prohibited by law. Such proxy or
evidence of authorization shall be filed with or delivered to the Secretary of
the Trust before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution or authorization, unless otherwise
provided in the proxy.
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Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, limited liability company,
trust or other entity, if entitled to be voted, may be voted by the president or
a vice president, a general partner, member, manager or trustee thereof, as the
case may be, or a proxy appointed by any of the foregoing individuals, unless
some other person who has been appointed to vote such shares pursuant to a bylaw
or a resolution of the governing board of such corporation or other entity or
agreement of the partners of the partnership presents a certified copy of such
bylaw, resolution or agreement, in which case such person may vote such shares.
Any trustee or other fiduciary may vote shares registered in his name as such
fiduciary, either in person or by proxy.
Shares of the Trust directly or indirectly owned by it shall not be
voted at any meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
The Board of Trustees may adopt by resolution a procedure by which a
shareholder may certify in writing to the Trust that any shares registered in
the name of the shareholder are held for the account of a specified person other
than the shareholder. The resolution shall set forth the class of shareholders
who may make the certification, the purpose for which the certification may be
made, the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share transfer
books within which the certification must be received by the Trust; and any
other provisions with respect to the procedure which the Board of Trustees
considers necessary or desirable. On receipt of such certification, the person
specified in the certification shall be regarded as, for the purposes set forth
in the certification, the shareholder of record of the specified shares in place
of the shareholder who makes the certification.
Notwithstanding any other provision contained herein or in the
Declaration of Trust or these Bylaws, Title 3, Subtitle 7 of the Corporations
and Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to any acquisition by any person of shares of
beneficial interest of the Trust. This section may be repealed, in whole or in
part, at any time, whether before or after an acquisition of control shares and,
upon such repeal, may, to the extent provided by any successor bylaw, apply to
any prior or subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of shareholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
shareholders.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector,
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the report of a majority shall be the report of the inspectors. The report of
the inspector or inspectors on the number of shares represented at the
meeting and the results of the voting shall be PRIMA FACIE evidence thereof.
Section 12. REPORTS TO SHAREHOLDERS.
The Board of Trustees shall submit to the shareholders at or before the
annual meeting of shareholders a report of the business and operations of the
Trust during such fiscal year, containing a balance sheet and a statement of
income and surplus of the Trust, accompanied by the certification of an
independent certified public accountant, and such further information as the
Board of Trustees may determine is required pursuant to any law or regulation to
which the Trust is subject. Within the earlier of 20 days after the annual
meeting of shareholders or 120 days after the end of the fiscal year of the
Trust, the Board of Trustees shall place the annual report on file at the
principal office of the Trust.
Section 13. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.
(a) ANNUAL MEETINGS OF SHAREHOLDERS. (1) Nominations of persons
for election to the Board of Trustees and the proposal of business to be
considered by the shareholders may be made at an annual meeting of shareholders
(i) pursuant to the Trust's notice of meeting, (ii) by or at the direction of
the Board of Trustees or (iii) by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in this
Section 13(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 13(a).
(2) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant to clause (iii) of
paragraph (a) (1) of this Section 13, the shareholder must have given timely
notice thereof in writing to the secretary of the Trust and such other business
must otherwise be a proper matter for action by shareholders. To be timely, a
shareholder's notice shall be delivered to the Secretary of the Trust at the
principal executive offices of the Trust not later than the close of business on
the 90th day nor earlier than the close of business on the 120th day prior to
the first anniversary of the date of mailing of the notice of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is changed by more than 30 days from the anniversary date of the
annual meeting held the prior year, to be timely the notice must be so delivered
not earlier than the close of business on the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made by the Trust. In no event
shall the public announcement of a postponement or adjournment of an annual
meeting to a later date or time commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's notice shall set
forth (i) as to each person whom the shareholder proposes to nominate for
election or reelection as a Trustee all information relating to such person that
is required to be disclosed in solicitations of proxies for election of Trustees
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being
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named in the proxy statement as a nominee and to serving as a Trustee if
elected); (ii) as to any other business that the shareholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder and of
the beneficial owner, if any, on whose behalf the proposal is made; and (iii)
as to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made, (x) the name and address of
such shareholder, as they appear on the Trust's books, and of such beneficial
owner and (y) the number of each class of shares of the Trust which are owned
beneficially and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a) (2) of this Section 13 to the contrary, in the event that the
number of Trustees to be elected to the Board of Trustees is increased and there
is no public announcement by the Trust naming all of the nominees for Trustee or
specifying the size of the increased Board of Trustees at least 100 days prior
to the first anniversary of the date of mailing the notice of the preceding
year's annual meeting, a shareholder's notice required by this Section 13(a)
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the secretary at
the principal executive offices of the Trust not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Trust.
(b) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall
be conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Trust's notice of meeting. Nominations of
persons for election to the Board of Trustees may be made at a special meeting
of shareholders at which Trustees are to be elected (i) pursuant to the Trust's
notice of meeting (ii) by or at the direction of the Board of Trustees or (iii)
provided that the Board of Trustees has determined that Trustees shall be
elected at such special meeting, by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in this
Section 13(b) and at the time of the special meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 13(b). In the event the Trust calls a special meeting of shareholders
for the purpose of electing one or more Trustees to the Board of Trustees, any
such shareholder may nominate a person or persons (as the case may be) for
election to such position as specified in the Trust's notice of meeting, if the
shareholder's notice containing the information required by paragraph (a) (2) of
this Section 13 shall be delivered to the secretary at the principal executive
offices of the Trust not earlier than the close of business on the 120th day
prior to such special meeting and not later than the close of business on the
later of the 90th day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Trustees to be elected at
such meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date or time commence a new time
period for the giving of a shareholder's notice as described above.
(c) GENERAL. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 13 shall be eligible to
serve as Trustees and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 13. The chairman of the
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meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth in this
Section 13 and, if any proposed nomination or business is not in compliance
with this Section 13, to declare that such nomination or proposal shall be
disregarded.
(2) For purposes of this Section 13, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable news service or in a document
publicly filed by the Trust with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 13, a shareholder shall also comply with all applicable requirements of
state law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 13. Nothing in this Section 13
shall be deemed to affect any rights of shareholders to request inclusion of
proposals in the Trust's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 14. VOTING BY BALLOT. Voting on any question or in any election
may be VIVA VOCE unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
TRUSTEES
Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least 21 years of age who
is not under legal disability. In case of failure to elect Trustees at an annual
meeting of the shareholders, the Trustees holding over shall continue to direct
the management of the business and affairs of the Trust until their successors
are elected and qualify.
Section 2. NUMBER. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may increase
or decrease the number of Trustees; provided, however, that such action shall
not affect the tenure of office of any Trustee.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Trustees shall be held at least once per calendar year. The Board of Trustees
may provide the time and place, either within or without the State of Maryland,
for the holding of regular meetings of the Board of Trustees.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Trustees
may be called by or at the request of the Chairman of the Board or the president
or by a majority of the Trustees then in office. The person or persons
authorized to call special meetings of the Board of Trustees may fix any place,
either within or without the State of Maryland, as the place for holding any
special meeting of the Board of Trustees called by them.
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Section 5. NOTICE. Notice of any annual, regular or special meeting
shall be given by telephone or written notice delivered personally, telegraphed,
facsimile-transmitted or mailed to each Trustee at his business or residence
address. Personally delivered or telegraphed notices shall be given at least two
days prior to the meeting. Notice by mail shall be given at least five days
prior to the meeting. Telephone or facsimile-transmission notice shall be given
at least 24 hours prior to the meeting. If mailed, such notice shall be deemed
to be given when deposited in the United States mail properly addressed, with
postage thereon prepaid. If given by telegram, such notice shall be deemed to be
given when the telegram is delivered to the telegraph company. Telephone notice
shall be deemed given when the Trustee is personally given such notice in a
telephone call to which he is a party. Facsimile-transmission notice shall be
deemed given upon completion of the transmission of the message to the number
given to the Trust by the Trustee and receipt of a completed confirmation
indicating receipt. Neither the business to be transacted at, nor the purpose
of, any annual, regular or special meeting of the Board of Trustees need be
stated in the notice, unless specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the Trustees then in office shall
constitute a quorum for transaction of business at any meeting of the Board of
Trustees, provided that, if less than a majority of such Trustees are present at
said meeting, a majority of the Trustees present may adjourn the meeting from
time to time without further notice, and provided further that if, pursuant to
the Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a majority
of such group. Notwithstanding the foregoing, no quorum shall be less than a
quorum required by Maryland law at the time of the meeting.
The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section 7. VOTING. The action of the majority of the Trustees present
at a meeting at which a quorum is present shall be the action of the Board of
Trustees, unless the concurrence of a greater proportion is required for such
action by statute.
Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or
permitted to be taken at any meeting of the Board of Trustees may be taken
without a meeting, if a consent in writing to such action is signed by each
Trustee and such written consent is filed with the minutes of proceedings of the
Board of Trustees.
Section 10. VACANCIES. If for any reason any or all the Trustees cease
to be Trustees, such event shall not terminate the Trust or affect these Bylaws
or the powers of the remaining Trustees hereunder (even if fewer than a majority
of Trustees remain). Any vacancy (including a
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vacancy created by an increase in the number of Trustees) shall be filled, at
any regular meeting or at any special meeting, by a majority of the remaining
Trustees, whether or not sufficient to constitute a quorum. A majority of the
entire Board of Trustees shall fill a vacancy which results from an increase
in the number of Trustees. Any individual so elected as Trustee shall hold
office for the unexpired term of the Trustee he is replacing, if any.
Section 11. COMPENSATION; FINANCIAL ASSISTANCE.
(a) COMPENSATION. Trustees shall not receive any stated salary
for their services as Trustees but, by resolution of the Board of Trustees, may
receive compensation per year and/or per meeting and/or per visit to real
property owned or to be acquired by the Trust and for any other service or
activity performed or engaged in as Trustees. Trustees may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting of
the Board of Trustees or of any committee thereof; and for their expenses, if
any, in connection with each property visit and any other service or activity
performed or engaged in as Trustees; but nothing herein contained shall be
construed to preclude any Trustees from serving the Trust in any other capacity
and receiving compensation therefor.
(b) FINANCIAL ASSISTANCE TO TRUSTEES. The Trust may lend money
to, guarantee an obligation of or otherwise assist a Trustee or a trustee of its
direct or indirect subsidiary. The loan, guarantee or other assistance may be
with or without interest, unsecured, or secured in any manner that the Board of
Trustees approves, including a pledge of Shares.
Section 12. REMOVAL OF TRUSTEES. The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration of Trust.
Section 13. LOSS OF DEPOSITS. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or shares have been
deposited.
Section 14. SURETY BONDS. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 15. RELIANCE. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Board of Trustees or officers of the
Trust, regardless of whether such counsel or expert may also be a Trustee.
Section 16. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and apply
to any contract or other transaction between the Trust and any of its Trustees
or between the Trust and any other trust, corporation, firm or other entity in
which any of its Trustees is a trustee or director or has a material financial
interest.
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Section 17. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the Trust
(other than a full-time officer, employee or agent of the Trust), in his
personal capacity or in a capacity as an affiliate, employee, or agent of any
other person, or otherwise, may have business interests and engage in business
activities similar or in addition to those of or relating to the Trust.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Trustees may
appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one or more Trustees,
to serve at the pleasure of the Board of Trustees.
Section 2. POWERS. The Board of Trustees may delegate to committees
appointed under Section 1 of this Article any of the powers of the Trustees,
except as prohibited by law.
Section 3. MEETINGS. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another Trustee to act in the place of such
absent member. Notice of committee meetings shall be given in the same manner as
notice for special meetings of the Board of Trustees.
One-third, but not less than two (except for a one-member committee),
of the members of any committee shall be present in person at any meeting of
such committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of such
committee. The Board of Trustees may designate a chairman of any committee, and
such chairman or any two members (except for a one-member committee) of any
committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any such
committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
Trustee to act at the meeting in the place of such absent or disqualified
members.
Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Trustees at the next succeeding meeting, and any action
by the committee shall be subject to revision and alteration by the Board of
Trustees, provided that no rights of third persons shall be affected by any such
revision or alteration.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Trustees may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
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Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Trustees may
be taken without a meeting, if a consent in writing to such action is signed by
each member of the committee and such written consent is filed with the minutes
of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Trust shall include
a president, a secretary and a treasurer and may include a Chairman of the
Board, a vice Chairman of the Board, a chief executive officer, a chief
operating officer, a chief financial officer, one or more vice presidents, one
or more assistant secretaries and one or more assistant treasurers. In addition,
the Board of Trustees may from time to time appoint such other officers with
such powers and duties as it shall deem necessary or desirable. The officers of
the Trust shall be elected annually by the Board of Trustees at the first
meeting of the Board of Trustees held after each annual meeting of shareholders.
If the election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as may be convenient. Each officer shall hold
office until his successor is elected and qualifies or until his death,
resignation or removal in the manner hereinafter provided. Any two or more
offices except president and vice president may be held by the same person. In
its discretion, the Board of Trustees may leave unfilled any office except that
of president and secretary. Election of an officer or agent shall not of itself
create contract rights between the Trust and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust
may be removed by the Board of Trustees if in its judgment the best interests of
the Trust would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Any officer of the
Trust may resign at any time by giving written notice of his resignation to the
Board of Trustees, the Chairman of the Board, the president or the secretary.
Any resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation. Such
resignation shall be without prejudice to the contract rights, if any, of the
Trust.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Trustees for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Trustees may designate
a chief executive officer from among the elected officers. The chief executive
officer shall have
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responsibility for implementation of the policies of the Trust, as determined
by the Board of Trustees, and for the administration of the business affairs
of the Trust. In the absence of both the chairman and vice Chairman of the
Board, the chief executive officer shall preside over the meetings of the
Board of Trustees and of the shareholders at which he shall be present.
Section 5. CHIEF OPERATING OFFICER. The Board of Trustees may designate
a chief operating officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Board of Trustees or
the chief executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Trustees may designate
a chief financial officer from among the elected officers. Said officer will
have the responsibilities and duties as set forth by the Board of Trustees or
the chief executive officer.
Section 7. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside over the meetings of the Board of Trustees and of the
shareholders at which he shall be present and shall in general oversee all of
the business and affairs of the Trust. In the absence of the Chairman of the
Board, the vice Chairman of the Board shall preside at such meetings at which he
shall be present. The chairman and the vice Chairman of the Board may execute
any deed, mortgage, bond, contract or other instrument, except in cases where
the execution thereof shall be expressly delegated by the Board of Trustees or
by these Bylaws to some other officer or agent of the Trust or shall be required
by law to be otherwise executed. The Chairman of the Board and the vice Chairman
of the Board shall perform such other duties as may be assigned to him or them
by the Board of Trustees.
Section 8. PRESIDENT. In the absence of the chairman, the vice Chairman
of the Board and the chief executive officer, the president shall preside over
the meetings of the Board of Trustees and of the shareholders at which he shall
be present. In the absence of a designation of a chief executive officer by the
Board of Trustees, the president shall be the chief executive officer and shall
be ex officio a member of all committees that may, from time to time, be
constituted by the Board of Trustees. The president may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Board of Trustees or by
these Bylaws to some other officer or agent of the Trust or shall be required by
law to be otherwise executed; and in general shall perform all duties incident
to the office of president and such other duties as may be prescribed by the
Board of Trustees from time to time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Trustees. The Board of
Trustees may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings
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of the shareholders, the Board of Trustees and committees of the Board of
Trustees in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the trust records and of the seal of
the Trust; (d) keep a register of the post office address of each shareholder
which shall be furnished to the secretary by such shareholder; (e) have
general charge of the share transfer books of the Trust; and (f) in general
perform such other duties as from time to time may be assigned to him by the
chief executive officer, the president or by the Board of Trustees.
Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys and other valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Board of Trustees.
He shall disburse the funds of the Trust as may be ordered by the Board
of Trustees, taking proper vouchers for such disbursements, and shall render to
the president and Board of Trustees, at the regular meetings of the Board of
Trustees or whenever it may so require, an account of all his transactions as
treasurer and of the financial condition of the Trust.
If required by the Board of Trustees, he shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the Board
of Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, moneys and other property
of whatever kind in his possession or under his control belonging to the Trust.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Trustees. The assistant treasurers shall, if
required by the Board of Trustees, give bonds for the faithful performance of
their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Trustees.
Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Trustees and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a Trustee.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Trustees may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Trust and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the Trustees or by an authorized person
shall be valid and binding upon the Board of Trustees and upon the Trust when
authorized or ratified by action of the Board of Trustees.
14
<PAGE>
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or agent of the Trust in such
manner as shall from time to time be determined by the Board of Trustees.
Section 3. DEPOSITS. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such banks,
trust companies or other depositories as the Board of Trustees may designate.
ARTICLE VII
SHARES
Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interests held by him in the Trust. Each
certificate shall be signed by the chief executive officer, the president or a
vice president and countersigned by the secretary or an assistant secretary or
the treasurer or an assistant treasurer and may be sealed with the seal, if any,
of the Trust. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Trust shall, from time to time,
issue several classes of shares, each class may have its own number series. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the Trust,
shall have a statement of such restriction, limitation, preference or redemption
provision, or a summary thereof, plainly stated on the certificate. In lieu of
such statement or summary, the Trust may set forth upon the face or back of the
certificate a statement that the Trust will furnish to any shareholder, upon
request and without charge, a full statement of such information.
Section 2. TRANSFERS. Certificates shall be treated as negotiable and
title thereto and to the shares they represent shall be transferred by delivery
thereof to the same extent as those of a Maryland stock corporation. Upon
surrender to the Trust or the transfer agent of the Trust of a share certificate
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Trust shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
The Trust shall be entitled to treat the holder of record of any share
or shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of beneficial
interest of the Trust will be subject in all respects to the Declaration of
Trust and all of the terms and conditions contained therein.
15
<PAGE>
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the Board
of Trustees may direct a new certificate to be issued in place of any
certificate previously issued by the Trust alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing the issuance
of a new certificate, an officer designated by the Board of Trustees may, in his
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or the owner's legal
representative to advertise the same in such manner as he shall require and/or
to give bond, with sufficient surety, to the Trust to indemnify it against any
loss or claim which may arise as a result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Trustees may set, in advance, a record date for the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or determining shareholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of shareholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
shareholders not less than ten days, before the date on which the meeting or
particular action requiring such determination of shareholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Trustees may provide that
the share transfer books shall be closed for a stated period but not longer than
20 days. If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the share transfer books are not closed
for the determination of shareholders, (a) the record date for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of shareholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the Board of
Trustees, authorizing the dividend or allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger containing the name and address of each
shareholder and the number of shares of each class held by such shareholder. The
stock ledger may be kept in written form or in any other form which may be
converted within a reasonable time into written form for visual inspection.
16
<PAGE>
Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Board of Trustees
may issue fractional shares or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the Declaration of Trust or these Bylaws, the Board of Trustees may
issue units consisting of different securities of the Trust. Any security issued
in a unit shall have the same characteristics as any identical securities issued
by the Trust, except that the Board of Trustees may provide that for a specified
period securities of the Trust issued in such unit may be transferred on the
books of the Trust only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Trustees shall have the power, from time to time, to fix
the fiscal year of the Trust by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by the
Board of Trustees, subject to the provisions of law and the Declaration of
Trust. Dividends and other distributions may be paid in cash, property or shares
of the Trust, subject to the provisions of law and the Declaration of Trust.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Board of Trustees
may from time to time, in its absolute discretion, think proper as a reserve
fund for contingencies, for equalizing dividends or other distributions, for
repairing or maintaining any property of the Trust or for such other purpose as
the Board of Trustees shall determine to be in the best interest of the Trust,
and the Board of Trustees may modify or abolish any such reserve in the manner
in which it was created.
17
<PAGE>
ARTICLE X
PROHIBITED INVESTMENTS AND ACTIVITIES
Notwithstanding anything to the contrary in the Declaration of Trust,
the Trust shall not enter into any transaction referred to in (i), (ii) or (iii)
below which it does not believe is in the best interests of the Trust, and will
not, without the approval of a majority of the disinterested Trustees, (i)
acquire from or sell to any Trustee, officer or employee of the Trust, any
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in which a Trustee, officer or employee of the Trust owns more than a
one percent interest or any affiliate of any of the foregoing, any of the assets
or other property of the Trust, except for the acquisition directly or
indirectly of certain properties or interest therein, directly or indirectly,
through entities in which it owns an interest in connection with the initial
public offering of shares by the Trust or pursuant to agreements entered into in
connection with such offering, which properties shall be described in the
prospectus relating to such initial public offering, (ii) make any loan to or
borrow from any of the foregoing persons or (iii) engage in any other
transaction with any of the foregoing persons. Each such transaction will be in
all respects on such terms as are, at the time of the transaction and under the
circumstances then prevailing, fair and reasonable to the Trust. Subject to the
provisions of the Declaration of Trust, the Board of Trustees may from time to
time adopt, amend, revise or terminate any policy or policies with respect to
investments by the Trust as it shall deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Trustees may authorize the adoption of a
seal by the Trust. The seal shall have inscribed thereon the name of the Trust
and the year of its formation. The Board of Trustees may authorize one or more
duplicate seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required
to affix its seal to a document, it shall be sufficient to meet the requirements
of any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
18
<PAGE>
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or any
former Trustee, officer or shareholder (including among the foregoing, for all
purposes of this Article XII and without limitation, any individual who, while a
Trustee, officer or shareholder and at the express request of the Trust, serves
or has served another real estate investment trust, corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, shareholder, partner or trustee of such real estate
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) who has been successful, on the merits or
otherwise, in the defense of a proceeding to which he was made a party by reason
of service in such capacity, against reasonable expenses incurred by him in
connection with the proceeding, (b) any Trustee or officer or any former Trustee
or officer against any claim or liability to which he may become subject by
reason of such status unless it is established that (i) his act or omission was
material to the matter giving rise to the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty, (ii) he actually
received an improper personal benefit in money, property or services or (iii) in
the case of a criminal proceeding, he had reasonable cause to believe that his
act or omission was unlawful and (c) each shareholder or former shareholder
against any claim or liability to which he may become subject by reason of such
status. In addition, the Trust shall, without requiring a preliminary
determination of the ultimate entitlement to indemnification, pay or reimburse,
in advance of final disposition of a proceeding, reasonable expenses incurred by
a Trustee, officer or shareholder or former Trustee, officer or shareholder made
a party to a proceeding by reason such status, provided that, in the case of a
Trustee or officer, the Trust shall have received (i) a written affirmation by
the Trustee or officer of his good faith belief that he has met the applicable
standard of conduct necessary for indemnification by the Trust as authorized by
these Bylaws and (ii) a written undertaking by or on his behalf to repay the
amount paid or reimbursed by the Trust if it shall ultimately be determined that
the applicable standard of conduct was not met. The Trust may, with the approval
of its Board of Trustees, provide such indemnification or payment or
reimbursement of expenses to any Trustee, officer or shareholder or any former
Trustee, officer or shareholder who served a predecessor of the Trust and to any
employee or agent of the Trust or a predecessor of the Trust. Neither the
amendment nor repeal of this Article, nor the adoption or amendment of any other
provision of the Declaration of Trust or these Bylaws inconsistent with this
Article, shall apply to or affect in any respect the applicability of this
Article with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the procedures
provided for indemnification or payment or reimbursement of expenses, as the
case may be, under Section 2-418 of the MGCL for directors of Maryland
corporations. The Trust may provide to Trustees, officers and shareholders such
other and further indemnification or payment or reimbursement of expenses, as
the case may be, to the fullest extent permitted by the MGCL, as in effect from
time to time, for directors of Maryland corporations.
19
<PAGE>
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration
of Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Trustees shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
ARTICLE XV
MISCELLANEOUS
All references to the Declaration of Trust shall include any amendments
and/or restatements thereto, whether effective prior or subsequent to the date
hereof.
20
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED HISTORICAL
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DISTRIBUTIONS RATIO
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------------
6/30/99 6/30/98 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Rental income $ 819,178 $ 571,370 $ 1,293,560 $ 707,733 $ 454,412 $ 373,919 $ 220,727
Fee income - outside managed 2,414 2,790 5,622 5,697 6,749 7,030 4,739
Interest income - investment
in mortgage notes 5,644 10,221 18,564 20,366 12,819 4,862 -
Interest and other income 11,323 9,010 19,703 13,525 4,405 4,573 5,568
------------ ---------- ------------ ---------- ---------- ---------- ---------
Total revenues 838,559 593,391 1,337,449 747,321 478,385 390,384 231,034
------------ ---------- ------------ ---------- ---------- ---------- ---------
EXPENSES
Property and maintenance 196,865 138,303 326,567 176,075 127,172 112,186 66,534
Real estate taxes and insurance 84,515 56,484 126,009 69,520 44,128 37,002 23,028
Property management 27,973 25,007 52,705 26,793 17,512 15,213 10,249
Property management -
non-recurring - - - - - - 879
Fee and asset management 1,624 2,247 4,207 3,364 3,837 3,887 2,056
Depreciation 197,134 131,910 301,869 156,644 93,253 72,410 37,273
Interest:
Expense incurred 158,499 105,651 246,585 121,324 81,351 78,375 37,044
Amortization of deferred
financing costs 1,661 1,275 2,757 2,523 4,242 3,444 1,930
General and administrative 10,914 9,974 21,718 15,064 9,857 8,129 6,053
------------ ---------- ------------ ---------- ---------- ---------- ---------
Total expenses 679,185 470,851 1,082,417 571,307 381,352 330,646 185,046
------------ ---------- ------------ ---------- ---------- ---------- ---------
Income (loss) before extraordinary
items $ 159,374 $ 122,540 $ 255,032 $ 176,014 $ 97,033 $ 59,738 $ 45,988
============ ========== ============ ========== ========== ========== =========
Combined Fixed Charges and Preferred
Distributions:
Interest and other financing costs $ 158,499 $ 105,651 $ 246,585 $ 121,324 $ 81,351 $ 78,375 $ 37,044
Amortization of deferred
financing costs 1,661 1,275 2,757 2,523 4,242 3,444 1,930
Preferred distributions 57,111 43,384 92,917 59,012 29,015 10,109 -
------------ ---------- ------------ ---------- ---------- ---------- ---------
TOTAL COMBINED FIXED CHARGES
AND PREFERRED DISTRIBUTIONS $ 217,271 $ 150,310 $ 342,259 $ 182,859 $ 114,608 $ 91,928 $ 38,974
============ ========== ============ ========== ========== ========== =========
EARNINGS BEFORE COMBINED FIXED
CHARGES AND PREFERRED
DISTRIBUTIONS $ 319,534 $ 229,466 $ 504,374 $ 299,861 $ 182,626 $ 141,557 $ 84,962
============ ========== ============ ========== ========== ========== =========
FUNDS FROM OPERATIONS BEFORE COMBINED
FIXED CHARGES AND PREFERRED
DISTRIBUTIONS $ 516,668 $ 361,376 $ 806,243 $ 456,505 $ 275,879 $ 213,967 $ 123,114
============ ========== ============ ========== ========== ========== =========
RATIO OF EARNINGS BEFORE COMBINED
FIXED CHARGES AND PREFERRED
DISTRIBUTIONS TO COMBINED
FIXED CHARGES AND PREFERRED
DISTRIBUTIONS 1.47 1.53 1.47 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 2.38 2.40 2.36 2.50 2.41 2.33 3.16
============ ========== ============ ========== ========== ========== =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 95,496
<SECURITIES> 0
<RECEIVABLES> 957
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 390,743
<PP&E> 11,163,990
<DEPRECIATION> 902,351
<TOTAL-ASSETS> 10,841,809
<CURRENT-LIABILITIES> 360,776
<BONDS> 4,707,744
0
1,335,884
<COMMON> 1,222
<OTHER-SE> 4,016,867
<TOTAL-LIABILITY-AND-EQUITY> 10,841,809
<SALES> 827,236
<TOTAL-REVENUES> 838,559
<CGS> 0
<TOTAL-COSTS> 310,977
<OTHER-EXPENSES> 10,914
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,160
<INCOME-PRETAX> 159,374
<INCOME-TAX> 0
<INCOME-CONTINUING> 159,374
<DISCONTINUED> 45,807
<EXTRAORDINARY> (451)
<CHANGES> 0
<NET-INCOME> 147,619
<EPS-BASIC> 1.11
<EPS-DILUTED> 1.11
</TABLE>
