<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): January 31, 1997
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
(Exact name of registrant as specified in its charter)
Commission File Number: 1934 Act File Number: 0-25968
Delaware 54-1681657
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2345 Crystal Drive
Crystal City, VA 22202
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (703) 920-8500
<PAGE>
Item 5. Other Events
- -----------------------
On January 30, 1997, Charles E. Smith Residential Realty, Inc. ("the
Company"), the general partner of Charles E. Smith Residential Realty L.P. ("the
Operating Partnership"), announced that its Board of Directors approved a plan
for the issuance of at least 2.7 million shares of Common Stock of the Company
("the Offering"). The Board also approved the acquisition, through the Operating
Partnership, of two luxury, high-rise properties for approximately $113 million,
primarily through the issuance of equity in the form of limited partnership
units of the Operating Partnership and the assumption of debt. The two
properties, Crystal Plaza and Crystal Towers, comprise 1,452 apartment units and
are located in Crystal City, Arlington, Virginia. The Company intends to use the
net proceeds from the Offering to purchase additional Operating Partnership
Units thereby increasing its ownership interest from approximately 45% at
December 31, 1996 to approximately 52% subsequent to the Offering. The Operating
Partnership, in turn, will use the net proceeds to repay certain indebtedness
that will be assumed in connection with the acquisitions and other acquisition
costs in connection therewith, to repay a portion of the outstanding
indebtedness under certain of the Operating Partnership's lines of credit and
for general corporate purposes.
The Operating Partnership has executed agreements to acquire the properties.
The agreements are subject to the consent of partners of the partnerships that
own the properties, including Robert H. Smith, a general and limited partner of
both partnerships, and Robert P. Kogod, a limited partner of both partnerships.
Messrs. Smith and Kogod are Co-Chairmen and Co-CEOs of the Company. These
acquisitions will consolidate the ownership by the Operating Partnership of all
of the Smith-developed multifamily communities in Crystal City and will increase
by 64.4% the number of apartment units that the Operating Partnership owns in
Crystal City, Virginia.
The Operating Partnership has also executed agreements for the acquisition of
The Kenmore, a 376-unit property in northwest Washington, D.C, for approximately
$16.3 million, and the acquisition for approximately $9.5 million of 17 acres of
land for the development of an estimated 630-unit apartment community in
Springfield, Virginia. Acquisition of The Kenmore is subject to a waiver by the
tenants of their right to purchase the property. Acquisition of the Springfield
development site is subject to finalization of proffer agreements with
government agencies.
A copy of the related press release is attached as Exhibit 99.1.
Item 7. Financial Statements and Exhibits
- --------------------------------------------
(A) Pro forma financial information - beginning at page F-6.
(B) Exhibits
99.1 Press Release dated January 30, 1997
99.2 Consent of Independent Public Accountants dated January 31, 1997
2
<PAGE>
INDEX TO PRO FORMA INFORMATION AND FINANCIAL STATEMENTS
Page
----
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
Pro Forma (unaudited) Consolidated Balance Sheet F-6
as of September 30, 1996
Pro Forma (unaudited) Consolidated Statement of F-7
Operations for the nine months ended September 30, 1996
Pro Forma (unaudited) Consolidated Statement of F-8
Operations for the year ended December 31, 1995
Notes and Management's Assumptions to Unaudited Pro Forma F-9
Consolidated Financial Information
ACQUISITION PROPERTIES
Report of Independent Public Accountants--Crystal Plaza F-12
Statements of Revenues and Certain Expenses of Crystal Plaza F-13
for the nine months ended September 30, 1996 (unaudited) and 1995
(unaudited), and the years ended December 31, 1995
(audited) and 1994 (audited)
Report of Independent Public Accountants--Crystal Towers F-16
Statements of Revenues and Certain Expenses of Crystal Towers F-17
for the nine months ended September 30, 1996 (unaudited) and 1995
(unaudited), and the years ended December 31, 1995
(audited) and 1994 (audited)
F-1
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Charles E. Smith Residential Realty L.P. (the "Operating Partnership")
was organized in Delaware in 1993. The Operating Partnership had no operations
prior to the completion of the business combination which occurred on June 30,
1994. Charles E. Smith Residential Realty, Inc. (the "Company"), a Maryland
Corporation, was formed in June 1993 with the intent of qualifying as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. In connection with the business combination, the Company, on June 30,
1994, raised equity through an initial public offering and a private placement,
and issued debt in a series of concurrent private financing transactions. The
proceeds were used to acquire the 1.0% sole general partnership and a 41.7%
limited partnership interest in the Operating Partnership. The Operating
Partnership is the successor entity to CES Group (the "Predecessor").
Simultaneous with the initial public offering and private placement, the
entities that owned the properties and the related service businesses included
in the CES Group transferred the properties and related service businesses to
the Operating Partnership (or corporations in which the Operating Partnership
owns substantially all of the equity) and received in exchange, directly or
indirectly, units of limited partnership in the Operating Partnership. Assets
and liabilities related to interests contributed by the Predecessor Partners
have been recorded at their predecessor cost. The Company, through the Operating
Partnership and its subsidiaries, is engaged in the ownership, operation,
management, leasing, acquisition and development of real estate properties,
primarily residential multifamily properties.
On January 29, 1997, the Company's Board of Directors approved a plan
to proceed with a follow-on equity offering of approximately $78 million through
the proposed issuance of at least 2.7 million shares of Common Stock of the
Company ("the Offering"). The pro forma consolidated financial information
assumes that the Underwriters' option for an additional 405,000 shares to cover
over-allotments will not be exercised. The Board also approved the acquisition,
through the Operating Partnership, of two luxury, high-rise properties in
Crystal City, Virginia, primarily through the issuance of equity in the form of
Operating Partnership Units and assumption of debt. Net proceeds of the Offering
will be used by the Company to purchase additional Operating Partnership Units
thereby increasing its ownership interest in the Operating Partnership from
approximately 45% at December 31, 1995 to 52% subsequent to the Offering. The
Operating Partnership, in turn, will use the net proceeds for repayment of
certain indebtedness that will be assumed in the pending acquisitions described
below and other acquisition costs in connection therewith, the repayment of a
portion of the outstanding indebtedness under certain of the Operating
Partnership's lines of credit and for general corporate purposes.
. Crystal Plaza. The Operating Partnership has executed an agreement
--------------
to acquire Crystal Plaza, a 540-unit luxury high-rise property located in
Crystal City, Virginia for a total cost of approximately $43.0 million,
consisting of Operating Partnership Units with a value of $8.9 million (subject
to adjustment under certain circumstances), the assumption of $33.0 million of
debt, other acquisition costs and a fair value adjustment to debt. The property
is currently subject to a 5.1% net profits interest in favor of an unaffiliated
third party. The Operating Partnership has reached an agreement in principle to
acquire such net profits interest in exchange for Operating Partnership Units
with a value of $0.5 million. In the first year after acquisition, the Operating
Partnership expects to realize an unleveraged yield on capitalized costs of
9.15% after estimated recurring capital expenditures. Messrs. Smith and Kogod
and family have a 17.19% interest in the partnership that owns Crystal Plaza.
The average monthly revenue per apartment unit for Crystal Plaza was $1,105 in
1995 and $1,167 in 1996 and its average occupancy (calculated beginning on the
rent commencement date) was 98.8% in 1995 and 98.7% in 1996. Crystal Plaza was
developed and managed by the CES Group, the predecessor to the Operating
Partnership, with the same quality standards as the properties in the Operating
Partnership's portfolio.
F-2
<PAGE>
. Crystal Towers. The Operating Partnership has executed agreements
---------------
to acquire Crystal Towers, a 912-unit luxury-rise property located in Crystal
City, Virginia for a total cost of approximately $69.7 million, including
consideration of Operating Partnership Units valued at $24.1 million (subject to
adjustment under certain circumstances), the assumption of $46.0 million of
debt, approximately $1.6 million in cash and certain acquisition costs, reduced
by a fair value adjustment to debt and the transfer of cash reserves. In the
first year after acquisition, the Operating Partnership expects to realize an
unleveraged yield on capitalized costs of 9.19% after estimated recurring
capital expenditures. The average monthly revenue per apartment unit for Crystal
Towers was $1,002 in 1995 and $1,047 in 1996 and its average occupancy was 97.7%
in 1995 and 97.6% in 1996. Crystal Towers was developed and managed by the CES
Group, with the same quality standards as the properties in the Operating
Partnership's portfolio. Messrs. Smith and Kogod and family have a 4.86%
ownership interest in the partnership that has a 93% ownership interest in
Crystal Towers, and the cash purchase of the remaining 7% of the property will
be made pursuant to purchase rights assigned (at no cost to the Operating
Partnership) from a partnership controlled by Messrs. Smith and Kogod.
. The Kenmore. The Operating Partnership has also executed an
------------
agreement to acquire The Kenmore, a 376-unit property located on Connecticut
Avenue in northwest Washington, D.C., for a total cost of approximately $16.3
million (subject to adjustment for changes in the market value of Operating
Partnership Units), at an unleveraged yield after estimated recurring capital
expenditures of 9.03%. Completion of this acquisition is subject to a waiver by
the tenants of their right to purchase the property. The Kenmore will be
acquired for a combination of equity in the form of Operating Partnership Units
and the assumption of debt. The Kenmore acquisition will increase the percentage
of the Operating Partnership's multifamily residential portfolio in northwest
Washington, D.C. to 16.7%.
. Springfield, Virginia development site. ("Springfield Land") The
----------------------------------------
Operating Partnership has executed a contract to purchase for $9.5 million
approximately 17 acres of land for the development of a 630-unit multi-phase low
and mid-rise apartment community in Springfield, Virginia. The site is
strategically located adjacent to a new Metrorail and commuter rail station and
a regional shopping mall, and offers access to the I-495 Capital Beltway and I-
395, a major route into Washington, D.C. Budgeted costs for this project are
expected to be approximately $59.1 million and construction is scheduled to
commence early in the summer of 1997, as soon as proffer agreements are
concluded with government agencies.
F-3
<PAGE>
Since January 1, 1996, the Operating Partnership, has acquired the
following Properties ("the 1996 Acquisitions"):
. Van Ness South. On July 30, 1996, the Operating Partnership acquired
---------------
this 625 apartment unit property located in northwest Washington, D.C. for $41.8
million. The cash acquisition was funded with proceeds from the Operating
Partnership's line of credit.
. 1841 Columbia Road. On August 2, 1996, the Operating Partnership
------------------
acquired this 8-story, 115 apartment unit property located in northwest
Washington, D.C. in exchange for 79,600 Operating Partnership Units valued at
$2.0 million, together with the assumption of $3.3 million of existing mortgage
debt. The mortgage debt is due on August 1, 1999 and bears interest at 9% per
year. The total value of the acquisition was approximately $5.3 million.
. Charter Oak. On March 15, 1996, the Operating Partnership acquired
------------
this 262 apartment unit complex located in Reston, Virginia, for 22,059
Operating Partnership Units which were valued at $0.5 million together with a
cash payment of $13.7 million. The cash acquisition was funded with proceeds
from the Operating Partnership's line of credit. The total value of the
acquisition was approximately $14.2 million.
. Governor Spotswood. On March 14, 1996, the Operating Partnership
-------------------
acquired this 47 apartment unit property located in Alexandria, Virginia for
$2.8 million. The cash acquisition was funded with proceeds from the Operating
Partnership's line of credit.
The following sets forth the Pro Forma (unaudited) Consolidated
Balance Sheet as of September 30, 1996, the Pro Forma (unaudited) Consolidated
Statement of Operations for the nine months ended September 30, 1996, and the
Pro Forma (unaudited) Consolidated Statement of Operations for the year
ended December 31, 1995 of Charles E. Smith Residential Realty L.P. The
unaudited pro forma information is based on the financial statements of the
Operating Partnership and should be read in conjunction with the 1995 historical
financial statements and
F-4
<PAGE>
notes related thereto appearing in the Operating Partnership's Form 10-K, as
amended.
The unaudited pro forma consolidated financial information is
presented as if the Offering (including the assets to be acquired) and the 1996
Acquisitions all had occurred by September 30, 1996 for the Pro Forma
Consolidated Balance Sheet and at the beginning of the period for the Pro Forma
Consolidated Statements of Operations for the nine months ended September 30,
1996, and the year ended December 31, 1995.
The pro forma consolidated financial information is unaudited and is
not necessarily indicative of the results which actually would have occurred if
the Offering (including the assets to be acquired) and the 1996 Acquisitions had
been consummated at the beginning of the periods presented, nor does it purport
to represent the future financial position and results of operations for future
periods. In management's opinion, all adjustments necessary to reflect the
effects of these transactions have been made.
F-5
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED) (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------------- ------------- ---------------
ASSETS
<S> <C> <C> <C>
Rental property, at predecessor cost, net $268,540 -- $268,540
Rental property, acquired and developed, net 202,487 43,480 (B) 341,508
69,673 (C)
16,328 (D)
9,540 (E)
Cash and cash equivalents 3,586 73,405 (A) 1,354
(375) (C)
(1,610) (C)
(73,405) (A)
(247) (D)
Tenants' security deposits 3,831 445 (G) 4,276
Escrow funds 6,449 900 (C) 7,349
Investment in and advances to Property Service Businesses and other 11,364 -- 11,364
Deferred charges, net 18,345 -- 18,345
Other assets 9,211 -- 9,211
---------------- ---------------
Total assets $523,813 $661,947
================ ===============
<CAPTION>
LIABILITIES AND EQUITY
<S> <C> <C> <C>
Liabilities
Mortgage loans $416,911 33,800 (B) $461,443
44,532 (C)
(33,800) (A)
(1,200) (D)
1,200 (D)
Notes payable 129,736 (39,305) (A) 101,171
1,200 (D)
9,540 (E)
Accounts payable and accrued expenses 10,486 -- 10,486
Tenants' security deposits 3,831 445 (G) 4,276
Due to related parties 287 -- 287
---------------- ---------------
Total liabilities 561,251 577,663
---------------- ---------------
Other Operating Partnership Unitholders' Interest, 290,850 9,380 (B) 331,045
at redemption value 24,056 (C)
(8,122) (F)
14,881 (D)
Partners' Equity
General Partner's General and Limited Partnership Interest (328,288) 73,405 (A) (246,761)
8,122 (F)
---------------- ---------------
Total liabilities and equity $523,813 $661,947
================ ===============
</TABLE>
F-6
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)(AMOUNTS IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------------------
Offering
(including
assets to be 1996
Historical acquired) Acquisitions (A) Pro Forma
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
RENTAL PROPERTIES
Revenues $122,814 $16,449 (B) $5,438 $144,701
Expenses
Operating 56,615 6,496 (B) 2,816 65,927
Depreciation and amortization 13,476 2,428 (C) 561 16,465
-------------- -------------- -------------- ------------
Total expenses 70,091 8,924 3,377 82,392
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 4,789 (366)(B) 4,423
Corporate general and administrative expenses (2,207) (2,207)
Interest income 726 726
Interest expense (32,248) (433)(D) (2,269) (34,950)
-------------- -------------- -------------- ------------
Net income of the Operating Partnership 23,783 30,301
============== ============
Net income per unit $1.09 $1.15
============== ============
Weighted average units outstanding 21,884 26,250
============== ============
</TABLE>
F-7
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-------------------------------------
Offering
(including
assets to be 1996
Historical acquired) Acquisitions (A) Pro Forma
-------------- ---------------- -------------- -----------
<S> <C> <C> <C> <C>
RENTAL PROPERTIES
Revenues $144,909 $21,096 (B) $11,213 $177,218
Expenses
Operating 65,627 8,884 (B) 5,319 79,830
Depreciation and amortization 16,258 3,237 (C) 1,139 20,634
-------------- ---------------- -------------- -----------
Total expenses 81,885 12,121 6,458 100,464
PROPERTY SERVICE BUSINESSES
Equity in income of Property Service Businesses 6,868 (453)(B) 6,415
Corporate general and administrative expenses (2,842) (2,842)
Interest income 1,424 1,424
Interest expense (37,421) (612)(D) (5,060) (43,093)
-------------- ---------------- -------------- -----------
Net income of the Operating Partnership 31,053 38,658
============== ===========
Net income per unit $1.44 $1.48
============== ===========
Weighted average units outstanding 21,603 26,071
============== ===========
</TABLE>
F-8
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN THOUSANDS)
1. Basis of Presentation
---------------------
The unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1996 and Pro Forma Consolidated Statements of Operations for the nine months
ended September 30, 1996 and the year ended December 31, 1995 are based
on the historical financial statements of the Operating Partnership and its
subsidiary financing partnerships.
The unaudited Pro Forma Consolidated Statements of Operations for the
nine months ended September 30, 1996 and the year ended December 31, 1995 are
presented as if the Offering (including the assets to be acquired) and the 1996
Acquisitions all had occurred as of January 1, 1996 and January 1, 1995,
respectively. The unaudited Pro Forma Consolidated Balance Sheet as of September
30, 1996 is presented as if the Offering (including the assets to be acquired)
had occurred by September 30, 1996. The assets to be acquired include Crystal
Plaza, Crystal Towers, The Kenmore and 17 acres of land for development located
in Springfield, Virginia. The unaudited pro forma information should be read in
conjunction with the historical financial statements and notes related thereto
appearing in the Operating Partnership's 1995 Form 10-K, as amended.
Preparation of the pro forma financial information was based on
assumptions considered appropriate by the Operating Partnership's management.
The pro forma financial information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the Offering
(including the assets to be acquired) and the 1996 Acquisitions had been
consummated at the beginning of the periods presented, nor does it purport to
represent the future financial position and results of operations for future
periods. In management's opinion, all adjustments necessary to reflect the
effects of these transactions have been made.
F-9
<PAGE>
2. Adjustments to Pro Forma Consolidated Balance Sheet
--------------------------------------------------------
A. Issuance of 2,700,000 Operating Partnership Units to general partner
assuming a unit price of $29.00
<TABLE>
<S> <C>
Proceeds from Offering $78,300
Costs associated with Offering (4,895)
----------
Net proceeds $73,405
==========
Repayment of Mortgage loans $33,800
Repayment of notes payable 39,305
Payment of Crystal Plaza acquisition costs 300
----------
Total use of proceeds $73,405
==========
</TABLE>
B. Acquisition of Crystal Plaza
<TABLE>
<S> <C>
Purchase price of rental property $43,180
Mortgage debt (33,000)
Fair value adjustment to mortgage debt (800)
----------
Value of Operating Partnership Units issued $ 9,380
==========
Number of Operating Partnership Units issued
(assuming a $29.00 unit price) 323,448
==========
Purchase price of rental property $43,180
Acquisition costs 300
----------
Cost basis of rental property $43,480
==========
</TABLE>
C. Acquisition of Crystal Towers
<TABLE>
<S> <C>
Purchase price of rental property $69,298
Mortgage debt (46,002)
Fair value adjustment to mortgage debt 1,470
----------
24,766
Fannie Mae cash reserve 900
Cash paid for Crystal Towers ownership interest (1,610)
----------
Value of Operating Partnership Units issued $24,056
==========
Number of Operating Partnership Units issued
(assuming a $29 unit price) 829,517
==========
Purchase price of rental property $69,298
Acquisition costs 375
----------
Cost basis of rental property $69,673
==========
</TABLE>
D. Acquisition of The Kenmore
<TABLE>
<S> <C>
Purchase price of rental property $16,081
Mortgage debt (1,150)
Fair value adjustment to mortgage debt (50)
----------
Value of Operating Partnership Units issued $14,881
==========
Number of Operating Partnership Units issued
(assuming a $29.00 unit price) 513,138
==========
Purchase price of rental property $16,081
Acquisition costs 247
----------
Cost basis of rental property $16,328
==========
</TABLE>
E. Acquisition of 17 acres of land located in Springfield, Virginia
("Springfield Land") for $9,540. Acquisition is assumed to be funded
with proceeds from the Operating Partnership's line of credit.
F. To adjust the redemption value of Other Operating Partnership
Unitholders' Interest for the issuance of Operating Partnership Units in
connection with the acquisitions of Crystal Towers, Crystal Plaza and
The Kenmore.
G. Records tenant security deposits for Crystal Plaza, Crystal Towers and
The Kenmore.
F-10
<PAGE>
3. Adjustments to Pro Forma Consolidated Statements of Operations
-----------------------------------------------------------------------------
A. During 1996 the Operating Partnership acquired Van Ness, 1841 Columbia
Road, Charter Oak and Governor Spotswood. The adjustments reflect the
operations of the four acquisitions as if the purchases occurred on
January 1, 1996 for the nine months ended September 30, 1996 and January
1, 1995 for the year ended December 31, 1995. Depreciation and
amortization has been adjusted based on the allocated purchase price of
the assets acquired and an estimated useful life of 40 years. Interest
expense has been adjusted based on the additional financing incurred as
a result of the acquisitions, using a weighted average borrowing rate of
7.3% and 7.9% for the nine months ended September 30, 1996 and the year
ended December 31, 1995, respectively.
B. Rental revenues and operating expenses of the following assets to be
acquired.
<TABLE>
<CAPTION>
Nine months ended Year Ended
September 30, December 31,
1996 1995
----------------- ----------------
<S> <C> <C>
Revenues:
Crystal Plaza $5,605 $7,167
Crystal Towers 8,556 10,962
The Kenmore 2,288 2,967
----------------- ----------------
$16,449 $21,096
================= ================
Operating Expenses:
Crystal Plaza $2,339 $3,016
Crystal Towers 3,368 4,764
The Kenmore 1,155 1,557
----------------- ----------------
6,862 9,337
----------------- ----------------
Elimination of management fee (687) (859)
Property management costs
in Property Service Businesses 321 406
----------------- ----------------
(366) (453)
----------------- ----------------
Total $6,496 $8,884
================= ================
</TABLE>
C. Depreciation and amortization has been adjusted based on the allocated
purchase price of the assets to be acquired and an estimated useful life
of 40 years, as if the purchases occurred on January 1, 1996 for the
nine months ended September 30, 1996 and January 1, 1995 for the year
ended December 31, 1995.
D. The interest expense adjustment is comprised of the following:
<TABLE>
<CAPTION>
Nine months ended Year Ended
September 30, December 31,
1996 1995
----------------- ----------------
<S> <C> <C>
Increase in interest expense for Crystal Towers
mortgage loan (assuming weighted average
interest rate of 7.3% for the nine months
ended September 30, 1996 and 7.9% for
the year ended December 31, 1995).
$ (2,522) $ (3,626)
Decrease in interest expense for pay down
of notes payable with proceeds from Offering
(assuming a weighted average interest rate of
7.3% for the nine months ended September
30, 1996 and 7.9% for the year ended
December 31, 1995). 2,152 3,105
Increase in interest expense for The Kenmore
(assuming a weighted average interest rate of
7.3% for the nine months ended September
30, 1996 and 7.9% for the year ended
December 31, 1995). (63) (91)
----------------- ----------------
$ (433) $ (612)
================= ================
</TABLE>
Interest expense related to draws on the line of credit to purchase the
Springfield Land were $522 and $754 for the nine months ended September
30, 1996 and the year ended December 31, 1995, respectively. These
amounts are capitalized in the cost basis of the property in accordance
with generally accepted accounting principles.
F-11
<PAGE>
Report of Independent Public Accountants
To Charles E. Smith Residential Realty L.P.:
We have audited the accompanying statements of revenues and certain expenses of
Crystal Plaza (the "Property") for the years ended December 31, 1995 and 1994.
These statements are the responsibility of the Property's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying statements of revenues and certain expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of Charles E. Smith
Residential Realty L.P. Material amounts, described in Note 1 to the statements
of revenue and certain expenses, that would not be comparable to those resulting
from the proposed future operations of the Property are excluded and the
statements are not intended to be a complete presentation of the revenues and
expenses of this property.
In our opinion, the statements referred to above present fairly, in all material
respects, the revenues and certain expenses of Crystal Plaza for the years ended
December 31, 1995 and 1994 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
January 24, 1997
F-12
<PAGE>
CRYSTAL PLAZA
-------------
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
-------------------------------------------
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended Year Ended Year Ended
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 5,605,203 $ 5,343,276 $ 7,166,685 $ 6,933,230
-------------- -------------- -------------- --------------
CERTAIN EXPENSES:
Payroll and related costs 445,588 429,484 599,756 572,609
Utilities 440,334 477,233 607,316 574,908
Repairs and maintenance 737,131 701,371 895,099 787,775
Real estate taxes 290,932 254,250 339,000 323,045
Leasing and management fees 264,167 249,434 337,915 318,013
Other expenses 160,441 154,213 236,685 223,416
-------------- -------------- -------------- --------------
Total certain expenses 2,338,593 2,265,985 3,015,771 2,799,766
-------------- -------------- -------------- --------------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 3,266,610 $ 3,077,291 $ 4,150,914 $ 4,133,464
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE>
CRYSTAL PLAZA
-------------
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
----------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
-----------------------------------------------------------------
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (AUDITED)
------------------------------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of Crystal Plaza apartments (the "Property") which is owned by
Plaza Associates Limited Partnership ("Plaza"). The Property consists of two
apartment buildings containing 540 residential units, located in Arlington,
Virginia. The Property is to be acquired by Charles E. Smith Residential
Realty L.P. (the "Operating Partnership").
The accompanying statements have been prepared for the purpose of complying
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
and thus, exclude certain expenses, such as interest expense, depreciation
and amortization, certain professional fees and other costs not related to
the future operations of the Property. Management is not aware of any
material factors relating to the Property which would cause the reported
financial information not to be indicative of future operating results.
Significant Accounting Policies
-------------------------------
The accompanying statements were prepared on the accrual basis of accounting.
Rental income attributable to residential leases is recognized when due from
tenants. The Property requires tenants to initially execute a one-year
lease. At the expiration of the lease term, the lease converts to a month-
to-month basis.
Interim Financial Information
-----------------------------
The interim statements of revenues and certain expenses are unaudited but
reflect all adjustments which are, in the opinion of management, necessary to
a fair presentation of the interim periods presented. The adjustments
consist of normal, recurring adjustments.
The statements of revenues and certain expenses for interim periods will not
necessarily be indicative of the operating results of the fiscal year.
2. RELATED PARTY TRANSACTIONS:
--------------------------
Smith Realty Company, an operating subsidiary of the Operating Partnership,
provided management services to the Property. Management fees, computed based
on a percentage of rents collected, were paid to Smith Realty Company for
management
F-14
<PAGE>
services. Prior to June 30, 1994, these services were provided by Charles E.
Smith Management, Inc., an affiliated entity.
Expenses of the Property also include payments to Consolidated Engineering
Services, an operating subsidiary of the Operating Partnership, related to
engineering, repair and maintenance services. Prior to June 30, 1994, these
services were provided by Consolidated Engineering Services, Inc., an
affiliated entity, and Charles E. Smith Service Company, Inc., an affiliated
entity.
The Property paid environmental computer service fees to an affiliate.
Charles E. Smith Insurance Agency, Inc., an operating subsidiary of the
Operating Partnership, received premiums and commissions from the Property
related to insurance.
Amounts paid or accrued for the related time periods are as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Smith Realty Company $338,000 $318,000
Consolidated Engineering Services - 57,000
Environmental Computer Services 7,000 7,000
Charles E. Smith Insurance Agency, Inc. 56,000 50,000
</TABLE>
Certain expenses are allocated to the Property by an affiliate. These costs
include advertising, marketing and proposal costs, and certain common area
service costs.
F-15
<PAGE>
Report of Independent Public Accountants
To Charles E. Smith Residential Realty L.P.:
We have audited the accompanying statements of revenues and certain expenses of
Crystal Towers (the "Property") for the years ended December 31, 1995 and 1994.
These statements are the responsibility of the Property's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying statements of revenues and certain expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K of Charles E. Smith
Residential Realty L.P. Material amounts, described in Note 1 to the
statements of revenue and certain expenses, that would not be comparable to
those resulting from the proposed future operations of the Property are excluded
and the statements are not intended to be a complete presentation of the
revenues and expenses of this property.
In our opinion, the statements referred to above present fairly, in all material
respects, the revenues and certain expenses of Crystal Towers for the years
ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
January 24, 1997
F-16
<PAGE>
CRYSTAL TOWERS
--------------
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
-------------------------------------------
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended Year Ended Year Ended
September 30, September 30, December 31, December 31,
1996 1995 1995 1994
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rental income $8,556,184 $8,109,800 $10,961,786 $10,606,841
------------- ------------- -------------- --------------
CERTAIN EXPENSES
Payroll and related costs 756,654 755,373 1,007,284 924,210
Utilities 752,194 724,303 966,207 944,954
Repairs and maintenance 679,898 643,360 1,141,286 917,536
Real estate taxes 503,598 493,523 658,029 554,575
Leasing and management fees 423,150 385,360 521,418 494,236
Other expenses 252,011 282,749 471,124 402,794
------------- ------------- -------------- --------------
Total Expenses 3,367,505 3,284,668 4,765,348 4,238,305
------------- ------------- -------------- --------------
REVENUES IN EXCESS OF CERTAIN EXPENSES $5,188,679 $4,825,132 $6,196,438 $6,368,536
============= ============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE>
CRYSTAL TOWERS
--------------
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
----------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
-----------------------------------------------------------------
AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 (AUDITED)
------------------------------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The accompanying statements of revenues and certain expenses relate to the
operations of Crystal Towers apartments ( the "Property") which is owned by
Tower Associates Limited Partnership ("Tower"). The Property consists of two
apartment buildings containing 912 residential units and 9 retail units,
located in Arlington, Virginia. The Property is to be acquired by Charles E.
Smith Residential Realty L.P. (the "Operating Partnership").
The accompanying statements have been prepared for the purpose of complying
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
and thus, exclude certain expenses, such as interest expense, depreciation
and amortization, certain professional fees and other costs not related to
the future operations of the Property. Management is not aware of any
material factors relating to the Property which would cause the reported
financial information not to be indicative of future operating results.
Significant Accounting Policies
-------------------------------
The accompanying statements were prepared on the accrual basis of accounting.
Rental income attributable to residential leases is recognized when due from
tenants. The Property requires tenants to initially execute a one-year
lease. At the expiration of the lease term, the lease converts to a month-
to-month basis.
Interim Financial Information
-----------------------------
The interim statements of revenues and certain expenses are unaudited but
reflect all adjustments which are, in the opinion of management, necessary to
a fair presentation of the interim periods presented. The adjustments
consist of normal, recurring adjustments.
The statements of revenues and certain expenses for interim periods will not
necessarily be indicative of the operating results of the fiscal year.
2. RELATED PARTY TRANSACTIONS:
--------------------------
Smith Realty Company, an operating subsidiary of the Operating Partnership,
provided management services to the Property. Management fees, computed based
on a percentage of rents collected, were paid to Smith Realty Company for
management
F-18
<PAGE>
services. Prior to June 30, 1994, these services were provided by Charles E.
Smith Management, Inc., an affiliated entity.
Expenses of the Property include payments to Smith Management Construction,
Inc., an operating subsidiary of the Operating Partnership, for construction
management services related to certain building repairs and improvements.
Prior to June 30, 1994, these services were provided by Charles E. Smith
Management Construction Company, an affiliated entity.
Expenses of the Property also include payments to Consolidated Engineering
Services, an operating subsidiary of the Operating Partnership, related to
engineering, repair and maintenance services. Prior to June 30, 1994,
these services were provided by Consolidated Engineering Services, Inc., an
affiliated entity, and Charles E. Smith Service Company, Inc., an
affiliated entity.
The Property paid environmental computer service fees to an affiliate.
Charles E. Smith Insurance Agency, Inc., an operating subsidiary of the
Operating Partnership, received premiums and commissions from the Property
related to insurance.
Amounts paid or accrued for the related time periods are as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Smith Realty Company $521,000 $494,000
Smith Management Construction -- 61,000
Consolidated Engineering Services 88,000 63,000
Environmental Computer Services 10,000 10,000
Charles E. Smith Insurance Agency, Inc. 91,000 101,000
</TABLE>
Certain expenses are allocated to the Property by an affiliate. These costs
include advertising, marketing and proposal costs, and certain common area
service costs.
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, hereunto duly authorized, on the
7th day of February 1997.
CHARLES E. SMITH RESIDENTIAL REALTY L.P.
BY: CHARLES E. SMITH RESIDENTIAL REALTY, INC.,
ITS GENERAL PARTNER
By: /s/ Charles R. Hagen
--------------------
Charles R. Hagen
Chief Accounting Officer
of Charles E. Smith
Residential Realty, Inc.
(on behalf of the Registrant
and as Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99.1 Press Release of the Company dated January 30, 1997 E-1
99.2 Consent of Independent Public Accountants E-10
</TABLE>
<PAGE>
Exhibit 99.1
NEWS RELEASE
[LOGO OF CHARLES E. SMITH
Charles E. Smith Residential Realty, Inc. RESIDENTIAL REALTY, INC.
APPEARS HERE]
FOR IMMEDIATE RELEASE Contact: Ernest A. Gerardi, Jr.
- --------------------- (703) 769-1000
January 30, 1997
M. Bruce Snyder
(703) 769-1029
Charles E. Smith Residential Realty's 1996 FFO Up 10%
Announces Follow-on Equity Offering to Fund Pending Acquisitions
ARLINGTON, VA - Charles E. Smith Residential Realty, Inc. (NYSE: SRW), the
largest publicly traded multifamily real estate investment trust focused on the
greater Washington, D.C. region, announced today that Funds From Operations
(FFO) for 1996 increased 10% over 1995 and that the Company's Board of Directors
approved a follow-on common equity offering, of at least 2.7 million shares, to
fund two acquisitions presently under contract.
The Board also approved the acquisition of the properties under contract,
two luxury high-rise apartment communities, for approximately $113 million.
These acquisitions will be purchased with a combination of Operating Partnership
Units and the assumption of debt, which will be partially repaid with the
follow-on offering proceeds. The economic impact from the two acquisitions will
be immediately accretive to FFO and, along with the equity offering and issuance
of Operating Partnership Units, will lower the Company's overall debt to total
market capitalization ratio from 46% to approximately 42%. The two properties,
Crystal Plaza and Crystal Towers, comprise 1,452 apartment units and are located
in Crystal City, Virginia. Underwriters for the offering are Goldman, Sachs &
Co.; Donaldson, Lufkin & Jenrette Securities Corporation; Prudential Securities
Incorporated; and Legg Mason Wood Walker, Inc.
(more)
E-1
<PAGE>
Charles E. Smith Residential News Release/January 30, 1997 Page 2
The Company's FFO for 1996 was $23.9 million, or $2.41 per share, a 10.0%
increase over the Company's FFO per share for 1995. For the quarter ended
December 31, 1996, FFO was $7.1 million, or $0.70 per share, up 11.1% over the
fourth quarter of 1995. FFO is widely considered to be the most appropriate
measure of a real estate investment trust's operating performance.
Ernest A. Gerardi, Jr., President of Charles E. Smith Residential Realty,
Inc., stated that "We are quite pleased with our continued solid growth in 1996,
which exceeded analysts expectations. This performance is the result of a
combination of our acquisition and development programs, together with
operational initiatives that will continue to fuel growth in the years ahead.
The implementation of these initiatives positions us well for 1997 and beyond."
The Company is structured as an umbrella partnership real estate investment
trust, or UPREIT. All property ownership and business operations take place in
an operating partnership and its subsidiaries and affiliates. The Company
currently owns approximately 45% of the Operating Partnership and is its sole
general partner.
The Operating Partnership's total revenue from rental properties was
$166.3 million for 1996, an increase of 14.7% over 1995. For the fourth quarter
of 1996, revenue from rental properties increased 12.0% over the same period
last year.
The Operating Partnership's 1996 income from rental properties before
depreciation increased 14.2% from $79.3 million to $90.5 million. Income from
rental properties before depreciation for the fourth quarter of 1996 increased
12.7% to $24.3 million. The Property Service Businesses contributed income
before depreciation of $8.9 million in 1996 and $3.2
(more)
E-2
<PAGE>
Charles E. Smith Residential News Release/January 30, 1997 Page 3
million in the fourth quarter of 1996. For the twelve months ended
December 31, 1996, the Property Service Businesses provided 8.9% of the
Operating Partnership's total income before depreciation.
The Operating Partnership's earnings before interest, taxes,
depreciation, and amortization (EBITDA) increased 12.8% to $97.8 million in
1996. For the fourth quarter of 1996, EBITDA increased 10.7% to $27.2 million.
The Company's net income for 1996 was $11.0 million, or $1.11 per share,
an increase of 37.0% over 1995. Net income for the fourth quarter was $5.0
million, or $0.49 per share, up 40.0% over the fourth quarter of 1995. Net
income in all periods reflect charges for quarterly distributions paid to other
operating partnership unitholders in excess of net income attributed to these
Unitholders, because these unitholders' partnership interests are carried at
zero on the balance sheet. Such charges were $4.8 million in 1996 and $0.1
million for the fourth quarter, and it is important to note that they have no
effect on the Company's FFO.
The Company will hold a teleconference on Friday, January 31 at 11:00am
EST to review the information reported in this release. To participate, please
call 1-800-759-6338 shortly before 11:00am and identify yourself as a
participant in the Charles E. Smith Residential Realty teleconference.
(more)
E-3
<PAGE>
Charles E. Smith Residential News Release/January 30, 1997 Page 4
Charles E. Smith Residential Realty, Inc. is a self-managed real estate
investment trust that is the largest publicly traded multifamily real estate
company focused on the greater Washington, D.C. region. The Company and its
subsidiaries and affiliates own, acquire, develop, and manage multifamily
residential, as well as provide related real estate services to other property
owners in the Washington region.
The total market capitalization of Charles E. Smith Residential Realty was
approximately $1.2 billion on December 31, 1996 based on a stock price of
$29.25.
This news release contains forward-looking statements regarding the
company's outlook, which are based on assumptions about economic and market
conditions, competitive dynamics and other factors subject to a number of risks
and uncertainties, some of which are discussed in the Company's filings with the
Securities and Exchange Commission. Actual results could differ materially.
(more)
E-4
<PAGE>
Page 5
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Financial Highlights
For the Three and Twelve Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
3 Months Ended December 31, 12 Months Ended December 31,
--------------------------------- ---------------------------------
% Change % Change
From From
(dollars in thousands except per share data) 1996 1995 Last Year 1996 1995 Last Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Funds From Operations of the Operating Partnership $15,489 $13,691 13.1% $52,748 $47,311 11.5%
Funds From Operations - attributable to the Company 7,050 6,090 15.8% 23,869 20,391 17.1%
Per Share (a) $0.70 $0.63 11.1% $2.41 $2.19 10.0%
Net Income of the Operating Partnership $11,034 $9,348 18.0% $34,817 $31,053 12.1%
Net Income - attributable to the Company 4,967 3,378 47.0% 10,977 7,529 45.8%
Per Share $0.49 $0.35 40.0% $1.11 $0.81 37.0%
Dividends Declared per Share $0.505 $0.490 3.1% $1.990 $1.930 3.1%
EBITDA of the Operating Partnership $27,174 $24,543 10.7% $97,769 $86,657 12.8%
</TABLE>
- --------------------------------------------------------------------------------
Debt Composition as of 12/31/96
<TABLE>
<CAPTION>
Dollars in % of
Thousands Total
--------- -----
<S> <C> <C>
Long Term Mortgage Debt (maturities greater than 1 year)
Fixed Rate (rate: 8.05%) $399,563 73.1%
Variable Rate 0 0.0%
Short Term Mortgage Debt (maturities less than 1 year)
Fixed Rate 0 0.0%
Variable Rate (rate: 7.20%) 17,245 3.2%
$100M Acquisition Line of Credit (rate: 7.16%) 82,050 15.0%
$83M Acquisition Line of Credit (rate: 7.27%) 30,000 5.5%
Construction Loan (rate: 7.32%) 17,686 3.2%
----------- -----------
Total Debt $546,544 100.0%
=========== ===========
Average Interest Rate: 7.82% Average Years to Maturity: 6.0
</TABLE>
[MATURITY SCHEDULE BAR GRAPH APPEARS HERE]
1997 116,981
1999 113,384
2001 125,214
2004 30,000
2009 148,095
2020 12,870
* As of 12/31/96, the Company's Debt to Total Market Capitalization Ratio was
45.9%, based on 9,969,607 shares and 12,029,857 partnership units
outstanding at a stock price of $29.25.
* The Company's Debt Coverage Ratio for the 3 months ended 12/31/96 was
2.53:1.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Weighted average shares, partnership units, and equivalents outstanding
during the periods were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Shares and equivalents 10,062,702 9,707,047 9,913,308 9,310,929
Partnership Units 11,960,203 12,115,528 11,994,324 12,292,066
------------ ------------ ------------ ------------
Total Shares and Partnership Units 22,022,905 21,822,575 21,907,632 21,602,995
============ ============ ============ ============
</TABLE>
(more)
E-5
<PAGE>
Page 6
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Operating Summary
For the Three and Twelve Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
3 Months Ended December 31, 12 Months Ended December 31,
------------------------------------- -----------------------------------
% Change % Change
From From
(dollars in thousands except per share data) 1996 1995 Last Year 1996 1995 Last Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTIES (a)
Revenue $43,469 $38,813 12.0% $166,283 $144,909 14.7%
Expenses (excluding depreciation) (19,164) (17,238) 11.2% (75,779) (65,627) 15.5%
----------- ---------- ---------- ------------ ----------- --------
Income Before Depreciation 24,305 21,575 12.7% 90,504 79,282 14.2%
PROPERTY SERVICE BUSINESSES
Engineering and Technical Services 1,126 1,044 7.9% 3,663 3,485 5.1%
Property Management Services 392 692 -43.4% 2,296 2,008 14.3%
Financing Services 1,041 805 29.3% 1,953 1,579 23.7%
Interior Construction and Renovation Services 665 511 30.1% 980 1,106 -11.4%
----------- ---------- ---------- ------------ ----------- --------
Income of the PSBs Before Depreciation 3,224 3,052 5.6% 8,892 8,178 8.7%
----------- ---------- ---------- ------------ ----------- --------
Total Income Before Depreciation 27,529 24,627 11.8% 99,396 87,460 13.6%
OTHER INCOME AND EXPENSES
Interest Income 303 425 -28.7% 1,029 1,424 -27.7%
Corporate General and Administrative Expenses (818) (808) 1.2% (3,025) (2,842) 6.4%
Interest Expense (including amort. of financing costs) (11,358) (10,228) 11.0% (43,606) (37,421) 16.5%
Depreciation of Real Property (4,455) (4,343) 2.6% (17,931) (16,258) 10.3%
Depreciation and Amortization - PSBs (167) (325) -48.6% (1,046) (1,310) -20.2%
----------- ---------- ---------- ------------ ----------- --------
NET INCOME OF THE OPERATING PARTNERSHIP 11,034 9,348 18.0% 34,817 31,053 12.1%
Interest of Other Operating Partnership Unitholders (6,015) (5,189) 15.9% (19,062) (17,648) 8.0%
Distributions in Excess of Earnings Allocated to
Other Operating Partnership Unitholders (52) (781) -93.3% (4,778) (5,876) -18.7%
----------- ---------- ---------- ------------ ----------- --------
Attributable to the Company $4,967 $3,378 47.0% $10,977 $7,529 45.8%
=========== ========== ========== ============ =========== ========
Net Income per Share (b) $0.49 $0.35 40.0% $1.11 $0.81 37.0%
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME OF THE OPERATING PARTNERSHIP 11,034 $9,348 18.0% $34,817 $31,053 12.1%
Add: Depreciation of Real Property 4,455 4,343 2.6% 17,931 16,258 10.3%
----------- ---------- ---------- ------------ ----------- --------
FFO OF THE OPERATING PARTNERSHIP 15,489 13,691 13.1% 52,748 47,311 11.5%
Interest of Other Operating Partnership Unitholders (8,439) (7,601) 11.0% (28,879) (26,920) 7.3%
----------- ---------- ---------- ------------ ----------- --------
Attributable to the Company $7,050 $6,090 15.8% $23,869 $20,391 17.1%
=========== ========== ========== ============ =========== ========
Funds From Operations per Share (b) $0.70 $0.63 11.1% $2.41 $2.19 10.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Details are shown on the following page.
(b) Weighted average shares, partnership units, and equivalents outstanding
during the periods were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Shares and equivalents 10,062,702 9,707,047 9,913,308 9,310,929
Partnership Units 11,960,203 12,115,528 11,994,324 12,292,066
------------ ----------- ------------ ------------
Total Shares and Partnership Units 22,022,905 21,822,575 21,907,632 21,602,995
============ =========== ============ ============
</TABLE>
(more)
E-6
<PAGE>
Page 7
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Rental Property Details
For the Three and Twelve Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
3 Months Ended December 31, 12 Months Ended December 31,
------------------------------------- ------------------------------------------
% Change % Change
From From
(dollars in thousands) 1996 1995 Last Year 1996 1995 Last Year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CORE RESIDENTIAL PORTFOLIO (a)
Revenue $33,266 $32,289 3.0% $132,111 $127,745 3.4%
Expenses (excluding depreciation) (15,082) (14,625) 3.1% (61,248) (58,566) 4.6%
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation 18,184 17,664 2.9% 70,863 69,179 2.4%
RETAIL PORTFOLIO
Revenue 2,619 2,692 -2.7% 10,176 10,418 -2.3%
Expenses (excluding depreciation) (708) (895) -20.9% (3,567) (3,447) 3.5%
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation 1,911 1,797 6.3% 6,609 6,971 -5.2%
SUB-TOTAL CORE PORTFOLIO
Revenue 35,885 34,981 2.6% 142,287 138,163 3.0%
Expenses (excluding depreciation) (15,790) (15,520) 1.7% (64,815) (62,013) 4.5%
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation 20,095 19,461 3.3% 77,472 76,150 1.7%
ACQUISITION PORTFOLIO
Revenue 6,482 3,179 N/A 19,914 5,831 N/A
Expenses (excluding depreciation) (2,925) (1,373) N/A (9,324) (2,850) N/A
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation 3,557 1,806 N/A 10,590 2,981 N/A
WESTERLY AT WORLDGATE
Revenue 1,102 653 N/A 4,082 915 N/A
Expenses (excluding depreciation) (449) (345) N/A (1,640) (764) N/A
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation 653 308 N/A 2,442 151 N/A
TOTAL PORTFOLIO
Revenue 43,469 38,813 12.0% 166,283 144,909 14.7%
Expenses (excluding depreciation) (19,164) (17,238) 11.2% (75,779) (65,627) 15.5%
----------- ----------- ----------- ----------- ----------- -----------
Income Before Depreciation $24,305 $21,575 12.7% $90,504 $79,282 14.2%
=========== =========== =========== =========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
(a) Includes Potomac View (192 units, acquired 8/94) and The Manor (435 units,
acquired 8/94) for a total of 12,462 apartment units.
(more)
E-7
<PAGE>
Page 8
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Funds Available for Distribution (FAD) Calculation
For the Three and Twelve Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
3 Months Ended December 31, 12 Months Ended December 31,
------------------------------------- --------------------------------------
% Change % Change
From From
(dollars in thousands except per share data) 1996 1995 Last Year 1996 1995 Last Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME OF THE OPERATING PARTNERSHIP $11,034 $9,348 18.0% $34,817 $31,053 12.1%
Add: Depreciation of Real Property 4,455 4,343 2.6% 17,931 16,258 10.3%
----------- ----------- ----------- ----------- ----------- -----------
FFO OF THE OPERATING PARTNERSHIP $15,489 $13,691 13.1% $52,748 $47,311 11.5%
=========== =========== =========== =========== =========== ===========
Add: Amortization of Deferred Financing Costs 631 690 -8.6% 2,583 2,719 -5.0%
Depreciation and Amortization - PSBs 167 325 -48.6% 1,046 1,310 -20.2%
Reserve Fund Reimbursements 0 176 -100.0% 398 995 -60.0%
Amortization of Unit Grants 120 143 -16.1% 525 570 -7.9%
Less: Additions to Rental Property (a) (3,344) (2,665) 25.5% (7,298) (5,257) 38.8%
Principal Curtailments on Mortgage Debt (103) (185) -44.3% (614) (466) 31.8%
Straight-Lining of Retail Rents (249) (234) 6.4% (962) (1,065) -9.7%
----------- ----------- ----------- ----------- ----------- -----------
FAD OF THE OPERATING PARTNERSHIP 12,711 11,941 6.4% 48,426 46,117 5.0%
Interest of Other Operating Partnership
Unitholders (6,927) (6,633) 4.4% (26,513) (26,240) 1.0%
----------- ----------- ----------- ----------- ----------- -----------
Attributable to the Company $5,784 $5,308 9.0% $21,913 $19,877 10.2%
=========== =========== =========== =========== =========== ===========
Funds Available for Distribution per Share (b) $0.57 $0.55 3.6% $2.21 $2.13 3.8%
Dividend Declared per Share $0.505 $0.490 3.1% $1.990 $1.930 3.1%
Payout Ratios
As a Percentage of FAD 89% 89% 90% 91%
As a Percentage of FFO 72% 78% 83% 88%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a)Additions to Rental Property details are as follows:
<S> <C> <C> <C> <C>
Core Residential Portfolio $2,682 $2,374 $5,806 $4,899
Retail Portfolio 80 9 287 55
Acquisition Portfolio 582 282 1,205 303
------------ ------------ ------------ ------------
Total Additions to Rental Property $3,344 $2,665 $7,298 $5,257
============ ============ ============ ============
<CAPTION>
(b)Weighted average shares, partnership units, and equivalents outstanding during the periods were as follows:
<S> <C> <C> <C> <C>
Shares and equivalents 10,062,702 9,707,047 9,913,308 9,310,929
Partnership Units 11,960,203 12,115,528 11,994,324 12,292,066
------------ ------------ ------------ ------------
Total Shares and Partnership Units 22,022,905 21,822,575 21,907,632 21,602,995
============ ============ ============ ============
</TABLE>
(more)
E-8
<PAGE>
Page 9
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Residential Portfolio Statistics for the Twelve Months Ended December 31, 1996
<TABLE>
<CAPTION>
Number of Average Monthly Average
Property Apartment Sq. Ft. Revenue Economic
Property Type / Property Name Location Units Per Unit Per Unit Occupancy
- ----------------------------------------------------- --------------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Core Residential Portfolio
High-Rise
Albemarle Washington, D.C. 235 1,097 1,126 99.3%
Calvert - Woodley Washington, D.C. 136 1,001 1,046 99.8%
Cleveland House Washington, D.C. 216 894 1,001 98.3%
Corcoran House Washington, D.C. 138 464 757 99.5%
Courthouse Plaza Arlington, VA 396 772 1,134 97.8%
Crystal House I Arlington, VA 426 917 933 96.7%
Crystal House II Arlington, VA 402 938 905 96.3%
Crystal Place Arlington, VA 180 894 1,210 97.6%
Crystal Square Arlington, VA 378 1,121 1,080 98.4%
Gateway Place Arlington, VA 162 826 2,023 93.1%
Marbury Plaza Washington, D.C. 672 997 621 95.3%
Skyline Towers Fairfax Co., VA 940 1,221 950 97.1%
Statesman Washington, D.C. 281 593 739 98.6%
2501 Porter Street Washington, D.C. 202 760 1,356 96.7%
Water Park Towers Arlington, VA 360 881 1,486 97.8%
----------- ------------- ------------ ------------
Sub-Total / Average 5,124 956 1,018 97.3%
Mid-Rise
Berkeley Arlington, VA 138 891 704 97.6%
Columbian Stratford Arlington, VA 227 942 719 98.2%
Executive Central Arlington, VA 230 903 749 98.8%
Executive North Arlington, VA 215 892 748 97.6%
Executive South Arlington, VA 266 842 727 98.1%
Windsor Towers Arlington, VA 280 1,025 760 96.9%
----------- ------------- ------------ ------------
Sub-Total / Average 1,356 920 737 97.9%
Garden
Bedford Village Fairfax Co., VA 752 1,070 859 96.1%
Car Barn Washington, D.C. 196 1,311 823 96.9%
Columbia Crossing Arlington, VA 247 976 1,116 98.2%
Concord Village Arlington, VA 531 1,025 762 93.9%
Fort Chaplin Washington, D.C. 549 983 603 96.5%
The Manor Montgomery Co., MD 435 999 729 95.6%
Newport Village Alexandria, VA 937 1,115 862 98.3%
Orleans Village Fairfax Co., VA 851 1,061 787 96.9%
Oxford Manor Washington, D.C. 227 1,005 596 94.7%
Patriot Village Fairfax Co., VA 1,065 1,162 851 96.7%
Potomac View Loudoun Co., VA 192 965 708 97.8%
----------- ------------- ------------ ------------
Sub-Total / Average 5,982 1,042 801 96.6%
----------- ------------- ------------ ------------
12,462 994 883 97.0%
Residential Acquisition / Development Portfolio
High-Rise
Suburban Tower (acquired 1/95) Montgomery Co., MD 172 677 762 97.4%
Connecticut Heights (acquired 6/95) Washington, D.C. 519 536 761 95.9%
The Bennington (acquired 9/95) Arlington, VA 348 804 986 97.3%
Van Ness South (acquired 7/96) Washington, D.C. 625 956 N/A N/A
1841 Columbia Road (acquired 8/96) Washington, D.C. 115 634 N/A N/A
----------- ------------- ------------ ------------
Sub-Total / Average 1,779 756 837 96.7%
Garden
Blvd. of Old Town / Gov. Spotswood
(acquired 4/95,3/96) Alexandria, VA 159 603 723 96.8%
Westerly at Worldgate (opened 5/95) Fairfax Co., VA 320 921 1,063 92.8%
Oakwood (acquired 12/95) Vienna, VA 218 968 1,001 93.9%
Charter Oak (acquired 3/96) Reston, VA 262 1,097 N/A N/A
----------- ------------- ------------ ------------
Sub-Total / Average 959 927 966 93.9%
----------- ------------- ------------ ------------
2,738 816 889 95.5%
----------- ------------- ------------ ------------
All Residential Properties 15,200 962 $884 96.9%
=========== ============= ============ ============
</TABLE>
###
E-9
<PAGE>
Exhibit 99.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K, into Charles E. Smith Residential Realty
L.P.'s previously filed Registration Statement File No. 33-82382.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
January 31, 1997
E-10
